Apple Pay Shows Some Signs of Leadership in Mobile Payments

As a young business, it remains unclear where value and leadership will develop within the mobile payments business. In principle, retailers who are the immediate buyers of payment services; the processing networks; issuing banks; device suppliers; new service suppliers or access services providers could emerge in a driving role.

And, so far, there have been some notable misfires. A consortium including AT&T, Verizon and T-Mobile US failed to gain traction. A consortium of leading retailers likewise failed to get leadership.

Google’s own efforts have encountered modest success, while device-oriented systems linked to Samsung phones or Apple iPhones have been launched.

There have been some notable successes, though. Starbucks might be the largest mobile payment system in regular use in the United States. Square likewise has been a success in the small business point of sale transaction processing segment of the business.

Apple Pay has been gaining traction as well. According to Apple, Apple Pay now represents 75 percent of all contactless payment transactions made in the United States.

Apple says half of transaction value from payments made through Apple Pay are coming from non-U.S. markets.

Apple Pay is currently available in the U.S. the U.K., Switzerland, Canada, Australia, China, France, Hong Kong, and Singapore.

Some evidence of Apple’s key role in the payments ecosystem can be gleaned by the actions of other in the value chain.

Four of the largest banks in Australia — Commonwealth Bank of Australia, Bendigo and Adelaide Bank, National Australia Bank, and Westpac Banking Corp — have asked the Australian Competition and Consumer Commission (ACCC) to be allowed to join forces and negotiate with Apple as a single block.

While Apple does allow some of the banking apps be loaded on iPhones, it limits their access to the handset's hardware, such as antennas or NFC. As a result, the bank apps are more Internet banking tools than full contactless payment platforms.

Leadership still is not a settled matter in the mobile payment or contactless payments business.

Business Imperative: Replace 1/2 of Revenue Every 10 Years

“Over the last 16 years we have grown from approximately 25 million customers using wireless almost exclusively for voice services to more than 110 million customers using wireless for mostly data services,” said Lowell McAdam, Verizon Communications CEO, during the firm’s second quarter 2016 earnings call.

It is an illustrative comment for several reasons. It illustrates Verizon’s transformation from a fixed network services company to a mobile company. But the comment also illustrates an important business model trend, notably that of firms in telecom needing to replace about half their current revenues every 10 years or so.

In the U.S. telecom business, for example, we already have seen that roughly half of all present revenue sources disappear, and must be replaced, about every decade.

According to the Federal Communications Commission data on end-user revenues earned by telephone companies, that certainly is the case.

In 1997 about 16 percent of revenues came from mobility services. In 2007, more than 49 percent of end user revenue came from mobility services, according to Federal Communications Commission data.

Likewise, in 1997 more than 47 percent of revenue came from long distance services. In 2007 just 18 percent of end user revenues came from long distance.

That change in revenue sources is going to continue. Mobile voice and messaging already is declining, and in its place mobile Internet access is growing. For fixed network operators, video revenues are growing, while voice is shrinking, and high speed access has become the anchor service.

The point is that there is a very good reason for all service providers to assume they will have to replace half their current revenue in 10 years, and possibly for every decade thereafter. It now appears the auto industry is about to experience that same sort of change.

That is why so much of the content at the upcoming Spectrum Futures conference will focus on app development and app partnerships. Venture capitalists Wish Ronquillo and Jay Fajardo, as well as app development consultant and VC V. Shrinath will be speaking at the event.

Wish Ronquillo, Venture Partner, Ruvento Ventures, Singapore

Jay Fajardo, CEO, Launchgarage, Philippines

Shrinath V, Venture Capitalist and Google Developer Expert, India

Verizon: Multiple New Network Investments to Support Fixed Wireless

There was more evidence of Verizon’s plan to deploy fixed wireless rather widely in its network during the firm’s second quarter 2016 earnings call. Verizon CEO Lowell McAdam spoke about a number of interrelated technologies supporting its coming networks.

Millimeter wave radio, small cells, fixed wireless and optical fiber backhaul were among those trends.

“I think of 5G initially as, in effect, wireless fiber, which is wireless technology that can provide an enhanced broadband experience that could only previously be delivered with physical fiber to the customer,” said  Lowell McAdam, Verizon Communications CEO, during the firm’s second quarter 2016 earnings call. “With wireless fiber the so called last mile can be a virtual connection, dramatically changing our cost structure.”

In fact, Verizon’s decision to deploy FiOS in Boston is based on creation of a single fiber optic network platform capable of supporting wireless and wireline technologies.

“Our announced agreement to acquire XO Communications will also be a key part of this strategy, providing us with the deep fiber assets, including 40 metro fiber rings in major cities and millimeter wave spectrum in a significant part of the country that will give us a critical competitive edge,” said McAdam.

The XO deal also supplies a good amount of millimeter wave spectrum.

Reza Arefi

McAdam also illustrated Verizon’s use of network architecture--rather than acquiring new spectrum--to increase capacity. “The farther we push fiber out into the network, the more small cell technology works for us,” he said.  

“The cost trade off that we expected prior to the last auction told us that we would be better off going with the small cells,” he noted.

“And then as we densify the network for 4G, it sets us up perfectly for deploying 5G with the millimeter wave technology,” McAdam added. “Now we have a clear field in front of us to not only densify with 4G, but use that same capital dollar to get the infrastructure in place for 5G. So we think we're in a very strong competitive position here.”

Greg Leon

Verizon is not the first telecom company to tout a wireless platform as a substitute for fiber. But it might emerge as one of the most influential and widespread users of fixed wireless technology.

That is among the reasons the business implications of millimeter wave platforms and fixed wireless will be featured at the upcoming Oct. 20-21, 2016 Spectrum Futures conference in Singapore.

Reza Arefi of Intel will talk about the business implications of millimeter wave spectrum at Spectrum Futures.

At the conference, Greg Leon, Google fixed wireless product manager, will explain the role Google now sees for fixed wireless as a complement or substitute for fiber to the home.

Rajnesh Singh

Rajnesh Singh, Internet Society, Director, Asia-Pacific Regional Bureau, will explore the role of fixed wireless to serve rural villages in India.

Chris Weasler, Facebook, Director of Global Connectivity, likely also will talk about new platforms for fixed wireless Internet access.

Chris Weasler

Auto Insurance is About to Experience Disruption the Telecom Industry Already has Faced

The telecom business is not alone in facing huge business model disruption because of technology advances. Consider driverless cars. By some estimates, as much as $160 billion out of $200 billion in revenue (for insurance premiums) is at risk of disappearing or shifting because driverless cars will reduce accidents so much that premiums will fall.

For those of you doing the quick math, that is an 80-percent hit to existing revenues.

Deloitte, for example, forecasts today’s $200 billion in personal-car-insurance premiums is safe for about seven or eight years, then slide to about $40 billion by 2040.

On the other hand, Deloitte believes $100 billion could shift to product-liability insurance and coverage bought by ride-sharing businesses, for a net drop of about 50 percent in total auto insurance revenues.

Assuming that change happens over roughly a decade, it would fit a pattern of revenue shift we have seen, and likely will continue to see, in the global telecom business, where roughly half of all present revenue sources disappear, and must be replaced, about every decade.

According to the Federal Communications Commission data on end-user revenues earned by telephone companies, that certainly is the case.

In 1997 about 16 percent of revenues came from mobility services. In 2007, more than 49 percent of end user revenue came from mobility services, according to Federal Communications Commission data.

Likewise, in 1997 more than 47 percent of revenue came from long distance services. In 2007 just 18 percent of end user revenues came from long distance.

You can count those as one single change, or two changes. Either way, it literally is the case that half of revenue sources changed within a decade.

That change in revenue sources is going to continue. Mobile voice and messaging already is declining, and in its place mobile Internet access is growing. For fixed network operators, video revenues are growing, while voice is shrinking, and high speed access has become the anchor service.

The point is that there is a very good reason for all service providers to assume they will have to replace half their current revenue in 10 years, and possibly for every decade thereafter. It now appears the auto industry is about to experience that same sort of change.

Internet Access Prices, % of GNI Per Capita is the Problem in Developing Countries

One frequently hears complaints that retail prices for Internet access are too high. Actually, by one common measure, Internet access prices in developed nations are quite low, less than one percent of gross national income per capita.

That is why Spectrum Futures exists. Here is the Spectrum Futures schedule, with speaker and topics. 

53% of World Population Still Does Not Use the Internet

source: ITU

Global Internet access in one picture. Important: note that the figures represent mobile access to voice communications and the Internet.

Fixed access adds some additional number of connections, but essentially is irrelevant to the broad trend--either for voice communications or Internet.

Fixed-network Internet access adoption remains at below one percent in Africa and other less developed countries. Though China is driving fixed broadband in Asia, fixed-broadband penetration is just about 10 percent in 2016, according to the International Telecommunications Union.

But mobile coverage is not ubiquitous, and not all mobile networks support fast or relatively fast Internet access. In 2016, 66 percent of the population lives within an area covered by a mobile broadband network.

Seven billion people (95 percent of the global population) live in an area that is covered by a cellular network.

Mobile-broadband networks (3G or above) reach 84 percent of the global population but only 67 percent of the rural population.

LTE networks have spread quickly over the last three years and reach almost four billion people today (53 percent of the global population).

Still, 3.9 billion people, representing 53 percent of the world’s population is not using the Internet.

That is why a Spectrum Futures exists. Here is the Spectrum Futures schedule.

In U.S., Internet Access Speed Doubles or Triples Every 5 Years

Some things do not seem to change. Among them: the high end of U.S. Internet access service speeds roughly double every year. That implies an increase of an order of magnitude about every five years.

If you assume access speeds (for lead users) are somewhere north of 100 Mbps now, they will be in excess of a gigabit in five years. In a growing number of U.S. local markets, typical offers for consumers already have reached a gigabit.

But what about average speeds, for typical users? By some estimates, including those of the U.S. Federal Communications Commission,  average Internet access speeds increased 300 percent in the last five years (2011 to 2016).

source: Nielsen Norman Group