Will 4G Adoption Mirror 3G?

Adoption of fourth-generation network services likely will miror adoption of 3G services in Europe, says Decaln Longeran, Yankee Group analyst, and that has to be seen as modestly good news, but not "great" news, as adoption will not be as fast as many will hope.

"Our assessment of the early days of 3G, from spectrum auctions through to the first one or two years of commercial services, tells us a lot about where 4G is today and where it’s heading," Lonergan says. The big danger is massive overpaying for spectrum, which happened with the 3G spectrum auctions.

"Overpaying for licenses will quickly destroy the 4G business case, just as it did for 3G in several countries, including the U.K. and Germany," says Lonergand. On the other hand, if bidders show reasonable restraint, they should be in a better position to the extent that the auctions will be dominated by incumbents, unlike the situation when 3G licenses were awarded.

There will be no new 4G contestants, Lonergan predicts.

Adoption will take longer than expected, he says. "Remember, it was a full five years after commercial launch before 3G handset ownership reached 6.5 percent penetration globally, and 4G will follow a similar path," he says.

The technology won’t sell itself, he says. Faster speeds will only provide so much incentive, and it is applications that could provide the bigger push to adoption.

Handsets matter more than most people think, as well. Early 3G players failed to understand the importance of quality and choice in their handset portfolios, Lonergan says. Prepaid plans might also be essential, as 3G adoption in Europe was severely hindered in the early stages due to limited availability of prepaid plans.

Coverage also matters less than most people think. Consumers don’t obsess about coverage, except in the places where they use their devices most. That might especially prove true where 3G service is available as a backup.

On the other hand, 4G is being deployed in different circumstances, where a reasonable base of mobile broadband customers exists, and new applications that take advantage of higher bandwidth and lower latency already are getting traction, ranging from video and social networking to mobile apps related to navigation and location.

The first commercial European 3G service was launched by Telenor in December 2001, with commercial 3G services launched in 2003 by 3 in the U.K. and Italy.

But it is worth remembering that 3G also promised major performance enhancements to existing mobile services, . new services, including video telephony, multimedia content and enhanced end user experience. Right now, 4G mostly promises "faster" broadband.

The issue is whether the shift from 1 Mbps to 3 Mbps, or 3 Mbps to 6 Mbps, represents so much a change in end user experience. One might argue the Apple iPhone or iPad represents something users find tangible, not the additional bandwidth.

One might argue that mobile Web access, like mobile email before it, and smartphones, are what is driving 3G adoption. Applied to 4G, will there be unique drivers, or will 4G simply be a 3G experience, albeit with more bandwidth?

In August 2005, for example, the Yankee Group predicted, at a time when 3G penetration in Western Europe was in the range of 0.5 to two percent, that by 2009, 3G penetration would reach 52.6 percent of the population. In reality, average 3G penetration in Western Europe was 27 percent as of December 2009.

The key takeaway from this comparison is that even 3G forecasts that were regarded as too conservative five years ago have proved to be too aggressive.

A new wireless technology will not in itself excite most consumers, no matter how amazingly super-fast its proponents claim it performs. Back in May of 2006, when 3G services had been actively promoted for at least two years in several European countries, Yankee Group conducted an end-user survey that suggested 29 percent of end users had no idea whether they had a 3G phone or not. About 27 percent of respondents claimed they owned a 3G phone. Of course, it is not always the case that a 3G phone uses a 3G connection, either.

In the U.S. market, matters are even more complicated, as various 3G platforms will be available nationwide by the end of 2010, and T-Mobile USA's network might actually operate faster than 4G networks, so even speed will not be a clear differentiator.

Handsets, on the other hand, could be more important. In the first 18 months after launch, Japan's DoCoMo failed to build any real momentum behind its 3G service, and 3G users accounted for well under one percent of the company’s total mobile customer base. Then DoCoMo moved aggressively on handsets, and penetration grew.

At least in the European market, prepaid service plans have been important. Prepaid was first introduced to Europe in 1995, and it was a major factor in the rapid growth in mobile services during the past 15 years, Lonergan notes. Mobile services penetration has now reached 130 percent of the population, and prepaid accounts for the majority of these connections, fully 54 percent at the end of 2009.

Back in the early days of 3G, most of the focus (misplaced, as we now understand) was on video telephony because this was one of the few services that 3G could support and 2.5G could not. It should therefore have been a 3G marketing manager’s dream, but it turned into something of a nightmare due to unreliable performance and largely apathetic consumers.

But the single biggest difference between 3G and 4G is the world of demand into which they were born. Smartphone penetration and use of mobile broadband applications clearly is different today than was the case when 3G first was being introduced.

Mobile broadband (the laptop/dongle version) is a good example. This service didn’t exist when 3G was introduced. Neither did the iPhone.

Consumers in 2010 understand the differences between a 2 Mbps, 7 Mbps and 20 Mbps connection. In 2001, most did not.

It took five years for 3G penetration to reach 6.5 percent of global mobile users. Our projections for 4G follow a similar curve: relatively slow adoption in the first three years, with a noticeable pickup in years four to five, says Lonergan.

Some possible areas of upside include handset options, retail pricing plans and indoor coverage. "No matter how lousy the service provider's network or customer service, if they achieve the right balance and choice in their handset portfolio and price plans, just about any provider can build market share," Lonergan says.

Indoor coverage possibly could be a differentiator as well. In the early days of 3G, it was assumed 3G would be used by individuals out and about and as a complement to home land-line broadband service. 4G might be different: onsumers might use it more as a substitute for some home broadband usage, as they already use their 3G mobiles indoors.

Marketers Still Can't Measure Social Media Return on Investment

Analytics continue to be an obstacle to heavier use of online, social media and mobile marketing campaigns, a new survey by Omniture suggests.


About 80 percent of survey respondents believe the ability to measure return on investment from online marketing activities is important, but only 31 percent of marketers can effectively measure it today.

About 86 percent of respondents think the conversion rate from online marketing activities is important to measure, but 25 percent cannot effectively measure it.



Only about 30 percent of marketers using mobile channels are able to measure mobile app conversions and, overall, only 23 percent say they are "very satisfied" with their current mobile measurement capabilities. That suggests there is pent-up demand for easier to use and easier to measure mobile marketing support.

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30% to 50% of All Advertising Will be Digital Within 8 Years, Google Exec Argues

"I personally expect in the next five to eight years 30 percent to 50 percent of advertising will be digital," says Nikesh Arora, Google's president of global sales, referring to online direct marketing, advertising and branding campaigns.


While Arora admits it is a bold claim, he backs up his forecast by pointing out that in the U.S. 10 percent of advertising is already digital and in the United Kingdom it is 20 percent.

In fact, late last year the U.K.'s Internet Advertising Bureau announced that online ad spending had risen above television for the first time.

Video will tip the balance, says Arora. If so, Apple's bet on creating a content-consumption tablet device might be precisely on target. The issue there is whether the iPad will be for video consumption what the iPod was to music consumption.

"I think mobile is a fantastic opportunity," says Arora.

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BT to Launch Own "Tablet," But Isn't Aiming at iPad

BT plans to launch its own touch-screen, tablet style computer, which inevitably will be seen as a way to compete with the Apple iPad, though BT apparently is not positioning the device in that way, and the comparison likely is misplaced.

The Telegraph reports that although no official details have been released by BT, the new device will have a screen larger than the 3.5-inch display found on the iPhone, but smaller than the 9.7-inch screen on the iPad.

In principle, the device could resemble the existing "OpenTablet 7," which is more an "advanced telephone" than a mobile device.

The BT device appears something more along the lines of the "Internet appliance" several telecom carriers have attempted to popularize in the past, though building on mobility rather than the fixed-line network. Previous attempts have focused on an easy-to-use device connected perhaps in a kitchen that allows light web browsing.

OpenPeak's "OpenTablet 7" can be used as a wireless, detachable tablet and features 3G HSDPA connections. It isn't yet clear what connectivity options BT will offer, but up to this point similar devices have been viewed as ways to enhance the value of a fixed-line connection by enabling use of new appliances and devices on those networks.

BT positions the new device as a cross between "a mini PC" and "the telephone of the future," which is roughly how the earlier attempts have been framed.

In a sense, that positions the new device as the latest attempt to build a "smart" fixed-line telephone, not a mobile tablet computer.

That will be the big issue. Prior attempts to create such an appliance have not gotten traction.

Shift to Prepaid Wireless Continues

I doubt this is news to anybody who follows subscriber trends in wireless, but prepaid accounts continue to grow, accelerating through all of 2009 and 2010 so far.

Up to a point that might be considered a good thing for  service providers who have made a business of prepaid, especially some of the regional providers.

But it never is too helpful when the "big guys," or at least some of them, decide they have to play in the prepaid segment, as Sprint now is doing.


The new "Common Cents" service is the fourth prepaid brand Sprint supports, after Boost Mobile, Virgin Mobile and Assurance Wireless, which is a government-subsidized cell phone program for people who are under or close to the poverty line.

Under the new plan, customers will pay seven cents per minute for phone calls and they will be charge seven cents per text message.

Wal-Mart is planning to sell phones, costing $20 to $70, in more than 700 stores.

Sprint will also give customers a break by rounding down on the minutes used in order to aattract more subscribers. Sprint says that "with minutes that round down after the first minute, not up, consumers get more minutes for their money."

In the first quarter of 2010, Sprint lost 578,000 postpaid subscribers. But it gained 348,000 prepaid customers.

Sprint also positions each of the prepaid brands in different segments. While Common Cents is geared toward value customers, who aren't looking for much beyond basic cell phone and texting service, Virgin Mobile's and Boost Mobile's services offer more data-centric plans that target the youth market.

TheVirgin Mobile and Boost brands have been offering flat-rate pricing for all-you-can-eat plans for $50 a month. Soon Virgin Mobile will also offer a $25 plan that comes with unlimited texting, e-mail, and Web surfing, plus 300 minutes a month of voice service. For $40 a month, customers can get 1,200 voice minutes.

Channel Conflict Develops in Mobile App Store Ecosystem

Channel conflict is an almost-inevitable by-product of complex ecosystems. A recent survey suggests channel conflict already is rising in the mobile application store ecosystem. A survey of 400 developers by Evans Data Corp. recently found that 80 percent of developers in North America think they should receive more than 70 percent of the revenue generated by their apps in an app store.

Of course, when Google launched its Android Market, the company pointed out that  "developers will get 70 percent of the revenue from each purchase; the remaining amount goes to carriers and billing settlement fees."

"Google does not take a percentage," the company said. "We believe this revenue model creates a fair and positive experience for users, developers, and carriers." But what is fair from Google's point of view might not be viewed the same way by developers or carriers.

That's channel conflict.

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Facebook To Create Ad Network?

It is widely believed that Facebook will soon follow the AdSense playbook by introducing an off-property ad network. They’ll try to use their strong base of advertisers to dominate intent-generating ads the way AdSense dominated intent harvesting ads.

Facebook Is About To Try To Dominate Display Ads The Way Google Dominates Text Ads

Apple Offers "Curated Computing," Not "Open"

The conventional wisdom is that open and standardized platforms are better than closed platforms, for any number of practical reasons, ranging from cost speed and speedier innovation to applications richness. For some, that is the importance of the "network neutrality" debate, though oddly, innovation arguments can be made on both sides, or all sides, of the argument.

But Apple always has been the salient exception to the "open and standards based" rule. In the past world, where Apple as a PC manufacturer and had three percent to four percent market share, that might not have mattered much. In today's world, where Apple emerged from nowhere to dominate the MP3 player market, then reshaped the mobile handset market and seems to be on the cusp of validating a new market for tablet devices, Apple's approach will be more important.

The iPad might be a new kind of PC, or might reshape existing devices; it is hard to tell at this point which future is more likely. But either way, Apple is creating what might be called "curated computing," where choice is deliberately limited to improve end user experience, says Forrester Research analyst  Sarah Rotman Epps.

Curated computing is perhaps a new mode of computing in which choice is constrained to deliver more relevant, less complex experiences, says Rotman Epps, in some ways resembling the old AOL approach, or even mobile service provider "walled garden" portals. You might argue that those approaches do not seem to have worked too well, but Apple always seems to be the exception to the rule.

It might be a bit of a stretch, but the analogy might be that a PC is a general-purpose computing platform, while an iPad is something more like an iPod. That is not to say iPad users cannot send and receive email and surf the Web, but simply that the principle is that "general purpose" computing is not the point.

Rather, users default to curated applications as the primary use mode, with Web surfing, email and other experiences being somewhat secondary. Put another way, where the Web is the default mode for most Internet-connected computing devices, the application is more the default mode for iPhones and iPads.

The broader question always seems to come back to the issue of how much choice users really want, and how much experience is enhanced when choices are limited. Apple always has delivered an enhanced end user experience precisely because its hardware choices were limited to "my way or the highway."

In all likelihood, should the tablet trend establish that there is a discrete new class of devices and behaviors suitable to less "general purpose" computing and more "content consumption," then curated experiences might be viable in a way that would defy the historical failures of walled garden approaches.

Should that prove to be the case, at least some in the mobile ecosystem might have to rethink the historic preference for open and standards-based development and "run time" environments.

Is Internet Access a Common Carrier Service?

On May 6th America’s Federal Communications Commission announced a plan to classify the last mile of Internet access as a “telecommunications service”; it is currently classified as an “information service."

That raises a thorny question: is Internet access really a utility, rather than an information service? In other words, is broadband access more like electricity than television or radio or publishing? It matters how the question is answered.

Since the 1930s providers of telecommunications services in America have been obliged to agree on rates with the FCC. They cannot discriminate among customers or traffic, and they have to contribute to a fund that subsidises rural connections. The new plan promises to refrain from any price regulation; the FCC wants to ensure primarily that packets pass from point to point without preferential treatment."

Economics focus: From ships to bits | The Economist

Cellphones Now Used Mostly for Data

Liza Colburn uses her cellphone constantly. She taps out her grocery lists, records voice memos, listens to music at the gym, tracks her caloric intake and posts frequent updates to her Twitter and Facebook accounts.

The one thing she doesn’t use her cellphone for? Making calls.

Cellphones Now Used More for Data Than for Calls - NYTimes.com:

No Skype for Microsoft 7

Microsoft has been having a tough time in the mobile market, it is safe to say, and now Skype says it will not develop a Skype client for Microsoft 7, says Dan Neary, Skype Asia Pacific VP.

Microsoft 7 is the successor to the Windows Mobile operating system.

Neary did not give a reason why Skype is taking that path, but Skype's demurral can hardly be good news for Microsoft.

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Mobile Agencies Look Beyond Apps

Advertising agencies say branded mobile apps aren't the be-all, end-all for mobile marketing, and will be challenged by mobile Web browser functionality, which will allow apps to run within the browser context.

Despite the hype surrounding the mobile application space thanks to app-centric devices such as Apple's iPhone and iPad devices, mobile agencies suggest new technologies like HTML5 and Apple's iAd product could help turn marketers' attention away from the crowded branded app space.

Mobile Agencies Look Beyond Apps as Market Evolves

Android 2.2 Runs 450% Faster than 2.1

The new Google Android version 2.2 appears to be as much as 450 percent faster than version 2.1, according to test run by Android Police. To the extent that faster processing means lower latency for any number of operations conducted on a mobile device, that should be a good thing.

Android Police tests suggest, for example, that the HTC Hero gets a test score of about 2 million floating-point operations per second, often called simply "FLOPs."

The Nexus One running Android 2.1 gets about 6.5 MFLOPS to 7 MFLOPS.

The Android version 2.2 operating system seems to run at 37.5 MFLOPS. One practical result is that Flash-authored video should run much better, as Flash puts strain on processors. Much-faster processors should mean much-better video performance.

While real-life applications will most certainly not be 450 percent faster across the board, but it stands to reason that it will help most applications run faster.

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Broadcasters Are Serving Up Lots of Web Video

Aside from YouTube, online video offered by broadcast TV networks and Web-only media brands, followed by magazine sites and music labels, seem to be getting the most traffic, a new study by Brightcove and Tubemogul suggests.

About 51.75 percent of viewers are navigating to video directly from the publisher’s main site. Google search drives 39 percent of viewing,  followed by Yahoo at 5.58 percent, Bing at two  percent and Facebook at 0.40 percent.

In the first quarter of 2010, the broadcast TV networks sampled in the study streamed 380 million videos, with Web media brands coming up close behind at 326 million video streams. However, the native Web brands, which include both video-only and general entertainment and news sites, saw 300 percent annual growth of video views in the first quarter, compared to 44 percent growth for the broadcast sites.

For all of 2009, Web media sites grew twice as fast as broadcast TV sites (165 percent compared to 74 percent). At this rate, they will overtake the broadcast sites in video views later this year, the study suggests.

In the first quarter of 2010, magazine-affiliated sites streamed 190 million videos, up 90 percent. In fact, magazine sites are streaming as many videos as music label sites, which came in at 191 million videos, up 60 percent.

Newspaper sites aren’t doing nearly so well, streaming 136 million videos in the quarter and growing five percent.  Newspaper sites are trying to catch up, though, and had two billion video player pageloads in the quarter (pages which loaded with a video player, but were not necessarily clicked on), compared to 1.2 billion for magazine sites, 760 million for Web-only media, and 670 million for broadcast TV sites.

But newspaper sites are having a real problem getting their audiences to watch videos, the study suggests.

For every two billion videos they throw in front of users, only 136 million get viewed (6.8 percent). Broadcast TV sites are getting 380 million views for every 670 million attempts (56.7 percent).
Even magazine sites are seeing a 12.7 percent hit rate.

But newspaper videos get viewed "to the end" more frequently than videos on other sites. The completion rates for videos on newspaper sites are 41 percent, versus 39 percent for magazine sites, 38 percent for broadcast sites, and 29 percent for music label sites.

Google Android Strategy is Working, Despite Nexus One

Google's strategy of seeding the market for its Android operating system, unlike its experiment with device retailing (NexusOne) seems to be succeeding.

The Android operating system "continued to shake up the U.S. mobile phone market in the first quarter of 2010," moving past Apple to take the number-two position among smartphone operating systems, according to The NPD Group.

Based on unit sales to consumers last quarter, the Android operating system moved into second position at 28 percent behind RIM’s operating system (36 percent) and ahead of Apple’s OS (21 percent).

Google's effort to retail unlocked, full-price handsets using a Web-site-only approach does not seem to be working out so well, as one might have predicted. Both Sprint and Verizon Wireless have declined to sell the Nexus One, though the logical explanation is that the HTC "Evo" at Sprint and "Incredible" at Verizon Wireless are functional equivalents, at the very least.

And it might just be the case that the battle between AT&T and Verizon Wireless accounts for the change, as iPhone sales in the United States are exclusive to AT&T, essentially limiting sales, while Android devices are pushed both by Verizon, T-Mobile USA and Sprint.

Verizon also has been aggressive about offering "two for the price of one" sales of Android devices.

Smartphone sales at AT&T comprised nearly a third of the entire smartphone market (32 percent), followed by Verizon Wireless (30 percent), T-Mobile (17 percent) and Sprint (15 percent).

Exclusivity on AT&T’s network obviously limits the potential sales for Apple to some extent. Verizon has more than 92.8 million subscribers, none of which can buy an iPhone for use on the network.

It isn't so clear whether the range of Android models or prices are a meaningful contributor to Android sales volume, but one has to think so.

The NPD Group cites an average smartphone price of $151 in the first quarter of 2010, roughly half of the $299 price tag for a top-shelf iPhone. Apple offers subsidized models at $99 and $199, but most subsidized Android phone prices top out at $199 and go down from there.

The Samsung Behold 2 running Android is currently free with a service plan at T-Mobile, for example. With so many choices, consumers can find Android units for well under $99 these days and can shop around in a greater range of price points.

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