Groupon Looking at Mobile Payments?

Groupon is testing a mobile payment service of its own, VentureBeat reports. The potential move shows the increasingly complex relationship between mobile marketing, the loyalty and promotion business and mobile-enabled payments. 


Like other services from Square, Intuit, PayPal, Verifone and Sage, the Groupon service would use a dongle on a smart phone that provides the card swipe reader, with the revenue earned on each transaction.


Groupon might be banking on the fact that there are segments within the mobile-enabled payments business. 


Groupon's pricing is said to include a 1.8 percent transaction fee and a 15 cent per transaction charge for transactions processed through the terminal. 


Square charges 2.75 percent with no per transaction fee. 


PayPal Here and Verifone Sail charge 2.7 percent, also with no transaction fee. 


But different cards have different pricing. Groupon is charging 2.7 percent  for processing American Express  transactions. Square and PayPal don’t charge extra, and Sail charges 3.7% for American Express transactions.


Groupon also is offering customers an iPod Touch and card reader, free of charge. 

For customers whose typical transaction exceeds $15, it can make financial sense to use Groupon’s offering. On a $100 Visa transaction, Groupon would charge $1.95, Square’s $2.75.

iPad 2 is 60% of Installed Base, Latest Model has 20% Share

Two months after its launch, the new third-generation iPad this week caught the original, becoming the second most widely used of Apple’s family of tablets, though the iPad 2 still represents 60 percent of the installed base.

After selling over 3 million devices and grabbing 14% of the US iPad market in the first four days of availability, the updated iPad has continued to sell extremely well. It now accounts for over 20% of all US-based iPads seen by apps using Localytics for app analytics, on par with the original and up nearly 50 percent from its launch-week share.

People Like Their Smart Phones, But Don't Want to Pay Too Much for Them

A new survey of U.S. consumers suggests the magnitude of the problem mobile service providers face as they try to wean buyers off of high handset subsidies.


The majority of consumers who recently purchased a handset reported a mean overall handset purchase price of approximately $114.23. Similarly, the majority of consumers who plan to buy any type of handset in the near future plan to spend on average approximately $127.25.

Granted, those figures include feature phones and smart phones, but about 71 percent of the sales were of smart phones.

When iGR examined the price the respondents were willing to pay for a smart phone, the survey showed that consumers were on average willing to pay $135.90 for an Apple iPhone compared to $124.65 for an Android device.

Given the cost of manufacturing and selling those sorts of devices, which can carry retail prices in the $500 to $600 range, there is a wide gap between apparent willingness to pay and actual cost. Of course, actual end user behavior is a better guide than survey responses. Based on those sorts of data, one might argue actual purchase behavior can run up to about $200 for high-end devices.


In a May 2012 survey, consumers indicated that 28 percent of the mobile handsets they purchased recently were basic mobile phones and 71 percent were smart phones. Close to 69 percent of the handsets they plan to buy in the future are likely to be smart phones, iGR Research found.

Mayors Want FiOS, But "You Can't Always Get What You Want"

It is not surprising either that nine New York mayors, as well as their counterparts in Boston and Baltimore want FiOS. By the industry's own reckoning, fiber to the home is the ultimate, future-proof network. Nor would the mayors be alone in thinking better consumer outcomes could result if there were robust competition between an incumbent cable operator and Verizon, in each city.

But the economics of fiber-to-home networks have never been especially easy. Verizon itself justified the FiOS network choice to investors by arguing a combination of benefits, including operating cost savings, would provide the payback.

But Verizon seems to have found the operating cost savings were not as large as hoped, and the incremental new revenue not large enough, to continue with the program. You can be sure that if FiOS were throwing off huge amounts of new cash, you couldn't keep Verizon from building as fast as it could.

The problem is that an argument can be made that major investments in all new fixed network infrastructure are questionable, at a time when a variety of reasons make wireless networks a clearly-better financial investment. Even proponents say the business case varies from location to location. 


Observers are right to wonder about the impact on competition if Verizon continues to refrain from FiOS expansion. On the other hand, wireless does provide an important developing element of the competitive picture. Wireless might never be a full-fledged alternative to fixed network access. 


But neither is it clear that the fixed network business case will remain where it is today. At least in principle, some shift in end user demand could boost the FiOS business case far beyond where it exists now. 


The point is that promoting competition, a reasonable public policy concern, also has to take acoount of the fundamental economics of various approaches to providing broadband access. What we might prefer is one thing. The economics might dictate something else.
Wireless also has become a feasible alternative for broadband access in many areas, and for some use cases.

Nor is there much evidence that service providers are doing anything but increasing investment, globally. It also is true that industry revenue is growing, globally. The issue is where growth is occurring.

In the 10 years from 2005 to 2015, telecom service provider revenue has shown and will continue to show year-over-year growth every year except in 2009, Infonetics Research says.
With industry revenues expected to grow at a modest two percent a year, overall capital expenditure will thus remain stable (0.7 percent CAGR) for the foreseeable future, with growth coming from spending on equipment. But capex is shifting to mobile, globally.

Wireless access infrastructure, already accounting for 43 percent of total telecom infrastructure capex, will increase its overall share as spending continues to shift away from fixed infrastructure.

That has to raise questions about the long-term role, revenue and services suite to be offered by broadband fixed network operators. Not, it must be said, because demand will be lacking, but only because cable operators seem to be executing on their premise that they can deliver bandwidth more affordbly than fixed-line telcos.

Indirect evidence for that view comes from the A.D. Little analysis, which suggests that fiber to the home investment for very-high broadband will be “mainly” driven by non-telecom players.

In part, in some markets, that will be the case because 65 percent of all households with access to FTTH  networks in Europe are on networks deployed by fixed-line incumbents. In other words, in Europe, much fiber investment already has been made. Where it has not been made, there likely are payback issues that make FTTH highly questionable.

So utility companies and alternative operators are expected to split the value chain as well as the financial investments, by forming innovative partnerships to invest in more fiber access, A.D. Little believes.

If cable operators continue to nibble away at available demand for fixed broadband, telcos will face the challenge of a radical rethinking of their business models and offerings.

If one assumes that broadband will underpin and drive most future revenue for fixed line providers, and if one assumes it is the cable companies who can do so at lower cost, telcos will face a challenging investment case, especially given the arguably better financial prospects in mobility and wireless.

Strategically, one might argue that, though expensive, a full fiber to home upgrade might be necessary. In some cases a fiber to neighborhood approach might be “good enough” as a bridging strategy over the medium term.

Either that, or a telco has to dramatically lower its operating costs to compete as a provider of lower-bandwidth solutions, with cable claiming the premium segments. That will not be an appetizing prospect for most telco executives, especially those without wireless assets.

FTTH is better, no doubt. But the business case remains challenging, especially where cable operators are able to boost bandwidth at much lower costs.

Does LTE Enable Flexible Mobile Pricing Plans?

Verizon CFO Fran Shammo says Long Term Evolution allows Verizon Wireless to consider, and possibly offer, many different types of retail charging plans. One might question whether that necessarily is true, while noting that introducing a new network offers a chance to position retail plans in different ways, even if the network itself is not the reason such different plans are offered.

In principle, Verizon could have offered, or could offer, the equivalent of "toll free" content consumption on its 3G network as well. As always is the case, billing platforms have to be able to handle such arrangements. Regulators have to stay out of the way.

Users have to perceive an advantage to consuming that way and service providers must be careful not to introduce plans that produce significantly less revenue, instead of generally adding revenue because incremental usage is encouraged.

Content providers likewise have to see a clear business advantage to pay mobile service providers for their customers' use of bandwidth.

That's a lot of "ifs," and it is unclear whether there actually is anything about LTE that makes such different retail packaging possible, in a direct sense. Latency is lower, to be sure, and that could create a premium pricing position for real-time services.

LTE does offer significantly faster access, and additional bandwidth. But it might not seem that such network advantages necessarily create the platform for different packaging. Those are management decisions, with attendant billing capabilities and organizational process requirements.

"Daily" access to public hotspots has been standard for years, and Clearwire has offered "by the day" access to its retail customers. It might be fair to say those efforts have been moderately successful.

One might argue that the billing and marketing effort required to sell and support true "a la carte" mobile broadband might, at present, exceed the potential revenue.

What Does Your Business Look Like in a Cloud-Based Business Apps Environment?

What would your business look like if most important and frequently-used business applications were a one-click app on a PC, tablet or smartphone?

What if key technology assumptions most businesses have to make boil down to convenient access to reasonably-fast broadband, and devices with Web browsing capability?

What if most businesses didn’t have to supply much more than broadband and Web-browsing devices to immediately download and use key business apps? There could be lots of implications for service providers, app providers, information technology providers and telcos and cable companies if all that happens.

What becomes of much of today’s premises network business? What happens to distributors of business software? How many more sales personnel in a range of industries might find they now can sell such products because installation, configuration and support now are a “mobile app” process?

What new channels could develop? Which channels will be disrupted?

Will European Telcos Lose 20 Percent of Revenue, 40 Percent of Earnings by 2020?

Many large service providers could face excruciating revenue pressures over the next decade.

By 2020, for example, European telcos could see their sales fall by up to 20 percent, while; earnings (EBITDA) could even drop by 40 percent, according to an analysis by Roland Berger Strategy Consultants 

Change of that sort might lead to relatively shocking changes for many service providers, including separation of retail and wholesale units or a switch to “wholesale-only” operations.

To respond, telcos must reduce operating costs, adopt new, sales and service models and tap growth markets, Roland Berger says.

The study suggests European telcos will have to invest up to EUR 600 billion, mostly for optical fiber and Long Term Evolution fourth generation mobile networks, says Alexander Dahlke, Partner at Roland Berger Strategy Consultants.

Business Revenue Driving ILEC Growth

There is an interesting pattern shaping up in first quarter financial reports from U.S. independent local exchange carriers, namely that revenue growth is strongest in the business customer segment.

In Windstream's first quarter of 2012, business revenue was $897 million, while consumer revenue was $338 million. In other words, business revenues were 73 percent of total revenues. Other telcos that once were more known for operating rural telephone exchanges, such as Frontier Communications, likewise generate more than half their revenue from business customers.

In the U.S. cable industry, services for business customers likewise represent the highest-growth potential, not services to consumers.

Mobile Data Revenue Mismatch is Getting Worse

It isn’t news that mobile service providers face bandwidth demands that threaten to outrun revenue while boosting capital spending and operating expense as well.

In Germany, Solon expects a 15-fold increase in data demand over the next five years. The additional network capacity required would almost double network operating expense from 12 percent of revenues in 2011 to 23 percent of revenues in 2016, not to mention the capital investment.

So bandwidth demand is growing much faster than revenue earned from supplying that bandwidth. That's a problem.

Where Do Service Providers Actually Make Their Profits?

One of the truths about virtually every business is that 80 percent of the profits will tend to come from about 20 percent of the activities people at those businesses conduct. In the communications business, profit historically was generated by business customers, who provided the surplus required to run the money-losing rural parts of the business, and later the break-even suburban residential business.

Those realities are changing with the advent of mobile service and broadband.

"Phablets" Will Surpass 208 Million Shipments Annually in 2015

You might have noticed, recently, that there is plenty of experimentation around form factors in both the tablet and smart phone markets, with each category containing devices that are migrating in a direction in the middle, namely smart phones with bigger screens and tablets with smaller screens.

Though cost reduction and portability might be reasons for creating seven-inch tablets, better content consumption experience might be the reason for crafting smart phones with screens in the five-inch range.

More than 208 million "phablets," a hybrid device that is larger than a smartphone but smaller than a tablet, like the Samsung Galaxy Note, will be shipped globally in 2015, says ABI Research.

Despite the slow start for phablet smart phones in 2011, HTC, LG, and Huawei each will introduce phablet smart phones in 2012, joining the ranks of Samsung’s Galaxy Note and Nexus. Additionally, another phablet smartphone was released earlier this month, the Samsung Galaxy S3, according to ABI Research.

“One of the chief drivers for phablets is the amount of time people use their smartphones for web browsing, reading articles and newspapers on the go, or simply navigating their journeys,” says ABI Research senior analyst Joshua Flood. “The larger screen sizes make a significant difference to the user’s experience when compared to conventional-sized touchscreens between 3.5 to 4 inches.”

Sale of all of T-Mobile USA "Unlikely"

Deutsche Telekom AG considers a complete sale of its troubled U.S. wireless unit T-Mobile USA as "unlikely,"  Chief Executive Rene Obermann says.

"We continue to look for a long-term solution to improve earnings in our U.S. business," Obermann  told shareholders at Deutsche Telekom's annual general meeting. "However, a complete sale like the one to AT&T is considered unlikely."

Among the options some believe T-Mobile USA could consider is a spin out of the asset to shareholders or a merger with a smaller regional provider. Few seem to believe T-Mobile USA realistically can grow its way to greater scale on an organic basis.

The problem is that Deutsche Telekom itself says it must increase its return on capital or reduce its capital investment in the U.S. market. That will be tough as T-Mobile USA continues to bleed its most-profitable customers and lags the other leading U.S. mobile firms in creating Long Term Evolution fourth generation networks. 

Android- and iOS-Powered Smart Phones Gain More Share

Smart phones powered by the Android and iOS mobile operating systems accounted for more than eight out of ten smartphones shipped in the first quarter of 2012, according to IDC.

Android had 59 percent market share, while iOS had 23 percent share of the 152.3 million smart phones shipped in the first quarter of 2012. Those statistics do not exactly related to "sales," though.

During the first quarter of 2011, the two operating systems held a combined installed base of 54.4 percent. IDC notes that  Android and iOS have grown their share over Symbian and BlackBerry, Linux and Windows Phone 7/Windows Mobile.

                                   Top Six Smart Phone Share, 2012 Q1 (Units in Millions) 

Mobile Operating System	1Q12 Unit Shipments	1Q12 Market Share	1Q11 Unit Shipments	1Q11 Market Share	Year-over-Year Change
Android	89.9	59.0%	36.7	36.1%	145.0%
iOS	35.1	23.0%	18.6	18.3%	88.7%
Symbian	10.4	6.8%	26.4	26.0%	-60.6%
BlackBerry OS	9.7	6.4%	13.8	13.6%	-29.7%
Linux	3.5	2.3%	3.2	3.1%	9.4%
Windows Phone 7/Windows Mobile	3.3	2.2%	2.6	2.6%	26.9%
Other	0.4	0.3%	0.3	0.3%	33.3%
Total	152.3	100.0%	101.6	100.0%	49.9%

Google Launching Knowledge Graph

Google has begun to introduce "Knowledge Graph" to U.S. English users. It also will be available on mobile devices. 


The Knowledge Graph allows users to search for things, people or places that Google knows about and then filters that information for relevance to a particular query. This is a critical first step towards building the next generation of search, which taps into the collective intelligence of the web and understands the world a bit more like people do.

Google’s Knowledge Graph builds on Freebase, Wikipedia and the CIA World Factbook but is augmented by facts Google already has amassed, as well as the relationships between these different objects. It also is tuned based on what people search for on the Web.

Tablet Growth Changing Ad Market

Non-phone mobile devices, especially tablets, accounted for 20 percent of all mobile advertising impressions on the Millennial Media platform during the first quarter of 2012, compared to 15 percent in the first quarter of 2011, showing the growing importance of tablets in the portable device universe and mobile advertising business.

Android remained the top overall operating system on the Millennial Media platform in Q1 2012, with a 49 percent share of impressions, and Apple remained the leading individual mobile device manufacturer, Millennial Media says.

The Apple iPad, Samsung Galaxy Tab and Amazon Kindle Fire were the top tablets in the first quarter of 2012, and all three were among the top 20 mobile devices.



Though the common observation is that tablets are displacing PCs for content consumption, tablets also are becoming a more-important platform for mobile content consumption as well.


IDC has forecast 2015 sales of 535 million PCs. That would imply tablet shipments about 60 percent of the PC level, heavily weighted towards developing regions of the world, the Guardian reports.


Apple will have just under 50 percent of the market of 326 million devices by about 2015, Gartner says. The Gartner forecast suggests tablet sales to end users will total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60 million units.

Apple's iOS continues to be the dominant media tablet operating system, as it is projected to account for 61.4 percent of worldwide media tablet sales to end users in 2012. Despite the arrival of Microsoft-based devices to this market, and the expected international rollout of the Kindle Fire, Apple will continue to be the market leader through the forecast period, Gartner argues.