"Telcos will Compete with Banks"?

Smartphones using encryption and biometrics will enable telecom companies to compete with banks and credit card companies for retail payment transactions, argues Futurist Patrick Dixon. That might not seem to be the way providers of mobile wallet services such as Google, Isis and PayPal are heading. In most cases, all of those providers require the existing payment providers to provide a complete solution. 


But there might be a difference between the ways new contestants side step into a market, and the efforts such firms might make in the future. As many strategists could argue, a common way new firms get into a market is by starting at the "low end," and then, over time, adding more and more capabilities until, at some point, full head to head competition is feasible. 


Rogers, in Canada, provides an example. Rogers is becoming a "bank," though it likely will confine its early efforts only to some highly-focused applications related to its current customer base. But it would require little imagination to suggest that, once successful, additional functions would become attractive. 


With the caveat that predicting the future is an often-perilous undertaking, and that predictions about the future are more often wrong than right, Dixon thinks big things can happen in mobile commerce, mobile payments and shopping. 


Mobile payments could generate commissions of up to EU2 billion a year in countries like France, Germany, Italy and the UK, he says.  Mobile Payments Future

How "Sticky" are Bundles When Consumers See Value Mismatch?

It now is conventional wisdom, and also rational thinking, that bundles create barriers to customer churn.


The obvious value is that consumers save money when buying a triple-play bundle, rather than each of the products separately. 


The same thinking applies to "family plans" for mobile services.


In fact, bundled products traditionally are seen as effective in many industries. Product bundling


But bundles arguably only work when consumers want the products in the bundle, or when the value-price relationship is seen to be acceptable That increasingly might not be the case for video entertainment services. 


Roughly 25 percent of customers from major U.S. triple-play providers are not satisfied with their service, primarily because they don’t think it offers enough value for the money, says Yankee Group analyst Sheryl Kingstone.



And that's the key issue: video subscriptions keep getting more expensive, and consumers arguably are starting to rebel. 


In western Europe, prices for mobile services arguably are high enough that if another global recession occurs, service providers could see resistance even for a "must have" product. That isn't to say people will drop mobile service. It is to note that they will likely reduce usage in ways that cuts their spending.


Mobile ARPU in Western Europe in fact declined by 9.1 percent cumulatively during 2009 and 2010, says Yankee Group analyst Declan Lonergan. During the same two-year period, ARPU declined in Greece by almost 30 percent and by over 16 percent in both Ireland and Spain.


If Europe slips into recession again in 2012, customers will change their mobile usage and spending habits, he argues. Voice and messaging revenue will suffer most, while spending on the mobile Web and apps will hold up relatively well.


The point is that bundling reduces churn when buyers seen a good fit between value and price. It doesn't take much insight to note that buyers increasingly see a mismatch in the video subscription category. 

How Telcos Can Live with Google

Telcos "Playing Politics" With SEC Reports and Accounting Charges? Are You Kidding?

One of the calumnies heaped upon telecom service providers is that their recent Securities and Exchange Commission notifications of charges caused by the new health care legislation are somehow a political ploy. Some even say that AT&T and Verizon, for example, are doing so as a political act, because they "contribute to Republican candidates."

As often is the case, such claims are uninformed. In its most-recent report, the Federal Elections Commission reported that AT&T gave exactly the same amount of money to Democrats and Republicans, splitting about $1.7 million 50 percent to Democrats and 50 percent to Republicans, the FEC reports.

The truly unbalanced spending was by union political action committees. The Operating Engineers Union gave 89 percent to Democrats, the International Brotherhood of Electrical Workers gave 99 percent to Democrats, the American Federation of State, County and Municipal Employees gave 99 percent to Democrats, the Teamsters 98 percent to Democrats, the International Association of Frie Fighters gave 88 percent to Democrats, the Carpenters and Joiners Union gave 90 percent to Democrats, the Plumbers/Pipefiters Union gave 95 percent to Democrats.

If you take a look at the chart, the largest telecom-affiliated PACs split their giving between Republicans and Democrats. If one correlates the spending with which political party occupies the White House, or controls the Congress, the pattern of giving by telecom PACis clear: more spending for candidates representing the party in power.

Click on the image for a larger view. 




http://www.opensecrets.org/pacs/toppacs.php

Recession Not the Issue, Structural Is What Challenges Telcos

The global telecom industry performed pretty much as it always does during the recent recession. Basically, revenue growth continued at low single digits, overall. As always is the case, some industry segments fared better than others, but consumer demand for communications and entertainment video services was steady.

Some might wonder whether some clear signs of consumer frugality will affect growth rates for some time to come, but even that is not the big issue.

The big issue is that wired communications is an industry with a cost structure too high for expected revenues over time, so cost cutting must continue and network operations must become even more efficient than they have, up to this point.

Ovum researchers point out that "the economic downturn hasn’t resulted in the downward pressure on telco top lines that many expected."

But Ovum researchers also point out that "revenue growth is in decline for many mature market operators, and slowing for those in emerging markets."

“Market saturation, increased competition and regulatory intervention on roaming and termination rates won’t disappear just because the economy picks up”, says Ovum Principal Analyst Clare McCarthy.

Telcos are cutting operating expenses and capital investment. They are also accelerating employee early retirement programs and stockpiling cash. Many telcos in fact are emerging from the downturn with healthier balance sheets than when they entered, as well as significant cash balances, Ovum says.

Telcos Practice "Strategic Indifference"

People who like the idea of rapid service and applications innovation typically are frustrated by the glacial speed at which network services operators move. In fact, the thought often arises that "pipes" companies, especially those dealing with actual "first mile" connections to actual users, are incapable of understanding threats to their business models.

Well, they do move slowly, compared with anything in the software world. There is no Moore's Law at work with construction, trenching, installing drop wires and network interfaces. Which explains the attractiveness of wireless alternatives.

That said, it also is true that incumbents do practice "strategic indifference." That is to say, they will seemingly ignore a threat such as VoIP, just as they seemingly ignored the advent of broadband access, in the form of Digital Subscriber Line and cable modem services.

You might not remember, but North American carriers were slow to understand mobility as well. As awareness grew, carriers simply bought the whole wireless industry.

The point is that the indifference is quite planned. If an innovation will harm current revenues, it makes business sense to plan to lose some market share and revenue rather than embrace the trend fully and lose even more money. Up to a point, incumbents will let attackers take share, on purpose.

If the innovation reaches a tipping point, where there are strategic drivers, incumbents simply pile on in a massive way. That's why the VoIP activity on the part of North American incumbents is so different from that of European carriers. In Europe, VoIP is past the tipping point, and incumbents must play. That point hasn't yet been reached in North America.

When the tipping point is reached, they'll move, and aggressively. But this is a matter of maximizing total revenue. If revenue is maximized by delaying VoIP, that's what carriers will do. If revenue is maximizing by making POTS more attractive, that's what they'll do.

Such carrier behavior is not "dumb." It is planned. In fact, other industries have been "dumb."

In fact, the music industry seems not to have understood the threat or the changes posed by digital media.

You can be quite sure the video industry has learned from that experience and is anything but complacent. No serious video executive takes user-generated content lightly. Everybody is taking steps to participate in a broader media landscape, though nobody yet knows how the business models will play out.

Of course, that also means nobody is going to sneak up on video incumbents. They know exactly where to look for opportunities and threats, and are doing so. IP video will not be a replay of VoIP, in terms of executive denial, simply because tipping points might be somewhat clearer, and because change in the video software space will not entail the massive capital spending carriers must yet contend with in migrating to a broadband, all-IP future.

Video contestants will move faster than you might think.

MySpace Opens Platform; What About IMS?

MySpace plans to open up its platform to external developers in the next few months, company CEO and co-founder Chris DeWolfe says. So here's the question for you: as global service providers creep towards IP Multimedia Subsystem as their next generation platform, who is going to develop for those IMS platforms if all the developers already are working for Facebook, MySpace and Google?

In fact, here's a prediction: by the time most global carriers have fully functioning IMS networks in place, the compelling applications IMS will enable already will exist someplace else. So the issue will be: what value to the application owners and distributors will accrue as the result of a business relationship with a carrier? Or can carriers create their own versions of these already-popular applications in a walled garden setting?