DirecTV to Drop 26 Viacom Channels?

Contract negotiations between video service providers and programmers often go right to the brink of "channels going dark" before new carriage agreements are reached, and that might be the case for on-going discussions between DirecTV and Viacom.


Viacom’s distribution agreement with DirecTV is set to expire at midnight on Tuesday, July 10. Viacom says it has been negotiating for months but hasn't reached an agreement on a new contract. 


In part, that might be because Viacom claims DirecTV wants lower ratse than Viacom receives from any other distributor in the industry. 


So it remains possible that nearly 20 million DirecTV subscribers will be without 26 Viacom channels, including Nickelodeon, MTV, Comedy Central, BET, VH1, CMT, Spike TV, TV Land, if a new agreement is not reached. 


Most often, though, some last-minute accommodation is reached. Still, the escalating number of disputes between distributors and programmers illustrates growing financial tension within the video subscription business. 


At least some consumers are finding they don't value subscription video as much as they used to. In other cases, especially with a growing percentage of Millennials, the value isn't high enough to convince them to subscribe, even when those consumers can afford to do so.

But affordability is a growing problem. Bernstein Research Senior Analyst Craig Moffett has argued that "after the necessities of food, shelter, transportation and healthcare each month, the bottom 40 percent of U.S. households have already exhausted all of their disposable income."

"There is," he says. "nothing left for clothing, for debt service, for cable or for phone."


That will put increasing pressure on service providers to hold the line on retail pricing or even reduce it. That will require any number of changes. Service providers can create modified and cheaper tiers of service, can drop whole channels, pay programmers less or cut some marketing expenses. 


Ultimately, the need to limit channels, and therefore operating costs, will be become a necessary step, unless programmers decide to yield on per-subscriber fees. In order for some networks to do that, the networks themselves will have to stop paying program creators as much as they presently do, as well. 


Up to a point, programmers and distributors will not want to upset a business model that has worked very well. But if the business model starts to crack, historically unusual steps will have to be taken.

T-Mobile USA Wrongly Slams Verizon Wireless "Share Everything"

The Verizon Wireless ’s "Share Everything" plans are "costly, complicated and punitive,"  T-Mobile USA argues. Using T-Mobile USA's own comparison, those complaints seem overblown. T-Mobile argues users can save "up to" $40 a month, for a customer who pays full retail for their new device. Under a standard contract plan, the savings might be $20 a month.


The same logic applies for plans with two or three users on a single account. For a three-device (smart phone) account, monthly savings for a user on contract, with subsidized phones, is only about $10 a month. Roughly the same difference exists for two-device accounts, with T-Mobile USA users saving about $10 a month, compared top a Verizon Wireless Share Everything plan.


That wouldn't strike some of us as especially "costly." Nor does it seem "complicated" or "punitive." There is a small difference. But not much. 

Is E-Commerce More Important in Developing Markets than in Developed Markets?

E-commerce might be more important for consumers in developing nations than in developed nations, according to Capgemini researchers. 


In developing markets, the study said the percentages were higher but that at least one third of the respondents in more developed markets agreed with the assessment. Developing nations don't have the retail shopping infrastructure that developed markets do. 


Paris-based consulting firm Capgemini found that more than half of shoppers globally think more physical stores will become merely showrooms by 2020. 


According to the report, which was based on interviews with 16,000 consumers from 16 countries, 51 percent of respondents said that, in the next eight years, they expect retail locations to be showrooms for selecting and ordering products. 

Tablet Screen Size is a Bit Like Mobile Cell Size: Highly Non-Linear

Tablet screen size is a bit of a non-linear matter, though it often seems as though it is quite linear. More accurately, screen size and mobile cell coverage area are "linear," but not on a 1:1 basis. 


The typical rule of thumb for decreasing a mobile cell site's coverage is that reducing radius of coverage by 50 percent requires a quadrupling of the number of sites. 


In somewhat similar fashion, an iPad "mini" of about eight inches screen diagonal would have roughly 40 percent more surface area than a seven-inch Kindle Fire or Android Tablet. Apple  might have business reasons for producing a smaller-screen device in precisely the dimensions it seems to be choosing. 

586 million LTE Devices to Ship in 2016

Some 586 million smart phones using Long Term Evolution, and 154 million network interface cards or routers will be shipped globally in 2016, according to the Marketing Intelligence and Consulting Institute. 

Global shipments of LTE terminal devices, 2012-2016 (millions of units)
	LTE smartphones	Other terminal devices  (network interface cards and routers)
2012	64	41
2013	188	69
2014	300	74
2015	440	117
2016	586	154

Source

Nokia, RIM, HTC Smart Phone Shipments Will Decline in Second Quarter of 2012

Nokia, RIM and HTC are expected to see their smartphone shipments, as well as market share, continue declining in the third and fourth quarters of 2012, according to a report. 


Despite efforts initiated by Nokia, RIM and HTC to fend off competition from Apple and Samsung Electronics, RIM and HTC already have reported lower than expected shipments for the second quarter of 2012, while Nokia is expected to see its second-quarter smartphone shipments drop below 10 million units. 

South Korean Telcos Will Charge for Mobile VOIP

In an illustration of the ways regulatory frameworks affect business models, the Korea Communications Commission has decided to allow mobile operators, SK Telecom, KT and LG U to charge users to use mobile VoIP.


That practice, which levies an additional fee to use a lawful application, is prohibited in the United States, not so much by network neutrality rules, but by the Federal Communications Commission's "Internet Freedoms" principles, which stipulate that users have the right to use any lawful applications after having paid for a broadband subscription giving users Internet access.


But different regulations can, and do exist, in other markets. 


The new rules appear a direct response to mobile service provider concern about over the top VoIP provider KakaoTalk, which has 36 million Korean users. There are about 50 million Korean mobile phone users.


Another issue is whether such rules will apply to other services, such as Apple's FaceTime, when those services use mobile broadband bandwidth. 

OTT Video Could Help ISPs

In some ways, growing viewership of online video by the likes of Netflix, YouTube, Hulu, iTunes and other video streaming applications and services represent both a threat and an opportunity for broadband access providers who also sell subscription video services. 


The threat obviously is the danger that consumers might shift viewing from video subscription services to over the top alternatives. Over time, that could mean fewer subscribers, and less revenue for one of the three anchor services for a triple-play services provider.


On the other hand, video represents the application with highest bandwidth requirements, so demand for bigger broadband access buckets should grow over time, and perhaps dramatically- if significant percentages of households shift a large part of their video viewing to online sources.


For pure-play broadband access providers, who do not sell video services, video provides upside, mostly, increasing demand for faster services and more consumption. 

"Project Oscar" U.K. Mobile Wallet, Mobile Payments Effort Could be Approved Soon

Vodafone, Telefonica (O2) and Everything Everywhere (Deutsche Telekom and France Télécom have been waiting for approval from the European Commission to launch a mobile wallet and mobile payments business in the United Kingdom, and approval is expected 2012, but most likely not in time for the London Olympics.


Project Oscar would provide a single platform that could be used by retailers, banks and other financial services groups, allowing mobile devices to store cash in the form of linked accounts to credit and debit card accounts, for example. 


Project Oscar also would support mobile payments using near field communications. The difference between a mobile wallet and mobile payments sometimes is subtle, but generally, a mobile wallet stores credentials, which might include loyalty program details.


A mobile payment service allows those credentials to be used at retail point of sale terminals or for online purchases. Business models also can differ. Some mobile wallet systems intend to make money supporting advertising, promotion or other marketing and loyalty programs, but not actual payment transactions, which will be handled by business partners.


Mobile payment systems generally involve a provider in the actual process of transactions, with the revenue earned from that role as a transaction provider. 


Both Isis and Google Wallet have opted for the mobile wallet approach, neither intending to be a direct payment brand, but only supporting transactions cleared by card issuers. 

One More Reason Why Phone Calls are Dropping: Companies Discourage Them

Customer service practices and attitudes might be changing in ways that actually encourage some enterprises to discourage customers or users from "calling" those enterprises. 


In fact, some might argue, when customers or users want to communicate with an enterprise, they often are discouraged from "calling," since there now is a preference for text-based messages, use of help sites or other methods that are viewed as more efficient because common questions can be handled in an automated, self service manner.


That might especially be the case for application providers. It isn't so much that phone systems cost money; it is that they are not seen as being as efficient as other forms of providing answers.  


An answer to a truly "frequently asked question" only has to be "answered" once. All subsequent "answers" are simply instances where a user reads or hears the original answer, so there are clear workforce implications. So long as nearly all questions can be answered using some "one to many" mechanism, the need for one-to-one mechanisms is reduced. 


Also, since it is easier to turn a one-to-one session into a one-to-many FAQ, phone communications do not scale, many might argue.


Of course, there are some salient reasons why such attitudes would persist, aside from the age demographics of the firms. Enterprises that try and deflect calls have indirect revenue models. 


There are, in other words, few incentives to deal with "users" who actually are not revenue producers. Advertisers are the revenue producers, and you can be sure those partners do have voice access. 


To the extent that use of indirect revenue models is growing, you can assume that the number of enterprises discouraging voice communications will grow. 

Net Subscriber Growth Falls 36% at Major U.S. Service Providers in First Quarter 2012

The largest U.S. mobile service providers experienced a 36 percent year-over-year fall-off of wireless net additions, causing a 32 percent decline in revenue-generating unit (RGU) additions during the first quarter of 2012, according to Fitch Ratings.

Some would argue that points to the maturation or saturation of the U.S. mobile market. 


The largest telecommunication service providers added approximately 2.7 million RGUs during
the first quarter of 2012, led by approximately 2.5 million wireless subscriber additions, according to Fitch Ratings.


Fitch estimates the largest wireless service providers activated approximately 6.8 million smart phones during the first quarter of 2012, reflecting a 19 percent decline relative to the smart phone activation activity during the year earlier period.

1Q 12 Subscriber Analysis	Contract	No contract	Wholesale and Connected Devices	Total
AT&T	187,000 -530,000	125,000 -34,000	414,000 -1,207,000	726,000 -1,771,000
Sprint	(192,000) -353,000	489,000 -18,000	785,000 -169,000	1,082,000
T-Mobile	(510,000) +196,000	249,000 +29,000	448,000 +487,000	187,000 +713,000
Verizon Wireless	501,000 -706,000	223,000 -29,000	*	724,000*
Leap Wireless		258,000 +79,000		258,000 +79,000
Metro PCS		131,000 -66,000		131,000 -66,000
US Cellular	(38,000) -18,000	4,000 -3,000		(34,000) -21,000
Clearwire *		49,000 +18,000	537,000 -367,000	586,000 -287,000
Tracfone * (MVNO)		369,000 -124,000		369,000 -124,000
Total	(52,000) -1,711,000	1,897,000 -86,000	1,815,000 -266,000	4,029,000 -1,694,000

source

Apple Hasn't Yet Chosen its Mobile Payments Strategy

Apple hasn't made a move yet, in mobile payments, though its Passbook mobile app does provide the "wallet" or "credentials storing" function of a mobile wallet service. Whether mobile payments will be a feature or the foundation for a new category of devices is a reasonable question. 


Apple historically has done best when it creates a new device category, or at least transforms an existing category. So far, it does not appear Apple is satisfied it can do either of those things in the mobile payments space, yet. But expect Apple to move, sooner or later. 


But only after it has figured out the value proposition, revenue model and business approach.

Prepaid Business is Shifting

According to NPD's Mobile Phone Track, 33 percent of phones bought are for no contract plans. And though much of that demand is driven by cost-conscious consumers, a new segment seems to be growing, namely purchases by consumers who simply do not want service contracts, though they otherwise could afford a post-paid plan. 


You might argue there now is a growing "pay as you go" segment, in addition to the traditional prepaid customers. 


Most larger mobile service providers are not especially fond of prepaid retail plans, for the simple reason that postpaid average revenue per user is higher. On the other hand, many mobile service providers who have targeted cost-conscious customers, and most mobile virtual network operators, tend to rely on prepaid packaging.


The latest wrinkle is a growing willingness on the part of service providers to consider ways of reducing handset subsidies. One way to accomplish that objective is to sell phones at full retail, without contract. 

And if that sounds like the "prepaid" model, it is. In fact, some believe a growing number of consumers are going to opt for "bringing their own phones" and buying service without need of a contract. 

But it is complicated. Carriers might not like paying handset subsidies, but they do like the churn-reducing contracts. Carriers might prefer the higher operating income from lower subsidies, but they also like the greater predictability of contract revenue.

In fact, AT&T Mobility and Consumer Markets President CEO Ralph de la Vega has said the growth opportunity in this country is in postpaid data, not in prepaid voice. AT&T's revenue growth of over $1.2 billion in 2010 for example, was more than twice the revenue growth for the entire U.S. prepaid industry. 

But consumer demand for prepaid continues to grow. In the U.S. wireless market, mobile service providers appear to have lost subscribers from contract-based plans for the first time in the first quarter of 2012.

That doesn't mean demand for mobile service is declining, only that demand is shifting towards prepaid plans.

The seven largest U.S. phone companies, representing more than 95 percent of the market, lost a combined 52,000 subscribers from contract-based plans in the January to March period, according to a tally by the Associated Press.

According to The NPD Group, prepaid now is a major reason even smart phones are gaining traction.

Top U.S. Smartphone Manufacturers	Q1'12
Apple	29%
Samsung	24%
HTC	15%
Motorola	10%
LG	7%
RIM Blackberry	5%

The rise of the pre-paid market contributed to Samsung’s growth in the first quarter of 2012. Android devices accounted for 79 percent of the prepaid smartphone market in the first quarter of 2012, for example.


NPD analysts have compared the end user cost of a a Virgin Mobile prepaid account and a similar contract-based offering from parent Sprint. The no contract solution shows a consumer cost saving starting in the 11^th month, NPD argues. 

NPD data also shows a steady growth in prepaid plan purchases, with a drop in indivisual postpaid plans. 

Verizon Filing Highlights Regulatory Chaos

It has been obvious for some decades that traditional methods of "regulating" distinct industries was going to become complicated as virtually all services and media could be carried over a single infrastructure, by firms that once were in distinct businesses, with different regulatory frameworks.

Verizon now is testing those frameworks, as it argues that network neutrality rules violate its free speech rights under the First Amendment to the U.S. Constitution.

In the past, newspapers and other media have been essentially "unregulated." TV and radio broadcasters have had more regulation, as have video service providers, while telecom companies have had the most extensive regulation.

So Verizon now argues that broadband providers have "editorial discretion" to give priority to their own Web content, and the U.S. Federal Communications Commission's net neutrality rules limiting that discretion is a violation of providers' free speech rights.

That is the same framework that governs cable TV and other video service provider services, so the argument is not unusual.

"Just as a newspaper is entitled to decide which content to publish and where, broadband providers may feature some content over others," Verizon argues.

The debate is not likely to end there, though, no matter what the courts rule. Today, contestants that provide identical services, such as cable TV and telco entities, are regulated under distinct and different frameworks. Beyond that "unfair" treatment, there is the broader issue of how to reconcile the "media" model of "no regulation" with the common carrier "heavy regulation" models, when a single company provides services in virtually every regulatory bucket.

When Will Amazon Become a Service Provider?

Some think it’s just a matter of time before Amazon starts reselling wireless data services on its own, under its own brand name.


Offering prepaid cellular service wouldn’t be a huge stretch for Amazon. The company has offered its “WhisperNet” service since the very first Kindle, which uses Sprint’s EVDO network to offer anytime data connectivity to its e-readers, some would argue.


The objective likely would be to encourage more users to buy Amazon-branded tablets and smart phones, growing the potential audience for sales of Amazon digital and offline products.


The notion that Amazon will become a service provider seems less and less unusual.