Aereo Aside, TV Broadcasters Will Go Mobile

Aereo Inc., the streaming television service that captures over the air broadcasts and makes them available to subscribers using iPhones and other Web-connected devices, will expand from New York to other large U.S. cities following a favorable court ruling that Aereo was not infringing broadcaster copyrights, Bloomberg says.

“Within a year and a half, certainly by ’13, we’ll be in most major” markets, said CEO Barry Diller. TV broadcasters are worried about the venture for a couple of reasons. For starters, cable, satellite and telco video service providers currently pay over the air broadcasters for retransmitting their signals.

If Aereo can retransmit without paying a fee, the door is open for cable, satellite and telco video service providers to argue they also should be exempt from such carriage fees. That obviously would hurt broadcaster revenues in two ways, first by slicing the fees they currently are paid, and secondly by sharply reducing their advertising potential.

Whether Aereo survives all the broadcast industry lawsuits, or does not, over the air TV broadcasters will get into mobile video themselves.

The Mobile Content Venture (MCV), a joint venture consisting of 12 major broadcast groups that operate the Dyle mobile TV service, suggests 68 percent of respondents would watch more TV if they we

More than 50 percent of consumers would consider watching mobile TV on smartphones and tablets.

Whether the current "dongle" approach Dyle is using makes sense, long term, is arguably a key 

question, though.

Did Device Subsidy Decision Cost Telefonica, Vodafone 380,000 Customers?

Mobile service providers in Spain lost a quarter of a million clients in May 2012, the fourth consecutive month of subscriber losses, la Comisión del Mercado de las Telecomunicaciones says.

The industry also lost 380,000 customers in April 2012, according to the Spanish telecommunications commission.

Precisely why customers are deserting is the issue. Spain is in what might be called a deep recession, so it is possible customers are dropping their mobile subscriptions to save money.

And it remains true that prepaid service, which offers consumers more control over their spending, continues to gain customers, which might reinforce the notion that economic distress is causing what might be called an unusual negative move in mobile subscriptions.

But some might suspect that the industry's end of subsidies for handsets also has had some negative impact, primarily by shrinking the number of new accounts mobile service providers need to add every month to compensate for departing customers.

Dept. of Justice Skeptical About Verizon-Cable Marketing Deals, Maybe for Wrong Reasons

Though the Federal Communications Commission has cleared a sale of spectrum by major cable operators to Verizon, the Department of Justice apparently is concerned a related marketing deal between the cable operators and Verizon would be anti-competitive.

That deal has Verizon and several cable operators, including Comcast, Time Warner Cable, Cox Communications and Bright House Networks in marketing deals that allow each of the cable partners to sell Verizon products, while Verizon can sell cable products.

The Justice Department therefore is holding up Verizon Wireless's $3.9 billion deal to acquire cable-company airwaves, according to WSJ.com.

Justice Department officials think the marketing deal would be anti-competitive, amounting to an agreement "not to compete" with each other.

The problem, of course, is that there is no "fact base" that would allow anybody to determine whether that fear is justified, or not. There are some markets, including Boston and Baltimore, where Verizon has not already finishing building its FiOS network.

So the fear that Verizon will somehow "not compete" with local cable operators, when it already has spent the money to build a competitive network, is hard to substantiate, with the notable exceptions of Boston and Baltimore.

Some also fear that the cable operators will henceforth not be competitors to Verizon in wireless. Some might point out that cable operators have been buying spectrum, creating ventures and trying to sell service for decades, and never have been able to create an effective mobile operation.

Not everyone will agree, but there is a sense in which the concern, though possibly justified in some respects, misses the larger point. It is no secret that fixed network business models are becoming troubled. It is not a secret that a telco can make more money, and earn more profit, in the wireless realm.

Beyond that, some of us would argue that it appears the financial return Verizon expected from FiOS has not proven to be as robust as its executives had hoped. The total return from incremental revenue seems to be lower than hoped, while operating cost savings seem also to be less than hoped. In other words, fiber to the home might not have been the best use of capital, after all.

In the abstract, it is fine to hope for robust facilities-based fixed network competition. As a practical matter, it is no longer so easy a decision to defend. European service providers, for example, face investments of perhaps Eur 270 billion to build fiber to home networks.

And it is absolutely no secret that executives question whether there is a financial return to be had, not to mention the higher returns from other uses of that capital.

So the Dept. of Justice might be rightly concerned about competition, but possibly for the wrong reasons. One might make the argument that, in the coming market, it might be imprudent for most service providers to invest heavily in fiber to the home.

Local Commerce Enabled by Mobile Devices Might Reach $17 Billion in 2015

But the business will be highly fragmented. Perhaps the single biggest segment will be mobile payments, assuming about 1.75 percent of gross retail volume as the revenue for transaction processors. But the "new" point of sale terminal segment, loyalty and daily deals segments will contribute revenues of single-digit billions.

66% of New Devices Purchased in U.S. are Smart Phones

Some 66 percent of U.S. consumers who bought a new mobile phone in the second quarter of 2012 bought a smart phone, Nielsen reports.

The installed base of U.S. devices now includes  54.9 percent smart phones at the end of June 2012.

Android continues to lead the smart phone market in the U.S., with 51.8 percent of people using an Android OS handset. Some 34.3 percent of smart phone owners use an Apple iPhone.

In Competitive Markets, Lowest-Cost Provider Wins

In a competitive market, the provider with the lowest operating costs wins, one might argue. And if there is one statement that virtually all contestants might agree upon, it is that, as a rule, the tier one telecom service providers have the highest costs.

Cable companies virtually always have lower overall costs, in both capital and operating areas. Contestants that base their businesses on wholesale access, either mobile or fixed, tend to have lower costs than the companies from which they buy that wholesale access.

Internet-only firms have lower costs than all the above. Of course, that is the easy part. Telecom executives are anything but dumb. They know their cost structures, and those of their competitors.

The practical issues are how to continue wringing costs out of their operations. And that means identifying cost drivers.

European service providers have, for example, been attacking operating costs since at least 1996. And though you might think converting increasingly to IP-based services would wring out cost, in some cases, it might increase operating costs, at least in the customer service area, contrary to expectations.

So where can telcos look for savings? According to researchers at Deloitte, telco operating costs can be classified into three categories. As a figure of merit, “non-process costs” account for 25 to 30 percent of the cost base (35 to 40 percent for wireless carriers).

That includes interconnection fees, taxes, customer premises equipment and uncollectible items. Deloitte researchers think it will be difficult to cut those costs very significantly.

Support processes typically account for 20 to 25 percent of the cost base (15 to 25 percent for wireless carriers), and include marketing, HR, IT, finance and other administrative costs. While savings opportunities may exist in support process areas, most telcos have done a better job of controlling these costs, so far.

Operational processes typically represent about 50 to 55 percent of the cost base (40 to 45 percent for wireless carriers). Those  process costs include customer service, sales, billing, and network-related processes.

It is these costs that carriers are challenged to control as the market changes, and this is where carriers should first focus on finding efficiencies and savings, Deloitte argues.

Network-related process costs (installation and repair, operations, and design) can typically account for 60 to 75 percent of operating expenses. Deloitte argues that 18 percent to 29 percent in savings in two main areas, including reducing dispatches and improving productivity of installation and repair technicians.

Reducing dispatches can save five to eight percent of total network operating expense,
achieved through better screening of tickets to reduce “no-trouble-found” dispatches, improved scheduling to reduce “no-access” dispatches, better management policies to reduce “non-demand” dispatches, and an increase in fi rst-pass resolution of tickets.

Deloitte also has  seen savings of 12 to 18 percent of total network operating expense achieved by increasing the use of “Good Jobs in Eight” (a metric that measures the number of good jobs in eight hours per technician), and moving to a pay-for-performance model.

But it is non-network operations which  can account for 35 to 45 percent of operating expense,
and Deloitte has seen changes in those areas yield 28 to 44 percent in costs. Telcos should focus on non-network operational process areas, such as call centers, field sales, retail stores, and the “order to cash” processes to get savings in those areas.

O2 Network Crashes, O2 Really Doesn't Know Why

The O2 mobile phone network in the United Kingdom crashed July 11, 2012, and company executives said they didn't actually know why it happened.

Separately, In France, the France Telecom mobile network had a national outage of the voice and text messaging network affecting 28 million users on July 6 and July 7, 2012.

Of course, millions of U.K. customers (O2 has 23 million customers in the United Kingdom) were affected. But that's not even the most important fact about the outage.

O2 said it did not know when the problem would be fixed, in part because it wasn't exactly sure what was happening, in the core of the network, to block calls and access, other than that it appeared to be a signaling issue.

Viacom Pulls its Content from Online Sources

Perhaps it has occurred before, but some of us cannot remember a programmer yanking its content from online sources, depriving all potential users of access, in order to put more pressure on one distributor.

But that is what Viacom has done, removing full episodes of shows like "SpongeBob Squarepants,"  "iCarly," "Jersey Shore" and "The Daily Show" from online sites. DirecTV had been telling its customers how to watch online.

Viacom obviously is hoping that move will prevent DirecTV customers from watching some of their favorite shows online, while the dispute remains unresolved.

There are potentially significant ramifications for DirecTV, Viacom, other distributors and programmers, not to mention potential online alternatives.

Consider the oddity of a video services provider telling its customers where they can watch the same programming they pay for on online sites, for no additional charge. Strategically, that is the disruption many fear, and many expect, at some future date, in any case.

Other distributors, of course, face the same programming cost pressures as DirecTV, though they doubtless would not mind gaining defecting DirecTV customers, should the blackout become permanent, something virtually nobody expects.

All other programmers, especially those with less market power than Viacom, have to worry that a DirecTV "victory" would put more pressure on the programming networks to control their own costs, so the upward cost pressures for distributors can be braked.

You might say it is equally odd for a programming network to "want" to control its own costs, to stave off asking distributors for contract rate increases. But all programming networks are starting to face a business climate where the health of the entire industry is becoming a real question.

Global Text Messaging from Twilio

Twilio, the cloud-based service which provides any app provider the ability to add text messaging capabilities, announced global text messaging (short message service, or SMS) capabilities that allow apps to connect users on over 1,000 mobile networks, globally, in 150 different countries.


Twilio SMS is now also multi-lingual, with support for a variety of languages, such as Arabic, Chinese, Japanese, Greek, Russian and dozens more. 


Twilio allows application developers to integrate voice and text communications directly into virtually any app that uses the Internet. 


Twilio already supports international voice calls, but the task of getting agreements with many separate mobile service providers was complicated. 

Mobile Payment Provider LevelUp (Scvngr) Tries to Disrupt Pricing

Price disruption is both a possibility and likelihood when new entrants try to reshape a large existing industry, and it appears credit and debit card payments are no exception. 


LevelUp, a mobile payment app provided by Scvngr, says it will drop all "interchange fees," the percentage of gross revenues paid by merchants to card processors as a transaction fee.


It remains unclear whether the gambit will succeed. But if it does, and other competitors start to match the pricing, the importance of marketing, loyalty and advertising revenues as a driver of the former payments business will grow. 


That sort of disruption is quite familiar to service providers in the communications business, where per-minute prices for use of voice services, or per-message pricing for short message service (SMS, or texting) has been dropping for decades. 


As access providers already have discovered, new revenue streams must be created to replace lost legacy revenues, and that will happen in the credit and debit card payments business, using mobile mechanisms, if the LevelUp strategy works very well. 


While it has been common for competing providers to offer lower interchange fees, LevelUp appears to be the first to try and abolish the fees entirely, thereby gaining business advantage, compared to rival processors.


Scvngr previously had charged merchants two percent interchange fees for each payment, but it says that it will drop the fee to zero. 


That raises the obvious question of how Scvngr will rebuild its revenue model. Marketing services apparently are viewed as a viable new model. 


According to Seth Priebatsch, Scvngr CEO, LevelUp will run special campaigns for merchants, probably or typically running promotional campaigns for merchants, who will pay a fee for a customer taking advantage of the offer. 


It appears that Scvngr still is responsible for paying an interchange fee to the issuing banks that use the LevelUp platform, though. But Scvngr says its fee deals are affordable enough to allow trying such an approach. 


Such pricing disruption seems a perennial feature of the way new competitors try and disrupt pricing in a market, and has been a feature of applications and service competition in the messaging and voice markets for quite some time. 

Gartner Says Cloud Adoption in Europe Will Trail U.S. by At Least Two Years

European privacy rules, multicountry business processes, a deep euro crisis and a lingering recession will conspire to delay cloud computing adoption in Europe by at least two years when compared to the U.S., according to Gartner, Inc. Gartner said that although interest in cloud is high in Europe, the diversity of Europe’s 44 different nations will result in slow cloud adoption in this region.

Amazon, Apple, Google Have Different Business Strategies, No Matter What They Sell

Amazon, Apple and Google sell all sorts of things, and likely will sell more types of things in the future. But even when all three firms compete directly, they have different business models. Apple makes its money on hardware, Google on advertising, Amazon on lifetime value of a customer. 


To be sure, Amazon sells lots of stuff, ranging from hard goods and electronics to books and video content. But Amazon's view of pricing always starts with "lifetime value of a customer." That frightens many observers, who worry about Amazon's profit margins. 


But Amazon wants to maximize the lifetime value of each of its customers. Apple wants to maximize the profit margin on each device it sells, Google preferring to build advertising volume and revenues. 


So Amazon might consider doing lot of things neither Apple nor Google would attempt. 

55% of Twitter Usage is on a Mobile Device

Mobile use of Twitter is growing about 40 percent a quarter, the company says. For any application or service provider that believes "mobile first" is a fundamental matter of business strategy, that's important. 

Facebook May Not be a Bank, But App is Going to Help Facebook Users Conduct Banking Transactions

Facebook is working with Australia's Commonwealth Bank to create an app that will allow Facebook users who are bank customers to make payments to third parties as well as Facebook friends using Facebook, Fortune reports. 


Engagement and traffic, not direct revenue, is Facebook's expectation for how the app will create value. To the extent that users and their connections, preferences and values are Facebook's "product," the banking capability is expected to help Facebook monetize those relationships and values in an advertising or marketing context. 

Tuenti, Telefonica’s Social Network, Launches Globally

Few tier-one global telcos have taken the over the top application opportunity as seriously as  Telefónica.  


Telefónica Digital believes it can develop significant businesses beyond  connectivity services. The unit expects to drive annual revenues of approximately €5 billion for Telefónica by 2015 with an annual revenue growth rate of 20 percent revenue growth, 


Among those efforts is Telefónica's Tuenti, a Spanish social network with 13 million users, is launching a global beta version, including a web application (www.tuenti.com), a web app optimized for mobile (m.tuenti.com), and native applications for Android and BlackBerry. Applications for iPhone and Windows Phone will be available in the coming weeks.

 

This marks the beginning of Tuenti’s international expansion, now available in six new languages (German, French, Italian, Dutch, Slovak, and Czech) in addition to the already existing Spanish, English, Portuguese, Catalan, Basque, and Galician versions. 

Telefonica’s footprint spans both mobile and fixed operations across Europe and Latin America, covering 25 countries and 309 million users,