Friday, July 31, 2009

JD Power Study Suggest Potential for Huge Prepaid Wireless Shift

About 16 percent of prepaid wireless users have switched carriers in the past 12 months. Some 51 percent of those switchers previously had contract service, a new survey by JD Power and Associates says.

About 12 percent of those surveyed said they would switch carriers sometime in the next year, compared to 13 percent in 2008.

Among those intending to switch, 24 percent intend to switch to contract service. That suggests 75 percent of switchers would consider prepaid plans.

And there are clear differences between "pay as you go" users and prepaid customers, suggesting two clear niches. The study also finds the average pay-as-you-go user is older, more likely to be retired and has fewer wireless phones in their household.

The monthly prepaid plan user more closely resembles the contract plan user, desiring a large network, mid-range feature phones and messaging, but without the commitment or penalties of a contract.

That is likely the most significant finding, as it suggests the real difference between prepaid and postpaid users is in fact not so much ability to pay or demographics as it is preference for terms of service.

That is not to say some prepaid users are "credit challenged" or lower income. But the survey suggests the potential prepaid audience is quite a bit larger than it has been in the past. "Mainstream" postpaid users might in fact be persuadable candidates for prepaid.

About 66 percent of prepaid users who renew monthly report that they have cut ties with their former contracted service carrier. That suggests huge possibilities for market share shifts as well.

Pay-as-you-go users spend an average of $35 for each airtime purchase, a decrease of $5 from 2008.

Monthly non-contract users spend an average of $25 less per month than those with contracts do. They report spending $56 per month compared with an average monthly service cost of $81 for contract users.

Non-contract customers report using 320 minutes per month—a notable increase from 233 minutes in 2008.
Pay-as-you-go users report using an average of just 145 minutes, while monthly non-contract users report an average of 573 minutes per month.

According to the study, more than 40 percent of non-contract plans are monthly plans, compared with less than 30 percent in 2008.

FCC Investigates Google Voice Blocking

The Federal Communications Commission has opened an investigation into the blocking of Google Voice from the iPhone App Store.

James D. Schlichting, acting chief of the FCC's Wireless Telecommunications Bureau, has asked for answers to several questions. The FCC wants to know what role AT&T played in the decision. Keep in mind that the FCC already is looking at wireless open access and handset exclusivity, both of which seem for those reasons to bear on the status of Google Voice on the iPhone.

The FCC further wants to know what role AT&T might play in restricting other iPhone apps. The agency also wants to know what roles Apple and AT&T can play, by contract, in the development of iPhone apps.

The FCC wants to know whether Apple consulted with AT&T in the process of deciding to reject the Google Voice application. Documents relating to any such discussions must be produced.

The FCC also wants an explanatiion of how Google Voice might differ from any other VoIP application that al4ready is authorized to be used either on the iPhone or on AT&T's network.

The agency wants detail on any conditions included in AT&T’s agreements or contracts with Apple for the iPhone related to the certification of applications or any particular application’s ability to use AT&T’s 3G network.

If there are terns of use limiting customer use of third party apps in general, the FCC wants to know what those limitations are.

The FCC wants to know about AT&T’s role in certifying applications on devices that run over AT&T’s 3G network.

If there are any differences in AT&T’s treatment of apps running on the iPhone and other devices used on its 3G network, the agency wants to know what those are.

Please list the services/applications that AT&T provides for the iPhone, and whether there any similar, competing iPhone applications offered by other providers in Apple’s App Store. The agency wants to know whether any other devices that operate on the AT&T network can use Google Voice.

The FCC also wants to know whether apps rejected for the iPhone are allowed to run on other devices on AT&T's network.

"Please explain whether, on AT&T’s network, consumers’ access to and usage of Google Voice is disabled on the iPhone but permitted on other handsets, including Research in Motion’s BlackBerry devices," Schlichting has asked.

People sometimes forget how powerfully regulatory and legal policies bear directly on the telecommunications business. This is just the latest example.

For All of You Who Find Mobile Usage EVERYWHERE Annoying

Really, there are times when our mobiles do not HAVE to be powered up.

Price War Breaking Out in Prepaid Wireless

MetroPCS Communications is making another potentially disruptive move in the prepaid wireless market, introducing a prepaid $40 a month unlimted plan including voice, texting and Internet access.

The $45 plan now include sunlimited email, navigation and social networking applications. MetroPCS’ $30 and $35 local unlimited plans will now include caller ID and call waiting.

The $50 plan continues to offer smartphone customers complete HTML Web browsing and enterprise wireless email.

For anybody who doubted potentially huge changes in the prepaid market, this is yet another example.

MetroPCS was the first North American wireless carrier to offer unlimited international long distance calling for an additional $5 per month, to over 100 countries and over 1,000 destinations. This unlimited international long distance feature is available on both the $45 and $50 service plans.

MetroPCS is also offering consumers a family plan. With MetroPCS’ family plan, families with two to five lines will be able to enjoy MetroPCS Unlimited Nationwide service for talk, text and Web access for $35 per line.

TracFone Wireless, the nation's largest prepaid wireless service, recently introduced a $45 flat-rate monthly plan for calling and text messaging. That undercut the previous $50 benchmark for unlimited monthly plans set by Sprint's Boost Mobile prepaid service earlier this year. The pressure is now on Boost, and Virgin Mobile, to match its rivals by dropping pricing below the $50 level.

The other big change will be a breakthrough in phone models available to prepaid customers, particularly the higher-end smart phones. Historically, low phone cost has been something of a requirement for budget-oriented customers, but that will change as the customer base begins to reflect the same demographics as the postpaid base.

Apple, AT&T Ban Google Voice, Put Restrictions On Google Latitude

In the never-ending debate about whether usrs benefit more from "open" amd "closed" application environments in the mobile space, Apple has tended to be the best example of innovation and consumer benefit provided by the "closed" model, even though many would likely argue the evidence tends to suggest "open" leads to more rapid innovation, as a rule.

"Closed" can lead to benefits if the provider can optimize performance of all applications and devices, while at the same time delivering better user experiences. Apple has excelled, on that score.

But Apple's recent decision to ban Google Voice from the iPhone App Store is a salient reminder that the ability to optimize user experience can come at a cost.

To be sure, nobody is quite sure who was the driving the ban. AT&T obviously has incentive to protect its existing voice business. If Apple drove the decision, the reasons are more difficult to discern.

Google Voice allows free domestic calling and texting and cheap international calls, and will in the near future provide number portability. That AT&T wouldn't be too happy is obvious. But why would Apple support such a move, beyond the clear interests of its partner?

Could perceived competition between Apple and Google, which traditionally has been quite well mannered, be moving to a new stage more analogous to the ways Microsoft and Google now compete?

In what might be a related move, Google Latitude for iPhone and iPod touch. available as a Web application running in Safari, might have been "forced" to operate in a more restrictive way than the same app runs on other mobiles.

Gooble says it worked closely with Apple to bring Latitude to the iPhone in a way Apple thought would be best for iPhone users. But afterwards, Apple requested that Google release Latitude as a Web application "in order to avoid confusion with Maps on the iPhone, which uses Google to serve maps tiles.".

"Unfortunately, since there is no mechanism for applications to run in the background on iPhone, which applies to browser-based web apps as well, we're not able to provide continuous background location updates in the same way that we can for Latitude users on Android, Blackberry, Symbian and Windows Mobile," Google says.

Again, there are reasonable user experience reasons for Apple to avoid user confusion. But one suspects there might be more than that going on here.

Thursday, July 30, 2009

Skype in Patent Dispute

eBay says in a regulatory filing that it is set to go to trial on June 10, 2010 on what appears to be a key VoIP patent dispute with Joltid Limited, which licenses peer-to-peer technology to Skype..
Skype has begun to develop alternative software to that licensed through Joltid.
EBay wrote in the quarterly filing that it recognized that pending litigation over the technology behind Skype could ultimately have an "adverse result," so it had begun to develop alternative software to the technology it licenses from Joltid Ltd for Skype.

In its regulatory filing, which contains the typical disclaimers about the potential damage if eBay's position is not upheld, eBay made the statement in typical legalese that if the company is not successful, it might have to shut Skype down.

That could, in a worst-case scenario, lead to Skype being shut down, but that typically is not what happens. The parties come to some sort of settlement. Remember the wave of patent infringement lawsuits back in 2007 that started with Vonage?

One way or the other, this will be settled. Joltid doesn't win if its customer goes away, and eBay is developing alternate methods in any case.

Wednesday, July 29, 2009

Watch for Fireworks in Prepaid Wireless Later This Year

Watch for shake-ups in the U.S. prepaid wireless market later this year. The obvious example is what Sprint Nextel might do with its 10 million customer strong Boost-plus-Virgin Mobile business.

Now that unlimited prepaid plans have been successfully launched by MetroPCS and Leap Wireless, for example, other contestants are likely to have to rethink packaging and pricing. Products, after all, are positioned in relationship to other products, not in the abstract. In fact, when a produce cannot be valued and priced in relationship to other known products, consumers are likely to resist buying.

In context, the prepaid market will look different to typical buyers when the range is "unlimited for this price" compared to "buckets at other prices." The value equation is changed, even if, as a practical matter, for most uers the difference between "truly unlimited" and "a big bucket" is indistinguishable.

Were Sprint Nextel to announce an unlimited prepaid, it wouldn't be unusual, given its similar "Simply Everything" postpaid offers, or the fact that major competitors already have proven market receptivity to prepaid "unlimited" offers.

That would not be Dan Hesse, Sprint Nextel CEO's style. He will want to do something more potentially disruptive. Since I have been predicting the emergence of smart phone prepaid plans, I might as well suggest that would be something Hesse would consider.

Traidtionally, major carriers have tried to protect their postpaid bases by restricting handset access available to prepaid users. But given heightened competition in the overall mobile market, the growth of demand for prepaid and the leading role of smart phones in creating a base for new data services and revenue, smart phones inevitably must move to prepaid, as well as being more heavily pushed on the postpaid side of the business as well.

So one possibility is a major push by Boost Mobile and Virgin Mobile USA to offer unlimited plans with access to devices such as the Palm Pre, reversing the age-old policy of allowing prepaid resellers access only to older handsets.

As for why Sprint Nextel might have wanted to buy Virgin Mobile USA, there are a couple of possibilites. Undoubtedly Sprint Nextel has concluded that prepaid is due for significant growth. In that case, one might as well start growing faster than other competitors.

Perhaps Sprint Nextel is preparing for a disruptive move in prepaid. In that case, heft makes sense. Perhaps Sprint Nextel simply wants the better economics that accrue to scale.

Also, Virgin Mobile might simply have reached the point where it typically makes sense for a larger player to buy out a smaller player. That point ideally comes when the target company customer base is highest, churn is lowest, costs have decreased, and demand has increased.

At the end of the first quarter, Virgin Mobile's base was at 5.2 million subscribers from 5.1 million in the year ago quarter and had gross adds of 630,259, falling from 795,575 subs. That suggests a peak has been reached.

Virgin Mobile’s churn at 4.8 percent was flat sequentially and down from 5.1 percent in the first quarter of last year. And its earnings of $19.1 million were up from $4.7 million in the prior quarter.

Basically, the acquisition profile was right.

And there are competitive considerations. It appears Verizon is looking at a possible expanded move into retail prepaid. T-Mobile already is a significant player in prepaid, and in recent quarters has seen most of its net growth in prepaid. AT&T says it is watching the market, though prepaid only represents about four percent of AT&T's market, and the company is wary of cannibalization of its postpaid base.

All of that is an explosive set of circumstances. I'd be watching for fireworks that will redefine "prepaid" later this year.

Tuesday, July 28, 2009

Verizon Offers Free Nationwide Wi-Fi to its Wired Broadband Customers

The public Wi-Fi hotspot model seems to be morphing again.

Verizon now is offering most of its broadband customers free access to more than 13,000 Wi-Fi connections across the United States, partnering with Boingo Wireless.

Other providers offer similar Wi-Fi services, including Cablevision Systems, which offers such free access for its cable modem customers, and AT&T, which does the same for its high-speed access customers at 20,000 locations, in partnership with Wayport.

To get the free Wi-Fi access, new Verizon FiOS Internet customers must order a 25 Mbps downstream / 15 Mbps upstream or faster connection and DSL customers must order 3 Mbps/768 Kbps or faster connection.

Barnes & Noble bookstores now offers free Wi-Fi access at tis retail locations, as do hotels and other public locations, at least in part, as a customer amenity, not a revenue driver.

The Wi-Fi business model has been through several iterations over the past several years, with most local providers discovering it isn't much of a business as a stand alone. That's one reason Verizon, AT&T and Cablevision essentially use Wi-Fi access as a customer acquisition and retention tool, not a stand-alone business.

Nor have municipal Wi-Fi projects fared well. Most have found the retail revenue insufficient to support service.

Hotels and airports often use it as an amenity. For Starbucks, the business model is coffee. For Barnes & Noble, the business model will likely include sales of e-book content.

The Barnes & Noble eBookstore launched with 700,000 titles, and since the Barnes & Noble e-reader will not be available until later this year, the only way the retailer can sell is to wireless-connected PCs or other Wi-Fi-enabled devices such as the iPhone, iPod touch or Wi-Fi-enabled Blackberries.

So far, retail models have relied on a mixture of wholesale service sold by one provider of infrastructure to another provider with a retail business model, for-fee use by retail users and product sales such as e-book content. Over time, it seems likely the wholesale model will expand, as retail opportunities are limited, given the growing use of 3G and 4G mobile connections.

Brands are Media, These Days

Because of the Internet, blogs and social networking, marketing really is changing. It has been clear for some time that where brands once relied on media companies to get their messages across, using public relations and advertising, new forms have arisen.

Many firms, perhaps most, now divert spending from advertising to bolstering their own Web sites. Many, because of real simple syndication, recommendation engines and other sharing tools, can become "media" in their own right. That is not to say the new tools completely replace the older channels. It would be more accurate to say the new tools more often supplement the older channels.

Most firms likely still would see more value in a story in the Wall Street Journal than on their own blogs and content sites. But most firms can use "earned media" (non-paid attention as compared to for-fee advertising, for example) to a growing extent.

Whether the goal is "branding" or "direct response," earned media seems to be assuming a greater role. But the business models are different. Where "professional" media have relied on a revenue model where attention is converted to advertising or subscription revenue, "earned media" relies on converting attention to sales of hardware, software or services.

That means many of the proxy measures used by professional media to measure success have less relevance. Where volume metrics such as visits, clicks or views are a way of demonstrating "attention," those same metrics may or may not have as much direct relationship to brand sales activity, especially in businesses with long sales cycles.

Attention still is important. But the attention a brand wants is the sort that contributes to sales of the firm's products, not advertising or other revenues. So far, this is a metric nobody seems to have figured out. Perhaps it is not directly measurable.

What does seem clear is that attention created by brand-sponsored content can lead to peer recommendations. And studies of influence do suggest that peer recommendations are more powerful, by far, than traditional or even most "new" media messages.

So far, this more art than science. But brands believe it works. Some studies show firms are switching spending away from advertising and towards their own Web sites and content. This will have big implications both for marketing and for the media.

Verizon Wireless Unveils Cross-Network, Cross-Device, Cross-OS App Store

Up to this point, "application stores" have been device specific. But Verizon Wireless is launching the first cross-device, cross-network application development effort and store. Specifically, developers can create apps running across four different mobile providers and operating systems ranging from Research in Motion, Android, Windows Mobile, Palm and Symbian operating systems.

The “Joint Innovation Lab” is a consortium consisting including Verizon, China Mobile, Vodafone and Softbank. That platform, which will push common standards for developers, will allow those developers to reach a billion customers on all four networks.

The consortium will offer its own software developer kit and open up handset and service application programming interfaces to developers.

This is important: until now, developers have had to design apps to work with the dozens of handsets supported by each carrier. Now, however, Verizon says it will offer tools so developers can write one app that will work on all handsets developed under the JIL standard.

The JIL will feature common application access management standards, including for things such as billing and common application management standards.

The app store will be run by Qualcomm. The storefront will be available on the Internet, mobile web and through a portal on the handset, and is expected to be operational by the end of 2009.

Many obstacles must be surmounted, of course, but the effort is qualitatively different from all prior app store efforts, in offering cross-network, cross device and operating system capabilities.

Sprint Buys Virgin Mobile

Sprint Nextel Corporation is acquiring Virgin Mobile USA for $483 million, Sprint already owns 13.1 percent of Virgin Mobile, which has been a mobile virtual network operator customer.

The move illustrates the growth of prepaid as a segment within the mobility business, as well as the maturation of the mobile business overall. Organic growth is harder to come by, making growth through acquisition a more reasonable tactic. But the biggest take away is the growth of the prepaid segment, which traditionally has been a segment major operators have shyed away from.

Monday, July 27, 2009

Broadband Stimulus: Let the Bellyaching Begin!

Not a dime of broadband stimulus money has been awarded but the carping will begin in earnest once the first round of awards are made. That is almost inevitable, given the vastly greater number of potential "losers" compared to the actual award winners, the range of contestants already locked in fierce competition with each other and the predictable complaints that incumbents got too much of the money.

The Rural Utilities Service portion of the program arguably faces more challenges. The National Telecommunications & Information Administration likely will have an easier time since that is where many training, public computing center and other projects can legitimately be funded.

Almost by definition, rural broadband communications is capital intensive enough that if one is not already a service provider, becoming one would be prohibitively difficult. Beyond that, running a service provider business does require some organizational skills and capabilities even experienced entrepreneurs have found challenging.

If the nation learned nothing else from the massive expansion of investment in competitive service providers in the late 1990s, it is that most such ventures without continuing "high cost" support will fail.
One example of such "incumbent bias" is Viaero Wireless, a Fort Morgan, Colo.-based wireless company providing services to residents and businesses in eastern Colorado and western and central Nebraska.

The company was formerly known as NE Colorado Cellular Inc., prior to which the company was known as Cellular ONE of Northeast Colorado.

Viaero is seeking as much as $150 million in stimulus funding to expand its operations, says Mike Felicissmo, company VP. That presumably would include an upgrade to a 3G network, though the company already provides EDGE services.

Wired telecom companies might not be too happy facing the new competition, though. And some will not be happy if such incumbent firms get funding. Of course, that is what RUS traditionally does.

Satellite Gains 3.5%, Cable Flat, says Centris

Satellite TV providers have gained 3.5 percent more subscribers, while cable TV operators were essentially flat for the period, say researchers at Centris. And while some have noted sluggishness in ownership of Blu-Ray video players, adoption grew 71 percent over the last year.

There were 7.2 million Blu-Ray households in the first quarter of 2008 and 12.3 million Blu-Ray households in the first quarter of 2009.

Some 32 million households now subscribe to satellite-delivered multi-channel TV service, up from 30.9 million a year ago.

Nearly 63 million households have cable TV, but pay-per-view is quite flat. In April 2009 Centris reported that 12.6 million households ordered PPV in a typical month, unchanged from 2008.

In the first quarter of 2009, about 64 percent of all US households access the Internet each month, up nine percent over 2008, and representing growth of about nine percent.

About 80 percent of all homes accessing the Internet did so using broadband, a 17 percent increase over 2008. The percentage of homes using broadband has grown at about a 17-percent rate over the last three years, Centris says.

Where Did AT&T Prepaid Accounts Go?

AT&T's prepaid results were weaker om the second quarter. "Obviously we had a net loss of customers of about 400,000," AT&T CFO Richard Lindner says.

So what happened? Did those users stop using their mobiles? Other evidence suggests not. Few users in recent surveys claim to have terminated their mobile services entirely.

So the most-logical explanation is that other prepaid mobile providers picked up those 400,000 customers. And Lindner doesn't dispute that view. "Certainly we’re seeing impacts from other competitive offers in the market," he says.

Prepaid represents about four percent of AT&T wireless service revenues and less than that amount as a percentage of total earnings. So AT&T is not likely to push too hard in the prepaid direction for fear of cannibalizing its more-lucrative postpaid business.

But that will mean growing opportunties for providers of prepaid wireless.

"Obviously we recognize there’s certainly some opportunities for us there in that portion of the market and so you’ll see us continue to address that and make some tweaks and changes to our product offers," says Lindner.

"But one thing that I think we feel is important is we are not going to put offers in the market that we don’t feel will be profitable or earn a reasonable return," he adds. "And we won't do anything obviously that would impact or cannibalize our postpaid base."

AT&T, Verizon: Business Segment Suffers Worse than Consumer

Verizon Communications and AT&T arguably took bigger hits to their enterprise than consumer segments as a result of the recession, second quarter financial results suggest.

Revenue from Verizon’s global enterprise business dropped 6.7 percent while the wireless customer segment revenue grew 27.7 percent. Even consumer wired services revenue grew 13.7 percent in the second quarter.

AT&T also reported that the deepest economic impacts in the second quarter came in the business services segment.

AT&T CFO Richard Lindner likewise says total business revenues, including enterprise, wholesale, small and mid-sized customers, were down 5.6 percent year over year. Excluding equipment sales, business revenues were down 4.3 percent, Lindner says.

Wireless revenue was up 10.1 percent, on the other hand, while total wireline consumer customer revenues were $5.4 billion in the second quarter, compared with $5.7 billion in the year-earlier quarter and essentially flat, down only $11 million, versus the first quarter of 2009.

"We’ve seen pressures across business product lines but the largest impacts are volume related in traditional voice and legacy data products," says Lindner. "The sectors where we’ve seen the most impact, as you would expect, are in finance, transportation, and manufacturing."

Consumer broadband and video are helping both AT&T and Verizon, while it appears legacy business products are suffering. Newer services including Ethernet, VPNs, hosting, IP conferencing and applications services grew 15.2 percent year over year.

In an economy where consumer spending drives roughly 75 percent of activity, one might have suspected consumer revenue would be harder hit. Instead, it appears massive job losses have crimped business segment spending the most.

Friday, July 24, 2009

50% to 60% of New Prepaid Wireless Users Will Never Go Back to Post-Paid

Prepaid wireless clearly is growing. In the first quarter, for example, about 61 percent of the new net customers T-Mobile added were prepaid accounts. In the fourth quarter of 2008, T-Mobile added 57 percent prepaid accounts. In the first quarter of 2008 T-Mobile added 25 percent prepaid customers.

So the big question is what those customers might do once the recession is over and there is less need to watch spending on mobile and other communications and entertainment services.

Wireless analyst Chetan Sharma thinks it is possible that "it is quite likely that 50 percent to 60 percent of such consumers don’t go back to postpaid."

For major wireless providers, this will mean a decline in average revenue per user. For prepaid providers, the trend will mean continued opportunities to take market share from postpaid providers.

The other trend is that although prepaid traditionaly has been viewed as a niche segment for lower-income customers, that could be changing. Lots of customers who traditionally have used postpaid plans might find they can get along quite nicely using prepaid.

Over time, even smart phone customers will find they are able to buy prepaid service that allows them to use higher performance, later model devices with prepaid plans.

Mobile Streaming Video Grows 58% Last Quarter

Worldwide mobile data bandwidth usage has grown 30 percent during the second quarter of 2009, says Allot Communications. Asia leads the growth with 36 percent; Europe posted 28 percent growth and the Americas 25 percent.

Heavy data users do not distinguish between their fixed and their mobile networks and seem to expect the same service from the Internet, irrespective of their access method, the report says.

That is going to be a problem, for the same reason a small percentage of heavy users create performance issues for all other users, one might reasonably conclude. The other issue is that the fastest-growing traffic type is streaming video, which grew 58 percent during the quarter. Since streaming video requires 100 times the bandwidth of a voice call, you can imagine what the problem is.

The other issue is that mobile traffic is not evenly distributed: some locations get dramatically more demand than others. Peer-to-peer traffic, for example, accounts for 42 percent of bandwidth utilization in the busiest cells on the network, but only 21 percent in the average cell.

Since mobile licenses are awarded in ways that mean usable bandiwidth in any one location is limited, fancier engineering, higher network cost and more-sophisticated traffic engineering are required at some cell sites, though others might manage just fine.

Thursday, July 23, 2009

Internet Rivals TV as Top Leisure Pursuit

The Internet now rivals TV as a favorite leisure activity, say researchers at Frank Magid Associates (click image for larger view). And computer or game consoles are not far behind.

Broadband Adoption is Not Just about Availability

Some observers think broadband adoption is primarily a matter of availability. It is important, but it is not the only important factor.

Even if every home and business in every OECD country were wired with a broadband connection, the United States "per capita" rank would actually fall to 20th, because of differences in the size of households in each of the countries.

In other words, "America would be 100 percent broadband saturated and yet our standing would plummet because the OECD ranks on a per capita basis rather than per household," says Federal Communications Commission Commissioner Robert McDowell.

In Spain, for example, 28 percent of people flatly say they "do not want" broadband. About 15 percent of homes do not own a computer.

About 13 percent of surveyed consumers say they do not find the Internet "useful."

S0me 12 percent say they do not have time to use the Internet and 10 percent say they do not know what the Internet is. Only four percent of non-users say it is "too expensive."

So the main reason non-users are not buying broadband access services is that they do not see the Internet's usefulness and value.

Wednesday, July 22, 2009

Questions about Zer01, Buzzirk

Nancy Gohring , a reporter fror IDG News Service, has raised some uncomfortable and so far unanswered questions about Zer01, the new prepaid mobile service launched by United Technologies Group and sold by channel partners including Buzzirk. The service promises unlimited voice and data for $70 a month, with no contract.

But Gohring says "what little information is available about the services is vague, technically inconsistent, and doesn't match up with public records."

And that's the least of the issues. Anybody thinking about becoming a distributor probably should read this as part of their due diligence. It's a heck of a piece of reporting and research.

Ad Market Recovery in 2010?

Perhaps we all are anticipating too much "normalcy" from the current recession and recovery. But PricewaterhouseCoopers (PwC) expects a 2010 recovery.

PwC says worldwide advertising spending will reach $421 billion 2009.

The bad news is that figure is down 12.1% from 2008, which saw $479 billion in spending.

Fortunately, PwC expects the online and mobile (which it treats as one category) and video game ad spaces to rebound in 2010 with five-year compound annual growth rates of 7.7% and 13.8%, respectively.

PwC expects all global media markets to see a rise in spending by 2012. Recovery will not be evenly spread around the world, however. Total ad spending in North America compounded annually will decrease by 1.6% from 2009 to 2013.

Online, mobile and video game advertising will see 6.4% and 13% compound annual growth rates, respectively, over the five-year period.

Online and mobile advertising spending, down in 2009, will rebound in 2010. North America will see overall advertising spending rise in 2011.

Ninety-four percent of North American advertising spending will come from the United States.

Tuesday, July 21, 2009

No Inflection Point for Interactive Media, Yet

Nothing is going to replace search advertising as the top interactive category, just as nothing appears able to dislodge display advertising, between now and 2014 or so.

And though interactive advertising is growing, it will not displace offline alternatives, either.

By 2014, all interactive channels together will account for about 21 percent of total ad spend.

That is not to say greater changes are unlikely. One of the enduring lessons of "disruptive" change is that there is a sometimes long gestation period before an inflection point is hit. Then the change goes non-linear and vast changes can occur very quickly.

Nobody knows yet if that is what lies ahead for advertising. But it bears watching, as 2009 seems to have marked something of a watershed for print media, for example.

U.S. Internet Growth 3% to 2013

The total number of people online will grow by over 45 percent to 2.2 billion users — with much of that growth occurring in Asia — over the next five years, according to Forrester Research.

Asia remains the biggest global Internet growth engine: 43 percent of the world's online population will reside in Asia by 2013, with 17 percent of the global online population in China.
Growth rates in the US, Western Europe, and the major industrialized nations in Asia Pacific such as Australia, Japan, and South Korea will slow to between one percent and three percent.

That is a significant finding, as it suggests most people who want to use the Internet already do so.

Online penetration in the United States will rise from 73 percent to 82 percent over the next five years, representing about a three percent annual growth rate.

By 2013, U.S. online penetration will be on par with the most highly penetrated markets of Europe and Asia, such as the Netherlands, the UK, Japan, and South Korea.

By about 2013, if not before, there also will not be any material difference between people using the Internet and people using broadband, other analysts project. That should lead policymakers to take a harder look at the costs and benefits of any programs designed to "increase" use of broadband access.

The United States is about at the point where non-use of broadband is directly linked to non-use of broadband.

Mobile Marketing Second Only to Web Among Top Ad Agency Execs

Though mobile marketing spending lags far behind combined Web advertising, mobile marketing has become quite interesting to many advertising excutives recently.

Where a third of executives say Web channels are most popular, mobile campaigns are second, at 15 percent.

That is interesting as mobile campaign spending is perhaps one percent the size of search advertising, for example.

Traditional methods, including TV, print and direct mail, are in single digits.

To the extent that spending ultimately follows interest, mobile campaigns should skyrocket, despite the currently limited amount of spending in the category.

Search Still Will Lead 2014 Interactive Marketing Channels

Search will remain the single largest interactive marketing channel in 2014, and online display will keep its second-place status among marketers.

But social media marketing will show the highest growth rate, passing email marketing.

Mobile marketing also will grow by an order of magnitude.

What Are New Satellite Phone Operators Up To?

New satellite communications operators TerreStar Networks and SkyTerra Communications plan to offer dual-mode (satellite and cellular) services in North America to dual-mode smart phones aimed at a niche market of public safety, law enforcement and government users.

Based on past experience, one might wonder whether that market opportunity is big enough to support much of a business for both providers.

ABI Research, for example, suggests three million satellite-capable LTE smartphones will be shipped in North America in 2012. But there might be something more going on here.

The Federal Communications Commission allows satellite operators to offer simultaneous satellite and cellular services over their licensed satellite spectrum. That suggests a possible play as a fourth-generation access play in rural markets where it is very expensive to supply such capability.

“We believe that the greenfield satellite companies’ plan is to forge short-term roaming partnerships with AT&T and other cellular operators and then, when LTE services are deployed, position themselves to be acquired by these major players, including their prized spectrum," says ABI Research practice director Kevin Burden.

Monday, July 20, 2009

Danger for Service Providers If Confidence Doesn't Climb

Led by a dramatic decline in the expectations of U.S. consumers for the near future of the U.S. economy, the most recent results of the Royal Bank of Canada Consumer Attitudes and Spending by Household Index show a marked downward shift for July 2009, continuing the slide begun last month.

"Consumer confidence is resetting to the levels seen earlier this year and is likely to remain there until there is concrete evidence of a turnaround, "says RBC Capital Markets Managing Director Larry Miller.

Should those trends continue, service providers will have to worry anew that relative stability in communications and entertainment servcies markets will take a hit more pronounced than what they have seen to date.

So far, there seems to be minor damage to broadband access revenues and a growing trend to substitute prepaid for postpaid mobility. Some surveys suggest only a few percent of broadband subscribers say they actually have cut off service. A recent Strategy Analytics survey suggests 10 percent would consider reducing broadband if they had to cut somewhere.

As many as 19 percent say they would consider abandoning mobile service, though there is little if any evidence users actually have done so, at that level. Most other surveys show little if any actual termination behavior.

About 19 percent of respondents to the Strategy Analytics poll say they would consider dropping their multi-channel entertainment service, but again, actual behavior does not support moves of that scale.

Still, a prolonged "scrape along the bottom would increase pressure on consumers to move more aggressively. And the RBC survey suggests that might just be the case.

After four consecutive months of rising hopes that the economy would turn around in the next six months, the longest such increase in expectations since the launch of the index in 2002, many Americans are coming to grips with the idea that it may still be some time before things get better, Miller says.

Apple iPhone, BlackBerry are Most-Profitable Mobile Devices

Just two mobile devices account for the overwhelming share of global handset profits, says Deutsche Bank analyst Brian Modoff. Between them, the two devices account for 35 percent of global mobile operating profits despite representing just three percent of global market share.

In 2009, the two devices will move up to five percent market share but claim 58 percent of
total operating profits.

Smart phones hold only about 13 percent of total cellphone sales globally, but are growing, despite a drop in the broader cellphone market in the first quarter.

The iPhone, which is exclusive to AT&T, draws the fattest subsidy at about $400 a phone, Modoff said. BlackBerries draw subsidies averaging $200 from U.S. operators. Basic cell phones get a $100 subsidy. Manufacturers of basic phones make next to nothing, unless they have enormous scale.

Nokia, the industry leader, manufactured 46 percent of the units sold last year but earned 55 percent of the profits, Modoff estimates.

5% of U.S. Universities, Colleges Have Deployed Unified Communications Campus-Wide

About five percent of U.S. university and college campuses already have deployed unified communications campus-wide, according to a recent survey by the Association for information Communications Technology Professionals in Higher Education. Another four percent of respondents say they have extensive deployments, but to a limited number of people.

About 44 percent report having limited deployments or trials underway. About 26 percent are in planning stages. About 20 percent have no UC projects or planning underway.

The survey featured responses from 103 institutions.

24% of U.S. Mobile Users Possibly Are No Longer Voice Centric

About 13 percent of U.S. mobile phone owners say they "never" make calls on their devices. Altogether, about 24 percent make calls once a week or less, according to Lightspeed Research. That's a shocking statistic for devices known as "mobile phones."

One might draw several conclusions from the results. It is possible that, for many users, the mobile is helpful, but not something that adds value on a daily basis. The other likely conclusion to be drawn is that text communications are, for many users, a preferred or reasonable substitute for voice, as email has displaced a huge amount of voice communications.

If so, the findings indicate the clear emergence of usage patterns centered around texting or mobile Internet activities rather than voice, and the importance for mobile service providers of migrating revenue models to primary reliance on data-related services and applications.

In many cases, it would seem to make sense to lead with data plans and features, and then add on voice only afterwards. It also would seem to make sense to plans and devices specifically optimized for text and Web applications.

That would be a reversal of historic practice, where voice plans lead and text plans or data plans are an add on.

But the practice would not be without precedent. Most BlackBerry users likely are more interested in mobile email than mobile voice. They want the voice feature, as many users buy primarily for voice, but want the texting feature. Most iPhone users likely value mobile Web access as much as voice or text messaging.

The point is that mobility has become a multi-product business, with lots of different ways to create devices and service plans that appeal to different user populations.

Will Skype and Google Voice Dominate Mobile VoIP?

Skype, the global leader in PC-based VoIP, has been preparing for mobile-based VoIP as well, but Google Voice might wind up being the market leader in mobile VoIP, says Jeffrey Lindsay, Sanford A. Bernstein analyst.

"It's probably the biggest current threat to Skype," says Lindsay. Ultimately, Google might grab as much as 60 percent market share in the mobile VoIP space, he predicts.

Saturday, July 18, 2009

40% U.S. Mobile Broadband Adoption

To the extent that U.S. consumers are not using mobile broadband, availability is not the problem.

Well over 90 percent of locations now are 3G enabled.

ComScore says the United States caught up with Western Europe in the adoption of 3G in June 2008, with 28.4 percent of American mobile subscribers having 3G devices versus 28.3 percent in the largest countries in Europe.

U.S. 3G penetration went past 40 percent in the first quarter of 2009, says wireless data analyst Chetan Sharma.

Enterprise C Suites Now are "Digital"

A generational shift is occurring in U.S. enterprise "C" title ranks, but one trend already is clear: the Internet has become the top information resource. Some 81 percent of respondents 50 or younger are on the Internet daily while 62 percent of executives older than that did so.

Also, most C-title executives at firms making more than $1 billion in annual revenue have shifted their information-gthering strategies away from traditional media and to Internet-based media.

When consuming "traditional media" at work, 70 percent of respondents say they get that information online. When consuming "traditional broadcast media" at work, 69 percent use the Internet.

C-suite executives do their own searches. That is a sharp break from the way most such executives probably worked decades ago, when "middle managers" gathered information and passed it up to the C suites. These days, the C suite knows it can get information directly, and does so.

Also, video and social communities are growing in importance, the survey reveals. About 33 percent of 50-and-under executives view work-related videos "daily," while 31 percent use a Web-enabled mobile device to search for information related to business.

The mean age of all executives taking this survey was 46.7 years. But there remains one glaring exception to the trend: only one percent of those over the age of 50 provide daily contributions to a work-related blog. Another four percent in this age group say they contribute several times a week, the Forbes Insights study found.

In contrast, 35 percent of executives ages 40 to 49 say they maintain a work-related blog daily. That figure increases to 56 percent of the executives under the age of 40.

That probably matches what you would have guessed: younger and "middle-aged" people have gotten comfortable with the new technologies while older people tend to resist. That same pattern was found for computer use, Internet use or email in the ealier days as well.

Overall, about three percent of surveyed executives over 50 participate in Twitter or another microblog. In contrast, 34 percent of the executives ages 40 to 49 participate. Among users under the age of 40, 56 percent of the executives under 40 participate.

The top three research topics that C-level executives seek are competitor analysis (53 percent), customer trends (41 percent), and corporate developments (39 percent).

Of those executives in sales and marketing, 76 percent say they seek customer trends. Of those executives in finance, 63 percent said they seek competitor analysis. Of those executives in IT, 59 percent seek technology trends.

The study, "The Rise of the Digital C-Suite," is based on a survey of 354 executives at U.S. companies with annual sales in excess of $1 billion. It also included one-on-interviews. Nearly half held C-level titles, such as CEO, CMO, and CIO; the others held senior-level titles, such as EVP, VP, and director. A total of 12 percent identified themselves as working in sales and marketing.

Friday, July 17, 2009

U.S. Will Leap Over Europe in Mobile Advertising Within 2 Years

Alex Moukas, CEO of Velti, the top European mobile ad company, said he fully expects the U.S. to leap ahead of Europe in mobile advertising within two years. That would be a switch, as U.S. practitioners have lagged their European counterparts up to this point.

So far this year, mobile advertising is the second most-popular marketing channel, following the Web.
Campaigns sending traffic to site increased 10.46 percent in June, says Millenial Media. The study also found that the average number of monthly page views per user was 99 page views.

Verizon Wireless to Voluntarily Limit Exclusive Handset Deals

In a wise and fairly clear attempt to head off more regulations, Verizon Wireless now says it will allow small wireless carriers to use its popular and "exclusive" handset models after six months. Smaller wireless providers have been complaining that exclusive handset deals represent unfair competition.

"Any new exclusively arrangement we enter with handset makers will last no longer than six months, for all manufacturers and all devices," Verizon Wireless CEO Lowell McAdam has told key Congressional lawmakers.

Some consumer advocates also object to handset bundling, for similar reasons. But some economists have pointed out that bundling promotes competition and innvoation, as it provides incentive to introduce new features and models. "Exclusivity arrangements promote competition and innovation in device development and design," McAdam says. "This new approach is fair to all sides."

It isn't immediately clear whether the new policy also applies to wholesale customers.

Online is the Only Growing Ad Business

ZenithOptimedia has raised its forecast for Internet advertising to10.1 percent global growth globally in 2009, up from the 8.6 percent it predicted in April 2009. By 2011 ZenithOptimedia expects online to account for 15.1 percent of all ad expenditure, up from 10.5 percent in 2008.

Most of this growth will come from paid search,. In the United States search advertising to grow 20 percent in 2009, while traditional display grows three percent and classified grows 1.8 percent.

The Internet is the only medium ZenithOptimedia expects to grow in 2009.

Thursday, July 16, 2009

Does National Broadband Policy Make a Difference?

How important are national broadband policies in explaining broadband adoption rates?

Apparently not so important, according to economists at the Phoenix Center for Advanced Legal & Economic Public Policy Studies.

In fact, "91 percent of the differences in fixed broadband adoption rates in the 30 OECD member countries can be explained by reference solely to differences in income, education, population age, and other demographic factors that bear little relationship to broadband or telecommunications policy," the Phoenix Center says in a new study.

That isn't to say government regulations and policies are unimportant. It's just to say that such policies explain about nine percent of adoption rate results.

Tuesday, July 14, 2009

Big Brand Marketing: What's Up, What's Down?

At a time when big brand marketing budgets have been cut about 20 percent on average,some channels, at many companies, are getting more funding: social media, Web site development, online advertising, and email marketing.

Traditional media is taking a hit, though. About 67 percent of big brand marketers say they have decreased spending on TV, print, radio and magazines (click on image for larger view).

About 52 percent say they have decreased spending on direct mail.

But 47 percent of respondents say they are spending 47 percent more on social media. About seven percent say they are spending less.

About 44 percent are spending more on Web sites, while 22 percent say they are spending less. Online advertising is being hiked at 40 percent of firms, while declining at 27 percent of companies. Email marketing is up at 38 percent of firms and down at 11 percent of big brand companies.

Perhaps significantly, the top two reasons why spending is being cut, the logic is a combination of tight budgets and inability to track ROI or track results.

That is important going forward as the recession will end. Budgets will grow again. But the desire for quantifiable returns of some sort will remain. And that will favor online and mobile campaigns.

60% of Marketers Shifting Spending to Social, Mobile, Online

Six in ten marketers surveyed by Forrester Research say they will increase their interactive marketing budgets by shifting funds from traditional media. Among the channels, it looks like direct mail will be among the biggest losers.

About 40 percent of respondents say they will be cutting it in favor of social, mobile or online. But 35 percent of marketers also say newspaper advertising budgets will be pared. Some 28 percent say they will shift budgets away from magazines while 12 percent say they will shift funds from TV campaigns.

But you might not see most of the movement until the current recession ends, as ad budgets overall are so tight that marketers cannot experiment much.

Among the interactive channels, Forrester sees social media and mobile marketing spending expanding significantly between 2009 and 2014, with social media jumping by 34 percent on a compounded annual basis and mobile marketing increasing by 27 percent.

But these are young channels, at least as compared with relatively mature interactive mediums such as e-mail, display advertising and search. Social media’s increase reflects a starting point of $716 million in 2009 (seen as increasing to $3.11 billion by 2014). Mobile marketing expenditures stand at 319 million this year, and are seen as jumping to $1.27 billion by 2014.

In comparison, online display advertising, which currently stands at $7.83 billion, will rise by 17 percent annually, ending up at $16.9 billion in 2014. Search marketing, which currently sucks up $15.39 billion in spending, will jump by 15 percent, to $31.59 billion, and email, now at $1.25 billion, will increase 11 percent, to 2.08 billion.

Monday, July 13, 2009

Social Networking Ad Spend up 13 Percent in 2010

After about a three percent dip in 2009, U.S. ad spending on social networks is expected to climb 13 percent in 2010, with another eight percent rise in 2011, researchers at eMarketer say.

Nokia, AT&T to Unveil Phone for Social Networking

AT&T plans to sell the Nokia Surge, a handset optimized for social networking and messaging, starting July 19, 2009. AT&T will sell the Surge for $79.99 with a two-year service agreement and after a mail-in rebate. Without the contract, the phone will sell for $130.

The phone will use an advanced Web browser with Flash support to view sites in full HTML or watch YouTube videos. Additionally, AT&T will supply the phone with their popular network features, including AT&T Navigator for GPS navigation, AT&T Music for Napster music support, and AT&T Video Share for one-way video conference-like calling.

Nokia is not positioning this phone against their high-end Nseries or Eseries smart phone devices, but more as a mid-range smart phone, which many of us would argue is the sweet spot for users who are big on social networking but unable or unwilling to spend much more for a smart phone.

The Symbian S60-based smart phone features a full QWERTY keyboard, a browser with Flash and supports IM, text or e-mail, sending multimedia messages, AT&T Video Share and updating and connecting to popular social networks.

The Surge also features a 2.0 megapixel, GPS capability, AT&T mobile music and AT&T video share. Through the pre-installed JuiceCaster users can share videos and pictures from the Surge to sites including Facebook, Twitter, YouTube and Flickr.

The "Nokia Surge hits the sweet spot between a quick messaging phone and a smartphone because of its low-price and strong feature set," says Michael Woodward,AT&T VP.

The Surge also features a microSDHC expansion slot and Bluetooth with stereo audio support.

France Telecom Gets Aggressive About Content

Many observers think telcos, which have no legacy core competencies in content, will not be much of a factor in the video market to the same extent that cable operators have become. France Telecom suggests those views might be wrong.

Last year, France Telecom launched five channels featuring films and TV shows from several major U.S. studios. France Telecom subscribers could get Warner Brothers "Harry Potter" movies or "The Sopranos" on their TVs.

France Telecom also has exclusive rights to popular soccer matches by France's Ligue 1 to create a mini-ESPN that French consumers can get only by signing on with Orange.

And the move seems to be paying off. In the last year, sports and TV offerings have helped boost Orange's TV customer base by 69 percent.

There are a couple of ways this could play out in the U.S. market. DirecTV, which does own exclusive National Football League programming, might wind up wholely owned by a U.S. telco. Beyond that, firms such as Verizon and AT&T already offer exclusive content.

AT&T iPhone customers recently had the chance to watch AT&T National golf tournament coverage on their iPhones, for example.

Will Google Voice, Google Wave be Business UC Contender?

Some people might not think Google Voice and Google Wave are contenders in the business unified communications business. But executives at Cisco Systems are not among them.

Officials at Cisco Systems Inc. say they are closely watching Google Inc.'s aggressive foray onto their unified communications turf and plan to respond quickly by boosting the capabilities of Cisco's offerings.

Cisco's announcement in late June that it plans to offer at least some pieces of its IP voice technology as a hosted service could be viewed as a direct response to Google's recent move to start limited release of its Web-based Google Voice and Google Wave communications tools.

Though Google Voice and Google Wave might be seen primarily as consumer offerings, they could provide value for smaller businesses. And as often is the case in communications, tools that start out in the consumer space frequently wind up adding more features over time, ultimately becoming useful for more business users, and even larger businesses.

Google Wave, which has been in development for about two years, promises to give users a single platform for accessing e-mail, instant messaging, blog, wiki, multimedia management and document-sharing tools.

Wireless: Fixing What Isn't Broken?

The Federal Communictions Commission says it wants to examine exclusive wireless carrier deals with handset makers because it may be "anti-competitive. But Bernstein analyst Craig Moffett says "it’s laughable" assertion.

Moffett argues that the Federal Communications Commission and the Department of Justice are wasting their time reviewing the wireless market. Wireless providers don't have market power, handset manufacturers increasingly do.

Apple has taken any power that AT&T has had, Bernstein argues.

Wireless prices are falling as carriers compete, handset makers are gaining more power in the ecosystem and the wireless game is about apps, a game carriers cannot control.

"The argument that handset exclusivity is anticompetitive also comes at a curious time," says Moffat.

"Indeed, a case can be made that handset makers – well, Apple, actually – have played one carrier off against the other in virtuoso fashion, and are on the brink of stealing the wireless business from the wireless carriers," says Bernstein.

Moffett says iTunes provides a better analogy.

"Apple’s direct-to-consumer end run around the wireless industry is in many ways simply a repeat of its brilliant negotiation with the music industry at the dawn of iTunes back in 2001," Moffat says. "Less than a decade later, Apple has managed to capture considerable value from the music industry as it sells ever more iPods."

Customer loyalty is to Apple, not AT&T.

"Something more profound than just short term economics is afoot," he says. "Apple has radically tilted the strategic playing field away from the network operator in favor of the device manufacturer"

"Remarkably, Apple has so thoroughly stolen the customer relationship – who would argue that Apple iPhone customers’ first affinity is to the device rather than to the network – that the network is not only irrelevant, it is rather a source of derision," says Moffat.

The iPhone seems to be doing just fine at "wrecking" the wireless business without the government’s help.

O2 Offers 600 Free Tweets

The UK's second-largest largest mobile phone network, O2, will allow customers to use Twitter for free, up to 600 total messages, starting in August.

The move says something about the cost of sending and receiving text messages in the U.K. market, the new role social networking is playing in driving mobile data usage and suggesting the growth of a new niche within the mobility space.

As Blackberry devices catered to email centric users, and iPhones catered to mobile Web users, we should now see the emergence of service plans, and perhaps devices, optimzied for social networking or texting.

"We believe that mobile will soon become the most popular way of accessing social networking sites, giving real-time access to tweets and status updates wherever you are," says Antony Douglas, the head of content at O2.

O2's move follows Vodafone's earlier move to allow free Twitter status updates, though Vodafone's offer is billed as a "limited time" offer.

The move by O2 is a result of a deal between Twitter and the UK's mobile phone networks struck earlier this year. That deal followed Twitter's decision to stop its text message update service in 2008 as a result of the high cost of sending texts over the UK's networks.

Orange and T-Mobile are expected to produce their own Twitter services soon.

Saturday, July 11, 2009

U.S. Online Advertising Grows One Percent a Year

The Internet’s share of total media ad spending is rising by at least one percentage point every year, partly because marketers are spending more on Internet ads, and less on ads in traditional media.

As often is the case for businesses with a key technology component, productivity improvements are not captured accurately by retail prices or spending.

Online advertising works better than offline media, so campaigns sometimes, perhaps most of the time, can be run for less money than has been the case in the past. As the shift to online media continues, overall advertising spending by brands can decline even as effectiveness increases.

In the United States, eMarketer projects that the online share of ad dollars will grow from nearly 10 percent this year to slightly more than 15 percemt in 2013.

Friday, July 10, 2009

16,000 More Cell Sites Needed for Ubiquitous Mobile Broadband

About 23.2 million U.S. residents live in areas where 3G wireless broadband service has not yet been deployed and that about 43 percent of roads lack such coverage, says CTIA.

It will require an additional investment of about $22 billion to reach those areas with a dual-mode network.

The study says about 16,000 new cell sites, including towers, will need to be constructed and 55,000 existing sites will need to be upgraded to create a ubiquitousnational mobile broadband network.

Mobile Broadband: New Business Models Needed?

The good news is that mobile broadband--using PC dongles or cards or mobile handsets--is growing fast. The bad news is that all that new data traffic is straining mobile networks.

Irish regulator ComReg, for example, notes that there were 1.27 million broadband subscribers at the end of March, up 28 percent from a year earlier and up six percent from the previous quarter.

But this has been driven mainly by mobile broadband subscriptions, which have almost doubled over a year with 90.6 percent growth.

And Ericsson predicts that mobile broadband connections will surpass fixed broadband connections as soon as 2010 (click image for a larger view).

Originally "dimensioned" to cope with small-screen devices used occasionally, 3G networks are having to cope with laptop-sized video downloads, hours-long social networking sessions and rich Web 2.0 sites which download content "in the background".

In some cases, says researchers at Telco 2.0, the revenues from mobile broadband services are not even covering the costs of delivering data to the users.

That suggests mobile operators may have to revisit their pricing and packaging plans.

Today, most mobile broadband subscribers buy traditional monthly contracts, typically over 12 to 24 month periods. The problem is the perceived value versus price, if an increasing number of mobile broadband devices are put into service and most of those devices use little data.

Broadband connectivity costs are evaluated one way when a single connection at home can be shared among many users, and when usage is fairly frequent. Broadband costs will be looked at quite differently when each user must buy multiple connections on a device-by-device basis.

That suggests an eventual need for pricing mechanisms of all sorts, most based on ways to better match usage to cost. Session-based access, similar to the familiar WiFi hotspot model, is one option. Temporary access is yet another possibility.

Bundling of mobile broadband with other services such as fixed broadband or mobile voice services, or creation of broadband family plans, are other options.

Ad-supported access is conceivable, though the model has not worked all that well for communications services, at least so far.

Prepaid and casual use models also likely will be needed. Perhaps most users will be comfortable paying for a home fixed broadband connection and then mobile broadband for their smart phones.

But as game players, music players, cameras or other devices start to benefit from broadband connectivity, episodic use plans at relatively low prices seem inevitable.

Thursday, July 9, 2009

Sprint Drops Bombshell

Sprint has decided to outsource all of its network operations to Ericsson as part of a seven-year deal that indicates Sprint no longer considers network operations a core function, or something that allows it to create customer-facing value.

Network operators have been outsourcing some operations and functions for years. But no tier-one carrier has gone this far. Sprint will continue to own its network and make investment and equipment purchase decisions.

Sprint personnel will maintain first-line, customer-facing operations. But Sprint no longer considers the day-to-day management of its network a core source of market differentiation.

The move does not indicate any change in the perceived value of network ownership. But the devaluation of routine network management is shocking for an industry where most employees once worked in network operations.

Apple iPhone Proves Disruptive

Apple and Nokia are on radically different trajectories, at least where it comes to smart phone market share, say analysts at Generator Research. The firm believes Nokia will tumble from about 40 percent share today to just 20 percent in 2013.

Apple's share, meanwhile, should accelerate and hit 33 percent of the market at the same point.

Apple would match Nokia's share sometime in 2011 and ship as many as 77 million phones that year.

Observers rightly point out that the mobile handset is a complicated business with lots of subtle angles. It also appears to be a business where new attackers can dislodge global incumbents.

Wednesday, July 8, 2009

Will New Unlimited Plans Tap New Market for Bill "Predictability"?

Ready Wireless, a provider of prepaid wireless services. Based in Hiawatha, Iowa, has launched two unlimited usage prepaid plans. The first provides three days of calling and a bundle of text messages for $10. The other plan provides seven days worth of calling for $15.
The plans are aimed at casual users who prefer unlimited calling, but have only sporadic use, or want to manage cash outlays closely. That's one potential new market segment for prepaid or postpaid.

The other market is any consumer that simply wants payment predictability.

Recently there have been new offers launched in the industry by prepaid wireless providers offering monthly plans costing $45 to $50. And amidst a bit of a shift from postpaid to prepaid plans, some speculate that another shift from traditional prepaid products to "unlimited" plans could occur.

John Hodulik, UBS analyst says 12 million of 50 million total U.S. prepaid subscribers are on an unlimited plan. But those numbers could grow very fast if a price war breaks out, and resets pric ing expectations.

Unlimited plans might be creating a new value proposition: "pay to avoid limits and overage charges" that might challenge the "pay only for what you use" value proposition.

In principle, those value propositions should hold either for prepay or postpaid plans.

Most customers still remain in the middle, paying for a bucket of minutes on a "use it or lose it" basis. But there always is an element of bill unpredictability with such plans.

You might think heavy talkers are the prime candidates for an unlimited plan, but I'd be willing to bet that the bigger market, ultimately, will be the typical consumer that simply values predictability.

As the prices of unlimited plans fall, they reach a level that appeals not only to heavy callers, but virtually any consumer that simply wants payment predictability, with no surprises. That's going to be the bigger market.

Sales Friction Creates Barriers to Buying Behavior

Sales friction occurs when a sales process is: too long (the line at the grocery store) too complicated (working with real estate agents) a...