Mobile Money Represents 13% of Safaricom's Total Revenue

If you want an indication of how big a deal mobile money services could be for some mobile service providers, consider that M-Pesa, operated by Safaricom, now accounts for 13.3 percent of Safaricom’s total revenue.

It is estimated that up to 364 million low-income individuals globally will be utilizing mobile money by the end of 2012, which would generate $7.8 billion in revenue. 

M-Pesa’s gross revenues amounted to $157 million in 2010, up 56 percent from the previous year. 

In 15 African countries, more than 10 percent of adults used mobile money in 2011. Globally, there are 137 live mobile money deployments, with 95 mobile money services in the planning stages, according to CSC.

It is estimated that two billion people have a mobile phone but do not have a bank account, suggesting the size of the potential market. Perhaps half of the world’s "un-banked" people can become mobile money users. 

You Might Not Recognize U.S. Telecom in 10 Years

"Every place we have FiOS, we are going to kill the copper," Verizon CEO Lowell McAdam recently said. "We are going to just take it out of service." That should hardly be controversial statement. The whole idea behind fiber to the home is to replace the copper access network.


Other Verizon assertions raise more issues, but should not. "Areas that are more rural and more sparsely populated, we have got LTE built that will handle all of those services and so we are going to cut the copper off there," says McAdam.


For some, that means "dooming" rural users to slower services. At some level, it is hard to challenge the assertion. Rural areas have long loops. Long loops mean poor DSL speed, and costly fiber upgrades. The former means that where copper exists, broadband access speed will be limited.


But the business case for optical fiber on long rural loops, without benefit of subsidies, is challenging, and always has been. Some will argue that Verizon, and other incumbent telcos, have an obligation to upgrade their fixed networks that use wires.


Others would argue that doesn't make sense in a world that offers other options, some that are vastly cheaper, but not as fast as an urban fiber to home network. Other alternatives are moderately faster, and moderately costly, but less costly by far than a rural FTTH network that features mostly long loops.


Shorn of politics, the rational technology solution would be to use a mix of technologies, none of them perfect substitutes for FTTH, but each making eminent financial sense if the objective is getting the fastest feasible broadband to all users, in a variety of situations, right away.


With the launch of new high-power satellites by the likes of HughesNet (Echostar) and ViaSat, rural users will be able to get service at significantly-higher speeds, perhaps up to about 15 Mbps downstream. It won't be as affordable as urban cable modem services or DSL, but rural areas have different economics. What is financially possible in an urban or suburban area is not possible in a very-rural area.


Verizon is banking on faster Long Term Evolution networks in areas with enough users to support mobile service. Whether downstream speeds will be as fast as 15 Mbps remains to be seen, in each area.


But the point is that LTE will be feasible in many areas where it might simply be impractical to build FTTH networks without government subsidies. The first generation of LTE will not run as fast as later generations, but even first-generation LTE will provide much higher speeds than 3G networks are capable of providing.


In other cases, where cable operators are upgrading to DOCSIS, cable might always have the "speed" advantage. If telcos choose not to compete, they will lose customers. But, shorn of politics, that might be the best outcome in some markets.


As European and North American communications regulators already have discovered, in real life, there might be a trade off between maximum feasible competition and maximum feasible capital investment in networks.


And that's only part of the story. It is not entirely clear whether other alternatives, such as white spaces, might emerge as a significant factor in rural areas. White spaces might provide a new wave of competition in rural areas.


The other problem we will have worked through, in a decade, is the division of roles between fixed and mobile networks. Some services that today make eminent sense might not be so logical in a decade. Which network supplies those features, apps or services might also be less obvious today, than will be the case in a decade.


Everywhere in the world, mobile networks are getting faster, and application development has moved to the mobile realm as well. In a decade, we might all be very surprised at how the business, and consumer behavior, have changed.


In the future, more than today, fixed networks will be recognized as "better" at some roles, while mobile is seen as "better" for other roles. Beyond the matter of which access network is used, we are likely to be surprised by the way former "telcos" make their money, as well.


The point is that the way Verizon chooses to supply applications and access should not be viewed through the lens of the past, but the prism of the future.

Optus HFC Sold to NBN: Sometimes "Less" Competition is "More"

SingTel Optus has been providing services in Australia for quite some time. But with the launch of the Australian National Broadband Network, which will supply wholesale access services to all retailers who want to compete, SingTel Optus has decided it would not be able to compete, long term.

So it is selling its business to the NBN, with 400,000 HFC network customers, and also will decommission parts of the network, following the Australian Competition and Consumer Commission’s final approval of the AU$800 million HFC asset deal.

That puts a major cable operator out of business, which might be deemed "bad" for competition. But SingTel Optus, which seemed already to have put a halt to further expansion, likely would have begun to lose customers at some point to NBN-using competitors.

That would have raised operating costs per customer, as more and more assets would have been stranded. Ironically, the loss of SingTel Optus, a facilities-based competitor, arguably will not deter competition, as the former SingTel Optus customers presumably will be sold to one of the retail providers, eventually.

Still, it is somewhat odd to see a facilities-based cable competitor essentially put out of business by a monopoly access provider.

Viacom, DirecTV: Time Warner Cable, Hearst Agree to Terms

After a nine-day blackout, Viacom Inc. and DirecTV Group Inc.  reached a long-term deal to restore Nickelodeon, Comedy Central, MTV and other Viacom channels to DirecTV's system. Separately, Time Warner Cable and Hearst Corp. settled their contract dispute, returning Hearst broadcast channels to Time Warner Cable systems.


Terms of the agreements, as usual, were not released. But a reasonable person would say that Viacom got less than it wanted, while DirecTV paid more than it might have preferred.

FCC Sees "Striking" Broadband Access Improvements

The Federal Communications Commission reports “striking across-the-board-improvements” in U.S. broadband access services in its July 2012 “Measuring Broadband America Report.”

The study focuses on three primary improvements in residential broadband service over the last year, beginning with accurate delivery of advertised performance. Five ISPs now routinely deliver nearly one hundred percent or greater of the speed advertised to the consumer even during time periods when bandwidth demand is at its peak, the report says.

In the August 2011 Report, only two ISPs met this level of performance. In 2011, the average ISP delivered 87 percent of advertised download speed during peak usage periods; in 2012, that jumped to 96 percent, the report says. .

Performance also is more uniform, across providers. The 2011 study showed wide variances between top performers and bottom performers in meeting advertised speeds.

On average, customers subscribed to faster speed tiers in 2012 than in 2011. This is a result of both upgrades by ISPs to their network as well as some migration of consumers to higher speed services.

During the testing period for the August 2011 Report, the average speed tier was 11.1 Megabits per second. In the latest report, speed increased to 14.3 Mbps, an almost 30 percent increase in just one year.

The actual increase in experienced speed by consumers was even greater than the increase in advertised speed. End user experienced speeds rose from 10.6 Mbps to 14.6 Mbps, an  improvement of about 38 percent over the one year period.

The report expresses optimism that the U.S. market is moving toward the goal of equipping at least 100 million homes with actual download speeds of at least 50 Mbps by 2015, and 100 Mbps by 2020.

The August 2011 Report showed that the ISPs included in the Report were, on average, delivering 87 percent of advertised speeds during the peak consumer usage hours of weekdays from 7:00 pm to 11:00 pm local time.

The July 2012 Report finds that ISP performance has improved overall, with ISPs delivering on average 96 percent of advertised speeds during peak intervals, and with five ISPs routinely meeting or exceeding advertised rates.

On average, during peak periods, DSL-based services delivered download speeds that were 84 percent of advertised speeds, cable-based services delivered 99 percent of advertised speeds, and fiber-to-the-home services delivered 117 percent of advertised speeds.

This compared with 2011 results showing performance levels of 82 percent for DSL, 93 percent for cable, and 114 percent for fiber.

Peak period speeds decreased from 24-hour average speeds by 0.8 percent for fiber-to-the-home services, 3.4 percent for DSL-based services and 4.1 percent for cable-based services. This compared with 0.4 percent for fiber services, 5.5 percent for DSL services and 7.3 percent for cable services in 2011.

Average peak period download speeds varied from a high of 120 percent of advertised speed to a low of 77 percent of advertised speed. This is a dramatic improvement from last year where these numbers ranged from a high of 114 percent to a low of 54 percent.

In 2011, on average, ISPs had a six percent decrease in delivered versus advertised download speed between their 24 hour average and their peak period average. In 2012, average performance improved, and there was only a three  percent decrease in performance between 24 hour and peak averages.

Comcast will Launch a 305 Mbps Broadband Access Service in Verizon FiOS Areas

Comcast is planning to offer a 305 Mbps downstream tier sometime before the end of the year in markets where Verizon sells FiOS, DSLReports reports.

That is significant not only because it suggests Comcast wants to be competitive with Verizon FiOS, but also because it suggests the agency agreements Comcast and Verizon want to sign, giving each company the right to sell the other company's products, will not reduce competition.

Even if you think the upgrade is designed to reassure Department of Justice officials said to be skeptical about the agency agreements, any such move will force Comcast to market competitive services where it already competes with Verizon. Those are the very areas where some worry competition will be less, if the marketing agreements are approved.

Sprint Launches Integrated Insurance Solutions: This is What "Machine to Machine" (M2M) Looks Like

Sprint will market "usage-based insurance" (UBI) services designed specifically for the auto insurance industry, in a prime example of what machine-to-machine (M2M) services look like, why they add value, and how they can become a primary revenue growth driver for mobile service providers.

Sprint says it is the first wireless carrier to offer a low-cost turnkey trial program for insurance carriers to start their own trials and pilot programs.

"Integrated Insurance Solutions from Sprint" will give insurance carriers the ability to offer customers personalized discounts based on their driving habits, the company says.

The vehicle is fitted with a small device that easily plugs into the diagnostic port. It captures vehicle information and driver behavior data which is transmitted over the Sprint wireless network.

A cloud-based system analyzes the data with driver scoring software that enables insurance carriers to improve driver risk assessments, reduce costs and improve profitability.

M2M services use mobile networks to support applications where sensors communicate with servers, for some business purpose. As person-to-person accounts reach saturation, and "everybody uses a smart phone," M2M is expected to provide a key way of creating new services using mobile networks, without the need to sell additional mobile connections to people.

LTE Is Not Changing Mobile Service Provider Pricing Models?

Launching a new network sometimes can represent a chance to change retail packaging and pricing, and those changes can be quite significant. Fixed network service providers did not make much incremental revenue from dial-up Internet access services, with the exception of some additional line sales, as was the case for home fax lines or teenager lines.

The shift to broadband created a fundamental new category of consumer services essential for triple-play bundles, which Verizon says now are purchased by fully 70 percent of its customers.

Some have argued that new networks such as WiMAX or Long Term Evolution offer service providers a chance to create packages that are different, including "on demand" or "casual" pricing such as "service by the hour or day," for example.

Analysts at Ovum say mobile service providers selling LTE are "failing to deliver innovative pricing models."

That lack of new charging models  is a missed opportunity for operators, Ovum argues.

“We looked at the LTE pricing strategies of operators in Europe, Asia-Pacific, and theUS, and were disappointed with our findings," says Nicole McCormick, Ovum senior analyst.

“LTE provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service," she says.
“However, most operators have not grasped this opportunity."

She points to "unlimited access" plans and "large buckets" as examples.

Some of us might disagree. Clearwire has offered access by the day, week or month, but not many seem to have bought it.

And now both AT&T and Verizon Wireless have reshaped wireless pricing by essentially offering consumers fixed prices for voice and texting (unlimited for domestic terminations), with variable pricing for mobile broadband.

One might argue that is a substantial change. Though some will object, the new plans, such as Verizon's "Share Everything," answer some crucial questions, such as how mobile service providers can earn money from voice and messaging features at a time when there are a growing number of alternatives.

One might liken the new Share Everything plan as turning the former voice and texting plans into a "network access" fee, with variable charges only for data consumption. Focusing too narrowly on creativity in "4G" models might miss those subtleties.

Giving consumers more options for data services is an arguably important area to explore and innovate around. But it also is important to avoid losing two other vitally important revenue streams, while innovating around retail broadband packaging. Share Everything does that.

Historic Switch in Demand Drivers for Fixed Broadband is Occurring

Get ready for a historic shift in the relationship between devices and broadband access accounts. Traditionally, there were more PCs owned than users of the Internet, and more users of the Internet than buyers of household broadband service.

Soon, if not already, there might be more broadband accounts in service than PCs or notebooks that use those networks. That historic reversal would mean a change in the traditional reason for buying broadband access.

Traditionally, the reason for buying broadband access services was for fast Internet access for some sort of PC. These days, there are other reasons.

Some users might want a fixed connection, solely or in part, to offload data sessions from a mobile network to a fixed network, to get access to the Internet from some other devices, such as a tablet or iPod.

Some might want broadband access to support Internet access for game playing consoles or some other video device (Roku, for example) that displays Internet video on a TV. In other words, there are many more devices, other than PCs,  that derive value from a fixed network broadband connection.

In the past, some might have argued that broadband access penetration would approach 100 percent of homes for one simple reason, namely that some users would see video content as the reason to buy broadband, rather than PC access to the Internet.

But there now are all sorts of reasons to buy broadband, beyond connecting PCs to the Internet. Connections for tablets and smart phones are only the latest reasons.

Research firm Consumer Intelligence Research Partners released the results of a study it conducted of more than 1,000 iPad buyers between December 2011 and April 2012. CIRP asked those recent buyers what they're most likely to do with their tablet and found that 40 percent of respondents indicated they surf the Web on the iPad, leading all possible activities.

A separate study sponsored by Business Insider found similar results. That reader survey got 2,242 responses. The Results aren’t really all that different from the first and second surveys. Basically, people use tablets for browsing, web-based communications and other content consumption activities.

In fact, a larger percentage and absolute number of people might soon be finding that connecting devices other than PCs or notebooks to the Internet provides most of the reason for buying fixed network broadband.

Notably, the Business Insider poll suggests 45 percent of users are doing their browsing on a tablet, 24 percent on a notebook and 17 percent on desktop PCs. About 14 percent of browsing now is conducted on a smart phone.

So you might say that 59 percent of browsing activities now occur on devices that really are not the “best” devices for content creation.

Also, as new smart phones start to push towards larger screens, such as the five-inch screen on Samsung Note, there will start to be less difference between smart phones and seven-inch tablets. The point is that much of the use case for a “computing” device these days is Internet-based content consumption.

In the United Kingdom, for example, household Internet access rose to 80 percent in the first quarter of  2012, up three percentage points on the previous year, and for the first time exceeded the penetration of PCs and laptops, according to Ofcom.

Internet access through a broadband connection stood at 76 percent of households, up two percentage points from the first quarter of 2011 but with a different mix between fixed and mobile connections.

Mobile broadband through a dongle or connection built into a laptop declined four percentage points to 13 percent of households in the first quarter of 2012, while fixed broadband household take-up rose five percentage points to 72 percent.

Three-quarters of the mobile broadband decline was among mobile-broadband-only households, while households with fixed and mobile broadband connections fell by one percentage point.

The decline in mobile broadband internet access is likely to have been substituted by the rise in fixed take-up and the increased use of Internet on a mobile phone (up seven percentage points to 39 percent).

Where once it would have been possible to model broadband adoption by tracking “PCs in the home,” that methodology increasingly would be defective. Already, a significant percentage of users rely on mobile broadband, rather than fixed, because they rely on smart phones, rather than PCs, for most of their Internet activities.

Dutch Banks, Telcos Abandon Mobile Wallet Venture

ABN Amro, ING, KPN, Rabobank and Vodafone say the initial project plans proved "too costly and too long" to implement, according to Finextra.

Initially seen as a venture that would launch in 2012, the system would have used near field communications and payment software located in a secure part of the subscriber information module in the user's phone.

The consortium, dubbed "Sixpack," earlier in 2012 set back their planned launch date until 2013 as they awaited the outcome of a European Commission investigation into Project Oscar, the proposed mobile payments JV from a group of UK telcos.

But it appears the potential partners now believe time to market is of the essence, and that it will take too long to launch. T-Mobile, for example, originally was a member of the consortium, but dropped out late in 2011.

One suspects regulatory clearance became an obstacle, though the rest of the market also is evolving rapidly, making "time to market" an issue.

The consortium represented about 90 percent of the mobile market share, as well as 90 percent of the banking market share in the Netherlands. That might not have won approval from European Community regulators who must approve the venture.

Average U.S. Mobile User Consumes 450 MBytes Each Month

The "average"  U.S. mobile subscriber used 450 MBytes of data each month, in the first quarter of 2012,  Nielsen says. In the first quarter of 2011, the "average" user consumed 208 Mbytes.

Of course, there is no such thing as an "average" user, measured as a "mean." Rather, usage historically always is highly skewed, with a very small percentage of users consuming high amounts of data, while most users consume relatively modest amounts of bandwidth.

In fact, one study by Arieso found that one percent of mobile users consume 50 percent of all downstream data, suggesting a Pareto style distribution (basically, an 80/20 rule, where 20 percent of instances account for 80 percent of results).

That suggests that the top one percent of users consumes 10 times (an order of magnitude) more data than users at the 80th percentile of usage.


In addition, overall usage will skyrocket, as well. 

Mobile phone users will, in 2016, on average consume 6.5 times as much video, over eight times as much music and social media, and nearly 10 times as much game content as in 2011 according to a forecast from Informa Telecoms & Media. 

In 2016, the average mobile user will be browsing six times as many web pages and downloading 14 times as many megabytes of applications on their handset as in 2011. 

The point, though, is that "mean" usage tells you almost nothing about "typical" usage. 

New Cracks Appear in Video Business Framework

There are some new cracks appearing in the traditional U.S. cable TV framework, which has included an informal “agreement not to compete” against other cable operators, as well as growing friction between all leading video distributors and leading programming suppliers, going well beyond the normal contract renegotiation disputes that happen from time to time.

In an unusual show of support, in recent days Time Warner Cable Inc., Cox Communications Inc. and Mediacom Communications Corp. have each publicly backed DirecTV's position in the firm’s negotiations with Viacom, as each of those companies share a similar concern about the spiraling cost of programming, which is resulting in annual rate increases for consumers that are significantly above the rate of inflation.

And that isn't all. In potentially historic development, Cablevision Systems Corp. appears to be readying a potential competitive challenge to other cable operators in perhaps 44 U.S. markets. That would violate an unwritten understanding among cable operators not to compete with each other.

To be sure, Cablevision is restricting its efforts to broadband access and voice, at least for the moment, avoiding a direct challenge to cable TV operator core video revenues. But the growing tensions between program suppliers and distributors, plus the potential competition between cable operators, show how tensions are growing in the video business.

Illiad "Free" Illustrates Service Provider Responses to Disruptive Attacks

Iliad, which launched its “Free Mobile” service in January 2012 in France, has been wrecking havoc on its competitors France Telecom, SFR and Bouygues Telecom.

Vivendi SFR, for example, anticipates a 2012 earnings decline of 12 percent.

Average France Telecom revenue from each account will fall almost 10 percent in 2012.

The competitive responses by French competitors to Illiad illustrate the possible responses to new competition, and the instances where "better" responses are possible. In this case, service providers had no choice but to embrace the "worst" option, a dramatic drop in retail pricing, either in the form of new tiers of service, or in the form of across the board price cuts.

"Better" options often allow for the possibility of allowing attackers to take some share, but preserving the structure of pricing within the market. In this case, the attack was so serious that sustaining the existing pricing regime was untenable.

Illiad signed up 2.6 million customers through mid-May 2012 offering no-contract service priced at two euros and another at 19.99 euros a month, significantly lower than had been offered by the other contestants.

Predictably, that has caused customer defections, and caused the other competitors to lower their pricing. That, in turn, is slicing revenue. Facing certain revenue shrinkage, the affected service providers are looking to cut costs to bring earnings back into line.

Though service providers sometimes can afford to wait before responding, Illiad's attack allowed no option but the undesirable revision of pricing levels.

In some other cases, service providers have essentially been able to manage a gradual decline of an aging product, such as international long distance, or defer a major move into a new market until both the opportunity and strategic situation were clear. That largely was the case for broadband access services, for example.

But Illiad has disrupted the market pricing framework, with no time for any option other than slashing prices, generally.

Verizon Meets 2Q 2012 Expectations; Future is the Challenge

Verizon met investor expectations for second-quarter 2012 financial performance, with growth fueled by wireless services, while fixed network and enterprise revenue remained flat. At the very least, those results point out the strategic challenges Verizon faces.

"On a national basis, wireline voice revenues are expected to continue their long-term decline, while the mobile market could grow to over $200 billion by 2015," Verizon says.

"Highlighting an overall theme in the telecommunications market, however, wireless voice revenues are expected to be flat to slightly down in the coming years but will be more than made up by rapid growth in data revenues thanks to the adoption of smart phones and the emergence of machine-to-machine services," Verizon also says.

Of course, saturation will be an issue for smart phone-driven revenue gains, while M2M represents a key growth opportunity. At the moment, growth rates for mobile advertising and hosting services also are key growth opportunities, at least on a percentage-growth basis. The problem is that it remains unclear how large is the revenue opportunity, that can be captured by service providers, in hosting and cloud infrastructure, or mobile advertising.

For the moment, it is data revenues that constitute both a logical and large revenue opportunity. 

Segmented by markets, the overall U.S. revenue picture shows that more than half of telecommunications spending is still in the consumer market segment, although the general business and enterprise (large-business and government) markets continue to grow.

A look at Verizon's revenues and recent strategic moves demonstrates the change in demand for telecommunications services over the past several years. 

Wireless services made up approximately 60 percent of Verizon's revenue in 2010, while traditional wireline services are shrinking as a percentage of Verizon's total revenue. 

Within the wireline market, however, Verizon has generated growth in revenues from broadband and video services.  Verizon's FiOS Internet and TV services now account for 54 percent of consumer wireline revenues, while strategic services represent 46 percent of global enterprise revenue.

At year-end 2005, Verizon reported annual operating revenues of $75.1 billion -- with wireline services generating $37.6 billion and wireless services generating $32.3 billion. 

Five years later, at year-end 2010, Verizon reported annual operating revenues of $106.6 billion -- with wireline services generating $41.2 billion and wireless services generating $63.4 billion. In addition to changing market demand and technology, part of the change in revenue mix was due to divestitures of traditional wireline assets combined with acquisitions of wireless assets.

Consumer Values Have Changed, Gartner Says

Of 10 consumer macro trends shaping the technology, media and service provider markets over the next 10 years, perhaps the most important is the shift to “value” as consumers reset expectations in response to sluggish global growth, analysts at Gartner now say.

“All 10 of these trends converge around questions of value, what consumers value enough to pay for, how consumers' values are changing, and how technology and service providers can respond to this to increase their sales and margins,” Gartner says.

Consumer technology markets are being redefined by consumer cuts of  discretionary spending in the wake of successive financial and economic crises.

Still, consumers seem to put a higher value on media and communications products in times of recession as they cut back on more-expensive substitutes, Gartner argues.

In addition to more “recession-friendly” marketing messages, a greater range of "affordable" or value product options, more-strenuous customer engagement efforts, and improved customer experience efforts, will be required.

Over time, there has been a closing of the classic "digital divide" between the haves and have-nots in terms of access to basic technology products and services. At the same time, there has been an acceleration of product update, upgrade and replacement cycles.

Acceleration should in theory give consumers more spare time to do the things they want. In reality, they experience the reverse. Therefore, the most valuable product that service providers can deliver to consumers is extra time in the day to do things that they want or need to get done.

Products and services that help consumers fill their time more productively and/or pleasurably are the most compelling, Gartner argues.