ISPs Increasingly Focusing Capital Outlays on Data Services, Vendor Sandvine Says
Network operators such as cable companies and wireless carriers are increasingly focusing their capital spending on their broadband services, a fact that could bode well for network equipment company Sandvine in 2012, CEO Dave Caputo told investors Thursday during an earnings call. Capital outlays from the major operators have been concentrated “around the delivery of the consumer data experience,” he said. “If you look at cable, that’s becoming the key pillar. If you look at mobile, mobile data is becoming the key pillar of their offerings,” he said.
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"We're hopeful we're delivering products at the core part of their service offering,” Caputo said. But companies appear to have been thrifty lately and the wave of so-called “budget flush” that typically accompanies the end of calendar and fiscal years hasn’t materialized “in the last few years,” he said.
Sandvine hopes ISPs will use its products to create new broadband services, Caputo said. It’s already happening outside of the United States, where carriers are offering mobile data tiers for email, chat and social networking, he said. “I continue to have confidence that there is going to be an increasing movement to selling mobile data in North America and the U.S. in different ways than we have traditionally had,” he said.
Just as “service creation” came to wireline phone service with the addition of voicemail, Caller ID and other services, a similar phenomenon could occur with broadband, Caputo said. Already, some smaller mobile carriers are experimenting, including Sandvine customer Cricket Wireless, Caputo said. Cricket offers pre-paid mobile data packages where customers can buy more time at retail, he said. “If we can create new innovative plans with a customer like Cricket, we believe those are very replicable around the world and in North America,” he said.
Increasingly, application and content providers could begin to pay for consumers’ broadband use, Caputo said: “There will be many new ways of buying bandwidth.” Already device makers such as Amazon are paying for consumer bandwidth for Kindle users, he said. Down the road, other devices such as cameras and GPS receivers could follow the same route, he said. “Content or cloud providers paying for bandwidth on behalf of the user as they consume it through the device, be it a camera or a book reader -- that type of concept is going to become a big thing,” he said.
Sandvine’s Q4 sales fell 14.7 percent from a year earlier to $20.6 million. It swung to a $3.6 million net loss from a $600,000 profit a year earlier. Separately, the company said it plans to buy back up to 12 million of its shares during the coming 12 months.