Just a Reminder About Where AT&T Makes its Money

Wireless drives fully half of all revenue. More than a quarter comes from data services of various types. Fixed network voice is 19 percent. 

Apple Doesn't Compete With Anybody Else, Really

In some genuine sense, Apple doesn't really compete with other suppliers. It competes against itself. That is one reason Apple, as a matter of business practice, destroys markets for existing products it already successfully sells, with new and "better" products. 


To be sure, "every" company claims to be an innovator. "Every" company claims to have products that are substitutes for Apple products. There is truth to some of those claims. But no firm of Apple's size and influence actually behaves the way it does, even if other firms claim they do the same.


Apple does not build products its surveys, and other market research, indicates people want. I can't think of another large firm that really operates that way, with a possible exception of 3M. Apple dreams up what it thinks people need, and never asks people whether they "need it."


Most other firms identify markets and then create products to serve those markets. Apple creates markets. 


Sure, Apple sells smart phones, tablets and MP3 players. A research firm tracking market share has to include Apple and other competitors in such studies. In that sense, Apple has competitors. 


But Apple really is different. I buy smart phones. I prefer Android, HTC and Samsung. My children buy iPhones, not smart phones. 


But I own three iPods, zero MP3 players. I wouldn't buy any brand other than Apple, if that was the product I was buying. In that sense, Apple is different. 

Gnashing Teeth Numbers

If you run a business, work for a business, or want to work for a business, these are tooth-gnashing numbers. The blue is actual economic growth. The red line is our debt burden. You know what it means. 


Consumption, spending and therefore growth will be choked for decades as debt repayments pinch back spending on every level. To get that red line back to where it needs to be, the blue line will continue to struggle, as we "spend" our money on debt service and principal reduction, instead of "buying stuff" that suppliers can sell. 


Getting the blue line growing faster than the red line is the key to generating enough surplus to pay off the debt. But paying off the debt will slow growth. That isn't to say every type of spending by businesses and consumers "has" to decline equally.


You can make the argument that some segments, such as consumer appliances, could do better than other segments. We do love our gadgets. But even then, there must be trade-offs made elsewhere. 


Gnash, gnash, gnash. 




If you subtract the added debt from GDP, this is what really is happening:

Microsoft Branded Smart Phone on the Way?

Though Microsoft naturally insists the release of its own line of branded tablets does not pose any risk of channel conflict with its traditional partners, that might not be the case. Nomura analyst Rick Sherlund says he has learned that Pegatron is also working on a handset for Microsoft. 


The project isn’t likely to be completed until 2013, but will contradict Microsoft's assertions that it is not competing with its customers. Google has faced the same issue with its ownership of Motorola Mobility.


The Microsoft move would emphasize for all third party device manufacturers that the mobile phone world is changing. Microsoft now will supply operating systems for third parties, but also will compete with its own branded devices, as Microsoft has signaled it will do in tablets.


Given Apple's highly-developed content ecosystem, the Android application community and now Microsoft's own move into tablets and, presumably, smart phones, third party suppliers who do not own their own operating system and content communities will find themselves at a serious disadvantage. 

Tablets Will Drive Personal Hotspot Adoption

Mobile modem sales will see a 16 percent compound annual growth rate to 2017, says Strategy Analytics.


Where 150 million units will be sold globally in 2012, 312 million will be sold in 2017, according to Strategy Analytics. 


By 2017, over 35 percent of stand-alone modems will be mobile hotspot routers, driven by growth in consumer electronics devices such as eBook readers, tablets and ultrabooks. 


In 2012, cellular modem sales will grow fastest in North America, at 69 percent year on year growth, followed by Asia Pacific at 34 percent;


The mobile broadband device installed base of USB modems, PC cards and embedded notebooks and netbooks will grow from 266 million units in 2012 to 688 million by 2017 and LTE will comprise 48 percent of all cellular modem shipments by 2017, Strategy Analytics says. 

Spanish Mobile Churn Hits Record Levels

Spanish mobile phone operators lost a record number of clients in April 2012, with some 70 percent of defections occurring at Telefonica and Vodafone, as they stopped subsiding smartphones for cash-strapped customers, CNBC reports. 


Observers will quickly speculate on why the historically-high rate of churn is happening. Some obvious explanations include the economic crisis, or perhaps the end of device subsidies, which might reduce demand for new phones. 


Around 380,000 customers ditched their mobile phone lines in April, marking the third straight month of decline in the overall customer base in austerity-crippled Spain, where one in four people is unemployed, the Spanish regulatory body says. 


"This crash for mobile phone operators has been especially notable in the prepay sector, which lost 297,984 clients," regulator Comision del Mercado de Telecomunicaciones says. 

Will U.S. Fixed Network Voice Connections Continue to Drop?

The latest report on U.S. fixed network voice connections by the Federal Communications Commission suggests that voice connections declined three percent between June 2010 and June 2011. That raises an obvious question: will number of fixed voice connections continue to drop, without end, to zero?


Some of us would argue that there is some stable number of connections, a non-zero number, that ultimately will be reached. How to encourage people to buy fixed network voice connections is the issue. "Value" is part of the equation. But some of us might argue that retail packaging is more important. 


Verizon Wireless "Share Everything" plans provide a key answer. Voice and text messaging are purchased as a basic part of the access service. No voice, no smart phone service. When you buy an automobile, you don't buy parts, you buy a car. Share Everything is the same sort of idea. 

How Much Better Can Telcos Do in IPTV Business?

For anybody who has followed the U.S. video entertainment market for some decades, that U.S. cable operator video penetration is as low as 44 percent of TV homes is a shocking statistic. There was a time when penetration was as high as 70 to 80 percent of homes in some areas.


Competition from satellite and telco competitors is the reason for the sharp reversal. So the question is how much more upside might exist in the IPTV business for telcos.  It isn't so easy to answer. 


In saturated markets with strong contenders, new accounts mostly come from defecting customers. And strong contenders don't give up customers very easily. 

What, How Big is Broadband Adoption in the United States?

There are some 93.3 million broadband subscriptions in service in the United States in the first quarter of 2012, according to the Broadband Forum. And it is possible those figures both overstate and understate actual broadband penetration. 


The "overstate" could occur if business accounts are included in the tallies. The "understate" would occur because those surveys do not seem to include mobile broadband, used by a significant and possibly growing number of households.


There are more people relying on mobile broadband as their primary form of Internet access and applications, these days. 

What Business Are AT&T and Verizon in, Really?

You might justifiably argue that the idea of “dumb pipe” scares telecom and cable TV executives, but not really for reasons often supposed. The notion implies, though it often is unstated, that dumb pipe means “low margin, commodity” access.


The problem is that the notion is partly true, and partly untrue. “Share Everything,” the new Verizon Wireless pricing policy, makes voice and text messaging a “flat-fee price of admission” to use the mobile network. Internet access, on the other hand, becomes a variable-fee feature based substantially on usage.


The point is that dumb pipe is a part of the business, not the whole business, nor is it the only business service providers already are in. But it is pointless to argue about whether dumb pipe is a business access providers must be in: they must, and will.


But that doesn't ever mean it is the only business they are in. Also, though there always is thinking and some action about access providers becoming app providers, historically, nearly all the money comes from apps that are closely tied to the core access function and network. That probably won't change. 

Verizon Wireless "Share Everything" Might be Controversial to Some, but is Indeed "Revolutionary"

Some don't think there is anything revolutionary about Verizon Wireless "Share Everything" plan. Some would disagree. Some might not remember, but there used to be a difference between a U.S. domestic mobile "long distance" call and a "local" call. There used to be a difference between a domestic U.S. landline call. 


But then AT&T introduced "Digital One Rate." Industry pricing changed dramatically. Keep in mind, there was skepticism about Digital One Rate when it was launched, as well.


Dan Hesse, Sprint Nextel CEO, was CEO of AT&T Wireless Services back in 1998, not many will recall. That was the month Hesse was able to act on a vision he had strenuously to sell to his superiors: that wireline minutes of use could be shifted to wireless, saving at&t money on access fees by doing so.

The Digital One Rate plan was not primarily aimed against other wireless carriers at all, but rather at reducing a significant cost of doing business on the AT&T long distance side of the house. 

At the time, Hesse pointed out that "we're taking a chunk out of revenue usually going to our competitors," meaning by that the Regional Bell Operating Companies that at&t had to pay access fees to.

The point is that major packaging initiatives can have unanticipated consequences. Digital One Rate was just a way to save AT&T long distance operations money on terminating traffic charges paid out to local carriers. 

But you might argue that Digital One Rate had more impact on the market, and consumer welfare, than did the Telecommunications Act of 1996, the first major revamp of U.S. telecommunications law since 1934. 

Something similar might  be said about the impact of family plans for voice and text messaging, which were adopted essentially for the purpose of turning teenagers into mobile users. It worked.

"Share Everything" might have similar unanticipated, and many expected, consequences. 

Poll Finds People are "Addicted" to Their Smart Phones

Nearly 60 percent of surveyed smart phone owners report they don’t go an hour without checking their phone, but you probably already knew that. 


Younger folks were the most "addicted," as  63 percent of women and 73 percent of men ages 18 to 34 say they don’t go an hour without checking their phones, a survey conducted  by Harris Interactive, and commissioned by Lookiout, has found.


Some 54 percent said they check their phones while lying in bed: before they go to sleep, after they wake up, even in the middle of the night. 


Some 30 percent of respondents admitted that they check their phones during a meal with others. About 24 percent said they check their phones while driving. 

Samsung Will Lead Smart Phone Unit Sales for 2 Years

Fitch Ratings expects Samsung Electronics to maintain its leading position in smart phone unit sales over the next two years.

Samsung’s market share of smart phone unit sales has risen to 31 percent from just three percent two years ago. In 2011, the company sold 96.7 million smartphones (Apple: 91.3 million), and 45 million in the first quarter of 2012 (Apple: 35.1 million). Apple’s unit market share increased to 24 percent from 16 percent, but Nokia plunged to eight percent from 38 percent.
 
In large part, the unit sales lead is possible because Samsung has a wider range of handset models than Apple, enabling a more effective penetration of both developed and emerging markets.

Samsung also is the undisputed leader for key smartphone components – including display, processor and memory chip technologies – reinforcing the likelihood that its future smartphone models will be equipped with cutting-edge technology, Fitch Ratings says.

Android operating system market share, which stood at 56 percent in the first quarter of 2012 suggests that the perceived gap in terms of user-preference between Apple’s iOS and Android’s OS has narrowed significantly.

Samsung has amassed a record 10 million pre-orders for its latest Galaxy S3 model, which was launched on a global basis in June 2012. Fitch forecasts that Samsung will sell around 400 million mobile handsets during 2012, of which 220 million will be smartphones (2011: 330 million handsets, including 97 million smartphones).

Smart Phone Ownership Predicts Tablet Ownership

There will be 69.6 million tablet users in the United States by the end of 2012, and 133.5 million tablet users by 2015, eMarketer estimates. 


People with smart phones are showing themselves to be eager adopters of tablets, according to  comScore. According to the research, 24 percent of smart phone users had used a tablet in the three-month period ending April 2012, an increase from 10 percent recorded a year earlier.

Microsoft Launches its Own NFC-Enabled Wallet for Windows Phone 8

Microsoft has unveiled its near field communications-enabled mobile wallet, as part of its planned Windows Phone 8 operating system. That's good news, long term, for NFC, but it makes the near term mobile wallet and payments business even more fragmented. Windows Phone will be the third major mobile platform to support a wallet, after Google’s Android-based NFC wallet and the recently announced Passbook wallet from Apple. 


But unlike Google, Microsoft has made it clear it will support subscriber information modules (SIMs)  as the secure element to anchor payment and other secure applications in its wallet. That is a carrier-friendly move in keeping with Microsoft's traditional approach to the mobile handset business. 


Windows Phone 8’s new digital Wallet will allow users to keep debit and credit cards, coupons, boarding passes, and other credentials in the device. When paired with a secure SIM from a mobile carrier, it will support payment functions.