Is Nexus One A Particular Threat to Service Providers?

Does Google's Nexus One launch mean anything in particular for mobile service providers? That might be a matter of some debate at the moment. Some observers were expecting something "more disruptive." Perhaps an ad-supported voice service; maybe a completely unlocked device able to work on any carrier's network; maybe a business model that clearly delineates a new role for the handset provider.

That didn't happen. Some observers think the bigger innovation is the way Google is selling from a
Web site. Some might see too much difference there, either. Selling from a Web site isn't too unusual these days, and Apple's retail stores and existing carrier Web sites.already provide models for handset distribution aside from the branded mobile carrier stores.

To be sure, an "unlocked handset" strategy always will be tough in the U.S. market until such time as most carriers are using one single air interface and handsets are equipped with enough frequency agility to adapt to whatever network si providing access. An unlocked handset today means a choice of no more than one or two major carriers (one WiMAX, two CDMA and two GSM).

The other angle is that U.S. consumers have not yet shown any desire to pay full retail price for a handset, when they can get a subsidized device at the price of a two-year contract. People might gripe about the existence of contracts, but they have choices. They can pay full retail for their devices and avoid the contracts. Not many make that choice.

The more interesting observation is about what various Android devices really are. A BlackBerry is an email device; an iPhone is a Web surfing device. Many feature phones are texting devices. Some models are social networking devices, or at least highly optimized for that purpose. Some devices are optimized for navigation.

Could a new niche be developing for a "search" device? Is "finding stuff" a sufficiently robust need that at least one of the Android devices becomes recognized as the single best device for finding things? That seems to me the most interesting question about what the Nexus One or broader family of Android devices might raise.

Matters always can change, but at least for the moment, it does not appear the Nexus One is especially disruptive of the existing mobile business model or standard practices, either.

http://connectedplanetonline.com/mobile-apps/news/googles-nexus-effects-0115/?imw=Y

Real Estate Advertising Trends: Newspapers Will Gain, Online Will Not

It might be true, at a strategic level, that newspapers are a declining medium while the Web is a growing medium. At a tactical level, that does not automatically mean ad spending always, inexorably is shifting from print to online.

The newspaper business, for example, might see a 16 percent increase in real estate advertising in 2010 while online real estate advertising actuall drops about four percent, more than it declined in 2009.

Ironically, media segments that have generally been perceived as weak, including newspapers and broadcasting, are set to do better. Conversely, those that have been otherwise least affected by the economic downturn, cable and online, are poised to do worse.

Real estate spending on broadcast TV will surge 39 percent in 2010 after declining 44 percent last year. Cable TV will drop 16 percent this year. In 2009, cable TV real estate ad revenue fell just two percent.

Part of the reason for the disparity among the major media segments is that local real estate advertisers have been increasing their spending, while national, out-of-market realtors are decreasing their spend.

The other angle is that so much money has shifted to online formats that there isn't a much room to grow, when other alternatives are more affordable.

About three of every five online ad dollars are currently spent by real estate agents and brokers. Not 60 percent of real estate advertising; 60 percent of all online advertising.

Another reason for the decline in online spending by realtors and brokers also is the result of a tactical shift. More money is being spent on less-costly paid search programs, less on display ads.

Sometimes the conventional wisdom can be wrong. It appears it certainly will be wrong about real estate ad spending in 2010. Newspapers and broadcasting will get more growth; cable and online less.

New Verizon Wireless Pricing Shows Growth Strategy

Verizon Wireless today announced that it is introducing new data, prepaid, and voice plans on January 18, 2010. The single biggest change is a new mandatory data plan requirement for all 3G multimedia devices. For "feature" phones, that will mean a $10 a month charge for use of up to 15 Mbytes. 

Smartphone packages remain at $30 a month. 

But Verizon also introduced new unlimited postpaid plans for voice ($70 a month) and unlimited talk and text for $90 a month. Prepaid unlimited plans sell for $75 a month for voice, and $95 a month for unlimited voice and texting.

"Nationwide Unlimited Talk Family SharePlans" will be $120 a month while "Nationwide Unlimited Talk & Text Family SharePlans" will cost $150 a month.

All Family SharePlan pricing includes the first two lines of service. The new plans do not apply to existing customers, though any current customer can change to any of the new plans without a penalty or contract extension.

So heree's the strategy background. Verizon wants to build the biggest-possible data customer base before it launches its new fourth-generation Long Term Evolution network. That's an essential part of getting a financial return on the 4G investment, and also reflects the growing importance of smartphones as a percentage of total devices sold and the importance of data service revenues.

Verizon also wants to protect its base of "high-value" customers by simplifying pricing plans, providing more value and encouraging uptake of higher-end plans. Verizon expects to see higher data penetration, higher average revenue per user and less churn, with lower-end customers moving up to unlimited plans in greater numbers. 

Verizon believes the moves to unlimited plans also will reduce operatinal costs. Since a large percentage of customer service costs are driven by consumers concerned about their usage and overages, unlimited plans will blunt the volume and cost of handling such requests. 

Strategically, the data plan moves also are a reflection of the vanishing voice revenues business, and the absolute centrality of data revenues as the mainstay of Verizon Wireless revenue. 

Are Emerging Market Consumers Different?

A new study by Accenture suggests that, in a globalized world, consumer demand for a wide range of technology products is remarkably similar, at least among those emerging market buyers with disposable income.

In fact, consumers in emerging markets are twice as likely as those in developed markets to purchase and use consumer technology in the next year and are more willing to pay a premium for “environmentally friendly” consumer electronics products, says Accenture.

The Accenture survey of 16,000 consumers in four “mature” countries (the United States, Germany, France and Japan) and four “emerging” countries (China, India, Malaysia, and Singapore) suggests current and future spending and usage patterns for 19 different consumer technologies, including smartphones, high-definition TVs and computers, is remarkably similar in developed and emerging markets, with one exception: developing market consumers are more likely to buy smartphones, PCs and other devices over the next year.

Compared with consumers in mature countries, consumers in emerging countries are more than two and a half times as likely to buy a smartphone during the next year (52 percent  compared to 20 percent).

Emerging market consumers also are more than twice as likely to have bought a smartphone in the past year (67 percent compared to 32 percent).

Twice as many emerging market consumers are likely to have bought a computer in the past year (40 percent vs. 20 percent). They also are more than twice as likely to have at least occasionally played video games on handheld devices (58 percent compared to 28 percent).

Do they use social networking? Yes, at about a 69 percent rate, compared to 38 percent in the developed markets.

Emerging market consumers also are significantly more likely to pay a premium for consumer products marketed as being environmentally friendly (84 percent compared to  50 percent).

“One of the reasons for this emerging-country growth is the rapid expansion of the middle class with its substantial disposable income,” says Jean-Laurent Poitou, managing director of Accenture’s Electronics & High Tech industry group.

“Furthermore, our research shows that the increased demand for smart connected wireless devices such as smartphones is being driven by social-networking applications.

“Emerging-country consumers use mobile devices more than they do computers to access Internet-enabled applications and services, and consumers in mature countries are also headed in that direction.”

Are Social Networks More Like Email or Google?

Social networks already have become a lead application for mobile devices. A new study by Accenture finds that “increased demand for smart connected wireless devices such as smartphones is being driven by social-networking applications," in both developed and developing economies.

But you likely still can get a good argument about whether social networking is a "feature" or a business model. Email for the most part remains a "feature." Early in the development of the dial-up business, email was so important it actually drove adoption of Internet access. These days, with the advent of Web mail and business and organization email, it simply is a feature, but not a direct revenue model (except for providers of email hardware and software).

Google and other Web mail providers have started building an advertising revenue stream, but it largely is ancillary.

The same sort of argument can be made about social networking applications. Skeptics point to Twitter, Facebook, MySpace,  Bebo and Geocities, which either are struggling to create a business model, or have been shut down.

Optimists might say that although many attempts will fail, a normal situation for the Internet applications business, one or two of the players will discover a sustainable business model and possibly even achieve "Google" style success.

Most believe advertising will be significant, and skeptics say social networks are not conducive to most types of display advertising, for example.

That would explain why no social networking company has yet emerged as a public company: there is not yet a viable business model.

It is possible that some new model will be discovered in time. Twitter, for example, is nearly at breakeven as a result of a search results deals with Google and Bing. That's not a complete answer, but it helps.

It is not yet possible to determine the final outcome. It is conceivable that some social networks will drive so much engagement and value that some will be acquired by larger firms able to leverage the networks to deepen and extend their other existing business models. In that scenario social networking winds up more like email than Google.

Right now, it likely is a coin toss which model is most believed.

Brands ARE Media These Days

Brands are media companies these days, many marketers would argue. That's a huge shift in thinking from an older world where third parties did "media," and then brands simply advertised in those media.

These days, more and more companies are becoming publishers or content providers in their own right, bypassing "media" outlets.

"The fundamentals of media business are toppling as their 20th century foundations crumble," says Mark Mulligan, Forrester Research VP. "Consumers are falling out of love with paying for media and striking up illicit affairs with free content, not just because it is free, but also because it is on their terms."

This is great news for consumers but terrible news for media businesses that have spent years building revenues upon near-monopolistic control of supply of content, says Mulligan.

"Why all this matters to brands is because the tectonic shifts in media value chains are creating exciting new opportunities for non-media companies to become media companies themselves," Mulligan says.

Just as Apple transformed from hardware company to media services company with the launch of the iTunes Store, so too are brands such as Procter and Gamble with BeingGirl.com, Tommy Hilfiger with Tommy TV and Audi with its UK TV channel.

Why are brands such as these choosing to become media companies? Because they can. Blogs, Web publishing, smartphones, tablets, e-book readers, netbooks and other tools providing access to the Internet allow firms to create media sites as easily as old-line publishers can.

It takes a Web site, but every firm has one these days. It takes an ability to create or aggregate content, but that's easier these days as well, with real simple syndication and other news feeds. But brands also are simply creating their own writing staffs as well.

And the logic of doing so likely makes more sense as well, as audiences fragment. If specialized audiences are what you want to reach, Web publishing makes lots of sense. Instead of creating and placing advertisements that might or might not hit the target audience, brands can create their own content sites, producing their own "media" and then placing messages and interacting in other ways with their intended audiences.

In the new world, the dividing line between "media" and "brand" is more fuzzy.

Skype "Dial Tone" No Threat to Mobiles, Fixed Lines

About 21.5 million Skype users were logged in simultaneously on January 11, 2010, which likely is a record.

Some refer to this as "Skype dial tone."

To give you some idea of how far Skype would have to go to be a credible alternative to other forms of consumer voice, consider that in March 2009 there were 4.1 billion mobile subscriptions in service, according to the International Telecommunications Uniion. The ITU also estimates there are about 1.3 trillion fixed lines in service globally.

So make that 5.4 billion devices that have "dial tone," compared to a third of a percent of Skype accounts, at peak. To the extent communications really does depend on network effects, Skype has quite some ways to go.

Business Prepaid Wireless Heats Up

Business customers have not been big users of prepaid mobile services. But that could be changing. Compass Intelligence expects growth of about 10 percent over each of the next three years.

Estimated to represent approximately five million of the 57 million prepaid subscribers by the end of 2010, prepaid business users make up a small part of the prepaid market at the moment, and is a recent trend.

About 60 percent of of decision-makers offering employees prepaid devices say they have done so far one year or more,” says Kneko Burney, Chief Strategist of Compass Intelligence.

One would be tempted to suggest that a new frugality caused by the recession is the reason business prepaid is picking up, and that likely is part of the explanation. But one might also suggest that more businesses are trying to control fast-growing mobile expenses. Shifting to prepaid is one way to do so.

“The real finding here is that the 'corporate liable' segment of the overall wireless market (representing roughly 14 percent of all wireless subscribers) is expected to change as a result this increase in business prepaid," ays Burney. Contracts will need to become more flexible and carriers will be wise to find a way to accommodate business needs for “prepaid-like” options in contracts, particularly for mobile broadband and possibly even push-to-talk.”

Decision-makers are most likely to provide prepaid devices to “sales people,” executives, business owners, IT or telecom staffs.

For many, the primary reason that prepaid is attractive is because it is “less of a hassle compared to a monthly contract.”

Prepaid mobile broadband also is getting traction. Many respondents to the Compass Intelligence survey say they will be buying nearly as many prepaid mobile broadband devices as prepaid mobile phones in 2010.

Despite the Noise, Broadband Subscribers are Highly Satisfied

Judging by some commentary one hears on the Internet and blogosphere, customers are very unhappy with their broadband access services.

After all, isn't the United States woefully behind other nations in speeds?

A new study by Parks Associates shows the opposite. The overwhelming percentage of U.S. broadband customers, across every single platform are "highly satisfied."

There is, to be sure, a small percentage of users on every type of access network who say they are "highly dissatisfied" with their service. The shock might be how few actually are really unhappy.

Granted, continual improvement is a good thing. But the Parks Associates study suggests providers need to keep improving a service that provides overwhelming "high" satisfaction, rather than scrambling to update services that basically are seen as somehow inadequate.

Rural-Urban Broadband Customers Not so Different

Are rural broadband customers all that different from suburban or urban customers? Not so much, a new analysis by Parks Associations suggests.

The percentages of rural broadband households who are very satisfied and very dissatisfied with their broadband services are within the margin of error for all U.S. broadband households, Parks Asociates notes. In other words, they are no more inclined to be pleased or upset with their service and service provider.

Rural broadband consumers desire value-added services on par with all U.S. broadband households, with premium technical support services and online backup as the top-two desired value-added services.

And the overwhelming percentage of U.S. broadband consumers are highly satisfied with their access services, despite a small percentage that say they are highly dissatisfied.

Overall, the rural status of a household has little impact on level of satisfaction with its broadband service. The type of access service does seem to have some bearing on high and low satisfaction.

Households with fiber broadband services report high satisfaction ratings in larger numbers, and households receiving satellite and wireless broadband services exhibit lower satisfaction ratings. But there is an important caveat. Customers who buy bundles of service are happier than customers who do not buy bundles. So the key variable seems to be the ability to buy a bundle, more than the type fo access.

The business implications would seem to be clear enough. Bundles create higher satisfaction and higher satisfaction reduces churn.  A highly satisfied broadband subscriber is 46 percent less likely to churn from a current provider, whereas a highly dissatisfied customer is 384 percent more likely to leave a current broadband provider.

A subscriber to a triple play of access services (broadband, television, and home telephone)
 is 15 percent more likely to be a highly satisfied broadband customer.

More than 70 percent of cable broadband households subscribe to a bundle, about 25 percent of which buy a triple play. But most, about 66 percent, buy a dual-play bundle of video and broadband access.

DSL providers have 58 percent bundle penetration, with 25 percent of customers opting for a dual-play package of  broadband and video while 17 percent buy a triple-play bundle.

Fiber broadband providers have 78 percent bundle penetration, with 64 percent buying a dual-play broadband and video bundle and 49 percent buying a triple-play package.

Rural broadband customers are 10 percent to 20 percent less likely than broadband subscribers on a national level to subscribe to the most-common broadband bundles. One would therefore expect lower satisfaction in rural areas, since satisfaction and bundles seem to be directly related.

To Solve the "Broadband Access" Problem, You Have to Know What Causes It

Solving the problem "people who don't use broadband access at home" hinges on the actual barrier to usage. Some people don't use the Internet; some don't use computers; some are unwillingness to pay current subscription prices while others would buy but literally have no physical access at their remote locations.

All too often the problem is viewed uni-dimensionally, as though lack of supply is the key problem. But there is increasingly acknowledgement that there are other barriers to surmount, such as users who would like to use the Internet, and could afford it, but who do not own PCs, and are unlikely to buy one.

The U.K. government believes "lack of PCs" is among the barriers, and now plans to give away
270,000 low-income families with free laptops and broadband access, as part of its £300 million broadband stimulation program.

Since the fall of 2008 U.K. officials have been training "well off" families about the value of broadband for users who can afford to buy broadband, but do not see the value.

The new inititiative aims to address a different problem: people who would use the Internet and see its value, but cannot afford the PC or recurring cost of a connection.

The program is to be included in the Children, Schools and Families Bill for 2009/2010, which is yet to be debated in the House of Commons. The legislation aims to ensure that all families with children aged between seven and 14 will be able to apply for a grant to buy a computer and broadband connection.

Loosely-Coupled Nexus One Mobile Ecosystem Creates Problems

Some problems are predictable; some aren't. It was predictable that as owners of unlocked Nexus One devices began to experience problems, they'd have to run the gauntlet of fingerpointing one often sees when ecosystems are loosely coupled.

Reporting connectivity issues, some users have been told by T-Mobile USA that it is "an HTC problem," while some users communicating with HTC have been told "it's a T-Mobile problem."

Other problems are echoes of what has been seen in the recent and immediate past, namely complaints about the quality of the 3G networks. Some users complain that 3G coverage is weak or non-existent. Some report that their devices are switching from 3G to 2G networks. Again, it might be a handset issue, but switching from a 3G to a 2G network is what happens when a 3G network gets congested.

In other cases, the error modes suggest there is a software or hardware problem. At least some users say an active HTC device, when sitting right next to a Nexus One, gets great signal while the Nexus One gets a weak signal. It's hard to blame that particular circumstance on network issues.

All that is known right now is that there is some problem using the Nexus One on the T-Mobile network.

The loosely-coupled ecosystem (open devices sold independently of service) is bound to create customer service issues, irrespective of the merits of either a network or handset.

Google Nexus One: the Difference Between "Device" and "Service"

There's a downside to "open" approaches to retail distribution and support of mobile devices. Highly-technical users might not mind, in fact, might enjoy, having to play with their devices and software.

Most end users just want things to work. For all its potential problems, tighly-integrated retail approaches, where software, hardware and retail support are integrated, has advantages. That approach tends to reduce the potential for user unhappiness, particularly when after-sale issues start to arise.

That is one downside for the Google Nexus One approach, which has Google selling unlocked devices, without direct retail relationships with service providers. When problems start to manifest themselves, users are likely to become frustrated with Google's ability to provide email and forum support.

As the old saying goes, one of the things about being a service provider is that one "occasionally has to provide some service." Granted, Google actually is acting as a device retailer for Nexus One. But users are not likely to care. They got their phones from Google and they will expect Google to solve after-sale problems.

If T-Mobile did not sell users their phones, they logically are going to refer users back to Google for device-related questions. It is bound to cause headaches, and also is likely to cause some buyers to gravitate towards a Droid, as Verizon will take ownership for all problems that could arise.

"Open" leads to more innovation, no doubt. But the mobile business is only partly about innovation. It is a service business. And that is likely to prove important, going forward.

Is Google Crazy, or Simply Unusual?

Cable and satellite providers of video entertainment have different financial interests from content providers, even though both are essential parts of the multi-channel video entertainment ecosystem.

Likewise, handets manufacturers, mobile application providers and access providers have distinct financial interests, though all are part of the single mobile ecosystem.

That being the case, conflicts between ecosystem partners are an ever-present reality. The issue is how much cooperation and conflict is possible, and whether enough benefit occurs, despite some conflict.

Google's release of the Nexus One, and its apparent plans to release a Nexus Two and other devices are prime examples. Some observers, including Google's competitors, will note that it is risky for a partner to compete with its other partners in a single ecosystem.

Microsoft of course questions the wisdom of Google's mobile strategy, insisting Google will have trouble attracting and keeping handset partners for its Android operating system now that the company is selling its very own branded devices.

That certainly is the conventional wisdom. But even a valid conventional wisdom can have exceptions. What "most" partners cannot envision, attempt or succeed at is not to say that "all" partners are so limited. Nor are relationships immutable; they can change over time.

Google might be one of the salient exceptions, as is Apple. Several years ago, most telecom executives were more afraid of Google than of cable operators. These days, executives are looking for ways to leverage and work with Google.

Apple has significantly reinvented business frameworks in the music and phone businesses, for example.

The other issue is that Google's relationship with some ecosystem partners can be qutie distinct. At least initially, HTC and Motorola have add a different relationship than other manufacturers, and T-Mobile as a service provider likewise was early to support Android.

Google's other partnerships are a bit more complicated and one has to think Verizon and Motorola are less than thrilled, even though both are key Android partners.

Still, the point is that ecosystem relationships periodically get tested. Content providers and cable and satellite operators are used to the possibility of significant conflict over carriage agreements. Also, at the margin, some distributors also are content owners, while some content owners have been distributors.

Some distributors are part of the equipment supplier segment, as well as distributors. Some equipment suppliers are becoming application providers.

Yes, Google risks some ire by distributing its own branded handset. But ecosystem "messiness" is growing throughout the communications and entertainment ecosystems. And some players can attempt strategies that would be considered suicidal if attempted by less powerful contestants.

There are rules, and exceptions to those rules. Apple and Google might prove to be right or wrong. What is indisputable is that they are different; they can attempt things most other players cannot think about.

FCC has No Current Authority to Impose Network Neutrality Rules?

The U.S. Federal Appeals Court reviewing whether the Federal Communications Commission currently has authority to create or enforce "network neutrality" rules has not yet ruled.

But initial questioning suggests the court questions whether the Federal Communications Commission has current jurisdiction to write, much less enforce, net-neutrality rules for the Internet. So some legal observers now suggest the appeals court will in fact rule that the FCC had not authority to sanction Comcast for the way it managed peer-to-peer services.

A 2008 FCC order forced Comcast to stop throttling BitTorrent applications as a means of managing network congestion.

U.S. Court of Appeals for the District of Columbia Circuit Jude Raymong Randolph pointed out to an FCC attorney that “you have yet to identify a specific statute.”

Since the Congress has passed no laws relating to network neutrality, the FCC had, and has, no authority to take action on the matter, the judge seems to suggest.

A ruling of that sort would at least temporarily delay any new efforts by the FCC to codify new network neutrality rules, and shift the battle over such rules to the Congress.

FCC Chairman Julius Genachowski has argued the agency has authority to set net neutrality rules because of the "Internet Freedoms Principles" set in 2005, which say that users have the right to use lawful applications, which P2P is, though the use of P2P sometimes includes transfers of copyrighted content without permission.

But Comcast argues it has the right to manage its network, which it interprets as permitting rate limiting of P2P services, when necessary to preserve user experience and relieve congestion.

To be sure, the specific issue at hand seems primarily about whether the FCC’s decision was improper for statutory reasons, as Congress has not given the FCC legislative permission to create such rules, observers say.

On a wider legislative front, some observers think the White House is dialing back its efforts to get "strong" network neutrality rules adopted. The evidence is indirect, but some point to the late-October resignation of of Susan Crawford, University of Michigan law professor, previously a key adviser to the president on technology and communications, and a proponent of "strong" network neutrality rules.

According to the American Spectator, Crawford's version of Net neutrality was too radical for White House economic adviser Lawrence Summers, contributing to her early departure. If that observation is correct, it would be a sign that any new rules would not strictly ban "every" form of packet prioritization.

Many observers note that quality of service measures typically are needed when users want to interact with important video or voice services, especially as video already has become the primary driver of bandwidth consumption on a global level.

Those observers also would note that strict versions of net neutrality, that would absolutely ban any packet prioritization, would prevent Internet access providers from applying prioritization on behalf of their users, even when those users might specifcially ask for, and desire, such prioritization.

"Packet discrimination" sounds bad, and is, when it is used as a business weapon, allowing unfair competition. But packet discrimination is a good thing when it helps maintain quality of experience for the emerging applications users say are important, especially video and voice.

Also, at the recent Consumer Electronics Show, White House deputy CTO Andrew McLaughlin said the FCC had yet to determine whether Net neutrality is needed to preserve the "open Internet."

If that seems unremarkable, consider that in 2009 McLaughlin had said network management practices of cable companies that limited the speeds of large file downloads were essentially the same thing as Chinese-style Internet censorship.

Management of bandwidth-heavy applications by some users at times of network congestion is not application "blocking" or censorship. It is an effort to maintain quality of service for most users. Some methods will be more palatable than others.

The analogy is access to the old voice network. Telcos do not "censor" speech when, at times of peak load, a user might encounter a "fast busy" signal indicating that no circuits are available. The point is that every network gets congested at least some of the time.

And it always has been recognized that some method of regulating access at such times is a legitimate network management matter. In fact, a fast busy tone does mean a user has temporarily been "blocked" from the network. Sometimes a mobile voice call experiences the same sort of temporary blocking.

That sort of access blocking is not any suppression of freedom of communication or expression. It is not an infringement of Internet freedom. It is a simple way of managing a congested resource at times of peak load.

The immediate matter at hand, though, is the simple matter of legislatively-granted authority. The appeals court seems to be signaling its belief that Congress has granted the FCC no authority to impose rules about network congerstion management or methods of doing so.