Congress, FTC Look at "Mobile Money"

Though executives at banking and financial services firms, as well as telcos, are well aware of the key role regulators play in shaping their businesses, technology firms, especially software concerns, probably do not fully realize how much regulation ultimately will shape the mobile commerce, mobile payments and mobile wallet businesses.

At the moment, most of the activity consists of efforts by participants to get traction with key stakeholders, early in the creation of what most hope will prove to be large businesses.

At some point, regulation is going to play a bigger role in shaping the fortunes of contestants, though.

"Money" is a highly regulated function, and banking likewise is a business with lots of regulatory context. Some of those rules relate to consumer protection, while many others limit and define the lawful scope of what can be done.

So it is no accident that both Congress held hearings on mobile money in March 2012, while the Senate and Federal Trade Commission also plan their own hearings in April 2012.

“We are, I think, on a precipice of some fundamental change in the way money is exchanged between consumers and businesses,” said Rep. Shelley Moore Capito (R-W.Va.) during the House Financial Services Committee consumer credit panel’s hearing on The Future of Money.“


The Senate banking committee also will hold the latest in its series of planned sessions on the mobile payments issue, and it plans to call witnesses from the Federal Reserve system to discuss information security and financial disclosure issues.


Separately the FTC will hold hearings on April 26, 2012. 


Among the questions are "jurisdiction," as one might argue the Consumer Financial Protection Bureau, the Federal Trade Commission, the Federal Deposit Insurance Corp., the Federal Reserve or  Federal Communications Commission have roles to play. 


Unfortunately, some contestants will wind up finding out that regulatory bodies have imposed rules that make some business plans unworkable, others merely much less profitable. 

"Post-PC" Means More Androids than Windows Devices

Android will be the leading platform for “smart connected devices” by 2016, overtaking Windows and iOS in units shipped, according to International Data Corporation.

The IDC predicts that in 2016 shipments of smart phones, PCs and tablets will reach 1.84 billion. This will be more than double the 916 million shipped in 2011, which created $489 billion (£308bn) in revenue.

To Fix Anything, You Must be Able to Define "What is Broken?" In Mobile Payments, We Don't Know, Yet

Lots of consumer innovations and products fail. Some might say the failure rate is 50 percent to 90 percent or even higher. Given that track record, one would have to be skeptical about prospects for any of the proposed new mobile payment, mobile commerce or mobile wallet systems. Even if any of those efforts ultimately do manage to change the shopping, buying or paying experience, most of the current iterations will not survive.

So having a clear understanding of precisely what is to be fixed might be worthwhile. Some of us have argued that the retail, in-store payments process, in fact, is "not broken." Retailers would prefer not to pay as much as they presently do to conduct the transactions. Payment processors would like to protect those transaction revenues.

But "paying for things" doesn't seem, in North America, to be something that causes consumers lots of difficulty. Nor is the ultimate potential reshaping necessarily clear. Up to this point, there has been a clear emphasis on changing the "retail" payments process. But retail shopping is clearly under serious pressure from online alternatives.

Best Buy is moving away from the "big box" business model as online competitors continue to chip away at the formerly-successful business model. Some might question the long-term potential of the moves, as many likewise would question whether Barnes & Noble can survive as an operator of retail locations as well.

That is not to say all retailers are destined to disappear. But many "big box" approaches might not work as well as they have in the past. Some might argue the only long-term model is the "Apple Store," where the object is to showcase merchandise and explain, educate or demonstrate its use, not "sell" it. That will have "payment process" implications, as many customers might "purchase" in new ways other than standing in front of a cashier operating a traditional point of sale terminal.

But there are other implications for mobile commerce as well. If fewer retailers are selling products, and fewer customers are "buying" in many retail settings, what does that mean for all the effort going into mobile payment terminals, applications and systems? Will the mobile device assume an important new role as a device to show the product catalog?

Will the mobile increasingly become the checkout terminal? At a broader level, how might the "shopping experience" change?

Beyond that, what is "broken" about the commerce, shopping, payment or marketing experience? Unless something is broken, there is no "fix." And if past experience with technology provides any clues, those proposed remedies need to provide a consumer experience that is about 10 times better than the current process.

Also, any proposed new process and experience will involve some amount of end user behavior change. So the pain of enduring the present state of things has to be greater than the pain of adopting the new solutions. It is not yet clear any of those preconditions exist.

It is not enough to say a new way of doing things is "better." It must be an order of magnitude better, and in consumer or end user terms, not in terms of how fast, how powerful, how different the new experience is said to be. Though hard to measure, it is the experience itself that must be an order of magnitude better.

LG Flexible E-Paper is Coming

People think e-paper, flexible thin displays that mimic paper, will be important for e-reading apps. As often happens, though, people might find other uses for the technology. In some cases, it might not be the flexibility but the thin or light display that emerges as the value driver.

Some of us have been thinking it would be an ideal medium for point of sale displays, or digital signage, for example.

Content a Bigger Issue for Mobile, Other Businesses

Content is becoming a bigger deal for "screens" of all types. Mobiles already are used by 69 percent of smart phone users every day. Also, consumer and business content consumption patterns appear to be changing as tablet and e-reader ownership grow.

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. That’s a doubling of mass market adoption in just 30 days, from a significant base.

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

Though iPads seem to be used for a variety of purposes, content consumption seems to be a dominant business application, though significant percentages of business users also say the tablet displaces some amount of smart phone use as well.

Web browsing, reading and news consumption are the top three usage contexts identified by professionals worldwide.

Whether tablet ownership “revives” the print newspaper and magazine market remains to be seen. But it already is pretty clear that tablets and e-readers are changing the function of “reading.”

The survey suggests that tablet computing is transforming patterns of content consumption. iPad-owning IT and business professionals are rapidly migrating away from newspapers and printed books, toward digital alternatives.

Nearly three quarters of iPad owners say that owning an iPad has reduced the frequency with which they purchase newspapers and books. Whether that helps or harms print content providers remains to be seen.

More than 61 percent of U.S Internet users research travel online prior to booking, a story in MediaPost reports. And there is evidence that the amount and types of content on travel-related sites make a difference.

Brands that invest in "content curation" (collecting third party content)  register longer average user time on site and more return visitors, according to L2. Brands recruiting local staff to provide tips can increase user time on site by 16 percent.

Also, users on brand sites with "curated itineraries" (essentially, content about other travelers who have gone to a specific venue, or used a specific travel method or provider) spend 12 percent more time browsing.

Smart Phones Reach U.S. Tipping Point

Almost half (49.7 percent of U.S. mobile subscribers now own smart phones, as of February 2012, says Nielsen. 

Shortly, smart phones will become the majority of U.S. devices, and the penetration will simply increase every year from this point forward.

That tipping point should have lots of implications for application usage, bandwidth usage, broadband revenue and implications for future mobile retail plans and packages, especially as tablet adoption also grows.

Increasing adoption of broadband-capable tablets and smart phones will mean there is more end user demand for mobile broadband plans that mimic the existing packaging of family voice and texting plans that allow multiple devices to share a single bucket of voice usage and texting. 

Nielsen says more than two thirds of those who acquired a new mobile device in the last three months chose a smart phone over a feature phone.

Why Tablets Finally Succeeded

If you look at the current media consumption habits of U.K. adults, you can see why PCs are becoming media consumption devices, and why tablets now have succeeded, when all efforts to create tablet markets have failed for the better part of a decade.

A new Ofcom report shows that media consumption is a big consumer activity, and most of the popular consumer media consumption activities increasingly can occur on a tablet or PC screen.

If you think back on the history of efforts to create mass markets for tablets, the notion was that "handwriting recognition" was a crucial capability, since it was expected that people would use tablets to "take notes," using a stylus.

In other words, tablets were conceived as "work devices." As it turns out, tablets are embraced precisely because they are convenient media consumption devices, using apps and touch, not a stylus, for interaction.

SIP Trunking, VoIP Haven't Been Outrageous Successes

How big a deal are SIP trunking and business IP telephony? Sure, those services are foundation services for any number of competitive local exchange providers. Adoption slowly is increasing. But how big a deal are those services, or unified communications, for that matter, in the grand scheme of things, for tier one service providers? You might be surprised to learn that the answer is "not much."

The penetration rate of SIP trunking in the United States is somewhere between five percent and 30 percent of all trunk lines. Some believe it’s on the lower end of this, right around five percent in the United States, about 2.5 percent in Europe and is almost non existent in Asia right now.

That isn't to deny that SIP trunking is vitally important to service providers who sell to small and mid-sized businesses, or to some enterprises and enterprise locations. It is to point out that total revenue is not large, in relation to total communications revenues.


U.S. wireless revenue in 2012 will be about $335 billion, while fixed network voice revenue will be about $132 billion, with an additional $38 billion in broadband access revenue and $6 billion in television revenue, for a total of about $176 billion in fixed network revenue, according to the Telecommunications Industry Association. 

In the U.S. market, for example, wireless now is 66 percent of total revenue; all fixed network services just a third.

So what of voice, the traditional “most important” revenue source. As it turns out, legacy voice still is, far and away, the most important revenue source.

VoIP will continue to expand at double-digit rates in 2012 followed by high single-digit gains, averaging 9.4 percent on a compound annual basis for the forecast period to $18.9 billion.

That compares with circuit-switched voice revenue that, though declining at a 1.5 percent compound annual rate through 2015, still will represent, in 2015, a $127 billion revenue stream. VoIP will amount to about $19 billion in 2015.

In other words, as a revenue source, legacy voice is seven times bigger than VoIP, you easily can conclude. 

That is not to deny the importance of VoIP in the consumer market. In 2012, VoIP access lines will be about 49 percent as large as circuit-switched lines, for example, suggesting that perhaps 58 million VoIP lines are in service. 

But the notable point is that VoIP does not represent all that much revenue. In 2015, declining circuit-switched voice will still represent an order of magnitude more revenue than VoIP.

In contrast, fixed network broadband access services will amount to about $46 billion in annual revenue by 2015. Entertainment video will contribute about $14 billion in annual revenue in 2015.

So VoIP will be a bigger revenue stream than entertainment television, but not by much. In 2015, legacy voice still will be the single most-important revenue stream for fixed-line service providers, by far, even though it is declining.

That is worth putting in perspective.

By 2015, total U.S. telecom industry revenue might be $337 billion. If that turns out to br correct, and the Gartner forecast also proves substantially correct, then hosted IP telephony would represent less than six tenths of one percent of U.S. industry revenue, being generous.

That is not to dismiss the importance of the new revenue streams. They are vital. But neither should one ignore the dominance of legacy revenues.

Business Tablet Users are Different from Consumer Users

Are U.S. business users connecting their tablets to mobile networks? You might think not, as up to this point most tablets seem to be the Wi-Fi-only models. But business users of technology behave differently than consumer users.

For starters, many business users have their devices and services subsidized by their employers. That means business users tend to spend more, and use more "for fee" services, than consumers tend to use.

You might wonder whether those changes hold for tablet use as well. Most consumers, studies suggest, buy and use their tablets with Wi-Fi connections, and tend not to buy mobile broadband subscriptions.

But iGR says a recent survey of information technology managers in small and medium businesses in the United States suggests that might not be the case for smaller business tablet users. .

More than half of the survey respondents said they use a tablet today, and the majority of those said their company either purchase or paid for the device.

IT personnel are, by definition, “more technical” than other business personnel, so when the respondents were asked whether  they had ever activated their 3G or 4G mobile broadband connection, defined as having purchased at least one month’s service from the cellular operator, more than 80 percent said they had used the 3G or 4G service at some point, and 25 percent  had signed a contract for the service,  iGR says.

This does not mean of course that this number of tablet SMB users connect to mobile data every month, iGR says. But clearly an influential group of users are connecting in significant numbers. At the very least, the survey suggests that the majority of SMB IT users are buying tablets with the 3G/4G modem included.

LTE Drives Optical Wireless Backhaul, Globally

The demand for mobile data in the U.S. market alone will grow at a compounded annual growth rate of 56 percent in the next four years, according to iGR.

In fact, more mobile data will be used in the first five weeks of 2016 than was consumed in all of 2011.

The corresponding growth in mobile backhaul means a CAGR of nearly 58 percent between 2011 and 2016. In other words, about 9.6 times as much mobile backhaul will be needed in 2016 as in 2011.

Microwave backhaul traffic is expected to grow at a CAGR of 68 percent from 2011 to 2016. But fiber is king: mobile backhaul traffic over fiber experiences the strongest growth in backhaul traffic, rising at a CAGR of nearly 85 percent.

So iGR thinks optical fiber will represent about 70 percent of all backhaul by about 2016.

Telcos "Don't Get it?"

Do telecom executives really not understand what is happening in their business? That often is the argument, and one could point to any number of indicators.

In some cases, there are tactical issues, such as inability to mine end user data in real time, and apply it to change operations. One might argue there sometimes are cultural issues. Perhaps there is no such thing as a very-large organization that actually is capable of moving rapidly and efficiency as a matter of course. So inertia remains an issue.

On the other hand, are there scenarios where "knowledge" does not provide any particularly useful clues to "action and change." The divested AT&T, one might argue, never "solved" the problem of declining long distance revenue and rates, no matter what it tried. In the end, neither AT&T nor MCI found continued existence as an independent and successful provider was possible, or the best course.

"It’s well understood that OTT (over the top) players are challenging the telecoms status quo, but many telcos don’t fully appreciate just what a big deal this is, said Mike McConnell, CTO and executive solution consultant for Huawei Technologies.

It might be true that for many app providers, the actual "product" is the user base, and what can be done, once there is a user base, to create revenue. For telcos, the services are the product.

The practical implications are that the "freemium" model--giving away something of significant value free--makes sense, as part of the process of building a user base. That would not come naturally for a communications service provider. Perhaps it cannot or should not be a preferred course of action, some would argue.

But that illustrates the problem. It might frequently be the case that executives in fact know full well what they face, but have no convenient solutions, any more than AT&T or MCI, as experienced as the managements of those companies were, could find winning solutions.

1.1 Billion Smart Phones, Tablets, PCs to Ship in 2012

About 1.1 billion smart phones, communications-capable tablets and PCs will be shipped globally in 2012, according to IDC. 

By 2016, IDC predicts shipments will reach 1.84 billion units, more than double the 2011 figure, a compound annual growth rate of 15.4 percent for the five-year forecast period.

The universe of smart connected devices, including PCs, media tablets, and smartphones, saw shipments of more than 916 million units and revenues surpassing $489 billion dollars in 2011, according to the International Data Corporation (IDC). 

Apple Has Presence in Half of U.S. Homes

Half of all U.S. households own at least one Apple product, according to a CNBC survey. 


That’s more than 55 million homes with at least one iPhone, iPad, iPod or Mac computer. And 10 percent of non-owning homes will buy an Apple product in 2012. 


Homes that own least one Apple, own an average of three Apple devices.


You would be hard pressed to think of any other brand name electronics product with that level of adoption.  

If Reviews are Accurate, Starbucks, PayPal Lead Mobile Payments

The Apple App Store does not provide detailed breakouts of which specific apps are getting the most activity. On the other hand, Apple does report user review data. By that indicator, at least within the iOS ecosystem, Starbucks and PayPal are getting most of the attention, in the mobile payment area, at least on iTunes.

More Xbox Live Users Watch TV than Play Games

Xbox Live Gold members in the US are now spending an average of 84 hours per month on Xbox Live, with entertainment app usage up more than 100 percent year over year. Globally, this has led to a 30 percent increase in the total hours spent on Xbox Live around the world.


The result of this increased Xbox Live activity means that for the first time on Xbox, entertainment usage has surpassed multiplayer game usage. According to Microsoft, Xbox Live members in the US are now spending more time watching TV, listening to music, and watching movies than they are playing multi-player games. 


That's one angle about the "post-PC era." We still use PCs to work. But much of what we want to do with "computing" devices is consume content. The growing availability of devices that bring such latent demand to the surface illustrates the trend. 


That might be why Apple finally was able to break through resistance and create a new tablet market, despite well over a decade of attempts to create demand for "tablet PCs." The big change is that tablets now are viewed as content consumption platforms, not "PCs."