In The Headlines
Hello World! Affordable Internet Service Comes to Ships at Sea
In the past, it has been a pricey proposition to connect a commercial ship to the Internet. But a new device is overturning the old business model for Internet access at sea, and lifting sailors’ spirits in the process.
One of the early adopters of the new service is Captain Amo Antonio of the Hellespont Progress, a tanker ship plying the Atlantic Ocean. When he uses the service to talk with someone, the voice on the other end is strong and crisp. This is no small feat. A call to a commercial ship 1,000 miles from land usually sounds garbled. Worse, it can cost several dollars a minute. The Voice over IP (VoIP) Internet calls Antonio makes aboard his ship are not only clear, but extremely cheap.
Antonio is able to do this because his ship is outfitted with a C-Bird antenna. The device, which is designed by a Brooklyn-based company called Maritime Broadband, gives commercial vessels high-speed Internet access at a relatively low fixed cost. Antonio, who has been working on ships since 1974, said the old phone technology made it hard to communicate. With VoIP, “…it seems like you are working on the land,” he says.
The C-Bird is the brainchild of Zevi Kramer, a telecommunications engineer who learned that commercial shippers faced a lack of affordable Internet access. After years of work, he developed a very small aperture terminal antenna that worked on the so-called C-band of frequencies, often used for satellite communication and considered reliable in rainy conditions.
Internet access on ships has been available since the 1990s but at a steep per-kilobyte cost. Ships had to be careful about how much data they used, lest they run up a large bill. With the C-Bird antenna, Maritime Broadband upended that business model, offering a flat rate for unlimited data usage starting at $400 a month with a $900 monthly equipment lease. The leading supplier of telecommunications to ships is currently a company called Inmarsat. Jim Lawrence, chairman of Marine Money International, a firm that tracks the industry says, “They really pushed Inmarsat, the 500-pound gorilla. Before Maritime Broadband, there really wasn’t price and performance competition.”
The C-Bird innovates in other ways. First, it is much smaller than conventional antennas, saving space on a ship’s deck. It also smartly protects its sensitive parts within its housing. Similar antennas require a pricey external shield called a radome. Furthermore, one of its three axes–which are used to position an antenna on a constantly shifting object like a ship–is virtual, using predictive software instead of a motor to control for position. Finally, the C-Bird ships in parts, allowing crews to assemble it themselves and avoid an expensive crane rental in port. “We provide a turnkey solution for commercial ships at sea to have Internet,” says Mary Ellen Kramer, Maritime Broadband’s chief executive.
Sounds like a lot of trouble for a simple phone call, but that is precisely the goal. A well-run ship turns over 20% of its crew, industry veterans say. And some jobs, like those in the oil and gas industry, require a company’s officers to have years of service to qualify for a contract. Internet connectivity gives crews a way to stay in touch with the rest of the world while at sea, helping improve morale and crew retention, according to a 2011 Deloitte report that outlines challenges for the maritime industry. To date, only nine ships have installed C-Bird, but Maritime Broadband says it is in talks with some 3,000 vessels. “In an industry that hasn’t had a revolution since going from sails to motors,” Lawrence says, “this is the biggest thing to happen in a long time.”
Uber Takes on America’s Cities
When Uber, the alternative to taxi service, started five years ago, it promised riders an end to overpriced trips in dirty, run-down cabs. For drivers, it offered an escape from working for a garage. On the back of buses in New York City, Uber puts ads aimed at cabbies, and just about anyone else with a driver’s license and a little free time. The ads say “Drive with Uber: Get Your Own Car for Under $30/Day, No Credit Needed.”
Early on, the company escaped the attention of the taxi system it sought to upend. Its drivers, mostly livery car operators who used Uber’s app to connect with passengers looking for rides, provided a premium service and were vastly outnumbered by taxis. In 2012, the company went a step further and introduced UberX, which allows nonprofessional drivers to make money on the side ferrying passengers in their own cars. Now, with tens of thousands of drivers in 140 cities worldwide, Uber no longer has the luxury of going unnoticed. The company has become the target of city and state legislators and union activists who want it to follow the same rules as traditional taxis.
Taxi drivers must meet training, licensing, and vetting requirements. Cabs are regularly inspected, and drivers have their licenses reviewed annually. New UberX drivers are only asked to pass a criminal background check, carry a license and proof of auto insurance, and have access to a vehicle in “excellent” or “exceptional” condition. The company says it monitors them, but a recent police sting at San Francisco’s airport caught nine UberX drivers operating without proof of insurance.
In June, Virginia ordered Uber to cease operations until it “obtains proper authority” to do business in the state. Police are issuing citations for as much as $500 to drivers caught picking up passengers. Nevada and Massachusetts joined insurance authorities in 16 other states in sending alerts alleging Uber drivers are not always insured. Unions representing traditional taxi drivers are piling on, as well: The Teamsters are trying to organize Uber drivers in Los Angeles and Seattle.
The company says it is being singled out by politicians who have an interest in preserving the old system. “We’re in this political campaign, and the candidate is Uber,” the company’s chief executive officer, Travis Kalanick, said at a tech conference in May. “And the opponent is . . . named Taxi.”
With a $17 billion valuation and backing from Google, Uber is taking a decidedly establishment approach to fighting the Establishment, hiring top lobbying firms in states where politicians are trying to regulate its business. In Illinois, where the company ran into opposition in Chicago, it retained Michael Kasper, a confidant of Mayor Rahm Emanuel; in Washington, D.C., it hired the Franklin Square Group, run by Joshua Ackil, a veteran of the Clinton White House. In California, where a bill advancing through the legislature would impose new insurance requirements on ride-sharing companies, Uber is represented by the lobbying firm Gonzalez, Quintana & Hunter, which also works for Facebook.
Uber has scored some successes with its lobbying efforts. On June 5, Colorado became the first state to grant the company statewide approval. Drivers there will not be required to meet existing taxi standards. In May, Boston Mayor Martin Walsh set up a task force to modernize the city’s taxi rules. He has hinted they will leave room for Uber to operate. “There is a balance,” he said. In New York and Washington, D.C., UberX is allowed to do business alongside heavily regulated taxis. Securing a foothold in a few major cities could help ease Uber’s way into places that are trying to shut it down. And the company’s public political battles may turn out to be useful in attracting new customers and supporters.
Sources:
1. http://bit.ly/1j5qYD7 – Fortune
2. http://bit.ly/1oaPWNv – Tech Times
3. http://buswk.co/1qYOGRI – BusinessWeek
The Good News Is . . .
• The U.S. unemployment rate for June fell to 6.1%, the lowest level since before the financial crisis peaked six years ago. The Labor Department said payrolls rose by 288,000 workers which handily beat economists’ expectations. The retail industry added over 40,000 workers last month and hospitality businesses payrolls rose by 39,000. Manufacturing added 16,000 new jobs and construction added 6,000. Government employment grew by 26,000 last month and is up by 54,000 so far this year, following a five-year downsizing.
• Nike, Inc., a leading maker of footwear, apparel, equipment, and accessories, reported earnings of $0.78 per share, an increase of 2.6% over year-ago earnings of $0.76. The firm’s earnings topped the consensus estimate of analysts by $0.03. The company reported that revenues rose 10.9% to $7.4 billion. Management attributed the company’s performance to an expanding gross margin and a lower average share count which more than offset increased sales and administrative costs and a higher tax rate.
• The Swiss drug maker Roche Group said that it would acquire Seragon Pharmaceuticals for $1.7 billion. Seragon is a privately held biotechnology firm focused on developing treatments for breast cancer. With rising R&D costs, established pharmaceutical companies are gobbling up smaller companies with promising products shortly before they are ready for wider distribution. The transaction is expected to bolster Roche’s portfolio of cancer treatments and comes as the pharmaceutical industry continues to consolidate.
Sources:
1. http://bit.ly/TVVymT – Nasdaq.com
2. http://bit.ly/1qJxhia – SFGate
3. http://www.cnbc.com/id/18080780/ – CNBC
4. http://bit.ly/1qzfJnc – Nike, Inc.
5. http://nyti.ms/1m4kFiD – NY Times Dealbook
Planning Tips
Tips for Evaluating Municipal Bonds
Municipal bonds are considered attractive by some investors because they offer an exemption from some taxes on the interest they pay. However, as with any investment, they also come with risk and it is important to consult your financial advisor to determine whether they are appropriate for your risk profile and investment portfolio. Below are some factors to help you better understand and evaluate municipal bonds.
Understand what municipal bonds are – Municipal bond is a catch-all term referring to any state or local government bond with some tax exemptions for the income the bond produces. Like other bonds, municipal bonds pay a fixed annual sum, called a coupon rate, until they mature. Municipal bonds are traded on bond markets, and their prices vary. Most municipal bonds are either general obligation bonds (backed by the government and its ability to raise revenues though taxes) or revenue bonds (payments depend on income from specific projects).
Determine the tax-equivalent yield – The yield is equal to the coupon rate divided by the price you pay for the bond, not the bond’s face value. The higher the yield, the more income you receive for the money you invest. Tax-equivalent yield is what a corporate bond without tax exemptions must pay to produce the same after-tax yield as a municipal bond. To calculate this, first total the rates of taxes from which the municipal bond income is exempt, and subtract that percentage from 1.0. For example, if your municipal bond income will be exempt from taxes totaling 30%, you have 1.0 minus 0.30 equals 0.70. Next, divide the municipal bond yield by that figure. For a yield of 5.6%, divide by 0.70 to get 8.0%. So a corporate bond would have to pay 8.0% to produce as much after tax revenue as the municipal bond.
Check the municipal bond rating – Credit risk is generally very low for municipal bonds, but it is not zero. Look up the bond rating from a service such as Moody’s or Standard & Poor’s. AAA bonds are those deemed to have the lowest credit risk. In addition, check to see if the bonds are insured. Some governments insure their bonds, further lowering your risk. Keep in mind that the safer the bond, the lower its yield will normally be.
Understand the terms and conditions of general obligation versus revenue bonds – Some revenue bonds do not qualify for exemption from federal taxes because of the nature of the project involved. For example, a hospital is deemed “for the public good” and is qualified. A sports stadium probably is not. The bond still might be a good investment for a community, but income from the bond will not be exempted from federal tax.
Consider the bond’s liquidity and inflation risk – Many otherwise excellent municipal bond issues are very small. Consequently, their volume of trading is low, and they might take some time to sell. If the ability to convert the bond to cash quickly is a priority for you, this could be a problem. If you buy a bond and hold it to maturity, you will only receive its face value. A factor to consider when investing for the long term is inflation risk. If inflation rates are high, bonds with a long maturity can lose a significant part of their purchasing power by the time they mature.
Sources:
1. http://1.usa.gov/1j5re4Q – FDIC
2. http://bit.ly/1t9ZsIX – MunicipalBonds.com
3. http://1.usa.gov/1zgwsQr – SEC
4. http://bit.ly/1j5rj8R – eHow
5. http://abt.cm/1t9ZzUP – About.com
6. http://bit.ly/VOBC79 – FinRa.com
