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A SURVEY ABOUT TALENT: The battle for brainpower
Oct 5th 2006
The Economist

Talent has become the world's most sought-after commodity, says Adrian Wooldridge. The shortage is causing serious problems

IN A speech at Harvard University in 1943 Winston Churchill observed that ?the empires of the future will be empires of the mind.? He might have added that the battles of the future will be battles for talent. To be sure, the old battles for natural resources are still with us. But they are being supplemented by new ones for talent?not just among companies (which are competing for ?human resources?) but also among countries (which fret about the ?balance of brains? as well as the ?balance of power?).

The war for talent is at its fiercest in high-tech industries. The arrival of an aggressive new superpower?Google?has made it bloodier still. The company has assembled a formidable hiring machine to help it find the people it needs. It has also experimented with clever new recruiting tools, such as billboards featuring complicated mathematical problems. Other tech giants have responded by supercharging their own talent machines (Yahoo! has hired a constellation of academic stars) and suing people who suddenly leave.

But a large and growing number of businesses outside the tech industry?from consulting to hedge funds?also run on brainpower. When the Corporate Executive Board (CEB), a provider of business research and executive education based in Washington, DC, recently conducted an international poll of senior human-resources managers, three-quarters of them said that ?attracting and retaining? talent was their number one priority. Some 62% worried about company-wide talent shortages (see chart 1). The CEB also surveyed some 4,000 hiring managers in more than 30 companies, and was told that the average quality of candidates had declined by 10% since 2004 and the average time to fill a vacancy had increased from 37 days to 51 days. More than one-third of the managers said that they had hired below-average candidates ?just to fill a position quickly?. The CEB found, too, that about one in three employees had recently been approached by another firm hoping to lure them away.

Can't get enough of it
All this brings back memories of the dotcom boom in the late 1990s, when management consultants were writing books such as ?The War for Talent? (by Ed Michaels, Helen Handfield-Jones and Beth Axelrod of McKinsey), telling companies that they must move heaven and earth to recruit and promote the best talent. No sooner had the bubble burst than many former masters of the universe were begging for work.

Indeed, companies do not even know how to define ?talent?, let alone how to manage it. Some use it to mean people like Aldous Huxley's alphas in ?Brave New World??those at the top of the bell curve. Others employ it as a synonym for the entire workforce, a definition so broad as to be meaningless.

Nor does stocking up on talent seem to protect companies from getting it spectacularly wrong. Enron did everything that Mr Michaels and his colleagues recommended (indeed, McKinsey was both a consultant and a cheerleader for the Houston conglomerate). It recruited the best and the brightest, hiring up to 250 MBAs a year at the height of its fame. It applied a ?rank-and-yank? system of evaluation, showering the alphas with gold and sacking the gammas. And it promoted talent much faster than experience. Another corporate disaster, Long-Term Capital Management, was even more talent-heavy than Enron, boasting not only MBAs but Nobel prizewinners among its staff. But despite all this talent, the companies still succumbed to greed and mismanagement.

The coming shortage
Clearly there is more to good management than hiring the best and the brightest. Among other things, it requires rewarding experience as well as talent, and applying strong ethical codes and internal controls. Indeed, talent-intensive businesses have a particular interest in maintaining high ethical standards. Whereas in manufacturing industries a decline in such standards is often slow, in talent-intensive ones it can be terrifyingly sudden, as Arthur Andersen and Enron found to their cost.

All the same, structural changes are making talent ever more important. The deepest such change is the rise of intangible but talent-intensive assets. Baruch Lev, a professor of accounting at New York University, argues that ?intangible assets??ranging from a skilled workforce to patents to know-how?account for more than half of the market capitalisation of America's public companies. Accenture, a management consultancy, calculates that intangible assets have shot up from 20% of the value of companies in the S&P 500 in 1980 to around 70% today.

McKinsey makes a similar point in a different way. The consultancy has divided American jobs into three categories: ?transformational? (extracting raw materials or converting them into finished goods), ?transactional? (interactions that can easily be scripted or automated) and ?tacit? (complex interactions requiring a high level of judgment). The company argues that over the past six years the number of American jobs that emphasise ?tacit interactions? has grown two and a half times as fast as the number of transactional jobs and three times as fast as employment in general. These jobs now make up some 40% of the American labour market and account for 70% of the jobs created since 1998. And the same sort of thing is bound to happen in developing countries as they get richer.

A second change is the ageing of the population. This will be most dramatic in Europe and Japan: by 2025 the number of people aged 15-64 is projected to fall by 7% in Germany, 9% in Italy and 14% in Japan. But it will also make a difference to China, thanks to its one-child policy. And even in America, where the effect will be less marked, the retirement of the baby-boomers (which has just started) means that companies will lose large numbers of experienced workers over a short period. RHR International, a consultancy, claims that America's 500 biggest companies will lose half their senior managers in the next five years or so, when the next generation of potential leaders has already been decimated by the re-engineering and downsizing of the past few decades. At the top of the civil service the attrition rate will be even higher. This means that everyone will have to fight harder for young talent, as well as learning to tap (and manage) new sources of talent.

At the same time loyalty to employers is fading. Thanks to all that downsizing, the old social contract?job security in return for commitment?has been breaking down, first in America and then in other countries. A 2003 survey by the Society for Human-Resource Management suggested that 83% of workers were ?extremely? or ?somewhat? likely to search for a new job when the economy recovered.

As well as becoming more footloose, the workforce is becoming less standardised. Today employees come in all shapes and sizes. Some 16% of American workers telecommute some of the time. A quarter of the staff at B&Q, a British DIY chain, are over 50; the oldest is 91. And these diverse workers are often part of a global supply chain that keeps going 24 hours a day. Managers not only need to deal with lots of different sorts of people, but also to manage workers in different countries and often across different functions. That means even more competition for people with up-to-date management skills.

Obsession with talent is no longer confined to blue-chip companies such as Goldman Sachs and General Electric. It can be found everywhere in the corporate world, from credit-card companies to hotel chains to the retail trade. Many firms reckon that they have pushed re-engineering and automation as hard as they can. Now they must raise productivity by managing talent better.

With opportunities at home running dry, the hunt for talent has gone global. Over the past decade multinational companies have shipped back-office and IT operations to the developing world, particularly India and China. More recently they have started moving better jobs offshore as well, capitalising on high-grade workers with local knowledge; but now they are bumping up against talent shortages in the developing world too.

Even governments have got the talent bug. Rich countries have progressed from simply relaxing their immigration laws to actively luring highly qualified people. Most of them are using their universities as magnets for talent. India and China are trying to entice back some of their brightest people from abroad. Singapore's Ministry of Manpower even has an international talent division.

The dark side
Competition for talent offers many benefits?from boosting productivity to increasing opportunities, from promoting job satisfaction to supercharging scientific advances. The more countries and companies compete for talent, the better the chances that geniuses will be raked up from obscurity.

But the subject is strewn with landmines. Think of the furore that greeted Charles Murray's and Richard Herrnstein's book ?The Bell Curve?, which argued that there are differences in the average intelligence of different racial groups; or the ejection of Lawrence Summers as president of Harvard University because he had speculated publicly about why there are so few women in the upper ranks of science.

It would be wonderful if talent were distributed equally across races, classes and genders. But what if a free market shows it not to be, raising all sorts of political problems? And what happens to talented Western workers when they have to compete with millions of clever Indians who are willing to do the job for a small fraction of the price?

This survey will argue that the talent war has to be taken seriously. It will try to avoid defining talent either too broadly or too narrowly but simply take it to mean brainpower?the ability to solve complex problems or invent new solutions. It will thus focus on what Peter Drucker, the late and great management guru, called ?knowledge workers?. But there is no point in being dogmatic. The nature of critical talent varies from company to company: it may be the ability to crack a few jokes while turning an aeroplane around in 25 minutes, as demonstrated by Southwest Airlines. It is one of the marks of a sophisticated society that it rewards a wide variety of different talents.

The survey will conclude by looking at the widening inequalities that will result from the competition for talent, and weighing up the risks of a backlash against the talent elite.

More here:

Skills shortage threatens UK future

Marcel Proust - on Genius

Sunday, September 24, 2006


Parintins, Brasil: Most Remote Digital City in the World
Ricardo´s Blog
September 21, 2006

Even before reaching Parintins I was very excited about coming to this place. Parintins is perhaps one of the most isolated medium-sized cities in the world. This week, thanks to a major effort by Intel and many other organizations, the city received an investment that is going to change its life forever. The investment is the kind of effort that shows very effectively how technology can be used to improve people?s lives in emerging markets.

Parintins is a city of more than a hundred and fourteen thousand inhabitants. It is an island in the middle of the Amazon, the world?s largest reserve of sweet water. There is no highway or bridge into Parintins, the only way to reach the island is by taking a 15 hour boat from Manaus or by taking a plane into the city?s airport. Despite its size, there is only one small community hospital in the island and furthermore, there are only 32 doctors to serve its people --- a ratio of one doctor for more than 3,500 people. There are 190 schools in the island and more than 2/3rds of them don?t have electricity. Only one of them was hooked to the Internet.

Despite its infrastructure challenges, Parintins has won national fame in Brasil by hosting a local festival called Boi Bum-Bá (a fantasy derived by the mixture of Indian and European cultures that revolves around a bull). The festival lasts for three days at the end of June and the beginning of July. The festival is a competition between two teams for the best fantasy, which includes music, singing, customs, fireworks and of course, dancing. Think of it as some sort of a smaller version of the Carnaval of Rio. But don?t think that small means low quality; the Boi Bum-Bá festival is a world class cultural event that attracts more people from around the world every year. The whole city is engaged in the festival, half of the city in the red team and the other on the blue team. They live their passion as much as the Brasilian soccer fans do for their national team.


Qualcomm sees wireless device boom
Stephen Lawson, IDG News Service
21/09/2006 13:25:12

Link: http://www.arnnet.com.au/index.php/id;1343010589;fp;2;fpid;1

A perfect storm is brewing in wireless communications, which may soon boom like the PC business did in the 1990s as the Web took off, a Qualcomm executive said Wednesday.

Ubiquitous high-speed wireless data, mobile applications and browsing ability will soon drive demand for 1GHz processors in handheld devices, said Sanjay Jha, executive vice president and group president of CDMA (Code-Division Multiple Access) technologies at Qualcomm, in San Diego. Speaking at Bank of America's annual investment conference in San Francisco, he compared today's wireless industry to the PC business when 64K bps (bit-per-second) modems and the Netscape browser appeared in the mid-1990s. Those, too, helped drive demand for chips with 1GHz speeds and above, he said.

Within a few years, wireless broadband of 300K bps (bits per second) to 600K bps will be widely available and people on the go will demand more processing power in devices to take advantage of new services, he said. To fill this need, device makers will have to fill in the comparatively empty market space between notebook PCs on the high end and cell phones on the low end, Jha said. Particularly in less developed countries, notebooks won't work as the next step up from phones for mobile data, he said.

Growing demand for processing power on mobile devices plays into Qualcomm's business plans. The pioneer of CDMA has aggressive plans for new silicon to be introduced over the rest of this year and 2007. Manufacturers are already working with one Qualcomm chipset, the MSM (Mobile Station Modem) 7200, that has almost 1GHz of speed: The chipset includes both an ARM 11 chip of 400MHz to 500MHz and an ARM 9 running at about 250MHz, Jha said. That chipset will support HSUPA (High-Speed Uplink Packet Access), a next-generation version of UMTS (Universal Mobile Telecommunications System) with a higher upstream speed, and will be able to handle VOIP (voice over Internet Protocol) calls, he said.

WiMax will help to change the game on mobile wireless as Intel Corp. integrates it into chipsets for notebook PCs, Jha said, though he downplayed the rival wide-area wireless technology. WiMax could become a good technology but needs work, Jha said, particularly in its support for voice and real-time applications.

Flash-OFDM (Orthogonal Frequency-Division Multiplexing), a rival to WiMax, has advantages because it was developed within a single company instead of by a committee, Jha said. Qualcomm acquired that company, Flarion Technologies Inc., last year.

In an interview following his presentation, Jha said Qualcomm is already talking with Next Generation Mobile Networks (NGMN), a group of mobile operators that last week demanded better licensing terms for network technology. Qualcomm has come under fire for its royalty practices. Jha said his company already meets the industry standard for fair, reasonable and non-discriminatory licensing terms but NGMN wants something beyond that.

The emergence of WiMAX
Monica Paolini
Senza Fili Consulting
September 2006

WiMAX, one of the most anticipated wireless technologies in recent years, is here. It has finally become a fully commercial technology and is being deployed worldwide. The first certified WiMAX products were announced in January 2006 and support for mobility will be added starting from 2007. There is a lot of excitement in the market, as network operators announce more trials and deployments, and the moment for the technology to finally prove itself on the ground has arrived.

Its superior performance over competing technologies combined with the promise of lower deployment costs, are likely to encourage the emergence of new services and applications, devices and business models. WiMAX offers unrivalled scope for services, as it can provide both fixed and mobile access over the same wireless interface. This gives network operators greater flexibility and the opportunity for economies of scale.

As awareness of WIMAX grows in the market, it is crucial to understand the major benefits that WiMAX brings to operators and the market opportunity it presents. This paper provides an introduction to the technology and a comparison with other wireless technologies. It also includes a quick update on the latest market and technology developments within the WiMAX community.


White Paper Link: http://wirelessledger.com/EmergenceOfWiMAX_SenzaFili.pdf

Ericsson restructures for new markets, amid private equity bid talk
Rethink Research
Published: Monday 18 September, 2006

Link: http://www.rethinkresearch.biz/index.asp

Since its acquisition of Marconi earlier this year, Ericsson has stayed aloof of the current consolidation race in the wireless infrastructure sector, but it is certainly not unaware of the new challenges this will bring to its currently high flying position in the market it commands. The Swedish company has announced a reorganization focused on accelerating its progress in key growth areas such as all-IP multimedia, a move that may have helped spark speculation that the company could be the subject of one of the wireless industry's increasingly common private equity bids. Whatever the real world likelihood of such a deal - which we believe to be low - the report from Dresdner Kleinwort that sparked the rumors does highlight some key vulnerabilities that remain within Ericsson despite its impressive progress of the past three years, and that will be only partially addressed by this latest restructuring.

The reorganization splits the world's largest mobile network maker into three units, and it plans to recruit 500 engineers to boost R&D capabilities in key growth areas, notably "next generation IP networks and multimedia". Such changes will be important to maintain Ericsson's margins, and its leadership in some cutting edge technologies, at a time when it is increasingly relying on the highly aggressive pricing its scale permits to guard its market share against other giants - a margin squeezing trend that can only be intensified by the upcoming merger of Lucent and Alcatel to form a daunting challenger to Ericsson and Nokia Siemens.

The three new units are Networks, Global Services and Multimedia, and they will be in operation by the start of 2007. Ericsson's highly regarded turnaround CEO, Carl-Henric Svanberg, said in a statement: "We will leverage our position in mobile networks, services and transmission and expand our leadership in next generation converging IP networks with a focus on multimedia applications and services. Multimedia is an area with obvious business opportunities and potentially a powerful driver for increasing network capacity and investments by operators."

Hardly original - all Ericsson's competitors are pursuing similar goals and markets - but the bolstering of R&D, coming in the wake of April's staff cutbacks, shows that the company is determined to stand by its recent assertions that European vendors could still use their advantages in technology expertise and design to keep their lead in the face of incursions by lower cost suppliers, notably the Chinese giants Huawei and ZTE. It also shows that it recognizes the need to introduce new blood to the company with a mindset focused on multimedia rather than traditional telecoms.

The other area where Ericsson will seek to boost its margins by expanding beyond its traditional infrastructure business is in managed services, a market where it has been making steady progress recently, but which now has its own division too, where it can develop its own culture and contacts. Part of the reason Ericsson has been able to sell networks recently at prices that resentful rivals have called "rock bottom" is that it has bundled infrastructure with far higher value services, as seen in its $1bn managed services deal with India's Bharti Airtel.

Ericsson's market lead in cellular networks is being reinforced by the trend towards economies of scale - driven by carrier consolidation - and looks as though it will be helped rather than diluted by the new wave of UMTS build-out. After a painful turnaround progress it is once more financially stable and is showing progress in the key new markets of the moment, notably IP multimedia, as well as boosting high value activities such as managed services and enterprise networks. However, it does have key vulnerabilities too. One is the obvious increase in competition in its market, particularly from scaled-up European rivals (Alcatel-Lucent and the Nokia-Siemens venture) and the aggressive Chinese newcomers. This will put pressure on Ericsson's profitability in its core sector, but in higher value activities, it also faces rising competition, and sometimes from companies with which it is less accustomed to dealing. In the vital IP Multimedia Subsystem, Lucent's strong progress in the US will strengthen Alcatel's hand, while in the enterprise, Ericsson faces the decline of its PBX base and competition from Nortel and Cisco.

And of course, there is the onset of '3G-plus' and 'pre-4G', driven mainly by vendors and operators disappointed with their showing in 3G, and now turning to an accelerated roadmap encompassing new platforms like WiMAX. Ericsson is the company that stands to gain most from a slowdown in the headlong rush towards the new generation, wanting to capitalize on its lead in UMTS (and HSxPA) for as long as possible before having to invest in another cycle of R&D, and compete in an all-IP market where its natural technology advantages will be less apparent, and it will probably lag behind some early movers like Motorola.

All this means that Ericsson will probably need a change of approach that is more drastic than its current tweaking, in order to cash in on its assets and position itself strongly for the next wave. Some believe this change of approach would be best achieved by a private equity buy-out, and Per Lindberg of Dresdner Kleinwort has put this strand of opinion into words with a new report, which claims the Swedish company could be subjected to a takeover bid if its share price does not correct itself in the near future. Lindberg writes: "If the stock market does not realign its valuation with that of fundamentals, then Ericsson may become subject to private equity firms' increasingly audacious forays."

The analyst's calculations conclude that only about SEK50bn ($7bn) of principal capital would be required to launch a SEK400bn ($56bn) takeover - a small premium on the current valuation of $54bn. Regearing of the balance sheet would free up SEK150bn ($21bn), argues Lindberg; disposal of the 50% stake in the Sony Ericsson handset venture would release around SEK50bn ($7bn); while borrowings from "yield hungry/risk seeking banks" would contribute SEK140-150bn (over $20bn). All this could produce a tenfold leap in principal capital within two years, the analyst claims. He believes a remodelled Ericsson could achieve an exit value of $106bn by the end of 2008, which would give the private equity players proceeds of about $80bn after repayment of loans and adjustments for free cashflow.

The new Ericsson structure:

Ericsson's Networks unit will deal with fixed and mobile services and will incorporate its current work in core and transmission networks, as well as next generation IP networks. Networks will take over the previous business units Systems, Access and Broadband Networks as well as Ericsson Power Modules and Ericsson Cables. Kurt Jofs, currently head of Access, is to take charge of the unit, which will have 21,500 employees.

The Global Services unit will be made up of the current Professional Services and Network Roll-out divisions. Ericsson's services divisions currently employ around 23,000 people worldwide.

The Multimedia unit, with around 4,000 employees, will consist of the multimedia activities within the current Business Unit Systems, Business Units Enterprise and Ericsson Mobile Platforms groups, as well as Ericsson Consumer and Enterprise Lab.

Rethink IT, News IS and our CIO surveys cover Information Technology, IT spending, CIO Surveys, and all other subjects that interests IT managers, such as Mobile devices, ERP software, CRM systems, Supply chain management, Utility Computing, On demand Computing, Windows 2003, Business Continuity, Server Consolidation, Linux, SAN (Storage Area Networks), NAS (networked Attached Storage), ISCSI, Raid 5, Sarbanes-Oxley, Outsourcing, Business Intelligence, BPM (Business Performance Management), Servers, Software and Systems Management, Business Services Management, Systems Integration and IT Consulting.

Wireless Watch covers all forms of Wireless and Wi-Fi, including WiMax, Wireless Metropolitan Area Networks (WMAN), OFDM, Telecommunications, Telephones, CDMA, WCDMA, UMTS, cellular technology, base stations, smart antenna and IEEE standards.

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Telecom Italia thinks dangerously short term in bucking the convergence trend
Rethink Research
Published: Monday 18 September, 2006

Link: http://www.rethinkresearch.biz/index.asp

Recently, it seemed that the whole telecoms world had reached a consensus on fixed/mobile convergence and quadruple play - everybody needed them. Wireline operators had to gain mobile capabilities quickly, hence the US cablecos' deal with Sprint Nextel; broadcasters had to access converged networks, and so we see News Corp/DirecTV embarking on a complex web of deals; and wireless-only carriers either needed to enhance their networks sufficiently to deliver fixed services too, or find a cellular partner. Even the stalwartly non-wired Vodafone is now moving rapidly, if belatedly, to launch converged services in its most pressurized markets, with the UK and Italy added to the list last week. So why does Telecom Italia want to buck this apparently unstoppable trend and sell off its cellular arm in order to concentrate entirely on fixed line IP triple play?

What could have been a straightforward, if incomprehensible, transaction has been turned, in true Italian style, into a murky and politically charged dispute that may, in itself, ward off potential bidders, and has already cost the company's chairman his job. Last week, Prime Minister Romano Prodi and other government ministers slammed the plan of chairman Marco Tronchetti Provera to split fixed line and mobile operations, and spin off the latter, because they fear this will lead to the sale of one or both to a non-Italian buyer or buyers (the mobile group, analysts estimate, would fetch about ?35bn). This opposition and an acrimonious public war of words led to Tronchetti Provera resigning this weekend, to be replaced by well respected former senator Guido Rossi. However, while the government opposition and shareholder confusion at Tronchetti Provera's reorganization - which signalled an abrupt reversal of his formerly enthusiastic convergence policy - could have severely limited his freedom of action in exploring strategic options for his company, the telco is now left with a new chairman and no clear direction at all. The government is likely to have a heavier influence over Rossi than his predecessor, even though the European Commission has warned against the government vetoing a possible foreign sale of any or all of the company. EU internal markets spokesman Oliver Drewes said: "As a very general remark, I can make the observation that golden shares as such have no place in the internal market. We will watch closely future developments for possible market violations." But it is unlikely that Rossi will simply undo the reorganization plan and put the telco back on its former track - break-up and mobile sell-off is still very much on the cards as the company struggles with its ?41bn debt mountain.

On Wednesday, Prodi's office said the prime minister was "surprised and worried" by the mobile spin-off plans, and disclosed private conversations with Tronchetti Provera, in order to show that sale of key Telecom Italia assets was very much on the cards, contrary to earlier statements by the telco, which had said the split of fixed and mobile operations was not designed to make it easier to sell parts of the company. "We have no intention to sell, we just want to add more flexibility, both operationally and financially," Tronchetti Provera had previously stated.

The impact of Telecom Italia's decision on the world of quadruple play is further complicated by the emergence of Rupert Murdoch's News Corp as a possible buyer for the mobile unit or the whole telco. Not in itself surprising - it is clear that the Murdoch organization is increasingly interested in the mobile and telecoms markets, as its recent acquisitions show, but shocking when coupled with news that the world's greatest media tycoon is considering selling out of the US satellite sector. Talks with Murdoch were one of the key issues disclosed by the Italian prime minister after his conversations with Tronchetti Provera, with a potential deal that could include the merger of News Corp broadcasting unit Sky Italia with Telecom Italia. Previously, both News Corp and Telecom Italia had said that they were only negotiating a potential content sharing deal.

Only two years ago, Tronchetti Provera was urging investors to back a strategy based on fixed-mobile convergence. In recent months, though, he has argued that the main focus should be on strengthening Telecom Italia's internet content offerings and now plans to divide the operator in three - the mobile arm, the fixed network owner, and the fixed customer base and content operations. Part of this strategy is to build up the internet business further on an international scale, as indicated by today's announcement that Telecom Italia would buy AOL's German unit from Time Warner for ?675m. This is fine, except that content alliances and investments need to be related to both the mobile and fixed networks, and sacrificing the most profitable and high growth part of the company, the cellco arm, would show that Telecom Italia had learned nothing from its UK counterpart BT's sale of its own cellular arm, which became O2 - a move that has forced BT into ever more complex and uncertain moves to try to gain a credible wireless offering again, including its expanding relationship with Vodafone.

As well as News Corp, Time Warner and General Electric were revealed by the prime minister's office to be in talks with the incumbent telco. Another possible option could be a private equity deal like the ?13bn purchase agreed for Danish incumbent TDC by a consortium of Apax Partners, Blackstone Group, Kohlberg Kravis Roberts, Permira and Providence Equity Partners.

Sale of the entire Telecom Italia group, notwithstanding government fury, would make far better sense than separating its key units. Despite progress in IPTV and other areas, a mobile-free Telecom Italia would be a rump organization that would find it hard to compete outside its own territory or even against converged players in its own borders - especially with that competition stepping up as Vodafone ties up with Fastweb. For Telecom Italia Mobile (TIM) itself, sale to a larger group would certainly be advantageous. TIM has 29m lines in Italy (40% market share) and 22m in Brazil, where it is number two in the mobile market, but it is being dwarfed by the steady march of the multinational majors - Vodafone, T-Mobile, Telefónica, TeliaSonera and Orange - which are set to sew up the European and, to some extent, Latin American markets between them. But TIM's interests would still be better served if the acquisition kept it coupled to its parent, adding a fully converged platform, in one of the most advanced all-IP markets, to the purchasers' footprint.

However, Tronchetti Provera is under intense pressure to pay off debt, which totals ?41bn, and sale of TIM would go a long way to achieve this, even though it would reverse a converged strategy that the chairman himself ushered in - last year he bought the 44% of TIM that Telecom Italia didn't already own for ?20bn. He also needs to boost the share price, which is half the level it was when he took over the helm in 2001, and while the converged company will surely generate more shareholder value in the medium term than a fixed- only organization, in the short term, media assets are generally valued on a higher multiple than telco assets - hence the insistent focus on redefining the company around media content distribution. Stock market semantics do not a successful operator make though - and it is clear that sell- off will deprive Telecom Italia of the chance to provide its content to mobile networks. And analysts doubt the ability of the telco to shift substantially into media. In a research note issued last week, Morgan Stanley wrote: "It is hard for the media tail to wag the telecoms dog" and said that media was "too small" to counteract downward trends in fixed line telecoms.

While Telecom Italia betrays its desperation by backing away from convergence, other companies know that fixed/mobile unity is the best way to address desperate situations of their own. Vodafone has already announced plans to offer fixed/mobile services in Germany using its Arcor broadband subsidiary, and has now agreements in the UK and Italy to gain access to fixed line networks.

In Italy, as Telecom Italia throws doubt on its own converged future, Vodafone has announced a joint initiative with the incumbent's leading challenger in broadband internet services, Fastweb. The joint offering, branded Vodafone Casa Fastweb, will be launched shortly. Customers will be able to make mobile calls to fixed line phones at fixed rates while at home and access Fastweb's broadband network, which covers about half the population at speeds of up to 20Mbps. There will be contract and prepaid tariffs, based on the current Vodafone Casa offerings, Zero and Infinity, both of which offer a fixed-to-mobile substitution service, which allows customers to buy a bundle of minutes for a fixed monthly fee and then to call fixed line numbers from their mobiles while at home for a small fee.

The joint initiative will also co-market and cross-sell the joint offerings for the business market.

In the UK, Vodafone is to launch fixed broadband services through a partnership agreement with BT, which already uses the Vodafone network under an MVNO deal for its Fusion convergence offering and other options. Now it has cut a deal with BT Wholesale to provide its customers in the UK with Vodafone-branded fixed line broadband services, allowing it to supply quadruple play services in competition with Virgin/NTL and France Telecom?s Orange, both of which are getting very aggressive in this sector, with 'free' broadband links for mobile customers. Vodafone expects to launch a proposition using the broadband lines and complementing its existing mobile services before the end of the year.

The two UK giants are increasingly close, with the MVNO deal and Vodafone's decision, early this year, to continue to use BT lines for backhaul for least half of its UK base stations (it had previously been looking into building out wireless fiber for much of this backhaul). This is a disappointment for Cable and Wireless, which had hoped to supply Vodafone as part of its recovery plan, which involves becoming a major wholesale supplier of broadband in the UK.

Vodafone is playing an unaccustomed game of catch-up in convergence, with the equally unaccustomed prospect of some of Europe's most sluggish incumbents, notably France Telecom and Telefónica, stealing its thunder. At least, as it launches its services with Fastweb, it will not have to worry about one of those threats coming from a converged and rejuvenated Telecom Italia.

News Corp to exit DirecTV?

Meanwhile, News Corp is apparently indulging in strange behavior of its own, conducting talks with Liberty Media, apparently about the Murdoch organization selling its controlling stake in US satellite broadcaster DirecTV to Liberty, in return for Liberty's 19% stake in News Corp. This would be a shocking volte-face for Murdoch, who acquired DirecTV after a long battle in 2003, and has shepherded the company to become a serious contender with the US cablecos for the television and, now, the emerging triple play market. DirecTV is said to be close to a partnership with broadband wireless operator Clearwire to add wireless and mobile capabilities, and a broadband return path, to its satellite services but it is operating in a slowing and highly pressurized US satellite sector, and one where it has to face the cablecos and the triple play plans of the large telcos, AT&T, Verizon and BellSouth.

T-Mobile eyes MVNO deal in Spain

It isn't just in converged markets where consolidation is leading to some unlikely marriages. In the mobile sector, the European cellcos know that survival rests, in a saturating market where 3G has progressed more slowly than expected, with international reach and economies of scale. T-Mobile is looking to add Spain to its operations in Germany, the UK and eastern Europe, through an MVNO deal with Telefónica - which, via its O2 subsidiary, actually competes with T-Mobile in many of its territories.

According to Spanish press reports, executives of T-Mobile's parent Deutsche Telekom have met with all three of Spain's mobile operators - Telefónica Móviles, Vodafone and Orange/Amena - but has made most progress with the incumbent, with a deal expected within weeks. Deutsche Telekom already has fixed line voice and internet operations in Spain through its local unit Ya.com, and is likely to combine these with the MVNO to offer a converged service.

Spain was recently opened up to MVNOs and several companies, including Spanish regional operator Euskaltel, UK's The Phone House, Sweden's Tele2 and Madrid-based Jazztel, have confirmed plans to launch virtual services over the next few months.

News Corp buys mobile entertainment firm

When News Corp makes a financial move, it?s not clever to sit around and just watch. This is one company that always conducts mergers for a reason. If anyone was unclear about that, they should look at the huge increase in value enjoyed by both MySpace and IGN Entertainment under the News Corp-owned Fox brand.

News Corp has now moved for a mobile entertainment firm, in the shape of the Verisign owned Jamba, paying $188m for a controlling stake. It will merge it with its Fox Mobile Entertainment assets. The new company can reach more than 1bn mobile subscribers in 30 markets and it will use the Jamster brand in the US and the Jamba brand worldwide.

For the past two years we have been saying that mobile entertainment is overcrowded and due for a consolidation, but it?s a consolidation that largely hasn?t come, and mobile entertainment and mobile games are two markets that are crowded and at the same time empty of clear predators. Overnight that is going to change.

Anyone with the ambition to have content on every platform - and that will include all the big US broadcasters and content firms - is going to be after a mobile entertainment business now in order to follow whatever Fox and News Corp comes up with.

Lucy Hood, formerly President of Fox Mobile Entertainment, will become CEO of the joint venture. With key centers in Los Angeles and Berlin, the new entity will be the industry's only vertically integrated mobile entertainment company with unique capabilities to produce, market, sell and distribute mobile content.

"This is an important step in News Corp's strategy of becoming the world's leading digital media company," said Peter Chernin, president and COO of the media giant. "Wireless technology gives us an enormous opportunity to reach billions of mobile phone users with our content. With this new venture we're looking forward to inventing new and compelling ways to engage this exciting new audience."

The new company will immediately become the largest customer for VeriSign's Digital Content Services (DCS) group, which specializes in providing intelligent infrastructure and connectivity to enable the delivery of rich content over mobile and broadband networks.

Under the agreement, Jamba will soon release its first products including MySpace Mobile Store, which will make Jamba MySpace's global m-commerce partner. The transaction is expected to be finalized by the end of 2006.

Telecom Italia Boss Abruptly Quits
Business Week
SEPTEMBER 19, 2006
By Maureen Kline

Marco Tronchetti Provera steps down as chairman after feeling the heat about a planned move to split key company units

In a dramatic turn of events, Telecom Italia Chairman Marco Tronchetti Provera resigned late on Sept. 15 amid a barrage of criticism over his plan to spin off and possibly sell the company's $16.5 billion mobile phone unit. The board appointed highly respected lawyer Guido Rossi to replace him?and to tackle the company's dual problems of a perennially sagging share price and mountainous debt.

Tronchetti Provera led a group of investors that acquired a 55% stake in Telecom Italia (TI ) through a series of holding companies in 2001 for about ?7 billion ($8.9 billion) and today controls the company with a 22% stake. But less than two years after folding Telecom Italia Mobile (TIM) into the parent company, he announced plans Sept. 11 to "demerge" and possibly sell it, mainly to work down the ?41 billion in largely acquisition-related debt still hanging over the company (see BusinessWeek.com, 9/12/06, "Telecom Italia: Losing a Limb").

Minority shareholders rejected the industrial logic of breaking off the mobile phone unit at a time when other telcos are scrambling to integrate their fixed and mobile offerings. The move also provoked a political storm within Italy, with Prime Minister Romano Prodi publicly lashing out at Tronchetti Provera for not informing him in advance of the decision. Telecom Italia was fully privatized in the 1990s, but it operates in a sector considered of strategic national interest.

NEW BLOOD. A Telecom Italia statement said Tronchetti Provera's resignation was "motivated by the intention to safeguard the interests of the company and its shareholders in pursuing?the strategic direction chosen by the board." The release added that it had become impossible for the company to pursue its new strategy because of the "unjustified personal nature" of the conflict with the government and reiterated that there would not be a change of strategy with respect to the spin-offs of TIM and of the company's local loop fixed-line network infrastructure, also announced Sept. 11.

Thus, Rossi, a former Telecom Italia chairman who is often tapped for difficult restructuring jobs, was called in more as a mediator than as an executive chairman with a clean slate on strategy issues. (Recently, Rossi also was tapped to clean up the Italian soccer federation following a corruption scandal [see BusinessWeek.com, 5/10/06, "Unsportsmanlike Conduct in Italian Soccer?"]).

To lend a hand, Telecom Italia's board also promoted Carlo Buora, previously co-CEO, to a new role as executive vice-chairman, giving him the executive powers previously held by Tronchetti Provera. Rossi's powers will be limited to a general counsel role and "institutional relations," the company said. Rossi is considered to be close to the center-left politicians in government and an excellent mediator.

A GENTLEMAN'S AGREEMENT. Prior to the resignation, Prodi had spelled out in a public statement the content of secret meetings between himself and Tronchetti Provera on July 19 and Sept. 2, revealing market-sensitive information. Prodi said he had discussed an entirely different strategic plan for Telecom Italia with Tronchetti Provera, and thus the drastic decision to demerge TIM took the government by surprise.

According to Prodi, the two discussed instead a plan to sell Telecom Italia shares to Rupert Murdoch's News Corp. (NWS ), in exchange for merging Sky Italia into Telecom Italia. Prodi said he had asked Tronchetti Provera to ensure that control of Telecom Italia remained in Italian hands.

In their second meeting, the prime minister said, Tronchetti Provera assured him that talks with Murdoch were proceeding favorably and that Telecom Italia's position was strengthened by professed interest in the company by General Electric (GE ) and Time Warner (TWX )?on Sept. 17, Telecom Italia struck a deal with Time Warner to buy AOL Germany's Internet access business for ?675 million ($852.7 million). Tronchetti Provera also reportedly told Prodi that Telecom Italia's Brazilian business could be sold for ?7 billion to ?9 billion to help reduce debt.

A DISCONNECT? During the month of August, Italian stock market authority Consob repeatedly asked Telecom Italia to respond to rumors of a deal with Sky or News Corp., but the company repeatedly denied that there were talks under way about anything other than a commercial deal for content distribution. On Sept. 11, Telecom Italia did announce a deal for 20th Century Fox films to be broadcast on Telecom Italia's Alice Home TV network. It is unclear whether Tronchetti Provera still intended, or intends, to widen that deal and sell an equity stake in Telecom Italia to Murdoch, but analysts now figure that Prodi's public disclosures would make it more difficult to negotiate any such deal.

A merger of Sky Italia with Telecom Italia's television interests would have created a larger competitor to state-owned RAI and Mediaset, the broadcasting group owned by former Prime Minister Silvio Berlusconi, though it's not certain whether Italian or EU antitrust regulations would have allowed the combination of the two.

An important piece of the puzzle is the Benetton family, of apparel fame, which owns 20% of the Pirelli holding company that controls Telecom Italia. The Benettons might be willing to increase their Telecom Italia investment in a scenario involving Murdoch, thus maintaining a higher concentration of Italian ownership?and appeasing the Prodi government.

CHANGE IN STRATEGY. But the family would have more cash to spend on Telecom Italia shares if the Prodi government were to unblock another deal. The Benettons are agitating for the proposed merger of Italian highway company Autostrade, in which they own a controlling interest, with Spain's Abertis. The Prodi government has blocked the deal, again citing the national interest in a strategic sector.

Meanwhile, Tronchetti's move to demerge TIM from Telecom Italia's fixed-line business and focus on broadband was criticized throughout the week by market commentators. With other telecommunications companies seeking to bundle their fixed and mobile service more tightly together, the decision was seen as a purely financial move aimed at reducing debt and lacking good strategic justification.

Analysts point out that Telecom Italia only recently spent approximately ?100 million ($127 million) to integrate its fixed and wireless units, in keeping with a strategy announced amid much fanfare less than two years ago. Instead, experts say, Tronchetti Provera should have given the integration more time to pay off. But then, he was a man under pressure: Telecom Italia shares now trade at about half of what they were worth in 2001 when he took over the company. The current turmoil isn't going to fix that problem anytime soon.

SMART BT ... ALWAYS INNOVATING ... BT extends Fusion to corporate customers
The Register
By Bill Ray
Published Thursday 14th September 2006 10:11

Link: http://www.theregister.co.uk/2006/09/14/bt_corporate_fusion/

Companies can keep in touch through Wi-Fi hotspots

GMTFree whitepaper - Backup-to-Disk Planning Options Continuing their march towards a grand vision of an IMS future where everything is routed over IP connections, BT have announced that their Fusion product will now be available to corporate customers. Fusion combines GSM and Wireless LAN connectivity for voice calls, with calls using Voice over IP when on a data network, such as Wi-Fi, then switching to GSM when out of range.

Leeds City Council has been trying the technology, which uses handsets that can roam seamlessly from Wi-Fi to GSM and back again without even dropping a call, and seem very happy with it.

For the moment those corporate customers will only be able to use Wi-Fi in their own offices, but BT plans to rapidly combine the service with their hotspot-sharing agreements and thus allow corporate customers to roam around the world connecting to Wi-Fi hot spots when they are available: reducing the cost of calls without changing the user experience of picking up the phone and dialling.

The problems of routing voice calls over wireless networks remain: call quality can suffer depending on the capacity of the hot spot, and handset battery life is much reduced. BT aren?t saying who will be providing the handsets for the service, only that they are in talks with leading suppliers and will let us know soon

News Corp not in talks with Telecom Italia
By Kelly Fiveash
Published Wednesday 20th September 2006 10:16 GMT

Original URL: http://www.theregister.co.uk/2006/09/20/telecoms_italia_murdoch/

News Corp chairman Rupert Murdoch said he has not been in talks with Telecom Italia.

Apparent negotiations were said to involve a possible deal with Sky Italia which would have further bolstered Telecom Italia's move into web content delivery.

In a surprise move early last week, Telecom Italia announced a shift from its traditional telecommunications business to delivering web content including music, film, and television through its broadband service.

Ex-chairman Marco Tronchetti Provera, who quit Telecom Italia on Friday after a major rift with Italian prime minister Romano Prodi over the sale of its TIM mobile unit, had claimed he was in talks with Murdoch.

Murdoch was speaking at a Goldman Sachs conference in New York yesterday where he said that no potential deal is in the offing with Telecom Italia, according to the Wall Street Journal.

In related news, Business Week reports that telecom workers are expected to strike on 3 October in dispute of Telecom Italia's restructuring plans.

As the Telecom Italia saga rumbles on, Prodi has confirmed that he will address parliament next week on the government's involvement with private business - a relationship that has provoked widespread disapproval.

He will hope to draw a line under what has been the first major test of his leadership.

TAKE A LOOK ON THAT ... TI (Telecom Italia) , News Corp, Tiscali and Vodafone see convergence so differently
Rethink Research
Published: Wednesday 20 September, 2006

Link: http://www.rethinkresearch.biz/index.asp

The numerous financial shenanigans this week by operators, especially the embarrassing situation Telecom Italia finds itself in, and the rumors surrounding News Corp and DirecTV, are all signs of the effect we have coined the Faultline, where neighboring businesses find themselves in violent competition to invade each other?s turf.

Telcos are having their main service, consumer voice, eroded by competition, and the result is that they have lost their identity. They want to be someone they are not. The same is happening in almost every other media and communications market, and it leads to companies doing unexpected things.

Telecom Italia wants to become a media business, and so do most other businesses in the operator world. The only difference is in strategy. It has become plain through genuine movement in convergence technology that the triple play that would provide fixed line operators with internet, voice and video revenues, can now extend itself to a quadruple play, involving mobile voice and perhaps mobile video.

The problem for Telecom Italia is that it cannot afford a transition into quadruple play, due to the fact it has overspent in times past, and now carries ?41 billion of debt ($52 billion), against revenues of ?30 billion ($38 billion).

That means it has already been a victim of the Faultline and its share price reflects that. It?s now departing Chairman Marco Tronchetti Provera, was faced with an impossible job. Pay down debt while retaining a credible position as a future media business. What most telcos would have done is sell off its overseas investments, such as those in Latin America, and today it has announced a deal to sell its part ownership in Turk Telecom for $500 million, almost the same day that it has purchased AOL Germany for ?675 million ($855 million).

Could Telecom Italia retain a stronghold with both a mobile and fixed convergence play, solely in Italy? Probably, and certainly for a while, but it?s strategy instead has been to offer a hybrid IPTV service in France and Germany, using its Alice Home and Alice Box brands, and to supplant this with more AOL broadband lines in Germany. In its home country, a deal this week by Vodafone to partner with Fastweb, seems to undermine the home strategy of operating without a mobile player and the idea of putting Telecom Italia on the block. Italy will, after all, have its own quad play.

Instead TI wants to be an expanding, European wide, triple play, just as other operators such as Orange and Virgin and Deutsche Telekom, and shareholders, are focusing on a quadruple play and converged services.

We have said in the past that British Telecom is fantastically disadvantaged trying to bring a triple play to life with no mobile arm, and now Telecom Italia, which has all the necessary strands, finds that its debt stopping it from doing the same. BT responded to its high debt by doing just what TI wants to do now, selling off its mobile arm, a move that must be hugely regretted, however necessary it seemed at the time.

We have analyzed the Telecom Italia deal in detail in another story in this issue, but other deals announced this week are related to the same stampede for convergence.

Dutch telecoms group KPN said it will buy the Netherlands operations of Italian Internet service provider Tiscali paying ?255 million ($323 million) for the privilege.

What KPN gets are 276,000 broadband and 126,000 dial up customers. What Tiscali gets is the opportunity to drop out of both the Dutch market and the German market, where its operations are also for sale, and spend the proceeds on a strong IPTV triple play in the UK, with its Homechoice acquisition, and in its home territory of Italy.

Again there is no fourth play, the mobile element, for Tiscali, but perhaps its doesn?t need one or can add one later.

The truth is that the underlying infrastructures of mobile and fixed communications ARE separate, except in the extremely new world of broadband wireless (only Sprint has voiced a strategy with four services delivered over the same wireless infrastructure).

So there are no fundamental underlying reasons why an MVNO, or partnerships with tier 2 and 3 cellcos, can?t be the basis of a quadruple play. So for Tiscali, and for Telecom Italia if it does succeed in selling off Telecom Italia Mobile, it may remain a viable strategy.

But although there are no technical reasons for having the same infrastructure, there are political and other dimensions to the quadruple play. Two organizations will squabble over who makes all the money. They won?t have economies of scale on content purchasing, they won?t be able to merge their content back end operations. They may run into regulatory issues.

So while it is reasonable for Tiscali to go cap in hand to someone like Vodafone and cut a deal either for an MVNO or for a package deal that includes all four services, this is only because it doesn?t threaten the mobile operators with its size or its market power. And any way it?s going to be tough for Tiscali to find a way forward, on its reduced footprint, once quad play economics begin to emerge. But it is an entirely different thing to give up a huge mobile brand like Telecom Italia Mobile and then try to build partnerships with what used to be your rivals, even with a company that will have virtually no debt. We can?t see Orange, Vodafone or T-Mobile falling for that one, because they either have, or are building their own quad play and anyone else is too small for Telecom Italia to partner with.

And similarly it is ok for Vodafone to cut a deal with Fastweb, because this will create the first quadruple play in Italy, using Fastweb broadband lines for the fixed portion of Vodafone?s service.

That service may compete with both Fastweb?s existing triple play, and with Telecom Italia?s potential for a quadruple play, but Fastweb wins out of it. It has only under 1 million customers, and it will gain access to the 24 million customers of Vodafone. So it has opted for a partner that can scale, despite the fact that it may end up competing with it. That deal is currently only about telephony, and converging phone services over wireless and fixed lines.

If Vodafone begins to offer video over the same lines, it might just as well buy Fastweb, and we would expect that to happen eventually.

In the UK, Vodafone felt a similar partnership with British Telecom was adequate and in Germany it has begun a convergence strategy with its Arcor subsidiary.

Quite clearly the way forward for Telecom Italia, given all of this, is to sell off the 22 million Brazilian customers it has, where it has no chance of any kind of fixed line play, to one of the stronger international majors, Vodafone, T-Mobile, Telefónica, TeliaSonera and Orange, and use the money to pay down debt. That would halve its mobile buying power, but a true quad convergence play across large swathes of Europe would more than make up for this.

But there are more deals, both rumored and announced this week which show the effects of the Faultline. The Telecom Italia story has thrown up the fact that its Chairman was in secret negotiations with News Corp CEO, Rupert Murdoch, which some commentators think might buy Telecom Italia Mobile.

This is of course nonsense, just as the idea that Murdoch is about to pull out of its stake in DirecTV in nonsense.

Murdoch is a remarkable businessman and he would undertake neither move. He MIGHT sell Sky Italia to Telecom Italia, although we doubt it, as that?s where he got it from. He MIGHT sell content to a Telecom Italia business that has sold off its mobile division.

He is supposed to be disillusioned with DirecTV and the prospect of it acquiring a return path in the US so that he too can set up a triple or even quadruple play. John Malone of Liberty Media, a business with a substantially lower worth than News Corp is said to be stalking further ownership in News Corp and getting close to owning more shares than the Murdoch family. A poison pill has been put in place to defend against this, and yet the US national newspapers see Murdoch running scared from the US king of media.

But selling off DirecTV disadvantages his Fox properties, and his MySpace and other internet acquisitions and reduces his scale in content buying. DirecTV is also growing at a fast clip.

The fear of Malone is supposed to be so palpable that Murdoch will risk everything just to get him out of his News Corp ownership, and he is thought to be discussing swapping control of DirecTV in order to get those shares back under his control.

If any of that?s true, Murdoch would not be out in Italy buying a mobile company, instead he?d be in the US, at home, fighting his corner. It might be different if Telecom Italia was in the US, where it would make up a quad play, but it?s not.

It is a tricky situation with Malone but the value of News Corp would likely fall if Murdoch lost control and the wonders that he has worked at DirecTV, getting it into profit and building up a substantial cash surplus, would mean that its value would plummet if he were no longer at its helm.

A better strategy for him would be to buy Liberty Media shares and build a stake that would scare Malone into swapping shareholdings and force him on the back foot setting up his own poison pill shareholder agreement.

So here we have companies that no longer are sure what they are. We have one telco that wants to be a media company. We have one media company that is trying to buy control of a TV operator, and a TV operator that has big content interests needing the benefits of becoming a fully fledged telco, or at least an ISP, with an IP return path. And iin such an environment, anything can happen, most of it bad.

High-speed WiMAX wireless coming
By Bill O'Brien

Link: http://www.record-eagle.com/2006/sep/24wimax.htm

Saginaw firm is expanding its service in region

TRAVERSE CITY ? A downstate company is poised to ramp up the availability of high-speed wireless Internet service across northern Michigan.

Saginaw-based SpeedNet, the state's largest wireless broadband provider in Michigan, received a $5.6 million loan from the Michigan Broadband Development Authority to expand its service network in northern and central Michigan and to purchase Wireless First, an Internet service company in Traverse City.

The company will use the funds to install new antennas on buildings and towers in Grand Traverse, Leelanau, Kalkaska, Emmett and Antrim counties. Equipment upgrades also are planned in Bay, Saginaw, Midland, Tuscola, Isabella and Presque Isle counties. The expansion will put the company within the service range of another 200,000 households in the central and northern parts of the state.

"We think it's the right time to invest in Michigan, because we think the economy is going to turn around," said Bruce Moore, SpeedNet's vice president and general manager. "And we see the northwest Michigan area as a great opportunity to invest in that."

SpeedNet specializes in providing "non-line of sight" access points ? also known as "WiMAX" technology ? that allow customers to receive a high-speed wireless Internet signal over significant distances from a transmitting tower without interruption. The technology is especially beneficial in rural areas where hilly terrain and trees can hamper direct signals.

A WiMAX transmission tower is conceptually similar to a cellphone tower in that it can provide service in a radius of up to 30 miles and beyond, compared to the typical 300-foot radius of a WiFi hotspot. WiMAX uses a lower frequency range where its transmissions are not easily disrupted by physical obstacles, allowing for better service in remote rural areas.

The service currently costs residential subscribers $34.95 per month for broadband service, with transmission speeds up to 100 times faster than a dial-up modem. It works with a modem or an outdoor antenna, providing customers with Internet service around their homes or other locations where a signal is available.

Moore expects service to be available in some parts of northern Michigan by early 2007.

WiMAX service could be a boon to both residents and businesses in northern Michigan, where high-speed Internet service is often confined to the infrastructure limits of the telephone and cable television companies.

"For rural economic development opportunities, I think this is huge for our region," said Tino Breithaupt, senior vice president of economic development for the Traverse City Area Chamber of Commerce. "It's a big deal for a lot of different companies."

High-speed wireless service will help businesses located in smaller towns or in remote areas better compete with those in larger cities where high-speed access has been available for years. The state's Rural Broadband Initiative program aims to provide affordable high-speed Internet access throughout Michigan by the end of next year.

Demand for the service should be strong, one local computer expert believes, and it could draw more business interest in northern Michigan.

"I think it very much would be (in demand), especially in our outlying areas," said Timothy Gillen, president of Terrapin Networks in Traverse City.

"With WiMAX, once the infrastructure's there you can shoot information all over the place," he said. "If there's serious money and a serious commitment, that's great news for us."

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