Unintended Consequences of Regulator Policy Decisions

Telecom policy makers always face tough choices when designing national communications policies. Because “for every public policy there is a corresponding private interest,” no single set of policies will universally be seen as “fair.” What helps big carriers often hurts smaller carriers. What favors mobile operators can disadvantage fixed network providers.

And, even where rules only affect a single provider, such as LightSquared or Dish Network, the affected providers might not think government rules are especially fair. And there always is a risk of unintended consequences, even when a policy is well intentioned.

Something like that, with price implications for lighter mobile data users, arguably has happened as an unintended result of an apparently unrelated decsion by the Federal Communications Commission regarding Verizon’s purchase of 700-MHz spectrum.

The FCC decided that Verizon was violating the “open access” rules of the 700 MHz spectrum licenses it purchased in 2008 by charging customers an additional $20 per month to tether their smartphones to other devices.

Verizon paid the fine and allowed tethering on all new data plans. Perhaps it is not a major issue, but one result of that ruling is that Verizon Wireless essentially has abandoned the “light user” part of the postpaid mobile broadband market, according to the Technology Policy Institute.

Basically, Verizon and T-Mobile USA offered lighter users the more-expensive data plans, before the decision. Afterwards, Verizon became the highest-priced alternative for light data users.

You might argue that the changes are completely coincidental. You might argue the changes do not reshape the market. 

But it is possible to argue that a decision ostensibly related to “open access” caused the leading mobile service provider to change its retail packaging in ways that made it the sole “high price” provider in the market where it had been within $5 to $10 a month of all the other leading providers. 

That's an unintended consequence, you might argue.

Search Can Predict Smart Phone Launch Success

Google says search predicts smart phone sales with over 90 percent accuracy.

In its "2012 Smartphone Launch Predictor" study, Google found that an extra 1,000 news stories in the weeks before launch will likely lead to a nine percent boost in smartphone sales.

About 52 percent of purchase-related searches occur before launch (and over one third of general smartphone searches).

An extra 25,000 mobile searches will likely increase smartphone sales 17 percent. One month after launch, those searches boost sales 20 percent.

Tablets a Nightmare for Microsoft?

Are tablets potentially a nightmare for Microsoft and other leaders in the PC market? Some think that could happen. The indicators include a shift of buyer spending towards tablets, and away from PCs.

At work, there is a trend of workers substituting tablets, smart phones and Apple PCs for Windows machines. Office suites can be sourced online, at free or low costs. Developer attention is shifting to iOS and Android.

And then there are the questions about Windows 8 and Windows Phone. Those fears might be overblown. But the data points seem to suggest there is legitimate danger. We will know more as Windows 8 rolls out, and as Windows Phone efforts intensify in 2013. 

Digital Wallet Value Proposition Might be Clearer for Online Payments

New markets often do not develop as proponents originally envisioned, at least in part because end users and customers often decide that the value represented by an innovation is different than what was intended by the developers. At least where it comes to products or services they never have seen before, people are unpredictable. 

That might also be true for "mobile wallets" and "digital wallets," which generally are seen as innovations for retail checkout and shopping. But it might turn out that people find more value for online shopping and checkout. 

Today’s consumer types in an average of 44 fields when shopping online, and V.me gets you down to five or six, Visa says. 

Smart Phone Becomes “Primary” Screen for Teenagers, for First Time

Once upon a time, the movie theater was the primary content consumption screen, followed by the television. These days, a smart phone, tablet or PC increasingly is likely to have become the primary media consumption screen for a significant percentage of users, a study by Orange suggests.

The “Orange Exposure 2012/2013” study shows a  stark contrast in mobile media habits between teenagers and adults, for example.

For teenagers, the mobile phone is the primary screen, for the first time, not the TV or PC.

Also, adults are using multiple screens more interchangeably than ever before, choosing the most suitable screen for any particular situation, Orange says.

In the United Kingdom, 83 percent of teenagers have a smart phone and 95 percent have one in Spain. In addition, 92 percent of teenagers in the United Kingdom say mobile is a “way to always have a media device at hand” and 55 per cent of teenagers in the UK say that they prefer their mobile over other screens.

Consumers also are increasingly using their mobile or tablet to replicate the same experience on their PC, about  62 percent of consumers in the United Kingdom agree. Consumers also are multitasking. Some 90 percent of consumers access the internet at the same time as watching TV,  in the United Kingdom. 

es the tablet device is designed to be used as a content consumption device.

At the same time as interchangeable usage is occurring, larger screens on smart phones are making accessing multimedia easier, and “smaller” sized tablets are increasing their portability. In Spain, 16 percent of tablet owners also own the more portable Samsung Galaxy Tab, for example.

The percentage of people primarily accessing mobile media ‘out and about’ on both their mobile and tablet has significantly increased across all markets.

In the United Kingdom 58 percent of respondents say they use their devices to access content and media while out and about.

Tablet use to access content and media “out and about” has grown from 11 percent of users in 2011 to 21 percent in 2012 in the United Kingdom.

And though some would say tablets are not a substitute for a PC, about 75 percent of tablet media users want to “find the same things on their tablet as on their PC,” the study also found. That doesn’t mean people believe they can “work” on a tablet in the same way as on a PC.

But where it comes to content and information, they do expect they will be able to consume all the same content they would expect to get on a PC.

Tablet devices arguably also are used as commerce platforms. Some 62 percent of tablet users have used their tablet to pay, redeem or reserve something over the last six months.  

Some 58 percent of tablet users paid for something online. The point is that tablets and smart phones are changing user behavior.

Freemium Apps Grow Google Play Revenue 350% in 2012

Freemium app revenues in both iOS and Google Play stores have, over the last two years,  more than quadrupled, for both Google Play and the Apple Store. 

In 2012, global "freemium" app revenues on Google Play have grown 3.5 times over 2011, App Annie says, Those revenues include content or virtual goods sales inside the free to use apps and advertising. 

Premium revenues (paid apps)  for both app stores remained relatively flat in 2011 and 2012. 

Click to enlarge

Value and Data Consumption are Not Closely Correlated, for Smart Phone Users

Though it is helpful in some ways to know how much total bandwidth is consumed from fixed devices, on fixed networks, compared to mobile devices on mobile networks, volume of data is not a reasonable proxy for value.

The reason is that the value of the mobile applications is very high, even if total consumed bandwidth is relatively low. And it appears the value of many different Internet applications is one reason so many people have embraced smart phones.

On the other hand, few of the popular activities really consume all that much bandwidth, and many of the activities have a real-time focus. The value comes largely from the context, the ability to get information immediately and use it to direct one's activities.

Chicago Issues RFI for Municipal Wi-Fi

The City of Chicago has issued a request for information for potential bidders on a new municipal Wi-Fi service that would serve public areas such as parks, and areas around research institutions, Chicago Business reports.  

The network does not appear to aim at providing service to residential consumers in the manner of high-speed access typically provided by cable companies and telephone companies, but is more a spot deployment more reminiscent of a competitive local exchange carrier network. 

At least so far, similar efforts have generally proven unworkable. 

Mobile Capital Investment Will Shift to Small Cells, but When?

Joe Madden of Mobile Experts thinks the global mobile service provider industry is about to enter a period where capital investment shifts to smaller cells. To be sure, 2012 seemed to see a waning of capital investment, with 12 percent lower RF transceiver shipments than 2011.

Madden says that fits a pattern of investment in transmission facilities that has been typical of second generation and third generation networks.

He calls the pattern a "two hump camel.” The first hump reflects the initial build. About four years later, those initial systems are upgraded with additional radio capacity and additional towers, and the second "hump" begins.

Of course, many service providers globally are on the cusp of major investments for Long Term Evolution. But global economic uncertainty appears to be causing a delay in capital investment, either in the form of additional 3G base stations or new LTE base stations, Madden argues.


The next big upsurge in investment will occur about 2014 or 2015, when consumers start to complain about performance. At that point, mobile service providers will turn to small cells for their 3G and LTE networks. Madden predicts more than nine million carrier-grade capacity small cells will therefore be deployed during 2017.

By 2017, roughly $1 billion worth of small cell infrastructure gear will be sold globally, Mobile Experts predicts.


Madden is not as optimistic as some about the use of carrier Wi-Fi to offload traffic. Softbank in Japan has tested the offload potential of dense Wi-Fi deployments and apparently has concluded that less than 25 percent of mobile data traffic can be offloaded to public Wi-Fi in the long term.

Those estimates correspond with figures Boingo suggests. Boingo believes about 22 percent of mobile traffic will be offloaded to Wi-Fi by about 2016.

Others might disagree. Cisco analysts say as much as 30 percent of mobile traffic could occur on Wi-Fi networks. And analysts at Juniper Research think more than 60 percent of mobile device traffic could be offloaded to Wi-Fi means by about 2015.

Others say studies show as much as 70 percent of smart phone traffic uses a Wi-Fi connection.


By 2017, Ericsson expects each macro base station in urban areas will be supplemented by about three small cells small cells.

Today, there are about five million macro base stations deployed worldwide and those in metro areas account for about 15 percent of the total, or about 750,000. That suggests a total of perhaps 2.25 million small cells.

It always is difficult to predict the deployment of small cells because that category sometimes includes virtually all cell sites smaller than a macrocell, including potentially large numbers of consumer grade units used inside homes or offices, plus larger small cells deployed as part of the public mobile network.

Even a casual conversation about the definition of a "small cell" will quickly lead to a series of necessary qualifications and a "fuzzy" answer. Pressed for a concise answer, many observers might point out that a "small cell" approach meaningfully could include every radio installation smaller than a traditional cellular macrocell.

And that's quite a lot of terrain. It includes "carrier" cell sites of 2-kilometer radius, "pico" cells of  perhaps 200 meters, but also customer-owned "femto" cells that cover indoor areas of perhaps 50 meters, and use the customer's own "backhaul" or "access," not a carrier-supplied link.

Those are some reasons why the "heterogeneous network" terminology now has become commonplace.  Future mobile networks will use a variety of cell types, with different capital investment parameters and coverage areas.

Future networks also might make much more direct use of both carrier-supplied and customer-supplied backhaul. A carrier public Wi-Fi hotspot might use a carrier-supplied access connection, while, on an informal basis, most smart phone customers use their own fixed network connections, with their devices connected to in-home or in-building Wi-Fi, in place of any of the mobile cell site types.

Without making too much of the development, "heterogeneous" implies a mix of carrier and consumer-supplied radio and backhaul network resources; a range of management options and quality of service mechanisms.

One might also say that heterogenous networks and customer offloading to Wi-Fi also represent an unparalleled and new form of asset sharing. Whether by formal contract or simply informal mechanisms, customers are using a mix of carrier and "owned" access to support their "untethered" access requirements.

While some entrepreneurs continue to work at creating whole networks using end user supplied access and radio assets, the heterogeneous network does the same thing, essentially. In a broad sense, users and their devices are supported by a mix of carrier-owned and customer-owned networks, both "mobile" and "fixed," using mobile air interfaces and simple Wi-Fi.

The point is that "small cells" are more than a technology. They are part of a shift to more use of "shared" networks in a real sense.

Battery Life, Not Bandwidth, Sometimes is the Key Mobile Limitation

The average power consumption for a 10-minute CDMA circuit-switched call in a recent test was about half that of a 4G Long Term Evolution call. That will get better over time, but right now, it appears that LTE voice calls are going to drain batteries about twice as fast as talking using CDMA networks. 

A 10-minute call using CDMA consumed 680 milliwatts (mW) while the average consumption for a VoLTE call of the same duration was 1358 mW. 

Spirent estimated that on a full charge, its test smartphone could support 502.6 minutes of talk time using CDMA only, but the same charge would only deliver 251.8 minutes of talk time using VoIP on the 4G network. And that’s with all other data communications turned off. And how often do users turn off unneeded radios? 

U,K. Mobile Operator EE Boosts Data Allowances 60%

EE, the U.K. mobile service provider now offering Long Term Evolution services, has boosted 4G data allowances about 60 percent, while keeping prices the same. 

 The 2GB plan now becomes a 3GB allowance, with the 3GB plan increasing to 5GB, and the 5GB allowance now extending to 8GB. All existing 4GEE customers will be automatically upgraded to the new data allowances, with no increase in their monthly fee, the company says. 

iPhone 5 Tops U.S. Smart Phone Sales, Android Leads Elsewhere

The latest smart phone sales data from Kantar Worldpanel ComTech shows that strong uptake of the iPhone 5 over the past 12 weeks ending in October 2012 has boosted iOS back to the number one spot in the U.S. market. 

Apple now has a 48.1 percent share of U.S. smartphone sales compared with Android which has 46.7 percent.

Android leads in other markets, though. In Europe, Android has the lead, accounting for 73.9 percent of sales in Germany and 81.7 percent in Spain.

The majority of US iPhone 5 sales, 62 percent, have come from existing Apple owners upgrading to the new device.

Apple Maintains Lead in Tablets but Market Share Down 14% in 3Q 2012

Apple had 55 percent share of the tablet market in the third quarter of 2012, says ABI Research. But competition from tablets powered by Google’s Android OS continue to eat away at Apple’s share. 

“With the introduction of a smaller, lower-cost iPad mini, Apple has acknowledged Android’s beachhead of 7-inch-class tablets,” says ABI Research senior practice director Jeff Orr.

If this continues, we will have the answer to the question of whether can create an MP-3 style market, where it completely dominates market share, or whether a pattern somewhat more akin to the smart phone or notebook markets will ultimately develop. So far, it appears Apple will not be able to sustain an MP-3 style lock on the market. 

So the market perhaps already has changed. Where early on one might have argued there was an "iPad market" and then a "tablet market," it seems that a unified "tablet" market is developing. For some, the additional question is whether we might see replay, in the tablet space, of the older Microsoft-Apple story, with Android taking the place of Microsoft. 

More Carrier Over the Top Services Launching

A few more European mobile service providers are jumping into the over the top voice and messaging app business.  In Spain, Movistar, Orange and Vodafone, Spain's three leading mobile service providers, have launched "Rich Communication Services" using the "joyn" brand.

That makes Spain the first country in the world to offer a fully interoperable carrier-owned over the top voice and messaging app, meaning that any customers of any of the mobile service providers can communicate with each other. 

In Germany, Deutsche Telekom and Vodafone both support joyn. 

The idea is that joyn will allow mobile service provides to create a very large community of users, with access to "rich" voice and messaging ("rich" generally implies support for video) features. So both "scale" and "feature richness" are viewed as part of the strategy. 

There are about three or four different ways mobile service providers globally can react. About half the options are hostile or unfriendly to the consumer. Carriers can block use of over the top apps, or charge extra fees for people who use the generally free apps. Neither of those approaches are especially desirable in competitive markets where another provider will avoid blocking or charging.

There are two approaches that are less surly ways of approaching the problem. Joyn is one way of competing with a carrier-owned alternative intended from the start to be a "third party" brand. 

In other cases, carriers have created their own branded OTT apps. The level of competition in a given market tends to suggest whether mobile service providers should offer their own OTT apps, or avoid doing so.

In markets where voice and messaging revenue already is sharply declining, competing might be the only choice. In other markets, where there is less pressure, service providers generally will resist jumping into branded OTT voice and messaging apps, to avoid cannibalizing carrier voice and messaging.

In other cases, as with Verizon Wireless, carriers simply offer unlimited domestic calling and texting as a basic network access fee, to undercut the value proposition of the "free" OTT apps.   That arguably works best where there is a very-large internal calling market. 


But third party developers aren't stopping. A newer trend is use of the "WebRTC" platform to create rnd audio communications from inside the context of a browser. Vidtel, for example,  now support the built-in ability to connect WebRTC-enabled browsers to enterprise video conferencing infrastructure. 

Vidtel says it iis the first to bridge WebRTC browsers with 3rd party video conferencing infrastructure such as Cisco, Polycom, or Vidtel’s own MeetMe service without the need for plugins.





 

European Broadband Access: DSL and Satellite Rule

Despite the seeming reality presented by media and analyst reports, change comes relatively slowly in the access business. 

"Despite all the publicity, FTTP doesn’t offer the main route to digital heaven, at least not for the time being. So far FTTP covers only 12 percent of homes," says Tim Johnson, Point Topic chief analyst. 

By way of contrast, cable operators can reach about 37 percent of homes with the Docsis 3.0 network, generally capable of providing faster speeds than digital subscriber line. 

In rural areas, only DSL and satellite networks are ubiquitous. 

Click image for larger version of infographic

Rural coverage by technology for each country in 2011
Countries	DSL	VDSL	FTTP	WiMAX	Standard cable	Docsis 3 cable	HSPA	LTE	Satellite
France	96.3%	0%	0.3%	0%	39.9%	28.2%	87%	0%	100%
Germany	51.4%	0%	0%	11.5%	2%	2%	30.7%	41%	100%
Spain	90.1%	12.6%	0.4%	7%	0.4%	0.4%	88%	0%	100%
Sweden	84.4%	7.2%	9.4%	0.1%	1.7%	1%	98.8%	13.9%	0%
United Kingdom	100%	17.4%	0%	0%	2%	2%	88.5%	0%	100%

Globally, Satellite TV Subs will Surpass Cable TV Subs in 2016

On a global basis, there will be more satellite subscription TV customers than cable TV customers by about 2016, Infonetics Research now predicts. 

Half of all Mobiles Will Use 3G, 4G networks by 2017

About half of all mobile devices in use in 2017 will use either 3G or 4G networks according to Wireless Intelligence. About 40 percent of connections will use 3G. About half will use 2G. Fourth generation networks will support about 10 percent of connections. 

U.K. Mobile Operator Three Launches M2M Platform

m2m revenue forecast worldwide in billion EUR

U.K. mobile operator Three has launched a wholesale machine-to-machine (M2M) platform designed to bring down setup costs and speed time to market for M2M retailers.

Ericsson is providing the platform, said to enable MVNOs launching M2M services to do so in just two weeks time.

Three partners get their own branded portal, the ability to activate and deactivate their own connections, apply data caps and track data usage.

Most researchers believe M2M will be a big market for mobile service providers.

Mobile Service Provider Capex Will Shift to Small Cells by 2014

Joe Madden of Mobile Experts thinks the global mobile service provider industry is about to enter a period where capital investment shifts to smaller cells. To be sure, 2012 seemed to see a waning of capital investment, with 12 percent lower RF transceiver shipments than 2011.

Madden says that fits a pattern of investment in transmission facilities that has been typical of second generation and third generation networks.

He calls the pattern a "two hump camel.” The first hump reflects the initial build. About four years later, those initial systems are upgraded with additional radio capacity and additional towers, and the second "hump" begins.

Of course, many service providers globally are on the cusp of major investments for Long Term Evolution. But global economic uncertainty appears to be causing a delay in capital investment, either in the form of additional 3G base stations or new LTE base stations, Madden argues.


The next big upsurge in investment will occur about 2014 or 2015, when consumers start to complain about performance. At that point, mobile service providers will turn to small cells for their 3G and LTE networks. Madden predicts more than nine million carrier-grade capacity small cells will therefore be deployed during 2017. 

How Much Mobile Traffic Can be Offloaded to Wi-Fi?

How much smart phone traffic can be offloaded to Wi-Fi is uncertain, at this point, though it already is clear that perhaps a majority of at-home smart phone usage routinely is shifted to Wi-Fi access. 

The bigger question is how much "out and about" usage might be shifted to Wi-Fi, particularly in urban areas. That might affect the deployment of small cells that also support Wi-Fi. 

Softbank in Japan has tested the offload potential of dense Wi-Fi deployments and apparently has concluded that less than 25 percent of mobile data traffic can be offloaded to public Wi-Fi in the long term.

Those estimates correspond with figures Boingo suggests. Boingo believes about 22 percent of mobile traffic will be offloaded to Wi-Fi by about 2016.

Others might disagree. Cisco analysts say as much as 30 percent of mobile traffic could occur on Wi-Fi networks. And analysts at Juniper Research think more than 60 percent of mobile device traffic could be offloaded to Wi-Fi means by about 2015.

Others say studies show as much as 70 percent of smart phone traffic uses a Wi-Fi connection.

Service Providers Don't Always Pick Technology Winners

For those who can remember widespread cable operator interest in "interactive TV," dating back to the 1980s, there is a lesson. Service providers are not always "right" about what consumers want, or how to supply the demand.

The early thinking was that people wanted, and would use, interactive features built around the video experience, using the TV, remote control and cable box as enablers.

As it turns out, people do "interact" or "augment" video programming, but in a way not foreseen: they use their PCs, tablets and smart phones to multitask. In other words, they "do other things" while watching TV. 

But they do not really want to interact directly with video content. The lesson is that suppliers do not always understand what it is that people might want to do. So the instinctive response is to ask people what they want, what they might pay for experiences and how they want those experiences delivered. 

But consumers nearly always have a tough time figuring out how they might use a product they never have seen. In such cases, asking doesn't help. Steve Jobs, former CEO of Apple, perhaps was the foremost practitioner of a skeptical approach to asking people what they want. 

Android, Apple iPhone: Key Mobile Shopping Differences

IBM’s Digital Analytics Benchmark reported U.S. Black Friday sales and the news is reasonably good. Overall online sales grew by 17.4 percent while mobile sales grew to make up 24 percent of traffic. That probably does not come as a surprise. 


The study suggests 75 percent of the activity was from PCs. Of the mobile activity, a highly disproportionate share was conducted by owners of Apple iPhones. That is more notable. 

Apple iPhone owners were nearly four times more likely to conduct transactions using their devices, compared to Android owners. 

What nobody can tell, at this point, is whether those differences are due to some key difference in user interface, activity preferences or are more related to differences in end user personal wealth, or something else. 

Google Rumor: 13-inch Chrome OS Touch Notebook?

The launch of a rumored touch-enabled Chrome OS touch notebook might suggest Google is tiptoeing even further towards offering its own branded devices, as Microsoft has done with its branded "Surface" tablet. 

As always, the move would increase the odds of channel conflict for both Google and Microsoft. 

European Smart Phone Penetration Hits 54%

Smart phone penetration in EU5 (France, Germany, Italy, Spain and UK) is now at 53.7 percent, with nearly 130 million people using smart phones in the three month average ending September 2012, according to comScore.

Out of this smart phone audience, 15.5 percent also own a tablet, compared to 9.3 percent last year.

Deutsche Telekom Faces Same Challenge as Many U.S. Service Providers

Most telecom executives, especially those facing growing competition from cable operators, have had to ask hard questions about their options for upgrading access networks. The simple fact is that a full replacement of the network to fiber to the home technology is expensive. 

Japan's Bank Nomura estimated the cost of a digital subscriber line upgrade, in areas where Deutsche Telekom needs more speed to counter cable operator high speed access offering, at around 4 billion euros ($5.1 billion), while a full upgrade to fiber to the home, across Germany, could cost around EUR80 billion, or perhaps $102 billion.

So Deutsche Telekom plans to selectively upgrade, using a faster form of digital subscriber line technology, in those areas where competition is most fierce. The vectoring approach provides a dramatic boost in speeds. 

Some would argue that Deutsche Telekom should simply rebuild its network using fiber to the home, essentially creating a "future proof" network. 

The problem, some would say, is that the financial return from doing so is questionable, at some level. Mobile substitution is one issue. The bigger problem is that the basic business case, overall, is much tougher. 

A shift of end user spending to mobile services means less potential revenue from a mix of services, ranging from voice to high speed access to video. Also, incumbent market share is far lower than it once was. In many cases, established operators have 30 percent to 40 percent market share, where they once had virtually 100-percent share. 

That means a complete upgrade is bound to "strand" a significant portion of those assets, which will not have revenue attached to the lines.