Consumer Price Points for Recurring Subscriptions are Fairly Clear

One might infer from average pricing for a variety of services ranging from fixed telephone service to broadband access, wireless and multi-channel video service that consumers have price sensitivity for any single service above $50 a month.

According to researchers at Pew Research and the Federal Communications Commission,  fixed voice costs about $48 a month. Wireless costs about $50 per user, while multi-channel video costs about $60 a month and broadband access costs about $40 a month.

Some of you immediately will note that your own spending is higher than these average figures suggest, with the greatest variability occurring in the mobile arena, as that is a service bought a person at a time, where the other services are bought household by household.

That's worth keeping in mind when surverys suggest there is robust consumer demand for just about any new application or service. Very few products ever have gotten mass adoption at prices above $300. Very few subscription products ever have gotten mass adoption at prices above $50 a month.

That doesn't mean it cannot be done; obviously it can. It simply is to point out that getting lots of consumers to buy a new recurring service at prices ranging from $5 to $10 a month is a big deal.

That's the reason so much consumer-focused content is advertising supported.

37% of Broadband Users Want Streaming Video to TVs

Nearly 37 percent of broadband households in North America are "extremely" or "very" interested in viewing over-the-top video content on the home TV, according to In-Stat.

Streaming should be easier in the future as more TVs, Blu-ray Players, digital media players and set top boxes support Internet connections.

By 2013, In-Stat predicts that nearly 40 percent of all digital TV shipments will be Web-enabled devices. Across all categories, there will be over half a billion Web-enabled consumer electronics devices in operation worldwide by 2013.

Shipments of such Web-enabled devices will see a compound annual grow rate of nearly 64 percent between 2008 and 2013, In-Stat predicts.

It always is hard to tell how well consumer input of this sort will translate into actual behavior, especially when spending on one category of purchases has to be shifted from some other existing category of expenses.

Doubtless the stated intentions are closer to reality when there is no incremental cost to view such content, and drops fairly predictably as the price of doing so raises above "zero."

50 Million Tweets Every Day

Twitter now has reached 50 million tweets a day, excluding all spam, says Twitter analytics staffer Kevin Weil.

Folks were tweeting 5,000 times a day in 2007. By 2008, that number was 300,000, and by 2009 it had grown to 2.5 million per day, he says. Tweets grew 1,400 percent last year to 35 million per day. "Today, we are seeing 50 million tweets per day—that's an average of 600 tweets per second," says Weil.

Tweet deliveries are a much higher number because once created, tweets must be delivered to multiple followers. Then there's search and so many other ways to measure and understand growth across this information network. Tweets per day is just one number to think about, he says.

Still, as with Skype's "concurrent users" metrics, it is a milestone.

Wal-Mart to Become an Online Video Service Provider

What do you do when you are one of the top retailers of DVDs in the United States, and the product starts to face serious substitution from a newer product?

You start selling the newer product. Or so Wal-Mart thinks.

The retail giant, according to the New York Times, has agreed to buy Vudu, a three-year-old  online movie service built into an increasing number of high-definition televisions and Blu-ray players.

Wal-Mart’s move is likely to give a lift to sales of Internet-ready televisions and disc players, which generally cost a few hundred dollars more than devices without such connections.  Nor is the move the first attempt by Wal-Mart to figure out a way to make a transition from sales of packaged media to online forms of video consumption.

Wal-Mart dabbled in aq Netflix-style online DVD rental several years ago, but sold the operation to Netflix after getting 100,000 to 250,000 subscribers. Wal-Mart also attempted to get into video rentals with HP in 2007, but it gave up on that project after a year.

The Vudu acquistion would instantly make Wal-Mart a significant force in the video streaming business, and would make the company a direct competitor to Netflix once again.

Vudu initially entered the market with a set-top box that offered access to its video streaming service, but gave up on building its own hardware, and started offering its service as a software offering that could be integrated into other consumer electronic devices.

That might make more sense, as Wal-Mart also now is one of the leading retailers of consumer electronics.

Of course, Wal-Mart also has to position its electronics sales against Best Buy, a major competitor that likewise  is working with CinemaNow to enable streaming video services on its own consumer devices.

Cloud-Based Services Will be Lead by Enterprises for Next 5 Years

It is highly likely that enterprises will drive most of the $9.5 billion in cloud-based mobile applications that Juniper Research believes will be bought by 2014, but consumer revenues are likely to overtake enterprise-generated revenues after five years.

 Juniper Research predicts that enterprise applications will account for the majority of revenues over the next five years, with businesses increasingly seeking to capitalize on platform services that will be used to provide scalable, flexible data storage solutions and device agnostic, synchronised office services.

But consumer-oriented apps will comprise an ever-larger proportion of total revenues over time, derived both from time-based subscriptions to services such as mobile online gaming and advertising from cloud-based social networks.

While the onset of a cloud-based ecosystem may further erode the strength of the mobile operator-to-customer relationship, cloud computing offers operators the opportunity to develop new revenues streams as well.

100 Mbps "Can't be Done"

I learned long ago that when somebody says something "can't be done," it is best to understand that claim as "I can't do it." I think we also have learned that even when somebody says something can be done, they might mean "it can be done so long as not that many people want to do it."

And that might be the case as cable operators prep broadband access services capable of running at speeds as high as 250 Mbps, at least so long as most people do not desire to buy services running at such speeds.

Broadband Reports says cable operators will start talking about a 250 Mbps service sopmetime later this year, though nobody will be able to buy it. Comcast also says it will be offering 100-Mbps service to about 25 percent of its potential customers by the end of 2010.

Comcast should be congratulated for that move, though it is not clear what might happen if lots of people actually bought it.  The rub is that providing 250 Mbps requires bonding of about eight standard 6-MHz channels.

The issue there is the same problem satellite operators have when providing downstream bandwidth. There are finite numbers of channels available, so cannibalizing bandwidth for data services reduces the amount of bandwidth available for video services.

The point is that some providers--particularly cable operators--will be able to claim speeds of at least 100 Mbps, at least in terms of what is commercially feasible at low penetration. it isn't clear any network can support 100 Mbps at high penetration, at least not at prices in two, rather than three digits.

Still, it is a reminder that when somebody says something "can't be done," one has to consider the source. Just because one company can't do it does not mean all companies cannot do it.

The other relevant observation is that "hero" devices and services are feasible. What is not clear is whether "mass market" availability is possible.

http://www.dslreports.com/shownews/Comcast-Exploring-250-Mbps-Service-107002

Mobile Signaling Causes Congestion, Not Bandwidth

Executives highly familiar with mobile broadband network operations know that radio networks can, and do, become congested for reasons having to do with signaling, rather than bandwidth consumption. Executives at Spirent and Alcatel-Lucent Bell Labs,  for example, have pointed out that mobile phone design can itself cause problems.

As it turns out, that is true of the iPhone as well, which tries to save power by disconnecting from the network whenever possible.

Now engineers at U.K. mobile provider O2 point out that the iPhone uses more power-saving features than previous smartphone designs. That's good for users, but bad for radio networks.

Most devices that use data do so in short bursts—a couple e-mails here, a tweet there, downloading a voicemail message, etc. Normally, devices that access the data network use an idling state that maintains the open data channel between the device and the network.

However, to squeeze even more battery life from the iPhone, Apple configured the radio to simply drop the data connection as soon as any requested data is received. When the iPhone needs more data, it has to set up a new data connection, O2 engineers say.

The result is more efficient use of the battery, but it can cause problems with the signaling channels used to set up connections between a device and a cell node.  Simply put, the signaling overhead congests the network, not the bearer channels. It is signaling load, not bandwidth consumption, that causes much congestion.

It's important to note, however, that this technique is not limited to the iPhone. Android and webOS devices also use a similar technique to increase battery life. While the iPhone was the first and currently most prolific device of this type, such smartphones are quickly becoming common, and represent the majority of growth in mobile phone sales in the past year.

Networks designed to handle signaling traffic dynamically, shifting more spectrum to signaling channels when needed, can mitigate this problem. But even with more signaling capacity, network nodes may not be able to set up a data session, or may have problems getting a valid network address from an overloaded DHCP server.

In fact, the fact that Europe embraced heavy text messaging and data use far earlier than users in the United States meant that the signaling networks were configured early on for heavy signaling traffic.

Neustar Lauches 2D Barcode Clearinghouse

Neustar recently launched a "Mobile Barcode Clearinghouse Services" operation intended to ensure that any mobile barcode can be read by any mobile phone or application. 

That might not seem like a big deal, but history suggests that penetration and use of any technology, no matter how useful, never gets routine and widespread use so long as the information cannot be communicated effortlessly across the entire base of people, applications and devices.

That was true for railroads. It was true for phone service. It was true of text messaging and email, and it won't be different for 2D barcodes. 

"The clearinghouse is an important component of Neustar’s mobile internet solutions strategy, which bridges network operators and enterprises and simplifies their delivery of value to customers," Neustar says. 

Neustar is right about that. 

Intel Tries to Join Apple Among Innovator Ranks

Here's another example of the fact that truly-significant innovation sometimes comes from the largest and most-influential firms, not from upstart firms. Apple is probably the best-known and most-apt example. Google once was an upstart, but these days is a deep-pocketed incumbent.

Now Intel appears to be preparing a ferocious assault on the underlying chip-level technologies that will power the next generation of mobile-based Internet and computing.

"The going rate for a state-of-the-art chip factory is about $3 billion," the New York Times reports. And those are just table stakes. Predicting a "bloody" war, the Times points out that, in this next phase, the manufacturers will be fighting to supply the silicon for one of the fastest-growing segments of computing: smartphones, tiny laptops and tablet-style devices.

The fight pits several big chip companies against Intel, and the winner or winners will be assured a significant place in the emerging mobile computing ecosystem, which most observers predict is the next era of computing to come.

Are Broadband, Voice, TV and Mobile Services Really Commodities?

Both industry executives and consumers might sometimes be accused of viewing mobile, voice, broadband and multi-channel TV services as "commodities." Whether that is true, and to what extent, is, and ought to be, a matter of debate, not certitude.

Consider Verizon and DirecTV, for example. You might say that both provide services that other key competitors also provide, and that the features and prices are, at some level, comparable and even similar.
But their offerings are not identical with the offerings of their key competitors, and that appears to be by design, not accident.

DirecTV is the biggest satellite pay-TV provider in the United States and competes with other satellite and cable providers.  But that doesn't mean it competes for an identical set of customers, even though there is much overlap.

The company is not exceptionally distinct in aiming to grow revenues in the future by focusing on average revenue per user growth more than growth in the number of subscribers. Indeed, virtually every provider expects to do that.

Nor is DirecTV distinct in that regard. In a competitive, multi-product market, virtually every provider seeks to get more revenue by selling more things to existing customers, not simply adding new customers.
But DirecTV and Verizon seem to be focusing on higher-spending customers, compared to the other competitors in each of their markets.

DirecTV focuses on "higher-quality" subscribers who tend to pay extra for its advanced services like high-definition and digital video recorder  service. In the fourth quarter of 2009, about 70 percent of new DirecTV subscribers signed up for HD and DVR services, for example.  Overall HD-DVR penetration amongst DirecTV’s subscriber base amounting to about 60 percent.

Some observers expect DirecTV’s HD-DVR penetration to increase to 80 percent by about 2016.
DirecTV plans to offer new services include mulit-room viewing and new broadband applications as well. DirecTV Cinema is a movie service that will allow subscribers to watch certain films through DirecTV as soon as they are released on DVDs.

Verizon likewise tends to focus on higher-spending customers as well.

The point is that even as broadband, mobile, voice and multi-channel TV services are highly competitive, they are not, in the strict sense, "commodities." It might not matter whether a sugar product was made from beets or sugar cane. It can, and often does matter, that a firm's customer service, features, devices, packaging or pricing are distinct.

Is "Access" Where Most of the Revenue Is?

Fretting over whether people will pay for content is based on a mistaken assumption: that people have ever paid for content in the past, says Forrester Research VP. "They actually haven't," he says.

 Instead, people have paid for access to content.  You have to think about this some. People buy newspapers, so isn't that a content purchase? Well, he argues, not really. The cost of the newspaper purchase never covers the full cost of the content, which is mostly paid for by advertising.

One had to think about a "newspaper" as a distribution channel and a content aggregator, not an actual "content product" in that sense.

So what about cable TV? McQuivey argues even monthly video subscriptions are about "access" to content, not direct content purchasing. "Pay per view," where a show or movie is bought a la carte, on the other hand, is a content purchase.  Subscriptions to linear channels are a form of access, he argues.

If one looks at matters that way, "access" constitutes 77 percent of what the average household spends for "content" each month is spent on content access, not content itself.

Some will argue with the notion that a cable, telco video or satellite video connection is "access" rather than content. On the other hand, having linear video streaming in the background, even when one is not watching, is somewhat akin to voice "dial tone" or broadband Internet access. It's there, one can use it when one wants, but it is not a discrete "content"purchase.

I'm not sure I'd go so far as to classify cable TV as "access" rather than content. People pay for their voice services using a flat-fee subscription, as they pay for linear video. Some of us might not think a different payment method, or retail pricing plan, changes the nature of the product.

But it is an interesting way of looking at the relative value of various revenue streams. Back in the early days of the tramnsition from dial-up to broadband, I gave a speech to a group of ISPs very concerned about the difficulty of the business model.

At that time, most of the actual revenue was earned by providing access. There was some amount of value-added service and products.  For better or worse, I said then, "access" was where most of the money was, despite the difficulty of the business case.

The business ecosystem was simpler then. Google had not grown to its current state, for example.  Looked at broadly, it may no  longer be true that most of the money is in access.

U.S. is "Most Mobile" Workforce

The U.S. workforce is the most mobile in the world, according to researchers at IDC. As early as 2008, about 72 percent of U.S. workers worked at least part of the time on a mobile basis.

The percentage of mobile workers will grow to about 76 percent by 2013, IDC projects, representing about 120 million workers.

 The world's mobile worker population will pass the one billion mark in 2010, IDC says,  and grow to nearly 1.2 billion people,  more than a third of the world's workforce, by 2013.

The most significant gains will be in the emerging economies of Asia and the Pacific region.

The Asia and Pacific region, excluding Japan, represents the largest total number of mobile workers throughout the forecast, with 546.4 million mobile workers in 2008 growing to 734.5 million or 37.4 percent of the total workforce in 2013. At the end of the forecast, 62 percent of the world's mobile workforce will be based in the APeJ region.

Western Europe's mobile workforce will reach 129.5 million mobile workers, about 50 percent of the workforce, in 2013, surpassing the total number of mobile workers in the United States.

Japan's mobile worker population will total 49.3 million in 2013, representing 75 percent of its total workforce.

The rest of the world will see its mobile worker population grow to 153.2 million by 2013. But mobile workers will represent 13.5 percent of all workers in those markets.

NARUC Calls for Controls on "Unreasonable" Packet Discrimination, Not "All" Packet Discrimination

The National Association of Regulatory Utility Commissioners has called for protecting “the right of all Internet users, including broadband wireline, wireless, cable modem, and application-based users, to have access to and the use of the Internet that is unrestricted as to viewpoint and that is provided without unreasonable discrimination as to lawful choice of content.”

The key language there is "unreasonable" discrimination. NARUC is not calling for network neutrality rules that ban "all" packet discrimination.  The problem is that some traffic types are  "latency sensitive" and can suffer at times unless packet discrimination mechanisms are used. Applications such as video, gaming and VoIP would suffer, at times of peak congestion, without priority mechanisms that users themselves may wish to have in place.

NARUC therefore has asked that policymakers and regulators keep in mind that "unreasonable restrictions or unreasonable discrimination" be areas of protection, not "all" forms of packet discrimination.

NARUC also asks for rules and regulations that will give providers incentive for continual innovation and a fair return on their investment, without jeopardizing consumer access to, and use of, affordable and reliable broadband services.

Discrimination that is solely, or primarily intended,  to protect business advantages, is an area of valid concern for policymarkers. But the Internet has changed. It is a network increasingly used to support isochronous applications (real-time applications) that are highly susceptible to degradation from latency, for example.
NARUC's position will seem to many a well-reasoned and balanced approach.

http://www.digitalsociety.org/2010/02/naruc-resolution-on-net-neutrality/

What Kinds of Online Content Will Consumers Pay For?

Consumer willingness to pay for online content seems to be shaped by their current experience with existing media.

Online content for which consumers are most likely to pay—or have already paid—are those they normally pay for offline, including theatrical movies, music, games and select videos such as current television shows, a new survey by Nielsen suggests.

(Click image for larger view)

Content users might pay for tends to be professionally produced, at comparatively high costs, and definitely not user-generated content, including social community content, podcasts, consumer-generated videos and blogs.

Respondents had mixed willingness to pay for newspaper, magazine, Internet-only news  and radio news and talk shows that are created by professionals, relatively expensive to produce and commonly sold offline.

After surveying 27,000 consumers in 52 countries, Nielsen also found 85 percent prefer that existing free content remains free.

Whatever their preferences, consumers worldwide generally agree that online content will have to meet certain criteria before they shell out money to access it. If respondents already pay for a product in physical form, 78 percent believe they should be able to use online versions of the same content at no additional charge.

At the same time, 71 percent of global consumers say online content of any kind will have to be considerably better than what is currently available free before they will pay for it.

About 79 percent say they would no longer use a Web site that charges them, presuming they can find the same information at no cost.

 Only 43 percent of respondents say an easy payment method would make them more likely to buy content online.

About  47 percent of respondents say they are willing to accept more advertising to subsidize free content. Some 64 percent say that if they must pay for content online, there should be no ads.

Killer Apps and Devices of 2020 Are Not Knowable

What will the killer apps and devices of 2020 be? About  80 percent of experts surveyed by the Pew Center's  Internet & American Life Project agreed that the “hot gadgets and applications that will capture the imaginations of users in 2020 will often come ‘out of the blue.’”

"The experts’ record is so lousy at spotting key technologies ahead of time that there is little chance they will see the killer gadgets and applications of 2020," Pew says. "If you had asked this question a decade ago, no one would have predicted the iPhone."

In other words, we don't know.

But some trends are clear, because they already have begun: Mobile connectivity and location-based services will grow in the next decade.  Still, it takes a generation to figure out which technologies have real impact and which are just fads, so many other application and device trends we now see might, or might not, be actual "killer apps."

 Significantly, just 61 percent of respondents suggested the Internet would remain a place where any user can communicate directly with any other user. About 33 percent think “the Internet will mostly become a technology where intermediary institutions will control the architecture and content, and will be successful in gaining the right to manage information and the method by which people access it.”

A significant number of respondents they argued there are too many powerful forces pushing towards more control of the internet for the end-to-end principle to survive. Governments
and businesses have all kinds of reasons to control what happens online, Pew reports.
There will be alternative networks for companies and individuals that prefer to have a more controlled environment for sharing and consuming content, many believe.

The future will produce a hybrid environment with a bit more control exercised in the core of the internet for some purposes, but for other purposes will enable end-to-end practices, researchers at Pew conclude, based on the responses. "Some things will have to be managed, especially if the capacity of the current internet becomes strained," Pew analysts say.

"The dictates of business will shape large parts of the online experience and more pay-to-play business models will affect information flows online," Pew says.

"The needs of users themselves will sometimes drive changes that bring more control of online material and less end-to-end activity," Pew notes. There will be “content service providers” who are gatekeepers of many users’ online experiences.

The point, one might argue, is that although the "open, end-to-end" Internet will continue to exist, so will many relatively closed experiences, sites, networks, applications and devices.