Wi-Fi Offload Causing Price Hikes?

Wireless service providers have been encouraging users to switch their mobile connections to Wi-Fi networks, when they can, as a way of managing their mobile data plans, and to improve user experience.

As it turns out, users have been heeding that advice to such a degree that AT&T now is raising mobile broadband prices and data caps, to encourage users to rely more on their mobile connections.

The ironic results show the unpredictable effects of operator policies intended to preserve user experience. Wi-Fi alleviates congestion on mobile networks. But Wi-Fi also is a substitute form of access, and AT&T now seems to be signaling that it wants to recapture more of the revenue-generating value of mobile access.

"AT&T said at a recent conference that they are seeing customers walk up to the edge of their tier and then use a lot of Wi-Fi to stay below the tier," Jefferies & Company Inc. equity analyst Thomas Seitz says.

Something similar can be noted elsewhere. Utility or water consumers often are encouraged to "use only what you need," in part to forestall the need to build expensive new generation facilities, dams and so forth.

But as consumers in Denver have found, because they reduced their use of water so much, Denver Water has had to raise rates, to cover fixed costs as revenue (water consumption is the revenue model) has decreased, precisely because conscientious consumers are behaving in a conservation mode.

Something quite similar might be happening in the mobile space. Mobile service providers globally have a vested interest in higher usage of broadband features, since that creates new revenue streams. But the desire to alleviate congestion by offloading traffic to Wi-Fi, also siphons off some usage that might otherwise be monetized by users who buy more-expensive access plans.

Offloading mobile broadband access to Wi-Fi might "help" consumers manage their consumption, as it helps operators alleviate congestion. But such measures can backfire, AT&T seems to be saying. 

Users Unclear About 4G Value

As you might expect, early adopters have clearer expectations about new technology, or at least want to "play" with new technologies, in a way that mainstream consumers do not share.

A recent study by Analysys Mason suggests that is the case for potential smart phone customers.

Many are not sure why they ought to buy and use smart phones, nor are they clear about why "fourth generation" networks have value.


More than six percent of all surveyed
mobile users believe that they lready have a 4G handset, which is obviously not yet true.

More than half of them do not understand mobile network generations or are unsure of the connectivity generation of their phone. The study also suggests that about 28 percent of
iPhone users believe that they have a 4G-capable handset.

Some 46 percent of iPhone 4 users also believe they already have 4G devices, even though no iPhones currently support 4G Long Term Evolution or WiMAX connections.

Also, except for PC dongle users, for whom the clear advantage is speed, and, in some cases, improved latency performance, the specific advantages of 4G are unclear.

That state of affairs is not unusual for broadband networks. Up to this point, the main advantage between one generation of broadband and the next is "speed." People instinctively understand "faster."

But 3G mobile networks did not lead immediately to significantly new uptake of new applications, until quite recently, when, for most users, 3G has meant a better web browsing experience. So far, it is not clear that most users can perceive the advantage of a "better" mobile web experience using 4G, as opposed to 3G, with the salient exception of mobile PC users.

AT&T, Verizon Results: Mobile Grows, Fixed Line Shrinks

It is not news, nor unexpected, that AT&T's traditional wireline business, and Verizon's similar business, are contracting, while mobile is leading growth at both firms.

Revenue for the AT&T fixed network business fell to $14.9 billion from $15.1 billion, year over year. AT&T, Verizon fixed line business contracts


Verizon encountered the same pattern in its most recent quarter. Wireless generated $18 billion worth of revenue, and wired services about $10 billion.

Operating revenue grew in mobile, but declined in fixed line. Basically, all the new FiOS revenue is simply compensating for losses in other legacy services, including voice services and digital subscriber lines.

In the fourth quarter 2011, Verizon Wireless delivered the highest number of retail net additions in three years and strong growth in revenues, driven by increased smartphone penetration andincreased retail postpaid ARPU (average monthly service revenue per user). Fixed line revenues decline

Total wireless revenues grew 13 percent year over year while data revenues grew 19 percent year over year.

Orange will not Match Competitor Prices: Why That Is Smart

France Telecom says it will not match the low-cost mobile offers recently launched by Iliad because such aggressive pricing would be bad for network quality and innovation in the long-run, says France Telecom CEO Stephane Richard. That Orange won't compete on price might strike you as unwise.

Goldman Sachs, for example, forecasts that Iliad's market entry will cause France Telecom to lose a third of its operating profits in its domestic market by 2015. That will obviously encourage thinking about the retail positioning of Orange's (France Telecom) pricing strategies.

Some will argue that Orange has to meet competitor prices. But others will argue that losing share is the wiser strategy.

There are ample precedents for France Telecom to do so, even though the strategy carries risks.

Beyond higher marketing costs as competition escalates, sometimes all an incumbent can do is harvest a business. That, in fact, was AT&T’s strategy when it was a dominant long distance provider facing growing competition from a growing number of competitors, and as prices for its product continually declined.

A similar strategy has been taken by incumbent telephone companies in the face of growing competition from VoIP providers. You might argue that telcos should have jumped into VoIP aggressively, matching competitor lower prices.

The suggestion is that sometimes a particular firm cannot compete in a particular line of business, on price. When that is the case, and when a contestant has very large market share, sometimes it will make better financial sense to harvest the business, and spend more organizational effort "finding something else to do."

It is a variation on the old theme that there always are some customers a particular contestant is better off not having. Incumbent mobile service providers frequently find themselves facing lower-cost competition, and it is not always possible to compete on that basis.

Dish Eyeing LightSquared Business Model?

Dish Network recently stirred speculation about whether it now wants to expedite its construction of a national Long Term Evolution network, simply by indicating in a yet-private communication to the Federal Communications Commission that Dish wants to "revise" its plans. Revised plan?

Some have speculated that the request is to accelerate the proposed construction timetable, but that isn't clear. It might make sense, if Dish believes it now has a chance to supplant LightSquared as a major wholesale partner.

Dish Network needs an FCC waiver to use its satellite communications frequencies to support a terrestrial mobile network, as LightSquared also requires.

LightSquared has run into a wall because of interference with the Global Positioning System.  Dish's proposal is seen as less problematic, as the frequencies it acquired last year from bankrupt satellite operators TerreStar and DBSD North America are further away from the spectrum used by GPS systems. Dish the successor to LightSquared?

Some now speculate that Dish might seen an opening, if, as some speculate, LightSquared fails to gain approval to use its spectrum to support a terrestrial Long Term Evolution network. Up to this point, Dish Network has suggested it would use its spectrum to build and operate a retail network.

There is no reason in principle why Dish could not operate both as a wholesale provider and a retailer, but there always is channel conflict when firms do so. 

On the other hand, since LightSquared already has identified more than 30 wholesale customers, a Dish Network move to offer wholesale services would give Dish an immediate customer base and potential revenue, even if it decides there are retail branded operations it also wishes to support.

U.S. Mobile Advertising Grows Faster than Expected

The U.S. mobile advertising market is growing far faster than expected, driven by the rapid ascension of Google’s mobile search advertising business, advertisers’ growing attraction to display inventory on tablet and smartphone devices, and the growing roster of mobile ad networks such as Google’s AdMob, Apple’s iAd, and Millennial Media, eMarketer says.



Mobile advertising spending in the US reached $1.45 billion in 2011, up 89 percent from $769.6 billion in 2010. 


This year, US mobile ad spending will grow 80 percent to $2.61 billion.



The most significant adjustment in this forecast comes as a result of “Google’s exceptional mobile advertising performance,” which has propelled mobile search advertising far faster than previously expected, eMarketer says.



eMarketer estimates Google’s share of overall U.S. mobile ad revenues reached 51.7 percent, or about $750 million, in 2011. Mobile advertising grows faster than expected.


The firm previously forecast U.S. mobile ad spending would grow 47 percent  to $1.8 billion in 2012, up from $1.2 billion last year.

Apple Sets Sales Records, Has $97 Billion in Cash

Apple first quarter results show record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion.


The company sold 37.04 million iPhones in the quarter, 15.43 million iPads and 5.2 million Macs. Apple also has an astounding $97 billion in cash. Any "normal" company would face unbearable pressure to distribute that cash to shareholders. Apple Reports First Quarter Results 

• Revenue: $46.33 Billion versus $38.76 billion expected

• EPS: $13.87 versus $10.07 expected

• iPhone units: 37.04 million versus 30.2 million expected 

• iPad units: 15.4 million 13.2 million expected 

• Mac units: 5.2 million versus 5 million expected 

• iPod: 15.4 million versus 13.9 million expected, according to Bloomberg

• Gross Margin: 44.7% versus 41.8% expected

• March quarter revenue: $32.5 billion versus $31.9 billion expected

• March quarter EPS: $8.50 versus $8.00 expected

• Apple now has $97 billion in cash, short term, and long term securities

• The iPhone's average selling price is up to $660

17% of Global Workers Telecommute

About 17 percent of workers around the globe, particularly employees in the Middle East, Latin America and Asia, telecommute frequently, and nearly 10 percent work from home every day, according to a new Ipsos poll sponsored by Reuters. About one in five workers worldwide telecommute

Ipsos surveyed a total of 11,383 online connected employees from 24 countries. 

Telecommuting is primarily taking place in emerging markets: those working in the Middle East and Africa (27 percent), Latin America (25 percent) and Asia-Pacific (24 percent) are considerably more likely than those in North America (nine percent) and Europe (nine percent) to telecommute ‘on a frequent basis.’

More specifically, employees in of India (56 percent), Indonesia (34 percent), Mexico (30 percent), Argentina (29 percent), South Africa (28 percent) and Turkey (27 percent) are most likely to be pursuing this form of employment.

On the other end, those in Hungary (three percent), Germany (five percent), Sweden (sixc percent), France (seven percent), Italy (seven percent) and Canada (eight percent) are least like to telecommute ‘on a frequent basis.’

Those with a high level of education are most likely to telecommute on a frequent basis (25 percent) followed by those under the age of 35 (20 percent) and those with a high household income (20 percent). 

Are Android Users Subsidizing iPhone Users at Verizon Wireless?

Subsidies Verizon Wireless is paying to entice consumers to buy Apple iPhones might also be penalizing Android devices, some now argue. Though top Android devices cost as much as Apple iPhones, high-end Android devices often sell for prices $100 to $200 higher than the iPhone.

In other words, Verizon is trying to recoup some of its cash flow and operating margin by making Android handset users pay more for their devices than Apple iPhone users.

Verizon is betting that buyers who want the high-end Android phones will pay, so they're marking those models up.

John Hodulik, an analyst at UBS AG has estimated that the iPhone subsidy could be as high as $400 per iPhone customer. If 13 million of the devices get sold in a year that implies a which $5.2 billion hit to earnings. Some argue that devices should not be subsidized, since doing so means consumers have to sign contracts. But iPhone subsidies are quite a big expense for firms such as Verizon Wireless.

From at least one perspective, contracts and subsidies offer value for consumers and service providers, with users getting devices they want at $400 lower prices, while service providers can smooth out recurring service revenues and reduce customer churn.

Apple has set a standard entry price of its newest smartphones at $199, with higher end models available with more storage. This year however, Verizon has set a new contract price for its high end Android phones at $299.

The implications are clear enough. If you like high-end Android devices, do not buy them from Verizon.

Both the Motorola Droid RAZR and the just released Google-branded Samsung Galaxy Nexus are $299 with a two year Verizon contract, and both are listed as costing $649 without a contract.

In contrast, Apple's 16GB iPhone 4S is offered for only $199, even though it costs the same $649 without a contact. Apple is getting a $450 subsidy, compared to just $350 for Android licensees Motorola and Samsung.

Verizon's $199 Android phones, including the Samsung Droid Charge, Motorola Droid 3 and Droid Bionic, cost $499, $459 and $589 respectively without a contract, making their subsidies worth just $300 to $390, or $150 to $60 lower than Apple's, one might note.  

The closest Verizon's phones currently come to an iPhone subsidy appears to be the HTC Thunderbolt, which is being offered for $149, a $420 subsidy compared to its $569 full retail price. However, this involves a special promotional discount of $100, making the "sale" price of Android models still higher than regular price of any of Verizon's iPhones. Verizon Wireless can do what it wants, of course. But consumers should also do what they want.

75% of Enterprises Use Social Media for Customer Service

Businesses use social media for a variety of reasons. Some 96 percent of respondents told Booz  & Company that they are using social media for “advertising and promotions.” 


Some 88 percent use social media for public relations.  Some 75 percent use social media for  customer service.  Social value in business 

Tablet, E-Reader Ownership Doubles in One Month: Unprecedented

The share of adults in the United States who own a tablet of some sort nearly doubled from 10 percent to 19 percent between mid-December 2011 and early January 2012.

The ownership of e-readers also surged from 10 percent to 19 percent over the same time period. Tablet ownership doubled in two months

That is an unprecedented growth rate for any consumer electronics device. Tablet ownership also had been on a strong adoption path earlier in 2011 as well, but doubling in 30 days from a base of 10 percent seems never to have occurred before.

To be sure, 10 percent adoption historically has been an inflection point: it is the point in an adoption process that represents critical mass, after which adoption accelerates.

You'll have to click on this chart to view it in more detail, but it is one of the most useful bits of historical evidence you can use to estimate how long it might take an application, service or device to reach 10 percent penetration of U.S. households, for example.

There are some caveats. Not every innovation succeeds. This chart only shows you what happened with the most-popular consumer electronics services and products.

The reason for sharing the chart is that a panel I was recently on was asked how long it might take for near field communications technology to be adopted by a significant number of U.S. consumers.

My response, based on past work studying consumer electronics adoption rates, was that it can take quite a significant amount of time, between three and 10 years, to reach the crucial 10-percent-of-homes threshold, which seems to be the point at which any innovation really begins to accelerate, in terms of adoption.  Consumer adoption patterns

Also, the more complicated the ecosystem, the longer it will take. Apple iPhones and iPads did not take long to reach the 10-percent penetration mark, because they operate in a fully-developed ecosystem where all that is required is purchase of a product, to obtain the value.

Telco Video Subscribers Approaching 100 Million

Collectively, global telcos had a total of 94 million video entertainment subscribers at the end of the third quarter of 2011, giving them a 12 percent share of the video market. Given current growth rates the subscriber total will have passed 100 million at the end of 2011.


Of course, global statistics can obscure as much as they reveal. In the U.S. market, for example, neither AT&T nor Verizon competes on a national basis, and each is a relatively modest competitor. 


Comcast alone has 22.4 million subs, while DirecTV has 19.8 million. Dish Network has 13.9 million subscribers and Time Warner Cable has 12 million. 


AT&T has 3.6 million video subscribers, while Verizon Communications has about four million. Granted, Verizon ranks about seventh in size, while AT&T ranks eighth, but Comcast is about 5.5 times bigger than either AT&T or Verizon. 


That is not to discount the importance of video services for telcos, either in terms of gross revenue or as a key component of the triple play that now is a service provider mainstay. But all fixed line services collectively are unable to drive overall growth at either AT&T or Verizon. That role exclusively is played by mobile services. 

Telco Pay-TV Subscribers Approaching 100 Million

Rank	MSO	BasicVideoSubscribers
1	Comcast Corporation	22,360,000
2	DirecTV	19,760,000
3	Dish Network Corporation	13,945,000
4	Time Warner Cable, Inc.	12,109,000
5	Cox Communications, Inc.1	4,789,000
6	Charter Communications, Inc.	4,371,000
7	Verizon Communications, Inc.	3,979,000
8	AT&T, Inc.	3,583,000
9	Cablevision Systems Corporation	3,264,000
10	Bright House Networks LLC1	2,109,000
11	Suddenlink Communications1	1,268,000
12	Mediacom Communications Corporation	1,100,000
13	Insight Communications Company, Inc.	670,000
14	CableOne, Inc.	628,000
15	WideOpenWest Networks, LLC1	432,000
16	RCN Corp.1	335,000
17	Atlantic Broadband Group, LLC	258,000
17	Knology Holdings	258,000
19	Armstrong Cable Services	242,000
20	Service Electric Cable TV Incorporated1	217,000
21	Midcontinent Communications	204,000
22	MetroCast Cablevision	182,000
23	Blue Ridge Communications1	171,000
24	General Communications	146,000
25	NewWave Communications	141,000

Earned Social Media Works, Study Finds

What is the value of a "fan?" In other words, can we quantify the business value of social supporters of brands?


A study of Christmas and holiday promotions by Amazon, Best Buy, Target and Walmart suggests that social engagement can drive better results, at least as quantified by visits to retailer online sites.


The data suggets that earned social media impressions can stack up favorably against paid ads for brands that are effective with their social efforts, at least i terms of website visits. 


Using an estimated value for earned impressions of $3.55 cost per thousand, Walmart earned $417,000 worth of impressions while Best Buy earned $86,000 in impressions.


When looking at the lift received from promotions that started in November 2011, all four brands received a lift of 2.2 times or higher. Target received the highest lift between October and the end of November at 3.5 times.


For most retailers, a significantly higher percentage of fans and friends of fans visited the retailer’s website, as compared to the rest of the Internet. About 64 percent of Amazon’s fans visited Amazon.com, compared to 27 percent of the total Internet. 


For Best Buy, 18 percent of fans and 13 percent of friends of fans went to BestBuy.com, compared to eight percent of the total Internet. Earned social media:

Amazon Kindle Fire Content Sales Stronger than Expected?

RBC Capital analyst Ross Sandler polled 216 Kindle Fire owners and concluded that Kindle Fire tablets are making Amazon more money than was originally expected. Sandler originally had estimated that each Kindle Fire unit would generate about $136 in content purchases over the useful life of the device. Content purchases on Kindle Fire

But Sandler’s most-recent survey of 216 Kindle Fire owners suggests content revenue might be higher than that.

The survey found that roughly 80 percent of users already have purchased ebooks, with 58 percent of respondents buying more than three e-books within the first two months of owning the tablet.

Averaged out, that’s five e-books per quarter, which nets Amazon $15 per Fire owner per quarter, assuming an average selling price of $10 for ebooks. That further implies revenue from e-books of about $60 a year.

About 41 percent of Fire owners also say they have bought at least three apps. This will put another $9 per Fire owner per quarter into Amazon’s coffers, or $36 a year of net revenue (after splitting gross revenue with content owners).

That implies possible gross sales of about $30 a quarter worth of apps, assuming Amazon’s share of revenue is 30 percent.

Those figures suggest annual Kindle Fire revenue of about $96 a year. Over three years, that suggests $288 of revenue for Amazon, even if users do not buy any video or audio products, which seems unlikely.

More Europeans Using Mobiles While Shopping

Mobile retail is one of the fastest growing new uses of  smart phones, comScore reports, with more than 13.6 million smart phone owners in France, Germany, Italy, Spain and the United Kingdom using their mobiles to access a retail site in October 2011.

But that isn’t the most-significant new finding. The more important trend is growing use of mobile devices inside retail locations, while people are shopping.

In October 2011, nearly 22 percent of surveyed mobile users in In France, Germany, Italy, Spain and the United Kingdom took a picture of the product while in a retail store, making it the most popular e-commerce related activity.

A significant percentage of smart phone users in retail stores also texted or called friends or family about a product (15 percent). Some six percent scanned a QR code in-store.

A large share of smart phone owners also managed their bank account from their device (20 percent), used electronic payment services to purchase goods (12 percent), or searched through shopping guides for the best products (11 percent).

Target and Sears are taking diametrically opposed approaches to the challenge of mobile-enhanced shopping, in particular comparison shopping while potential customers are inside stores.

Target wants its suppliers to create "retail store only" versions of products that cannot be bought online, as well as helping Target match online prices. Target is particularly concerned about showrooming, the practice of consumers examining merchandise in a store, but buying online.

Sears, on the other hand, is going to make it easier for mobile shoppers to compare prices inside Sears locations, by adding Wi-Fi, at least at some of the Sears stores.

In fact, Sears is by offering in-store shoppers free Wi-Fi access at select stores, to provide customers with faster access to the merchant’s mobile commerce site and apps. That isn’t completely surprising.

What is more interesting is that Sears also will allow those users to access the sites and apps of other retailers, a move intended to show Sears comfort with its pricing.

With free Wi-Fi customers can use their smart phones to surf the web, shop online at Sears.com or compare prices before they purchase to make sure they are getting the best price on the products they want, the company says.

About 63 percent of smart phone users have visited a retailer’s website from their mobile device, up from 53 percent in 2010, and 41 percent have done so while in the retail store, according to a study by Hipcricket.

While mobile retail sites have historically served as “brochures,” lightweight versions of retailers’ full websites that provide limited information such as store locations, directions and hours, today’s mobile-specific retail sites are now providing more significant benefits to consumers as they move along their path-to-purchase.  

Fully 50 percent have checked a competitor’s mobile website while in another store.
The survey found that smart phone owners are visiting mobile retail sites to:

Research prices (46 percent);
Search for coupons and offers (36 percent);
Research products (28 percent); and
Purchase products (13 percent)

Some nine percent report that any of their favorite brands market to them using the mobile phone. At the same time, consumers continue to indicate a willingness to join mobile customer relationship management or loyalty programs for their favorite brands. Some 33 percent would be interested in joining such a program, but only 12 percent currently participate in one.
Mobile sites now a factor in retail shopping

Some 79 percent of U.S. smart phone owners relying on their phones to help with shopping, according to Google.


About 70 percent use their phones while shopping in-store and 74 percent of smart phone shoppers made a purchase as a result of using their smart phone.

Some 67 percent said they research on their smart phone and then buy in the store. Fully 95 percent of smart phone users have looked for local information, and as you might expect, such searches often are an immediate precursor to purchasing.  After looking for local information, 77 percent contacted a business, and 44 percent made a purchase. Reaching Today’s Mobile Shoppers