iPad Demand Cooling?

Goldman Sachs analyst Bill Shope says iPad demand is slowing. "We believe it is prudent to assume the iPad is facing some near-term demand challenges," says Shope. To reignite growth, price cuts are required, he says.

“The iPhone enjoyed several major retail price cuts in its first year,” he says. “The 8Gb version of the first iPhone saw its retail price slashed from $599 to $399 in its first three months on the market.”

Similar price cuts occurred with the iPod throughout its existence, and both the iPhone and the iPod saw storage capacity increases with each product refresh. In contrast, the launch of the iPad 2 saw no increase in storage capacity across the SKUs and no price change, says Shope.

A price cut at the low end, and the possible introduction of a low-capacity iPad 2 line once the iPad 3 is released,  could stimulate demand considerably without any substantial margin compression, he argues.

It is possible demand is shifting a bit in the direction of e-readers, by some potential buyers, and towards Android tablets, by other buyers, one might suspect. Demand For The iPad Is Fading

It seems reasonable to suppose that iPad sales volume has been helped by business buying, something that probably did not happen so much with iPhones, which initially were not supported by enterprise information technology departments. 

OECD Predicts Slowdown

None of the world's major economies will escape a slowdown, the Organization for Economic Co-operation and Development says, according to Reuters, highlighting increasing signs that growth momentum is dwindling across the board.



The Paris-based organization's composite leading indicator (CLI) for its members fell for the seventh straight month to 100.4 in September, down from 100.9 in August and hitting the lowest reading since December 2009.


Readings for individual countries and big developing world economies were broadly lower at levels indicating slowdowns, and were in many cases below their long-term averages. Economic slowdown coming

Does Net Neutrality Create Incentives, or Not?

Net neutrality impact on revenue

"Policy advocates have been arguing about network neutrality for years. Some even argue that Internet access providers have less incentive to invest unless strong network neutrality rules are in place. 


Some might find that an odd argument, given the universal opposition to strong forms of network neutrality on the part of entities that actually own and operate access networks. Though service providers who operate networks nearly universally claim that incentives for investment are higher when there is freedom to create new services that prioritize packets in ways that enhance end user experience, some argue the reverse is true. 


Professors H. Kenneth Cheng, University of Florida Warrington College of Business Administration; Subhajyoti Bandyopadhyay, University of Florida Warrington College of Business Administration and Hong Guo, University of Notre Dame, argue that ISPs gain from encouraging "scarcity," which creates incentives for users to buy prioritization services. 


"We find that if the principle of net neutrality is abolished, the broadband service provider stands to gain from the arrangement, as a result of extracting the preferential access fees from content providers," they argue. 

"When compared to the baseline case under net neutrality, social welfare in the short run increases if one content provider pays for preferential treatment, but remains unchanged if both content providers pay," the professors argue. 

"Finally, we find that the incentive to expand infrastructure capacity for the broadband service provider and its optimal capacity choice under net neutrality are higher than those under the no net neutrality regime except in some specific cases," the professors say.  Consumer welfare under net neutrality rules

"Under net neutrality, the broadband service provider always invests in broadband infrastructure at the socially optimal level, but either under- or over-invests in infrastructure capacity in the absence of net neutrality," they maintain. 

But analysts at Frost & Sullivan argue that net neutrality has the potential to significantly discourage infrastructure investment. This is because investments in infrastructure are highly sensitive to expected subscriber revenue. Anything that reduces the expectation of such revenue streams can either delay or curtail such investments.

Operators would likely reduce investment due to the increased business risk, they argue. 

An operator denied the opportunity to generate service revenue would be forced to adopt other methods for covering deployment costs, Frost analysts argue. These could include simply passing along the costs to the consumer, creating service bundles that limit consumer choice or passing the cost along to content providers.

"To the extent that consumers were unwilling or unable to incur such costs, net neutrality could, ironically, have the effect of actually reducing broadband penetration," the analysts argue. 

Net neutrality acts like a tax on the Internet. It imposes overheads on network operators, which, in turn, decrease network investments, providing less opportunity, not only for the operators, but also for those that use the operators' networks as well. Net neutrality reduces investment


Frank Gallaher, Stifel Nicolaus analyst, warned of just that outcome in 2009. At least some other policy advocates are too sanguine about the impact on investment if harsh new rules are enacted, he argued. 


Likewise, Matt Niehaus, Battery Ventures analyst, warned in 2009 that telecom investment capital has been declining over the past 10 quarters. The capital flight is caused in large part because of a perception that there is too much competition in telecoms, and therefore further investment is less likely to provide an adequate return on capital investment.

 "It's a perception in Wall Street, there's too much competition, and therefore it's difficult for entities to obtain a great return, " he says.

  "One of the things that worries me, is you can execute very well, and the problem is you may do all those things right, yet it's not clear you will be rewarded on the back end for it," Niehaus says.

But S. Derek Turner, Free Press research director, says carrier investment decisions are driven by a variety of factors, but regulation plays only a minor role.

"In general, firms’ investment decisions are driven primarily by six factors: expectations about demand; supply costs; competition; interest rates; corporate taxes; and general economic confidence -- making the overall decision to invest a complex process that is highly dependent on the specific facts of a given market," says Turner. "It is simply wrong to suggest that network neutrality, or any other regulation, will automatically deter investment."


Carriers worry about investment climate

PayPal Wallet Flexible Payment

The most notable feature of PayPal’s mobile wallet is payment flexibility. Users of PayPal’s mobile wallet application will be able to choose how they want to pay for purchases even after the sale. 


That means a purchase can be transferred to a different credit card, a debit card, a PayPal account or even a store gift card, if necessary, directly through the PayPal app. 


The payment could also be split between multiple cards or payment sources.


Typically, shifting a purchase balance requires returning the item to the retailer and buying it again. PayPal describes its method as separating the buying experience from the paying experience. PayPal's Coolest Mobile Wallet Feature: The Oops Button

On such subtleties will wallet value come to be built.

For Those Who Face Adversity, Remember "Honey Badger Don't Care!"

For all of you who face adversity, remember the honey badger, whose attitude towards adversity is "don't care."  

Adversity is part of everyday life.

How Much Will Consumers and Business Pay for Really-Fast Broadband?

As the Federal Communications Commission shifts universal service programs to support broadband access rather than voice, the European Commission pushes for ubiquitous 30-Mbps service across the community, with a further objective of 100-Mbps service for roughly  half of potential consumers by 2020, it is fairly clear that there is widespread support for the idea that faster broadband can have important economic and social benefits.

If Federal Communications Commission Chairman Julius Genachowski gets his way, the FCC will set a goal of 100-Mbps service delivered to 100 milliion American homes by 2020. 100 Mbps or faster is the FCC goal

Genachowski says his preferred approach to a national broadband policy would require ISPs to offer minimum home connection speeds by 2020. The “100 Squared” initiative might in fact be too modest a goal, he suggests.

"We should stretch beyond 100 megabits," he adds. But "availability" is only part of the business equation. Demand is the other part. And at least so far, there isn't much evidence that substantial numbers of businesses or consumers are willing to pay for 50 Mbps, 100 Mbps or potentially 1 Gbps service. 

It might be a different story is the cost of such service were no more than what consumers now pay, but it seems highly doubtful investment can be raised, if that were to be the expected outcome.

Few customers now buy 50-Mbps services where such speeds are available, in large part because the cost is in the triple-digits range. Proponents might argue that the goal is 100 Mbps for not much more money than people now pay for 4 Mbps or 7 Mbps service, but it is hard to envision how even "free" opto-electronices could support such a value-price combination.

In other words, even if all the active elements actually were provided for free, could service providers actually build ubiquitous networks offering 100 Mbps or faster speeds, and price in middle-double digits? So far, the answer appears to be negative.

About 60 percent of the cost of building an FTTH network is construction work, ducts and cables, not to mention cabinets, power supplies and other network elements. Still, in some dense areas, it might be possible to do so, since the construction and cable might amount to about $1200 per home passed. Again, keep in mind we assume totally free opto-electronics.

In suburban areas the business case is marginal, at best, since about $2400 might have to be spent on construction and passive elements.

Since the FCC goal only calls for connecting 100 million homes out of possibly 113 million, we can safely assume the cost of most rural networks of such capacity need not be considered.

Of course, opto-electronics are not "free." But the point is that construction costs, were nothing else an issue, would still be a tough proposition, if the goal is very high speed access at prices most consumers would pay.

American consumers will be paying more for broadband in the future, if for no other reason than that most mobile plans will require it, and those charges will be paid for on a "per-device" basis, not "per home."

What seems improbable is that U.S. consumers are willing to increase overall broadband spending by an order of magnitude (10 times) to have 100 Mbps or faster service on a fixed basis.

One can of course argue from history. Prices for lower-speed broadband services have declined over time, while the prices for the faster tiers have remained stable, but speeds have increased. The issue is how much price compression is possible.

"In order to earn a return for investors, you have to be conscious of what consumers will pay. I don't know this is something consumers will pay for," Piper Jaffray analyst Christopher Larsen says. "It's a nice goal, but it's a little on the over ambitious side."

And in a capital-intensive business such as communication networks, being too early, with too much additional capacity, processing or storage, can be ruinous. One might point to the dramatic bubble in capacity investing, competitive local exchange networks or e-commerce sites around the turn of the century.

Equally to the point is the serious gap that developed between 3G mobile networks, especially in Europe, and the promised new applications that proponents expected would develop.

It has been roughly a decade since European mobile operators placed big spectrum bets on "third generation" mobile broadband, and then largely watched as killer apps failed to emerge, customer use of the new networks remained sluggish, and executives ruefully noted they had overpaid for spectrum.

As operators now gear up for a transition to 4G, we will hear similar talk about new applications the network will enable. The difference is that, a decade after launch, the  "killer app" for 3G turns out to be mobile broadband access.

Right now, 4G is mostly “just” faster access. But 4G looks to be a potential replacement for fixed-line broadband, so maybe, early on, a lead application for 4G will be displacement of fixed-line broadband connections, and not any particular new application.

Some might argue that a lead app for 4G is turning out to be personal Wi-Fi hotspots, for example, another “access” function. A decade from now, we are likely to have discovered that some important new applications, enabled specifically by 4G, have arisen. But it will take some time, if 3G is any predictor.

At some point, the gap can be bridged either by “build it and they will come” improvements in processing, storage or communications that outstrip known demand, or “build it and they will come” applications that might be usable by only a fraction of potential consumers.

Some think the logjam can be broken only by moving faster towards faster networks, to create the right environment for application developers. That tends to be an opinion held by people whose core business interests do not require investing the money.

Service providers are quite a bit more circumspect, and “greed” is not the primary reason for such views. In fact, experience teaches service providers that consumers are quite careful about spending their own money on communication services, devices and features.

One case in point is a study of small-business broadband by Columbia Telecommunications Corporation, which conducted a nationwide survey on behalf of the Small Business Administration.

The really significant finding is that respondents won't pay all that much for 100 Mbps or 1 Gbps connections. Businesses Want 100 Mbps, 1 Gbps, but won't pay

And price resistance is stubborn. Even when the price for such a service is just 10 percent to 20 percent higher, businesses are significantly less likely to switch to a 100-Mbps service from what they currently buy.

As you might guess, if small businesses are hesitant to spend 10 percent to 20 percent more to get 100 Mbps, they are even more hesitant to spend more for an extremely fast Internet connection of 1 Gbps. This is especially true for prices that are 40 percent or more higher than their current prices.

If you asssume the average prices now range between $70 a month to $124 a month, then survey respondents show significant resistance to paying much more than $84 to $149 a month for 100 Mbps service, or $98 to $174 for 1-Gbps service.
This graphic might confuse you. The taller the bars, the less likely the respondent is to take the action indicated. The tallest bar, a score of "5" would mean "highly unlikely" to take the action. SMB broadband demand report

A score of "1," shown by a shorter bar, would indicate strong willingness to take the action.

The point is that small business users aren't willing to spend much more to upgrade from their current level of service to 100-Mbps service.

The most surprising finding is that even the same prices, or prices 10 percent 5to 20 percent lower do not cause small business respondents to become certain of switching. Scores around "3" indicate a "maybe, maybe not" attitude.

No matter what these respondents say about wanting higher speeds, they don't appear to be willing to pay much of anything for it.

People Now Watch Videos Nearly 30 Percent Longer On Tablets Than Desktops | TechCrunch

Viewer engagement by device

It perhaps is counter intuitive, but a new study by Ooyala suggests that people spend more time watching long-form video on their tablets, than on their PCs.


Even more surprising, there is evidence that smart phone users, on the smallest screens, might be watching video at levels approaching PC viewing.


In fact, the Ooyala study already shows that viewer "engagement," defined as the percentage of any bit of content that the user actually watched, is higher on smart phones than on desktop PCs or game consoles, both of which offer the biggest screens.

Granted, the Ooyala report does confirm that, given a choice, most people seem to prefer watching video on the biggest available screen. But what might be surprising is the amount of viewing on the "smallest" screen--the smart phone--so much of the time.

Tablet viewers watch for longer periods of time than viewers of desktops or mobile devices, and tend to watch more of any single bit of video as well.

For each minute watched on a desktop, tablets recorded “1:17 in played content”, which works out to 28 percent longer than the desktop average. People Watch Videos Nearly 30 Percent Longer On Tablets

That tablet viewers are more than twice as likely to finish a video than desktop users might be explained by the fact that much tablet use occurs "on a couch, rather than at a desk," meaning the user is in a more-relaxed setting without the "I'm at work" mindset.

The completion rate for tablet viewers was double what it was for desktop viewing, and is 30 percent higher than that of mobile devices. 


It is just a historical anecdote, but 30 years ago, the best and brightest video executives would have adamantly insisted that people would not watch entertainment video on small screens. But that was a long time ago. Before optical fiber changed fixed networks. Before most people had mobile phones, much less smart phones. Before 3G and 4G. Before digital video and video compression. Before high-definition video. Before the Internet and the Web. 


It's just a reminder that what seems true "now" might not have been true in the past, and might not be true in the future. 

Tablets are Untethered, not Mobile Devices

Ross Rubin, executive director of industry analysis for NPD Group, says the reality is that a lot of tablet usage seems to be at home or in Wi-Fi hotspot areas. tablets are untethered, not mobile

"Consumers are maybe reluctant to pay $15 or $20 a month when they may just need cellular access for a few hours," Rubin says. "Obviously, for some time there's been a lot of discussion about per-person billing versus device-based billing, and the tablet situation has really made that more of a real issue versus a theoretical issue."

In other words, if mobile service providers want to encourage more tablet use on mobile broadband networks, they probably will have to start offering the equivalent of mobile broadband "family plans" now common for voice and text messaging services.

ABI Research reports that less than half of tablets actually ship with a cellular modem, and less than half of those are ever actually activated after shipment.

Mobile Changes Mom Spending Dramatically

Motherhood is a catalyst for sharing, says Michael Fogarty, BabyCenter SVP. It also is a catalyst for content sharing and therefore an opportunity for content marketing on mobiles, in significant part because motherhood seems highly correlated with significant changes in spending. 


Some 62 percent of moms change the brands they buy when they become moms. And 73 percent change their purchase criteria for apparel and beauty products. "For example, the Victoria’s Secret brand goes from relatively high on the list to right down in the basement; it doesn’t even show up," says Fogarty.

E moms blogher and parenting 8 2, jkc

View more presentations from BlogHer

"They’re sharing photos of their kids, of course, but in terms of shopping, they want to share their recommendation about which stroller or diaper brand to buy," says Fogarty. "Anytime you get a coupon for something that’s relevant, especially in terms of the stage you’re at—whether it’s pregnancy or new motherhood—there are thousands of moms out there who would benefit."

"If you’re on a social network, you’re going to share that," Fogarty says. "And increasingly it’s being shared via mobile because it’s so much easier."  Mobile Changes Mom’s Path to the Register

"It’s very clear that moms are using mobile in different ways from the general women’s mobile segment because motherhood instigates mobile usage," says Fogarty. "We learned that 53 percent of moms actually purchased a smartphone as a result of becoming a mom."


"So it’s easy to see why moms are 18 percent more likely to have a smartphone than the general population," he says. "It’s much more than a phone—it’s everything from her calendar, her scheduler, her text messenger, her way to keep up with the nanny, her recipe finder, her GPS."


BlogHer Inc., in partnership with Parenting Magazine, conducted their second annual study of moms and technology in June 2011.  The findings show that moms are more engaged than ever with laptops, the Internet and mobile phones.  In fact, they have become the Chief Technology Officers for their families, overseeing households where children begin interacting with various electronic devices at an extremely early age; in some cases younger than two. Blogher survey

Kindle Fire Disables Some Android APIs

The Amazon Kindle Fire apparently does not support some application program interfaces used by other Android devices, meaning some Android apps won't run on the Kindle Fire. Though most consumers won't care, the "fragmentation" many observers see in the Android ecosystem illustrates the complicated nature of "openness" in software platforms these days.

It appears almost no platform is completely open, or completely closed. Amazon Kindle Fire disables some APIs

Isis Thinks Google Wallet Competition is a Good Thing

Mobile wallet providers

Michael Abbott, the CEO of carrier-backed mobile payments joint venture Isis, has an interesting take on rival Google Wallet: "It's the best thing that could happen."


You might think that an odd thing for one competitor to say about another major competitor. But early in the development of a brand-new industry, it actually can help to have multiple substantial contestants promoting the new market.


That is helpful because it reduces the perceived risk, on the part of potential users and customers. Any company executive that has tried to explain "what we do" in a market with no other providers or competitors will immediately grasp the concept. 

Abbott argues that competition from multiple parties is a good thing, early on, as it generates greater consumer awareness and can convince many other essential providers in the ecosystem to participate. Google Wallet is good for mobile payments


One is reminded that Apple under Steve Jobs did not conduct market research to develop new products, as Jobs' philosophy always was that people could not provide meaningful feedback about products they never have seen. 


That's another aspect of new markets, for new products consumers do not have experience using. Since people may not even be aware of why they need a product, it can be hard to sell such products. Having more contestants in such a market contributes to the overall evangelization process that creates better understanding on the part of users of why they "need" a product. 

U.K. Will Not Reach 30 Mbps Broadband Access Goal by 2020

Rural fiber infrastructure cost

BT Group Director of Strategy and Policy Sean Williams considers the EU target of 30 Mbps to all citizens by 2020 as "not achievable for any country." 


That doesn't mean complete or even substantial failure. In fact, one might argue the opposite. 


BT does seem to believe it will be possible to provide 30 Mbps access to about 90 percent of the U.K. population. 


For the final 10 percent of homes or locations, 2 Mbps might be more reasonable, for all sorts of good reasons related directly to the cost of building communications infrastructure in rural and isolated areas. Some might argue that the cost curve looks very much like the curve that describes the cost of providing health care to people, where most of the cost is incurred late in life. 


Likewise, the cost of building facilities to the last couple of percentage points of locations is very high. That's one reason satellite broadband providers have a business. The core market is about two percent of U.S. households, for example. 


The high cost of reaching the last 10 percent of locations in either the U.K. or U.S. markets always will be a problem, at least when using fixed networks, whether the services are narrowband or broadband . EC broadband target unreachable 


So some might argue that 90-percent coverage of the United Kingdom with 30 Mbps service by 2020 is not in any way "a failure." It is a success. But the problem with all infrastructure goals is that it always is a stretch to reach the last 10 percent of potential customers with networks of any kind.

Tablet Users Watch 30% More Video

Where it comes to online video consumption, device type matters. And it looks like tablets are shaping viewer behavior in new ways. Tablet users averaged nearly 30 percent more viewing time per play than those who watched on desktops, for instance, and they completed videos at double the desktop rate, according to data from Ooyala. 

Viewer engagement was generally higher on mobile devices than on desktops. Mobile viewers completed 75 percent of a long-form video at a rate of 20 percent, compared to 18 percent for desktops. As a general rule, device type heavily influences viewer engagement. In the third quarter of 2011, tablet viewers were the most engaged, while desktop and laptop viewers were relatively less engaged.

For each desktop viewer who completed a video, for instance, more than two viewers did the same while watching on a tablet. Across all plays, the video completion rate for mobile devices was slightly higher than that for connected TV devices and game consoles, as well.

In fact, the latest data suggests  viewers are turning to their tablets, mobile devices and especially their
connected TV devices and game consoles to watch medium- and long-form videos. You might think mobile users would watch shorter clips, while desktop PC users watch more long-form programming. That doesn't seem to be the case. 


Desktops or laptops are far more likely to be used to watch short clips, the Ooyala data suggests.  Videos shorter than three minutes, for instance, accounted for more than half (52 percent) of the hours of content viewed on desktops.


That same measure is 42 percent for mobile devices, 29 percent for tablets and just six percent for
connected TV devices and game consoles. 


By contrast, longer-form videos represent a bigger share of the hours played on non-desktop devices. Videos 10 minutes or longer accounted for 30 percent of the hours watched on mobile devices, 42 percent on tablets and nearly 75 percent on connected TV devices and game consoles, Ooyala reports. VideoMind Video Index

China Telecom Plans to Offer Wireless Service in U.S. in 20129

If you are going to start a new mobile service provider in the U.S. it helps to have a clear niche, and that is what China Telecom Corp. seems to be thinking. China Telecom says it will start selling a wireless service to U.S. consumers under its own brand early next year, seeking to sign up Chinese-Americans, students and tourists who travel often between the two countries.

China’s biggest fixed-line provider will offer users of the service handsets with two lines, one that will work in the United States and another in China, says Donald Tan, president of China Telecom Americas.

China Telecom Plans to Offer Wireless Service in U.S. in 2012

Smart phones Now the "Lead Offer"

Lead offers vary by segment, in the U.S. or any other communications market. For competitive local exchange carriers, the lead offer long has been a bundle of business broadband access and business voice.


Consumer fixed-line providers have been leading with the triple play of consumer video, voice and broadband access. 


Wireless providers might arguably be leading with a device, not so much services. Basically, the "smart phone" now is the lead offer for a wireless provider, with data access, voice and texting becoming features. 


More than one-half (55 percent) of US consumers who purchased a new handset in the three-month period ended May 2011 bought a smartphone instead of a feature phone, up from the 34 percent who did so during the same period one year earlier, according to a survey from Nielsen.


Overall, 38 percent of U.S. consumers owned a smartphone as of May 2011, and 62% owned a feature phone. Smart phones as lead offer