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Will personal cell towers replace the giant monstrosities currently sitting on rooftops and beside highways? Manish Singh, a VP with Continuous Computing, says that may be the case with the 4G buildout. He spoke with me about the company’s new line of software and hardware for carriers deploying LTE networks, noting that those in North America and Europe are asking whether they should deploy citywide — or one consumer at a time, using femtocells.

He said two things are driving this, one being the huge capital expenditure associated with building out a wireless network and the second being the length of time it has taken for widespread use of the 3G data networks. Verizon started deploying its EVDO networks in 2003, but only in the last few months — thanks to better pricing and the iPhone — has 3G data been used by many customers. When it comes to 4G provided by LTE, a controlled femtocell deployment ensures that customers could get LTE speeds of up to 150 Mbps (in theory) while at home or in coffee shops and use the existing 3G network while out and about.

The femtocell strategy will be used in another 4G rollout — this time for WiMAX — as part of the Clearwire joint venture involving Clearwire, Sprint, Google and several cable companies. Earlier this year Dave Williams, a former wireless executive and now SVP with Comcast, told Light Reading the cable ISP will use femtocells to build out a network. Using femtocells will bypass wholesale network costs and eliminate some of the problems of backhaul that can stymie 4G networks, Williams said.

I doubt that wireless carriers will abandon towers altogether, but using femtocells to deploy 4G to customers who want to sign up for the service before a citywide deployment sounds like it could make sense. It could also lead to big returns for investors in femtocell companies such as ip.access, Ubiquisys, or the recently funded Percello.

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I happened across a post on Verizon’s Policy Blog this afternoon and had to chuckle. The entire post is an effort to refute statistics used by organizations that claim the U.S. is falling behind in speed or has really pricey broadband compared with other nations. We all know that statistics can lie, but this particular diatribe is hilarious coming from a company that has stood in the way of collecting meaningful broadband data for years, most recently by suggesting the government pay a nonprofit to collect it. From the Verizon post:

The statistics cited regarding broadband speed, penetration and pricing are confusing, often compare apples and oranges, and in most cases don’t measure really important factors such as who is deploying next generation technologies most rapidly. Mark Twain had a very earthy saying about statistics - “There are lies, damn lies, and statistics”. He meant this as a humorous observation about how easy it is to assume numbers are always right. But it is not the numbers per se but rather how they are used and how comparisons are made that is key.

So while the post knocks the numbers and reports available, Verizon, AT&T and other carriers know the penetration, costs and speeds of most of the broadband users in the nation — and continue to fight giving out those numbers. So, to Mark Twain’s “earthy” aphorism I would add, yes, there are lies, damned lies and spin.

In its second-quarter earnings call this morning, AT&T highlighted the awesome growth of its wireless business, which surged 14.8 percent to $11 billion and accounted for roughly a third of its $30.9 billion in revenue for the period. The company also said that the 3G iPhone was selling twice as fast as the first one, which given the price cut, isn’t too surprising.

Equally unsurprising was the 10 percent rise in the number of smartphone subscribers over the second quarter of 2007 (AT&T is the sole carrier of the iPhone in the U.S.). And those users are surfing the web, pushing AT&T’s data revenue up 52 percent from the same period a year ago, to $2.5 billion. After adding 1.3 million wireless subscribers during the quarter, AT&T is still the largest cell phone carrier with 72.9 million subscribers. However, Verizon said yesterday it had added 1.5 million subscribers, so the iPhone exclusivity can only do so much.

The tethered world was a little less rosy, however. AT&T did add 170,000 new U-verse subscribers, bringing that total to 549,000; it also reiterated its goal of having a million subscribers by year-end. But triple-play services were down and broadband growth is slowing. Subscribers to voice, data and TV fell to 48.4 million from 49.5 million at the end of the second quarter of 2007. And AT&T’s total broadband connections now number 14.7 million, up 1.4 million over the same quarter last year but a mere 46,000 higher than the first quarter of the year.

Verizon President and Chief Operating Officer Dennis Strigl made a big splash at NXTcomm 08 yesterday when he announced that the entire Verizon FiOS footprint could now get speeds of 50 megabits per second. Typically such bandwidth news wouldn’t cause that much of a furor, but there wasn’t much to write home about from the show, which was held in Las Vegas this week.

In his speech, Strigl pointed out that the U.S. has the highest number of broadband users when compared with other countries, in particular that broadband is available in every U.S. zip code. Good point — and one that I’ve made in the past myself — except that it’s no longer true. By that metric, China now leads. Yes, the FCC used to defined broadband as a service that offered, at a minimum, 200 kbps downloads, but it’s since changed that requirement to 768 kbps.

But where Strigl went too far was when he suggested that three-quarters of American households have two providers to choose from — aka a duopoly, which is not my idea of a competitive marketplace. If you factor in wireless and satellite, he said, there are actually six or seven competitors. Talk about twisting the facts to fit one version of the truth! This part of his speech, however, had me choking on my breakfast cereal.

“Massachusetts and New Jersey have similar population density to Korea and Japan and similar broadband penetration. Unlike other countries, what we have accomplished has come not through [government] policy but through private investment.

How telling. So subverting government policy via lobbyists and highly biased friends at the FCC to ensure a future monopoly is all part of good, capitalistic, private investment theory? Maybe Harvard can include that in its future MBA curriculum.

Regardless, I thought it would be fun to see how Massachusetts and New Jersey really square up against South Korea and Japan when it comes to the price of a broadband connection:

Average broadband speeds in South Korea and Japan are 49.5 megabits per second and 63.6 megabits per second, respectively. The average U.S. speed is about 4.9 megabits per second, making it the 14th-fastest country in the world. The average price in South Korea and Japan is about 83 cents per megabit. In the U.S, it’s about $2.83.

But since it would be unfair to use average U.S. stats, I went with Verizon’s prices, the ones it’s going to offer in Massachusetts and New Jersey. On Verizon’s FiOS network, a 50 Mbps connection costs $140 a month — or about $2.80 a megabit. In fact, if you went with Verizon’s 20 Mbps service, you would be paying $3.25 per megabit. (To be fair, Verizon’s price-per-megabit is still cheaper than the $5.25 Qwest charges for its 20 Mbps connection, which costs $105 a month.)

In other words, not until Verizon starts selling a 50 Mbps connection for $41.50 a month and 20 Mbps fiber connection for $16.60 a month can Strigl get away with comparing U.S. broadband with that of the rest of the world.

Verizon reported its first-quarter earnings this morning, with most things going as expected. Wireless is booming (1.5 million net additions, 13 percent revenue growth), FiOS TV’s demand seems to be picking up (263,000 new subscribers, putting the total at 1.2 million), and not surprisingly, the company saw accelerated decline in the number of wireline customers. During the quarter, the company lost 762,000 residential lines and about 186,000 lines.

In other words, there is a renewed urgency around FiOS offerings. The fiber broadband and TV offerings can help overcome some of the line losses. During the quarter, the company added 266,000 new broadband connections — 262,000 of which came from FiOS Internet service. The company had a total of 8.5 million connections: 6.7 million DSL-based Verizon High Speed Internet connections and 1.8 million FiOS Internet connections.

What that means is that Verizon’s DSL growth is all but over. At the end of 2007, the company had 8.2 million subscribers. Of the 300,000 new subscribers Verizon added in the first quarter of 2008, 262,000 are FiOS fiber subscribers. That leaves 38,000 DSL subscribers — or roughly 12,600 new additions per month. At present, FiOS Internet is available for sale to 7.9 million premises. Penetration for the service averaged 22.9 percent across all markets.

Verizon, like many other carriers, is in a race against time: It is critical for the phone companies to keep people talking on their lines if they want to sell them broadband and video services in the future.

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• TechDirt: Court Scrutinizes Software Patents Again
• Engadget: Verizon Offering Unlimited Plans

The 700MHz auction kicks off today, and like kids waiting for Santa Claus, the technology and business publications are tense with anticipation. But FCC chairman Kevin Martin is keeping a lid on this auction, rather than post periodic updates as was done in the AWS auction in 2006.

While you wait to learn who gets the goods who gets a lump of coal, here’s a quick list of everything you need to know about the upcoming auction and why it matters. Check out all the links, because the bidding doesn’t conclude until March 24 and down payments aren’t due until April 11. You’ve got time.

• Setting the rules for this auction took a lot of time — and lobbying.
• There are a lot of bidders: Out of the 214 of them, the big ones to watch are AT&T, Verizon and Google. Interesting no shows are Sprint Nextel and Time Warner.
• It costs a lot to bid: Reserves are set high at $10 billion, but several people think that the current economic crisis might make it hard for those reserves to be met. Heck even Google has seen $16.15 billion lopped of its market cap so far this week.
• Already some have failed. Both Frontline Wireless and Cyren Call, both of which were going after the “D” block of spectrum and its heavy load of public safety requirements, have already bailed.
• Google is bidding, but may not be playing to win against the carriers.
• The winners have to create an open network. The dream of having a network that would allow any device onto it is still alive.
• Or maybe not. Om would like to see the spectrum become unlicensed and treated much like Wi-Fi is today for it to be truly open.

And like childhood obesity, short attention spans and the general decline of Western Civilization, you can blame all of this controversy on television — the shift from analog to digital TV signals, to be exact.

Cynthia Brumfield is a long-time communications, broadband and media analyst at Emerging Media Dynamics, and a blogger at IP Democracy.

AT&T CEO Randall Stephenson triggered a mini-free fall in the shares of phone companies last week when he told investors at a Citibank conference that non-pay disconnects are “happening all across consumer products lines,” with the possible exception of wireless voice accounts. In other words, a larger-than-expected chunk of customers aren’t paying their bills. And AT&T is pulling the plug on them.

This bit of concrete evidence that a recession is indeed underway spooked an already jittery stock market, dragging down non-telecommunications shares in the process. Hardest hit, though, were the leading telecom and cable companies, which managed to recovered slightly but continue to labor under a cloud of investor suspicion.

Comcast CFO Michael J. Angelakis echoed Stephenson’s claim. Speaking at the same Citibank conference, Angelakis said that during the second half of 2007 “we clearly saw bad debts increase, and we clearly saw a pickup in churn.” Translation: A growing number of cable customers aren’t paying their bills, either.

Against this backdrop, earnings season is about to get underway, meaning we’ll soon get a look at some hard fourth-quarter 2007 numbers from the top telecom and cable companies. If Stephenson and Angelakis are any indication, we’re in for disappointing results from the country’s top broadband, voice and video providers.

But a recession-driven slowdown for either cable or phone companies would be a new thing. Historically, cable has prided itself on being recession-proof. During the recession of the early 1990s and the downturn in 2001 and 2002, cable companies didn’t lose customers. In fact, in 2001 and 2002, cable was in the midst of digital TV and high-speed Internet rollouts, which cranked up growth (although the telecom and dot.com meltdowns, not to mention the accounting scandal that brought down WorldCom, made cable seem like it, too, was in the doldrums).

Phone companies have also held up well during economic downturns. Even though the big incumbent companies that now make up AT&T, Verizon and Qwest started losing access lines in 2000, those losses were mostly restricted to the commercial sector and were due to the rapid late-90s rise of competitive local exchange carriers. Consumer spending cutbacks typical of a recession didn’t come into play.

Things could be different this time around, because unlike in the past, cable and phone companies now sell a lot of services that consumers feel are discretionary. During past downturns, customers clung to their voice and pay-TV services because the telephone was considered essential and subscription TV was a bargain service, relative to other entertainment options.

However, that held true before the days of triple-play or quadruple-play bundles, before multiple digital service tiers and HD packages came along and before broadband either existed or was widely adopted. The thing to watch out for now is the possibility that the proverbial bundles of voice, video and data services might unravel.

For example, homes that buy both mobile and landline voice services could feel free to simply cut off the wired voice connection. During his Citibank talk, Stephenson cited this cost-savings measure as one cause of what will in all likelihood be stepped-up line losses for the company in the fourth quarter. Not that wireless substitution hasn’t been going on for a while, but tight household budgets could no doubt accelerate this trend.

Contrary to what I would normally expect, broadband service might turn out be a dispensable expense during a recession. “It’s non-pay disconnect that is driving the disconnect on access lines and on broadband as well,” Stephenson said during his Citigroup talk, reiterating several times that residential broadband growth has suffered some kind of a setback.

Cable companies, which posted very disappointing growth rates across the service board for the third quarter of ‘07 — before the economic slowdown truly took hold — have already started drawing up lower-cost service options and are about to market “double-play” packages of voice and high-speed services.

So what will we hear from cable operators and phone companies in the upcoming quarterly reporting season? Comcast officially confirmed back in December that it won’t make its fiscal 2007 guidance, citing weaker-than-expected subscriber gains. Based on the sounds Stephenson made, AT&T is managing expectations in advance of a weak fourth-quarter report as well.

Most of the other cable and phone companies will probably not have much better news, with the possible exception of Verizon, whose CFO, Denny Strigl, told the same Citigroup investors that the weak economy had “minimal” impact on his company. Moreover, in contrast to its peers, Verizon issued relatively robust third-quarter numbers last fall.

But compared to a lot of other industries, and despite any short-term hit that cable and phone companies may take, the communications network business — be it cable, telco or wireless — is a relatively sure bet in the long term. Both AT&T’s Stephenson and Comcast’s Angelakis, while acknowledging the challenges of increased competition and a weak economy, stressed this fact. “We are in the middle of a growth industry,” Stephenson said.

Vermont regulators are giving Verizon’s decision to sell 1.6 million lines in Vermont, Maine and New Hampshire the thumbs down. They are concerned that buyer of these lines, Fairpoint Communications of Charlotte, NC is too small and as a result the service will suffer, according to The Wall Street Journal.

Fairpoint will have to take on about $2.5 billion in debt to make the deal happen, which means there is real risk of quality of service will go down as Fairpoint starts to tighten the belts to pay off the debt. This is particularly bad news for Verizon which is counting on sales of these quasi-rural lines to fund its fiber optic network. The $2.5 billion can be revived if Verizon lowers the price.

This isn’t the last we have heard of Verizon’s problems with the state PSBs, and expect this to become a hot issue in the upcoming election year.

Update: A spokesperson for Verizon emailed me and said that the sale of lines is not for funding the fiber optic network.

We are NOT counting on this money to fund anything, including Fiber deployment. Our debt is very low and our cash flow is high. We have the capex already built into our funding plan. We are selling these lines simply because they are not a strategic fit for us given our broadband plans. Plus, we’ll continue to be heavily invested in Vermont with wireless and enterprise.

Why phone lines - 1.6 million in total - not strategic for a phone company, I don’t get!

Consider the recently unveiled “any app, any device” initiative by Verizon Wireless in the context of the company’s latest quarterly results.

The wireless unit of Verizon (VZ) reported year-over-year subscriber growth of 12 percent, but a mere 5 percent rise in voice revenues. Data revenue saved the day, surging 63 percent and lifting the company to 15 percent revenue growth overall. Data revenue per user increased 43 percent, while voice revenue per user declined 5 percent — pushing data to 20 percent of revenues from 14 percent.

The same report revealed a 10 percent decline in residential access lines. The voice business of Verizon Wireless, in other words, seems to have entered the same cycle of contraction suffered by Verizon’s wireline business in recent years. Joining the open access bandwagon promises to keep data revenues growing strongly, but CEO Lowell McAdam faces some mighty difficult choices as the 80:20 ratio of voice to data revenues reverses. The legacy pricing model incorporates price discrimination that will prove awkward to preserve.

Consider the lucrative SMS business of shipping 160 character messages for 10 cents each, or roughly $1,000 per megabyte. What happens when all devices cleanly incorporate instant messaging? “Any app, any device” means VoIP-capable devices that transparently support voice and web browsing via data plans. Why would someone pay Verizon an extra $40 per month for voice services? Any data plan that makes video affordable makes voice essentially free.

Does Verizon really have enough conviction to price without discrimination by application type? McAdam said pricing for the bring-your-own-device crowd will be “competitive” and “usage-based.” Even assuming other carriers follow Verizon’s lead to create competition, does “usage” refer to bit volume or application type?

“Any app, any device” sounds like it eliminates the long list of acceptable use prohibitions associated with existing data plans — quite a change of heart for the company. Verizon only recently settled a lawsuit brought by New York Attorney General Cuomo for terminating the accounts of customers with so-called “unlimited” Internet plans for unwittingly violating the plans through activities such as downloading movies.

It may already be too late for Verizon to back away from the edge. Anything short of a fully open network, neutral to bit type, seems likely to turn the PR love fest into user backlash. In any case, no one expects Verizon to embrace the “faster, cheaper” mantra necessary to fully earn induction into the infocom future.

We can suspend our disbelief until the pricing details arrive in January, but the unintended consequences of the announcement likely represent the best hope for progress. Verizon’s vision of the future may not have changed much. It just gets easier to read the writing on the wall when your back is up against it.