Will Apple Become a Service Provider?

Will Apple become a service provider? As complicated a move as that might be, some think it is not "unthinkable."

Complicated and fast-evolving ecosystems often feature some amount of “jockeying” between contestants in formerly-distinct parts of the ecosystem. Google becoming a mobile operating system supplier and a handset manufacturer provide examples. Now Microsoft has become a branded supplier of tablets, potentially competing with its operating system licensees.

In prior years, we have seen any number of over-the-top application providers becoming suppliers of voice or text messaging services, voice mail or video apps, for example.

The nagging concern many mobile service providers logically have is whether one or more application or device suppliers might one day decide to become service providers in their own right. Historically, one might have argued that doing so would not make much sense.

Channel conflict is the issue. If you want all service providers to sell your devices, it might not make sense to compete with those distributors. But the ecosystem is a very complicated place these days.

In fact, it might be complicated enough that Apple might eventually decide to become a mobile virtual network operator, or perhaps even consider owning its own network, not so much for the voice revenues, but for the ability to optimize its network for support of mobile devices. It would not be an easy decision.

But if streaming video becomes important, Apple might want the same level of control over quality of experience as cable, satellite and telco TV providers already have.

Are Consumers Buying Full Price iPhones?

BTIG Research says its random and admittedly limited channel checks suggest there is not yet any indication that large numbers of people are anxious to buy a full-price Apple iPhone, to avoid a service contract.

Of course, it does not appear that Virgin Mobile, which has begun selling such full-price iPhones, has swung serious marketing effort at the new program.

Until a full marketing push, it will be hard to assess demand. And it might not be the case that the market demand will come largely from traditional "prepaid" customers. In fact, the demand might actually turn out to be customers that in the past would have opted for a traditional postpaid plan, have the money to pay full retail, but simply want the lower month recurring charges.

So far, it is too early to conclude much of anything about the actual level of demand.

Anyfi Networks Helps Fixed Networks Support Wi-Fi Access

Anyfi Networks thinks it can help fixed network service providers add a "mobility" or "untethered" capability outside the subsciber's home, using software.

"By remotely upgrading your home gateways with our patent pending software you can transform your existing infrastructure into a mobile broadband network, license exempt and Wi-Fi compatible, literally overnight," Anyfi says.

"Anyfi.net Simple"  lets a fixed-line broadband operator extend the home Wi-Fi user experience outside the home, the company says. "Since devices always authenticate against the home gateway the connection is automatic and completely secure," Anyfi Networks says.

"The trick is combining Wi-Fi with IP, Internet Protocol, to break the tie between logical network and physical infrastructure, much in the same way as Voice over IP separates your phone service from the physical line. You can think of it as Wi-Fi over IP," the company says.

Anyfi claims that a fixed-line operator having a high density of broadband subscribers in certain urban areas could actually become mobile operators overnight, just by upgrading the modem software remotely, transforming the infrastructure into a radio access network.

Anyfi says that the ability to offload mobile traffic to any Wi-Fi access point depends on a business relationship between the "home" ISP and the operator of the remote Wi-Fi hotspot. In other words, Anyfi does not enable access to Wi-Fi hotspots whose owners do not agree to cooperate.

Deutsche Telekom, Sprint to Back Firefox Phones

Deutsche Telekom and Sprint will support a new Firefox smart phone platform to turn up the heat on Google and Apple in the mobile software market, starting in 2013. Smart, Telecom Italia, Telenor and Etisalat also are backing the Firefox platform.

Mozilla Foundation, creator of Firefox Internet browser, said phone makers ZTE and TCL Communication Technology will roll out the first Firefox phones using Qualcomm's Snapdragon processors in early 2013.

Whether the support will manage to create a serious alternative remains a question. You might argue that telcos generally have had little to no success creating viable alternatives to either Apple's iOS or Android, so far.

A combination of forces are at work, including consumer preferences, not just operator support, and so far, customers simply have preferred both Apple and Android devices. You might also argue that consumers do not actually buy "operating systems," but rather the full bundle of values any device represents.

Still, some might argue the Firefox devices will be less costly for consumers, so some demand could exist in the "lower cost device" end of the market.

NFC Has to Solve Problems People Didn't Know They Had

Mobile payments solves a problem nobody, or few people, really have, one sometimes hears. It might be reasonable, even for its supporters, to argue that adoption will take some time, given the complexity of the required ecosystem.

In fact, the question of "what problem is getting solved?"  has many potential answers. With specific regard to near field communications, one might suggest that it is not yet clear which specific problem NFC "solves."

Many might argue that, in developed regions, the payment process in fact is not "broken," making NFC-based mobile payments less a needed substitute and more a feature or capability that adds value in some other way.

It is possible that the ultimate answer will be that NFC solves a problem people don't know they have, as Apple has created products that people did not "know" they needed.

Square Processes $11 Million Worth of Transactions a Day

Square processes at a rate of $5 million a day (up from $3 million in 2011, and $4 million in March 2012), Sybase says. Others say Square processes $11 million a each day.

Assuming Square gets a 2.75% cut of all of the $11 million in payments processed per day, that’s around $300,000 in gross revenue per day, or a $110 million annual revenue run rate.

LTE Will Reach 1 Billion Users by 2017

So says 4G Americas.

Mobile Payments Will Reach $245 Billion by 2014

According to 2011 data from Ernst & Young, mobile payments are expected to reach $245 billion in transaction value by by 2014. The actual forecast transaction is probably not so important. 


Neither is the forecast number of mobile money users are expected to total 340 million, equivalent to about five percent  of global mobile subscribers.


Perhaps the more-important issue are the categories of mobile money Ernst & Young believe offer revenue potential for mobile service providers globally. 

Mobile payment technologies and scenarios¹

	SMS	NFC	Mobile internet
Payment type	Person-to-person Person-to-business Business-to-person	Person-to-business Business-to-business	Person-to-person Person-to-business
Use case	Domestic remittance International remittance Branchless banking	Contactless payments Identification- and marketingrelated services	In-app payments Mobile wallet transactions
Characteristics	Payment services for the unbanked and underbanked	High levels of cross-industry collaboration	Extension of online payment services
Examples	Salary payments (Roshan, Afghanistan) Money transfer (M-PESA, Kenya; Obopay)	Transit payments (Mobile FeliCa, Japan)	Mobile wallet (Paypal, Zong, Starbucks)
Payment providers and enablers	Start-ups Mobile operators Money transfer companies Handset manufacturers	Card issuers Mobile operators Handset manufacturers Merchants Start-ups	Web services players Start-ups Mobile operators Merchants
Mobile operator participation	High	Medium	Low

Voice over LTE Gains Momentum, From Low Base

"The US and Asia, especially South Korea, are leading the voice over LTE charge, with Verizon Wireless, Metro PCS, SK Telecom and LG U all planning to launch VoLTE services this year,” says  Stéphane Téral,  Infonetics Research principal analyst for mobile infrastructure and carrier economics.

"South Korea and Hong Kong have already successfully launched LTE data roaming and by August, SK Telecom expects to have the Samsung Galaxy S3, the first handset to support VoLTE on their network," he says.

Keep in mind that the growth is from a small end user base. By 2016 VoLTE will make up only about 14 percent of global mobile VoIP revenue, while over-the-top mobile VoIP continues to make up the lion's share by far,” he says.

Smart Phone OwnersUse Devices 2 Hours a Day, Talk only 12 Minutes, O2 Finds

On average, O2 smart phone owners now spend over two hours a day using their devices, but talk only 12 minutes, and text only 10 minutes.

Smartphone users spend more time browsing the internet (25 minutes a day), social networking (17 minutes a day), playing games (13 minutes a day) and listening to music (16 minutes a day) than they do making calls (12 minutes), O2 says.

That illustrates the multi-function nature of smart phones, as well as the key role smart phones now play in a full range of "Internet access" activities.

Checking or writing emails represents 11 minutes of activity a day. Watching video consumes 9.4 minutes a day, while reading books represents about 9.3 minutes a day.

People spend about 3.4 minutes a day tacking pictures, as well.

What Must Apple Do to Revolutionize the "TV"

Apple’s rumored interest in producing television sets might prove a bigger challenge than its efforts with other consumer devices. It isn’t so clear what about TVs actually is “broken” enough for Apple to revolutionize the category as it has transformed the “mobile phone.”

Based on that past experience, some significant breakthrough in ease of use, features and content would be necessary. The touch interface arguably was key, but most of us also would say it was the App Store, and apps (content) that really made the difference.

In the case of a TV, that presumably would mean Apple has to change the “content” part of the value proposition in some significant way, beyond integrating existing Web content, which has been the key feature of Apple TV so far, in its ancillary device implementation.

It seems unlikely that navigation and Web content integration alone will transform the experience. What would be revolutionary is some new way for consumers to buy and watch programs they want, including a relatively full range of TV shows normally shown on subscription video networks.

But that is not a technology problem, that is a licensing problem. And, so far, the networks have seemed unwilling to cooperate.

Perhaps Apple really can revolutionize the TV set. But it won’t be easy.

Mobile Signaling Growing 30% to 50% Faster than End User Traffic

While data traffic is growing, signaling traffic is outpacing actual mobile data traffic by 30 to 50 percent, if not higher, 4G Americas says. As another example, a web-based IM user may send a message but then wait a couple of seconds between messages. To preserve battery life, the smartphone moves into idle mode. When the user pushes another message seconds later, the device has to set up a signaling path again, 4G Americas notes in a new white paper.

For real-time Internet applications, the logical always-on connection between the
server and client is required, resulting in frequent or periodic small heartbeat packets to be sent as a keep-alive message to maintain the connection.

“Push” services and “always on” apps add more load. All of that is in addition to the “bearer” traffic. Heavy users of apps illustrate what could happen to network demand as “early adopter” or “heavy user” behaviors become more mainstream. Today, heavy video or audio streamers consume about 2 Gbytes a day worth of video, or 1 Gbyte each day for audio streaming.

In other words, optimizing a mobile network for bearer traffic is one issue, while optimizing for signaling traffic is a different problem.

General computing these days revolves around content consumption and sharing, and heavy users of social networks can consume 7.5 Gbytes a month up to about 14 Gbytes a month. Cloud storage, for early adopters, now ranges from less than a gigabyte a month, up to about 5.5 Gbytes a month.

Leading users of  gaming can consume gigabytes a day. The upshot is that total U.S. data traffic could grow 47 times over the next five years, unless wi-fi offload is available. If Wi-Fi offload is available, demand grows by “only” 24 times over the next five years.

The point, 4G Americas suggests, is that improvements to network, device platform, and application design can all help alleviate capacity issues, but there can be no lasting success without understanding end user behavior.

There is no question that end users are using more and more data every year. In 2011, 44 percent of mobile subscribers owned smartphones, which is more than double the market penetration of two years.

According to Nielsen, more than 50 percent of U.S. mobile phone users now use smart phones, in the first quarter of 2012.

Between 2010 and 2011, the numbers of smartphone subscribers engaged in various rich media
activities other than mobile video have all grown by 45 percent or more. Numbers of subscribers
performing game downloads and playing online games both increased more than 80 percent each in the same year, Nielsen also has reported.

It's Tough to be "10 Times Better" Than Everybody Else

One rule of thumb used by venture capital investors when assessing technology firms is to look for an order of magnitude better capabilities, when making decisions about whether to invest in a new start-up.


The reasons are many, but the assumption always is that, while a funded start-up is gearing up for its market challenge, market leaders will respond by closing the performance gap. By the time a challenger is ready to challenge the market leaders, the potential advantage will have been reduced.


Some might argue that technology performance is not the right way to measure order of magnitude advantages, though. What matters, some argue, is not technology performance but end user experience. At least in part, that is because most users don't buy "performance" so much as "experience."


That is particularly true for software products where the "experience" is the value, not the performance, as such.

A mobile payment capability, for example, has to offer an experience that is qualitatively and significantly better than paying with cash or a credit card. It can’t be a little better. It has to be a lot better. And that means it cannot be new experience that is just seconds faster.

Slight little improvements won’t motivate change, because the current process isn't really "broken."

You might argue that Square, and other merchant point of sale services offered by Intuit and PayPal have gotten such big traction because they were those sorts of “vastly better” experiences, allowing small retailers to take credit card and debit card payments where they never could do so before, on significantly better terms.

Small merchants might also value the faster time to see funds deposited into accounts, plus increased sales volume, without significant capital investment. All of that makes the payment experience better for a merchant. Technology advantages are of relatively small value. 


The point is that it is harder than it seems to offer a new product that is really 10 times better than what exists. When that happens, though, as with payment systems that turn a tablet or smart phone into a merchant point of sale terminal adoption can be rapid. 

Tablets Quickly Grabbing a Role in E-Commerce

Tablets quickly are establishing a role in e-commerce, passing smart phones after only a couple of years in existence. When tablets are used might have something to do with the growth. People often are "in transit" when using a smart phone, and more often are sitting on a couch when using a tablet. Also, tablets feature larger screens, and that means better display surfaces, better visuals and easier interaction than on a small screen.

Analysts Slash RIM's Equity Price Targets, Others Simply Say the Firm is Doomed

At least 10 firms have cut their stock price targets by as much as 50 percent, with analysts at Citi Investment Research and Jefferies pegging RIMs stock at $5.00 per share,  a 45 percent decrease from the closing bell yesterday.

Cannacord Genuity added that BlackBerry 10 will not save the company, and RIM needs to strongly consider selling the company in full as soon as possible. Some say nothing can save RIM.