Big Future for Location-Based Services?

Location-based services might not be a big mass market business yet, but it seems almost inevitable that they will be. You don't get the likes of Nokia and Google placing such big bets on location-based services without something developing.

ABI Research expects personal navigation devices (PNDs) will grow to a global sales volume of more than 100 million units by 2011. While dedicated PNDs will remain the preferred form-factor for use in cars, GPS will increasingly be an expected ingredient in handsets, portable media players (PMPs), ultra-mobile PCs (UMPCs), and other mobile devices, ABI forecasts.

Handset-based GPS will grow strongly in North America, reaching a sales volume of 21 million units by 2012, ABI Research forecasts.

In-Stat reaches very similar overall conclusions, though it adds digital cameras and even handheld games to the mix of devices expected to include GPS. In-Stat predicts that sales of mobile devices with integrated GPS will grow from 180 million units in 2007 to 720 million units in 2011.

In fact, mapping-related and location-related Web apps might be more commercially attractive than entertainment was expected to be. For starters, mobile Web advertising revenues in 2011 are expected to be dominated by Web and search. In fact, Strategy Analytics estimates that about 76 percent of all mobile advertising will be generated either by Web apps or search.

All of that dovetails with Google’s thinking about the advertising potential of the mobile Web. And the point is that if consumers find location-based Web apps attractive, and there is a robust advertising support model, carriers are bound to see big increases in broadband service plans, even if they don’t see similarly robust demand for walled-garden enhanced services.

Orange UK: Still Looking for Killer App

Mobile Web appears to be the most-frequently-used mobile app, according to new data from Orange U.K.(France Telecom).

Orange U.K. has 1.4 million broadband wireless customers, but the single most-used application is text messaging, which doesn't require broadband access. Orange U.K. customers send or receive about 71 text messages a day (more than 2,000 a month) but just about 4.3 Multimedia Message Service (MMS) messages a day (129 a month) for users who take advantage of MMS, and most do not.

About 58 percent of Orange U.K. customers can use MMS and six-month usage growth was 37 percent.

In the mobile search area, Orange saw about 250,000 repeat visitors each day, on a base of 1.4 million users. One might therefore estimate that about 18 percent of the base uses mobile search daily.

Orange users downloaded about 7,680 games a day across the user base, up about 3.4 percent over the last six months. Music downloads grew about 15 percent over the last six months to about 3,280 a day.

Orange mobile TV usage is said to be growing at double the management forecast, but one suspects the numbers still are fairly low, as the actual numerical results were not released. Mobile video clip downloads averaged 5,211 a day.

Downloads of logos, wallpapers and pictures averaged 3,233 a day. On the other hand, users are uploading about 23,333 photos a day to online photo albums.

So far, the story would seem to be consistent with what many would have expected: lots of niche applications but no single “killer app” beyond text messaging, which doesn’t require a 3G network. Orange U.K., like other mobile service providers, remains in a “throw it on the wall and see what sticks” mode, watching to see what apps are most compelling to users of 3G services.

So far, no other mobile carrier has discovered the elusive application that users intuitively understand and that is capable of driving 3G access. Right now, that’s the point: keep experimenting.

So far, one would have to conclude that mobile Web usage is the leading app, in terms of daily hits.

No EchoStar Purchase for at&t

at&t appears to have decided not to buy EchoStar to jumpstart its TV business, as it has boosted its dividend and launched a stock buyback program.

In total, at&t might spend roughly $17 billion in 2008 on dividends and buybacks, consuming most or all of the cash its businesses are likely to generate, leaving little to finance a purchase of EchoStar.

at&t also plans to expand U-Verse to cover 30 million households by 2010 in the 22 states where AT&T is the main local-phone company, up from an earlier target of 18 million households.

Broadband access strategy might have played a role in the thinking as well. By speeding its TV capabilities, at&t automatically creates a better network for high-speed access as well.

Make that 9 Reasons IT Won't Support iPhone

Apple appears to be working on improving the iPhone's support of Microsoft's Exchange email platform, which could finally deliver true syncing capabilities, eliminating a potential objection to enterprise adoption. At least that's what one would conclude from a new company job posting.

The listing seeks a "motivated, highly-technical Exchange test/sync engineer with excellent problem solving and communication skills."

"You will join a dynamic team responsible for qualifying the latest iPhone products," the company wrote. "Your focus will be testing Exchange and Outlook functionality with Apple’s innovative new phone."

So far, the iPhone's official support of Exchange has been limited to IMAP functionality.

The lack of full support for the Microsoft platform is commonly cited as one of the primary barriers to adoption of the Apple handset by businesses, as Exchange is widely deployed as the email solution of choice amongst the corporate world.

But there are lots of other reasons enterprise IT might not be rushing to embrace the iPhone as an officially supported device. See the post below.

10 Reasons IT Won't Support iPhone

Forrester Research has put together a really good list of the top 10 reasons enterprise technology managers will not to support the iPhone. The objections are valid and important. And somehow we think users are going to use iPhones anyway, with or without enterprise support. Some of the objections are more important than other.

But Forrester analyts also note that enterprise "C" level executives are using them anyway, so it is only a matter of time before the iPhone filters down the corporate pyramid.

1. Doesn’t natively support push business email or over-the-air calendar sync. The iPhone can sync with Microsoft’s Exchange and IBM’s Lotus Notes over IMAP and SMTP ports, but server and security administrators have to configure their infrastructure to do so or purchase a mobile gateway. The issue is "doesn't natively support" push email. People can work around that, or the email services can be tweaked. A problem, but not a really big problem.

2. Doesn’t accommodate third-party applications, including those internally developed. This is a big problem. But Apple software engineers must know this. And there are rumors Apple already is working on a software developer kit that should take care of this objection.

3. There isn't a way to encrypt data on the device. Yes, this is a pretty big problem.

4. Can’t be remotely locked or wiped in the event of a lost or stolen device. Also a big problem.

5. Lacks a hard keypad that provides feedback, which isn’t ideal for rapid and accurate input. Not a major objection, ultimately. Yes, accuracy typically is less than on a QWERTY keyboard. But this is an irritant, not a show stopper. And people get better at it with practice, it seems.

6. Limited service provider support and its carrier lock-in inhibits flexibility. Issues, yes, but not as big a deal as the security issues.

7. It is expensive. Well, it is being bought by consumers, who bring them into the enterprise environment, so not a direct enterprise problem.

8. Is only the first generation, and lacks 3G support. This problem fixes itself.

9. Lacks a removable battery. Definitely an irritant. Apple doesn't seem to want to sell replacement batteries. But that support isn't available for iPods either, and we have found ways to replace those batteries.

10. There are no case studies of firms that have deployed it enterpris-ewide. Sure, IT will say this, but it isn't a major objection, ultimately.

One reason the iPhone probably is used in smaller businesses is that people don't have all those custom apps to support. And we are entering an era where maybe there are some devices and apps that IT will simply say it won't support, but users can buy them and do their own support. Younger users will do that. Even some of us older users will do so.

Really, its is the security and support for proprietary enterprise apps that are the real barriers.

Qwest to Reinstate Dividend

Qwest Communications will issue its first dividend since 2001, setting a recurring quarterly payout to shareholders of eight cents per share. In some ways, the move represents the final end to the "dot bomb" and telecom crash of the early 2000s.

Zayo Buys Citynet Fiber Network

Zayo Group is acquiring Tulsa, Okla.-based Citynet Fiber Network, the wholesale division of communications provider, Citynet. CFN will become part of Zayo Bandwidth, Zayo Group's fiber based bandwidth business unit.

The CFN network has 8,500 route miles of fiber covering 57 Tier I-III markets in 10 states. The company's on-net buildings encompass many major carrier locations like local exchange carrier central offices, carrier hotels and wireless mobile switching centers.

The transaction is acquisition number six for Zayo, and part of the continuing consolidation trend in the U.S. metro access space.

Conflicting Regulatory Silos Keep Popping Up

One of the problems everybody faces as we move increasingly to a world of IP-enabled communications, information and entertainment is that a growing clash is occurring, piecemeal, between historically-distinct regulatory silos. Whether we can stumble forward forever, without acknowledging the end of regulatory silos, as well as technology or industry silos, remains open to question.

The problem is simply that different sorts of activities and businesses are governed by distinctly-different frameworks. Magazines and newspapers, for example, operate under First Amendment "free speech" rules and have virtually no "common carrier" obligations.

TV and radio broadcasters operate under different rules, with more limited "free speech" rights (broadcasters do not enjoy unrestricted rights to transmit any sort of content). Cable TV regulation is more akin to broadcasting than telecom regulation, but there are some tax and local franchising rules that are more akin to common carrier businesses.

Telecom companies operate under the most-restrictive rules, with legal requirements to interconnect with other telecom service providers and deliver their traffic. Data services and content generally have been immune from these rules, though. That's why the Web, and Web content, have developed essentially as a zone of freedom.

Of course, in the U.S. market there is more talk about "network neutrality", a troublesome issue not because of the immediate implications some attribute to it, but because it is just one more examples of how the old "silos" of regulation are breaking down, and becoming intellecutually incoherent in a world where media, TV, radio, music, talk, testing, Web surfing and data communications all occur over one physical pipe.

Should that not require some harmonization or revamping of the fundamental regulatory regimes each of the media types up to this point has enjoyed? And here's the crux of the matter: how does one square first amendment, "zone of freedom" rules historically applied to newspapers, magazines, data services and the Web, with common carrier rules applied to telcos, or the quasi-regulated broadcasting industry?

The fact that delivery modes change does not alter the zone of freedom newspapers, magazines and other media, even "Web media" are supposed to have. And the U.S. courts have ruled that corporations do possess rights of free speech as well. So the issue is whether the zone of freedom is expanded or contracted as multiple media types are delivered over IP pipes.

So it is that some consumer and public advocacy groups are urging the Federal Communications Commission to declare that "short code" text messages deserve the same nondiscriminatory treatment by telephone carriers as email and voice messages.

So are "short codes" advertising, a direct response mechanism, or are they "speech." And whose "speech" rights are supposed to be protected? Those of the speaker, as the early founders seemed to think, or the rights of the "listener," as jurists increasingly have argued over the past 50 years or so?

The issue is more complicated than sometimes positioned. Text messaging services might include a "zone of freedom" in terms of what is said. But note that the freedom is for the speaker. But who is the "speaker" whenever we are looking at media?

The Washington Post might not accept advertising from its competitor, the Wall Street Journal. Verizon Wireless might not accept ads from Sprint or T-Mobile. Cable companies don't take ads from telephone companies marketing competing services. In those cases, rights of speech are exercised by a "speaker." A TV, cable or radio network has the right not to allow speech (advertising also is speech) to be paid for and transmitted.

The fundamental problem is that as IP pipes carry virtually all communications, information and entertainment, we are going to see more disjointed efforts to regulate "unlike" things in "like" ways. That will be the corollary to regulating "like" things in "unlike" ways.

at&t Renegotiates Yahoo Deal

at&t says it is close to renegotiating a contract with Yahoo Inc. that undoubtedly will result in Yahoo earning less money. Under the current deal, Yahoo earns as much as $250 million a year of revenue. The renegotiation is expected to affect other deals Yahoo has with other telecom service providers.

The renegotiation is a reminder: large telcos often partner with other entities when entering a new market, and sometimes move slowly in those markets. That doesn't mean the relationships are stable. Ultimately, as they acquire the skills they believe they need, and scale, some partners aren't so important and "value" moves back inside the service provider organization.

There sometimes is a perception by outsiders that telcos are too "dumb" or "too slow moving" to dominate new markets. On the contrary, telcos are big enough, and smart enough, to wait for markets to develop before making a move to dominate. It's a business strategy, not an indication of "not getting it."

Mobility and Video Will Drive Growth

If Bear Stearns analysts are correct, mobile penetration will zoom past 100 percent, as will digital TV penetration, quite soon. Which suggests those two types of devices are where ad revenue opportunities are brightest, not to mention other sorts of "for fee" services and applications.

at&t to Drop DirecTV

at&t will stop offering DirecTV services to its customers toward the end of the first quarter. The not-unexpected move came as at&t found itself reselling both DirecTV and Dish Network services as a result of its acquisition of BellSouth, which had been a DirecTV partner. In its own territory, at&t has been partnering with Dish Network.

The Dish Network contract itself expires at the end of 2008, but at&t's longer business relationship with EchoStar, which offers the Dish Network service, probably is decisive.
DirecTV has to have anticipated the decision and has to be expected to roll out new channel and direct sales efforts early next year, to compensate for the loss of sales momentum from at&t.

It will have a lot of work to do. By some estimates, at&t accounted for an estimated 15.2 percent of DirecTV's gross additions but 58 percent of net subscriber growth. And though DirecTV probably will end 2007 with strong subscriber growth at the same level it saw in 2006, 2008 obviously will be more challenging.

Singapore will Structurally Separate NGN

Singapore is issuing a request for proposal to build a next-generation optical access network and has decided it will be built using a "structural separation" regime, where one company will build and own the access facilities and provide wholesale access to any retail provider that wants to use the network.

The RFP to construct the network will therefore provide for structural separation of the passive network operator from the retail service providers. If necessary, the government also is prepared to mandate open access provisions.

Put your finger in the air. The wind is blowing. As Bob Dylan once said: "you don't need a weatherman to know which way the wind blows."

Android: It's the Business Models

The most important thing about Android, the open mobile operating system and platform sponsored by Google, is arguably not the technology or the implications for handset cost: it's the development of business models.

One might think: "well, this is open source, so we will look for business models that are like the existing models for open source." But that's probably not going to be the case. Today's revenue model for open source is payment for enhancements, support and training.

To some extent, the business model is implicit rather than explicit. If I am a hardware or software applications provider, I simply use Asterisk because it is a lower-cost way of implementing something that an end user actually buys, even it the thing being bought essentially is a "legacy" requirement.

Voice mail, phone system or messaging platform are examples. In those cases, the operating system is an input to a business model, but not the model, which is the same one that existed before the open source tool was available.

Translated into a mobile market, it looks different. Open source will not do much, in and of itself, to lower the cost of a handset. So open source doesn't necessarily mean "cheap or free handset."

One can assume handset makers using Android will stabilize their versions so there is little need for third party end user support. That is a bug, not a feature, in the mobile end user world.

And since the whole idea is "easy to use," there shouldn't be much of a market created for training people how to use, develop, maintain and upgrade their operating systems. End users don't want to do that.

Assuming Android devices are used on existing networks (the 700-MHz C band network remains a bit of a wild card), the pricing models for data access are relatively affordable already, so it isn't clear whether there is immediate impact on data plan pricing either.

So consider Android a better way to help create a mobile Web business. The mobile phone business is built on recurring payment of access fees for voice, text and data access. The mobile Web just assumes access.

So the revenue model must begin where the Web itself begins. And that means advertising, to the extent that features and content have to be monetized directly. Of course, there's also content and applications given away for free in hopes that the attention will lead to support for some other business model, be that public relations, consulting, marketing, software or what have you. In that case a content provider doesn't necessarily require a revenue model.

But that's not what service providers, device manufacturers and application providers are looking at. The issue is revenue. And from where I sit, that means a media model.

The media model includes "for fee" and "for free" services and content, with greater or lesser degrees of advertising support. That means "aggregating eyeballs" and "aggregating highly-detailed information about the owners of those eyeballs" and "tracking the behavior of those people." That makes the advertising model quite valuable.

In the mobile arena, valuable as in "can I entice you to visit Starbucks right now; it is around the corner?" Valuable as in "are you hungry and a lover of good Thai food? You are half a block away."

Some will speculate about whether an entirely ad-supported model is conceivable. Well, it's conceivable, but not likely. Broadband access isn't free. But that isn't the point. If the value is high enough, a reasonable fee is not a barrier to usage.

Android is more likely to have an impact in making the mobile Web, and applications built on the mobile Web, far easier to use and vastly richer in functionality.

That's a hugely important and economically significant activity. But I don't think Android is about "free phone calls" or "free Web access" or "free phones," as many either think or hope for. Rich applications will be reward enough for users, who are quite capable of figuring out a value-for-money proposition. Android is about the promise of a mobile Web so useful we won't mind paying access fees to use it.

The one exception is that some users will appreciate "sometimes" being able to use Wi-Fi hot spots to access applications. This is a subset of users who choose not to pay a recurring fee for fully-mobile access, and want to rely on Wi-Fi for all of their connectivity.

Then there are users who occasionally will be happy to have Wi-Fi access for signal strength reasons, even if they are comfortable with a fully-mobile broadband connection.

Still, it seems likely that the early pull of Android applications is going to be location-based. "Where am I? How do I get there? Where can I find it? I didn't know that was on sale. So that's where you are."

Ad-supported phone calls, devices or access might have some role to play, sometimes. But I doubt that's the big impact.

Cable Squeezed on Both Ends

Most observers expect telco-delivered video to gradually take market share from cable operators, though modestly over the next couple of years. Most observers also think satellite-delivered services have crested, and will be lucky to hold onto their current market shares.

But one suspects there will be more change, longer term, than most observers now expect. For starters, video demand itself could shift to other IP formats, including at least some forms of Web video. So far, there isn't all that much evidence of shift. Consumers haven't embraced any of the devices and services that port video over to TV screens, though there continues to be evidence of a lessening of interest in linear television on the part of younger consumers.

Nearer term, satellite providers remain aggressive about high-definition TV services and pricing, and most consumers seem pleased with their satellite service.

And as compelling as many consumers find triple-play or quadruple-play services, not all buyers will find the pricing the most-compelling attraction. Some services, networks or suppliers are going to be picked as "best of breed" by some portion of the market, despite the fact that a bundle can be purchased from two providers in a market.

That will continue to put some incremental pressure on cable providers, who are using bundling, as telcos are, to lock in and protect the current customer base.

at&t U-Verse: 30 Million Homes Passed by 2010

at&t says it expects its U-Verse fiber-to-customer-driven video service to be available in 30 million homes by the end of 2010, compared to 5.5 million as of its last quarter. The company has said it hopes to pass 17 million homes by the end of 2008.

For users not interested in at&t's IPTV offering, the extension of the fiber-to-customer network means higher broadband access speeds will be available as well. For many of us, if not for at&t, that is the more important part of the story.