Apple Sales Explode: It's a Cloud Computing Effect

Among the conclusions one might draw from the explosion of Apple market share in the U.S. PC market--in February 2008 Macs got 14 percent unit share and 25 percent dollar share--is that the "Web" really is becoming a computing utility. The results are drawn from a survey of buyers by NPD Group.

As more things can be done "in the cloud," the operating system of the access device matters less. To use an analogy, we aren't yet to the point of simple mobile phones, where most features except for subscriber identity are properties of the network.

We more nearly are in a position analogous to smart phones, however, where some important functionality resides locally, and much is in the network.

If you like, think about PC use pre-Web or pre-local area networks. Initially, with the exception of connection to a printer, a wide area network connection was not necessary to derive value from a PC. Later, as more PCs appeared in the workplace, it became necessary to connect PCs locally.

Operating system mattered greatly, in those applications. Once people started to interconnect over the wide area network, though, things began to change. Obviously one needed the "right" physical interface to support a dial-up modem service. But beyond that the PC operating system begins to matter less.

The wide area network is designed to work transparently to edge devices, so long as the wide area network transmission protocols and interfaces are supported.

That's what is starting to happen with computing applications and services--and video and audio plus multimedia content now are computing applications. The details of edge devices will matter less once "networked" applications take firmer hold.

To use another analogy, consider televisions. The internal details are unimportant so long as the communications interfaces are standard. A TV must tune to standard NTSC signals now, and then HDTV formats in 2009. The display technology must render those pictures properly. Other than that, the details of device operation don't matter.

That perhaps is one reason buyers now are more free to buy Macs, and abandon the Microsoft operating system: OS choices aren't so important now as more value is drawn from the network.

Pacific Crest Securities analyst Andy Hargreaves says the latest NPD results represent 60 percent Apple unit growth and 67 percent revenue growth over the same period one year ago.

At the same time, overall U.S. PC retail shipments grew just nine percent on a five percent increase in revenues.

Apple saw particular strength in notebook systems, which rose 64 percent in units and 67 percent in revenues, suggesting strong sell-through of the company's new MacBook Air, a device specifically designed to rely on the Web and Internet more extensively than a typical machine.

Apple also saw robust demand for its desktop systems, which grew 55 percent on a 68 percent increase in revenues, compared to the overall retail segment which saw unit sales decline of five percent on a two percent drop in revenues.

Of course, Apple design smarts and the spillover glow from the iPod and iPhone probably are enticing buyers who might not have considered a Mac before.

But users wouldn't be doing so unless they were convinced their computing experience won't not be disrupted unnecessarily. One reasons for that greater level of confidence is simply that much of that experience now hinges on access to the Web and Internet.

700 MHz: No Big Surprise

As most observers probably would have bet, Verizon won the C block while at&t won hundreds of local licenses to augment the 700 MHz spectrum it already owns. Those two developments arguably were the most-likely outcomes all along.

EchoStar, though, won enough E block spectrum to create a nearly-national footprint as well. What it plans to do with that spectrum isn't so clear at this point. There isn't enough spectrum in that block to run WiMAX or probably even Long Term Evolution protocols with any kind of loading.

Many argue that slice of spectrum is best suited to mobile video delivery.

31% Smart Phone Sales by 2013

The market for smartphones will grow from around 10 percent of the total handset market in 2007 to 31 percent of the market in 2013, say researchers at ABI Research.

Fueling he growth: carrier interest in boosting data revenues and the migration of advanced “smart” operating systems down into middle tier devices.

Mobile Walled Garden? No Way

Mobile phone owners already are partially outside mobile operator content walled gardens, a new survey by ABI Research suggests. And there is no reason to believe this trend is not a permanent feature of the mobile content and applications business.

The 14 percent of respondents who said they use their phone to watch video was split nearly evenly between those who watch video from websites such as YouTube (35 percent), from their own carrier’s video offering (31 percent), and from video they sideload onto their mobile devices (28 percent).

The leading source of music files on a mobile phone was ripped CDs and sideloading onto the phone (48 percent of mobile-music listening respondents), while over one third of music-listening respondents (35 percent) purchased music through their carriers.

As an example, today’s mobile consumer is more likely to watch a video from YouTube on his or her phone than a video from the carrier’s own service, but is more than twice as likely to get ringtones from the carrier than from any other source.

“Perhaps more with the mobile phone than any other consumer electronics device, content is obtained from a variety of sources,” says research director Michael Wolf. “This shows that despite the strong control most carriers retain over the network, their control over the mobile content ecosystem remains limited. The consumer will see more and more options for obtaining rich media in the future.”

In the mobile business, as in the video, music, voice and Internet businesses, closed and walled garden business models are learning to live side by side with the open models of the Web. It isn't clear whether, in the future, all content will flow "over the top."

At some point, if it is possible for consumers to grab the content they want, when they want it--and business relationships with content owners are just as important as physical bandwidth in that regard--then we will see a serious test of the dominance of "packaged" distribution such as cable TV, broadcast TV or telco voice.

Email Overload?

Are business users drowning in unwanted email or not? Some observers argue they are, and also say the overload is harming productivity. A typical analysis might be that a half hour a day is wasted when people have to deal with unwanted email. Over an eight-hour working day, that's 1/16 of total time at work. For a person earning $100,000, that's an annual loss of $6,250.

The countervailing view is that managing email is no more a "time waster" than socializing around the office, and might have positive value to the extent that all business is social, and that relationship building and maintenance of those relationships.

Granted, email can be chore if a user feels compelled to respond to every message. But there's no reason to respond to most messages, some would argue. Instead, email is part of a flow of communications and information that streams past a person, providing context on what other people one works with think is important.

Recognizing the pattern is the key thing, not "responding" to all messages in the flow. It's a little like "Twitter" streams, Real Simple Syndication feeds or Facebook updates. One doesn't have to respond to the updates. But the updates can have value.

The issue is whether "information overload" is a problem or an opportunity. Providers of unified communications capabilities obviously see the management of message streams as an opportunity; a chance to solve the inefficiency of missed, delayed or repeated communication attempts.

Where a company's cost structure or revenue streams are involved, "inefficient" communications are a problem. In other cases, maybe not. When information is a stream of messages about the state of one's environment, maybe not. The "problem" exists to a large extent only in compulsive response, or inordinate attention to, the flow of data.

The same might be said of other "interruptions" of one's work. To a point, pings from co-workers do "interrupt" the specific tasks any particular person has. On the other hand, to the extent that organizations are social, "interruptions" are part of the collaboration process. To the extent that business value grows from collaboration, "interruptions" simply are part of the collaborative process. So is collaboration wasted time? Hardly.

Online Content Use Up, Across All Age Groups

Online content is getting more attention from users in every age category, says Burst Media.

Overall, 59.6 percent of respondents to a recent survey report they are visiting more Web sites in a typical week than they were one year ago, say researchers at Burst Media. And the trend holds in all age segments.

In fact, 62.8 percent of respondents 55 years and older say they are visiting more sites today in a typical week of web surfing than they were one year ago.

Local and national news is the most popular content consumed online with half of respondents regularly seeking it out. Still, there are differences in the types of content consumed by age segments.

Among respondents 18 to 34 years of age, entertainment information (44.7 percent) is the most regularly sought online content, followed by: local or national news (40.1percent), online games (38.1 percent), shopping or product information (36.1 percent) information for work (35.0 percent), and online communities such as social networks, forums and blogs (31.4 percent).

Local or national news (54.2 percent) is the most popular online content for respondents 35 to 54 years of age. Other types of online content sought by respondents 35 to 54 years of age include shopping or product information (44.8%), information for work (42.7 percent), health information (37.1 percent), entertainment information (37 percent), and travel information (33.7 percent).

Local or national news is by far the most popular online content for respondents 55 years and older. About 56 percent of respondents in this segment saying they regularly seek such information online.

Shopping and product information (44 percent) is the second most popular type of content sought and is closely followed by health information (42.5 percent).

Other types of content sought include: international news (38.9 percent), travel information (38.2 percent), and food information/recipes (34.1 percent).

Two-thirds (67.7 percent) of respondents say their daily routine would be disrupted if their Internet access was taken away and not available for one week.

About 43 percent say such a loss would be "significantly" disruptive.

And Web access is disruptive for every age group. In fact, among respondents 55 years and older, 44 percent say their daily life would be significantly disrupted if they were unable to access the Internet.

Internet access now has become an essential service, it appears, like voice, text and video entertainment.

Opera Mini for Helio Ocean

Opera's Opera Mini mobile browser now is available for the first time in the U.S.market as a mobile service provider on-deck option. Helio users can surf the Web with Opera Mini on their Ocean devices using Opera Mini that has been specially-tailored for the Ocean handset.

Available as a downloadable application from Helio's Web portal, Opera Mini is touted as providing a desktop-like experience with fast response.

Apple Seeks "Free Access to iTunes"

Apple is in discussions with leading music companies about giving customers free access to its entire iTunes music library in exchange for premium pricing of its iPod and iPhone devices, reports Andrew Edgecliffe-Johnson of the Financial Times.

The “all you can eat” model, a replica of Nokia’s “comes with music” deal with Universal Music last December. Nokia reportedly will offer $80 or so to music industry partners, in exchange for the use of music assets.

Apple is said to have offered $20 per device, and also is said to be examining a subscription plan for iPhone users, as that device obviously comes with a billing arrangement.

The subscription model might allow users to keep up to 40 or 50 tracks a year, even if they later cancelled a subscription or changed devices.

As the old adage goes: "With all this ---- lying around, there has to be a horse here somewhere." In other words, there are new business models to be discovered that provide direct benefits to content owners, device manufacturers and access providers.

Over the long term, the only way viable business models will be constructed that support the building of fiber-to-home and mobile broadband networks, is when all the key value chain members also participate in the revenue chain. An uneasy relationship it will remain. But the relationships and models have to be created.

Otherwise, we won't get ubiquitous and capacious broadband upon which services and applications can be run.

U.S. 700 MHz Auction Now is Ended

No further details at the moment.

Consumer Electronics Spending Decelerates

The ChangeWave Alliance's latest survey shows a" sudden huge" pullback in consumer retail purchasing on electronics by U.S. consumers, the largest one since ChangeWave began measuring spending trends back in 2002.

The February 18-25 survey of 4,427 consumers looked at a range of popular gadgets in the consumer electronics industry, including digital cameras, iPods and video game consoles.

Only 19 percent of survey respondents say they'll spend more on electronics over the next 90 days compared to 33 percent who will spend less, an unprecedented sign of weakness in the consumer electronics space.

Broadband Users Generally Satisfied

U.S. consumers generally seem to be aware of the importance of bandwidth as a determinant of their Internet experiences, says Mike Paxton, In-Stat analyst. For the most part, they also seem satisfied with their current access speeds.

Anecdotal evidence suggests many consumers are aware there is a difference between theoretical bandwidth and the actual bandwidth they get when lots of other users are on the network at the same time.

For that reason, consumers increasingly are receptive to higher-bandwidth offers, In-Stat argues. Most consumers probably are not aware that, at peak load, the average bandwidth they may be able to use is as much as an order of magnitude less than the theoretical bandwidth.

That said, more than 83 percent of respondents to a recent In-Stat consumer survey, which included a speed measurement, said they either were "very satisfied" or "somewhat satisfied" with their current connection.

In large part, that finding is testament to generally enhanced access speed offerings by virtually all suppliers.

The survey of 700 users found an average downstream speed of 3.8 Mbps, while the average upstream speed is 980 kbps.

The average downstream fiber-to-home speed was 8.8 Mbps, while cable modem connections averaged 4.9 Mbps and DSL averaged 2.1 Mbps, In-Stat says. Those findings are generally congruent with research published by the Communications Workers of America in 2007.

The average monthly price for broadband service is a bit over $38.

High Latent Mobile Web Demand?

If iPhone users, and a recent study of smart phone users, are any indication, there is clear and vast potential for mobile Web applications, devices and services.

And that is despite the relatively low usage of mobile Web services at the moment. "It is amazing how unaware consumers are of what is, and what is not available" in mobile, Web and other forms of communications, says Elaine Warner, Compete.com analyst.

On the other hand, there is clear potential. “We asked smart phone users what was important to them and 68 percent said Web access was really important,” says Warner. Considering that just seven percent of respondents to the Pew study say they do so on a typical day, Compete’s findings suggest there is vast untapped potential.

One of the biggest struggles the mobile industry has is getting the user experience right, though Warner says the iPhone was a breakthrough.

“We did a study about iPhone and found the two things people want is surfing the Web and checking their personal email,” says Warner. “They still feel they can't do that easily.”

Along the way, application and service providers will have to adapt the context of mobile Web use. “You don't search for the same things you do on a PC as you do from a mobile handset,” says Warner.

“You don't want a Wikipedia page to be the top listing when you enter a search term, she says. “That’s not likely to be what you want.

More typically a user will want to find a place to get to, or something to buy.

Though “voice in your pocket or purse” was the initial “killer app,” sizable demand now exists in the “email in your pocket or purse, “music in your pocket or purse” and to a lesser extent “Web in your pocket or purse” user segments.

That few people have used the mobile Web up to this point is understandable. It has been a difficult experience, for the most part. And it may turn out that early iPhone users are particularly avid users of the Web.

But if Compete’s survey findings are any indication, there is pent-up demand for mobile Web access.

How Many Lines or VoIP Accounts?

Suppliers shipped an estimated 9.8 million VoIP subscriber feature server licenses for deployment in service provider networks, according to analysts at iLocus. Those licenses generated $177.4 million in revenue, and grew
34 percent, quarter over quarter.

The growth is due to high voice over broadband activity in Europe and among cable operators in North America. In Asia-Pacific VoBB growth is still confined to Japan mostly.

Of the 9.8 million VoIP subscriber licenses sold during 4Q07, licenses for hosted business phone system (hosted PBX or hosted Centrex or key system) lines account for about 1.2 million.

The remaining 8.6 million were mainly deployed for residential VoIP or switch replacement, iLocus says.

That suggests, at least for the short term, a belief that 12 percent of overall VoIP sales by service providers are of the hosted phone system sort.

Keep in mind that such data is not so granular as we might hope. In fact, even the reported penetration of landlines is less granular than one might think. If one looks at reported landline phone penetration, for example, there is a period between 2005 and 2007 where the installed base appears to oscillate wildly.

It appears that changes in the survey instrument are partly the reason. Government researchers now ask whether "any" phone service is available, specifying that mobiles count, where they used to ask whether a phone line was available. The government now makes a distinction between phones "in the living unit" and "available in the building" as well.

So it is likely we simply have reporting error in recent data. Over time that should correct. But the point is that even the official Federal Communications Commission data now have to be interpreted.

It's just another reminder that all our survey data should be considered indicative of trends rather than firm descriptions of physical reality.

Google IS Online Advertising

Though total U.S. ad revenue at 17 public companies increased nine percent in 2007, online revenues grew 28 percent, says Henry Blodget, Silicon Alley Insider author. Total ad revenue for the 17 firms was $58 billion, while online revenues were $18 billion.

Offline revenue grew about $1 billion while online grew $4 billion. Google got $2.7 billion of that total, while online ad revenue at Yahoo, Microsoft, and AOL grew $1.3 billion. In other words, says Blodget, Google captured twice as much revenue as its closest three competitors combined.

Google.com's U.S. revenue growth was more than twice as much the growth of ad revenue in all of the 13 offline media companies Blodget tracked.

More Online Video, More Managed P2P

Online video sites have delivered promising stats recently, says Compete.com analyst Aniya Zaozerskaya. Netflix’s WatchNow, which allows subscribers to any Netflix plan to watch full-length movies and TV episodes online from their collection, had 69 percent more people using the service this quarter as compared to last quarter.

Veoh.com, which allows users to view and share short YouTube-like videos as well as stream full-length TV show episodes, has grown from just under 1.5 million unique visitors one year ago to over six million in February 2008.

Hulu.com, a newer site offering both full-length movies and TV shows, including the most recent in-season episodes, also is gaining traction, she says.

Assuming peer-to-peer applications are deemed lawful, and therefore not to be blocked--and that seems a certainty--managed P2P services would seem to be poised for growth.

One reason P2P chews up so much bandwidth on service provider backbones is the unmanaged way P2P traditionally operates. Bits of content might be fetched from long distances when the same material actually resides on a user hard drive someplace local.

So far, it appears, managing P2P streams can reduce overall backbone network traffic by 60 percent or more, executives at Pando Networks and Verizon Communications say.

Network-aware versions of P2P that can fetch data from local sources rather than reaching far across the network, can help,in that regard.