How Big is the Difference Between “Unlimited” and “Enough?”

Withim a single day on Aug. 21, 2012, MetroPCS and T-Mobile USA did what underdog firms often do, namely shake up retail pricing in an attempt to reverse flagging sales or market share. 

In this case, both firms announced “unlimited” data plans for smart phones.Those moves come against an industry backdrop of movement away from unlimited, flat rate data plans that threaten to erode profit margins as well as limit gross revenue opportunities. 

There are a few fundamental questions one might ask. First, are such plans sustainable, by these two contestants (which is a different question than whether unlimited plans are sustainable by other competitors). 

Also, related to that question, is the issue of whether the new offers will change the cost structure of T-Mobile USA and MetroPCS in some qualitative way, for better or worse. 

Granted, usage tends to grow, over time. But a June 2011 Nielsen monthly analysis of cell phone bills for 65,000 lines, though showing smart phone owners, especially those with iPhones and Android devices, are consuming more data than ever before on a per-user basis, the amounts are not so huge. 

The amount of data the average smart phone user consumes per month has grown by 89 percent from 230 megabytes in the first quartrer of  2010 to 435 MBytes in the first quarter of  2011.

Separately, T-Mobile USA executives have noted 2012 consumption of 1.3 Mbytes a month by 4G network users. More typical users, not the “power” users, consume something on the order of 760 Mbytes a month.

In the United Kingdom, U.K. service provider Three has reported that its users have more than doubled how much mobile data they consume every month in less than a year.

The “average user” now consumes  1.1 Gbytes,, compared to 450 Mbytes in the summer of 2011.

As always “average” in the sense of “arithmetic mean” is misleading. According to U.K. service provider O2, though average consumption is 200 Mbytes a month, 0.1 percent of users consume more than 800 Mbytes a month, while 97 percent of users consume less than 500 Mbytes a month.



The point is that, for most consumers, the difference between an “unlimited” plan and a plan offering 2 Mbytes to 5 Mbytes is virtually zero, in terms of potential value. Most people just won’t use all that much data, no matter what plan they are on.

Apple FaceTime Does Raise Issues, Just not "Net Neutrality"

Apple's FaceTime, and the charges some AT&T users might incur to use it, raises issues, but not of "network neutrality." AT&T has offered a "narrow" defense based on technical rules related to network neutrality.

Others might raise broader issues. Network neutrality rules, you will recall, codify the Federal Communications Commission's Internet freedom principles that dictate users have the right to use all lawful Internet apps, among other assurances.

Keep in mind that Apple's FaceTime app has generally been restricted to Wi-Fi use, in large part because of the amount of mobile network bandwidth the app consumes. As with the matter of "freedom of speech," the existence of some time, place and manner of use restrictions do not infringe the freedom being protected.

AT&T defends its new policy granting unlimited use of FaceTime on some of its mobile data plans, and not others, on the narrow grounds of compliance with the language of the FCC's network neutrality rules, namely that service providers may not lawfully block apps that compete with existing service provider offerings.

You might argue that a good lawyer will use the narrowest possible argument that clearly advances a particular line of legal reasoning, rather than a larger, more philosophical argument that embraces more aspects. AT&T logically uses a narrow construction based on the language of the FCC rules

Some of us would argue AT&T also has a larger argument. There have been, and can be, time, place and manner restrictions of several sorts on bandwidth-intensive apps that could degrade user experience for all other users. In the voice world, we are accustomed to outright blocking. That's what happens when a caller gets a "please try your call again later, all circuits are busy" recording when trying to place a phone call.

That's what happens when Twitter servers become overloaded. You see the "fail whale" and you can't use Twitter. In principle, the FCC bars deliberate blocking of lawful apps. The FCC does not prohibit or punish "over capacity" blockages that occur when servers get overloaded.

Nor do the FCC rules prescribe the business logic contestants might employ when selling various device features. Personal hotspot features are "blocked" on most networks unless a user pays a separate fee to enable such use.

In other words, network neutrality rules exist primarily to prohibit anti-competitive behavior, and not to prescribe the ways service providers decide to package and price features and capabilities. By definition, every service provider marketing policy can affect competition, in an open and transparent way. That is not something "network neutrality" even tries to prevent.

Any AT&T user can use Apple FaceTime on any Wi-Fi connection without incurring any additional charges. On some mobile data plans, the mobile network can be used. On some plans FaceTime cannot be used on the mobile network. The use of FaceTime is not "blocked."

But the manner of use is differential. Other suppliers can make different choices. None of the choices, except a complete inability to use FaceTime ("blocking" as a policy) are a net neutrality infraction, in a broad sense.

Orange “Sosh” Illustrates Competitive Challenge, and Range of Responses

Mobile and fixed network service providers are, by now, used to competition. And, by now, there are some standard competitive responses to new competition, in either the mobile or fixed services realm.

Typically, incumbent service providers are attacked on the pricing front, the reason being that the simplest of all value propositions for a customer is “same product, lower price.” So the easiest marketing position for a challenger to take is “same product, lower price.”

Typically, mobile service providers respond by creating new “value” brands that attempt to protect pricing for the mainstay brands, while allowing the new value brand to compete head to head with lower-cost competitors.

Sometimes it works better than others, though. In France, Orange has found that its initial assumptions about what is required to compete with Illiad’s “Free” service have been inadequate. That seems to be the case right now.

Sosh, sold only online as a way of creating differentiation and controlling sales cost, has boosted account data buckets for its top offer to 3 GBytes, to match Free’s offer, and also creating new price plans that better align with Free’s offers.

The Orange packaging changes come as Sosh adapts to a pricing attack that has been more vigorous than anticipated. The other French mobile leaders, including Bouygues Telecom and SFR, also have had to adjust to Free’s attacks by crafting their own value brands or changing retail packaging.

In this case, the leaders are trying to contain the pricing damage by creating value brands that compete with Free on price, while generally protecting the existing prices of the original brands. The longer term issue is whether that strategy is sustainable over the longer term.

The danger is that, at some point, the pricing expectations change so much that the original brands have to lower prices as well. So far, Orange appears to have been quite surprised by the vigorous Free pricing.

Compared to the initial offers unveiled in September 2011 by Sosh, the latest price drops at Sosh are significant. Sosh initially offered 1 GByte buckets of usage for 39.90 euros. Sosh now offers is now three times more data for less than 37 percent of the original retail pricing.

So far, the pricing umbrella has dropped only for the major mobile carrier “value” brands. The bigger issue is how long it might be before general end user expectations about value and price change enough that even the original brands must respond to the price pressure.

In the fixed network realm, the choices generally have been more limited. Mobile service providers can choose to offer different devices, can sell postpaid or prepaid and can change service features about as easily as they change devices. That's one advantage of running a business where so much of the feature set is "at the edge."

Mobile service providers also have found it easier to create wholly new value brands around customer segments.

In the realm of voice services, for example, most telcos seem to have concluded that it was not feasible to create some sort of "value" voice service directly competitive to over the top VoIP. So the decision generally has been to allow some loss of market share, in order to maintain pricing and margin for the remaining units sold.

In the case of high speed access, telcos in the U.S. market, for example, did not respond until it was clear that a new product category had been created, that legacy special access services really would not be damaged by substitution and that the telcos would lose huge amounts of that market to cable and other competitors if they did not jump in.

T-Mobile Will Introduce New “Unlimited” Data Plan?

T-Mobile USA might be preparing launch of a new unlimited plan without caps or rate limiting. The rumored plan is said to be priced at $30 for "Classic Plan" customers and $20 for "Value Plan" customers. If you want to use your device for personal hotspot service, though you will have to buy another plan, such as the 5GB and 10GB rate plan options, instead.

But the T-Mobile USA and new MetroPCS unlimited plans show that competition in the high-speed access space is not as limited as many would argue it is. 

MetroPCS Launches Unlimited "Everything" Plan for LTE

MetroPCS Communications Inc announced a "promotional" $55 4G LTE service plan that offers unlimited domestic talk, text and data, for $55 a month. 

The $55 price tag is for a single connection and families can get this offer for $50 per month on the their second, third and fourth connections. 

MetroPCS already had been selling such unlimited "everything" plans, but there generally were bandwidth consumption buckets that allowed unlimited use of data but on a rate-limited basis. 

Some will say MetroPCS is responding to the AT&T and Verizon Wireless shared data plans. Others might argue MetroPCS is simply trying to halt a slide in its customer net acquisitions. 

The deal is described as promotional, so it is not clear whether the plan will be retained as a "permanent" plan. 

Virtually All Video Subscription Providers Will Offer PC, Smart Phone, Tablet Viewing

Some 83 percent of video subscription providers plan to offer video streaming of some sort for PCs, smart phones and tablets by 2013, says Jeff Heynen, directing analyst for broadband access and video at Infonetics Research.

That is an eminently logical response for a video subscription services provider. The additional viewing adds value, while propping up the existing TV-based services.

Consumers Don't Really Care About "Interactive TV"

Nearly half of all consumers 16 to 24 use messaging, email, Facebook or Twitter to discuss what they are viewing on TV. 

Some 80 percent talk to other people in the same room while watching TV, another means of distracted viewing.

There is muted appetite for interaction with TV programs, one of the concepts that has been viewed as central to interactive TV,  though. 

Qube was in 1977 billed as the "world's first commercial interactive TV service," launched by Time Warner in Ohio, and failed commercially. In 1997 "Prestel" launched in the United Kingdom. It failed. 

People like to interact with video games. They like to interact with social networks. Some even like commenting on stories they read online. But few people really are interested in choosing their own camera angles during sporting events, changing the plots of TV shows or necessarily even playing along with TV quiz shows. 

Only 10 percent of surveyed respondents browse the Internet for information about the program they are watching, according to a survey conducted by Deloitte UK. 

Some viewers (40 percent) like being able to send their comments in to a live program, though. 

But 68 percent would not want the websites for products, personalities or advertising that have just been shown on television, to automatically appear on their computer, tablet, or smart phone.

The rise of ‘second screening’ - the use of other screens, such as laptops, smartphones and tablets while watching TV – is a source of excitement and concern for many in the TV and technology industry according to a new report from Deloitte UK. 

Nearly a quarter of all respondents (24 percent) use "second screens," typically a smart phone, or increasingly, a tablet. 

Nearly half of all respondents 16 to 24 use communication tools such as messaging, email, Facebook, or Twitter to discuss what they are watching on TV. The vast majority of over 55s (79 percent) never talk about what they’re watching on TV or the Internet.

Google, Boingo to Expand Ad-Supported Wi-Fi Test

Google and Boingo are building on their free Wi-Fi project in New York City, launching the advertising-paid access model in eight malls across the country.

Boingo and Google didn’t name the specific malls, saying only that at least four of them would be in San Francisco, Los Angeles, Tampa and Seattle. 

Google Offers will sponsor the service, meaning customers connecting to the hotspots with a smart phone, tablet or PC will encounter a welcome screen encouraging them to sign up for Google’s daily deal service. Regardless of whether customers sign up for the service or skip past the screen, they’ll get free, unrestricted access. 

In New York, Google and Boingo have offered the promotion in six subway stations and 200 hotzones throughout Manhattan on a trial basis until Sept. 7. The two firms also offer discounted Wi-Fi access in sixteen airports. 

Lots of entrepreneurs have tested the notion that Wi-Fi hotspot service can be supported by advertising. dSpot and AT&T are among them.  

Are There Really Any U.S. Households That Can’t Buy 12 Mbps Internet Access?

Some 19 million people in seven million U.S. households live where fixed broadband networks do not reach people with a minimum speed of 4 Mbps downstream, and 1 Mbps upstream , according to the U.S. Federal Communications Commission.

So it might seem silly to ask a serious question about whether there are any U.S. households that really “cannot” buy Internet access service operating at 12 Mbps, from at least two providers. The reason is that looking at fixed network access, while useful, does not actually exhaust the options already to potential buyers.

Exede, the satellite broadband service already offers 12 Mbps service. HughesNet, which has successfully launched a new satellite identical to the bird used by Exede, has not yet announced its retail packages, but will be able to offer similar speeds. Subject to business logic and some engineering constraints, HughesNet could offer faster services.

But most U.S. consumers also can buy mobile broadband services. The FCC report also notes that just 6.2 percent of people do not have access to mobile broadband services offering downstream speeds of at least 3 Mbps.

In other words, the percentage of people without access to speeds of 4 Mbps on a fixed network (about six percent, using the FCC calculation) is matched by six percent of people also unable to purchase a mobile broadband service operating at at least 3 Mbps.

Put in a positive way, some 94 percent of U.S. consumers have access to fixed or mobile broadband services of 3 Mbps to 4 Mbps, and in many cases, both, from multiple providers.

The FCC study also says that the percentage of people unable to buy either a fixed or mobile broadband access services of at least 3 Mbps is 1.7 percent. That represents about 5.5 million people, or about 2.2 million locations, using the 2.5 persons per household metric.

So in addition to the two U.S. broadband providers offering 12 Mbps services, one has to take into account mobile broadband, and some amount of fixed wireless, as well.

The FCC analysis implies some 5.9 percent of U.S. households are not reached by a fixed network, using 116 million U.S. households as the universe of places. Some might use a household base of 130 million, which would suggest five percent of U.S. housing is not reached by a fixed broadband network.

The point is that the same report also suggests that mght not be as big a problem as might seem to be the case. Keep in mind that the percentage of people or households not able to buy a 4 Mbps service does not mean they cannot presently buy a service that runs at lower speeds.

The report also suggests that in June 2011, some 9.6 Americans did not have service of at least 768 kbps downstream. Assuming a typical figure of 2.5 people per household, that would imply about four million U.S. households not able to get Internet access at speeds of at least 768 kbps, from a fixed network provider.

The FCC report also notes that 79 percent of telco-served locations nationally have access to service running at least as fast as 4 Mbps in the downstream direction, while 85 percent of cable-served high speed access locations have access running at a minimum speed of 4 Mbps in the downstream.

The point is that it is perhaps useful to note how well various contestants are doing, but less useful to argue that any one type of network is the benchmark for measuring the extent and quality of access.

Barnes & Nobles's Nook Sales Decline, Content Sales Increase

Sales of Barnes & Noble’s line of tablets and e-readers declined in the company’s fiscal 2013 first quarter ending July 28, 2012, the Barnes & Noble reported. But digital content sales increased 46 percent, generating enough revenue to offset lower device sales.

So you might say Barnes & Noble has the right strategy; it just needs to execute by selling more content players to support its media sales.

In earnings report, Barnes &  Noble broke out Nook sales in ways that obscure the dip in device sales and the growth of content sales. 

*Nook revenue is comprised of Nook devices, digital content and accessories.

Barnes & Nobles's Nook Sales Decline, Content Sales Increase

Sales of Barnes & Noble’s line of tablets and e-readers declined in the company’s fiscal 2013 first quarter ending July 28, 2012, the Barnes & Noble reported. But digital content sales increased 46 percent, generating enough revenue to offset lower device sales.

So you might say Barnes & Noble has the right strategy; it just needs to execute by selling more content players to support its media sales.

In earnings report, Barnes &  Noble broke out Nook sales in ways that obscure the dip in device sales and the growth of content sales. 

*Nook revenue is comprised of Nook devices, digital content and accessories.

Like Telcos, Cable Will Try to "Enhance Value" Rather than "Cut Price"

As telcos have tried to "add value" to their services rather than "cut prices," so too video entertainment subscription providers will try to emphasize "more value" as an alternative to "cutting prices." 

What remains to be seen is the success of such tactics, over time. At the moment, there doesn't seem to be much danger, though. 

Since people buy "content," and since most of the popular content is not easily available online or over the top on the Internet, video subscriptions still have drawing power. 

Monday Night Football is but one example of video content that remains exclusive to subscription services, The Hollywood Reporter reports. 

Adding online and mobile content access as a form of added value for video subscribers likely will remain a major tactic, even as some operators mull launching lower cost services in some way, and possibly will do, at some point.

In the past, telcos have had mixed success trying to "add value" rather than "cut prices." In fact, you might argue, even over the top messaging and voice services that do provide added value mostly are valued because they represent lower-cost alternatives to traditional voice and messaging services. 

But video is a different sort of product than "communications." The clearest example is the steady upward prices for video subscriptions every year, compared to declining nominal rates for communication services, or at least declining costs per unit. 

Ofcom allows Everything Everywhere to use existing spectrum for 4G

Ofcom has today approved an application by the mobile phone operator Everything Everywhere to use its existing 1800 MHz spectrum to deliver 4G services, a move similar to what Ofcom in 2011 allowed in the transition from 2G to 3G. 

Observers will note that the decision gives the largest U.K. mobile service provider a short window where it will be the only service provider to offer Long Term Evolution services in the United Kingdom, for a time. 

The United Kingdom is required to make the 900 MHz and 1800 MHz spectrum available for 4G use in light of a Decision of the European Commission, so the authorization is in line with the future 4G spectrum allocations. 

The move gives Everything Everywhere a bit of a headstart in 4G services, of course, compared to other competitors that will have to wait until 4G spectrum auctions are completed. 

Ofcom's decision means Everything Everywhere could, in principle, start offering Long Term Evolution services as early as Sept. 11, 2012, giving Everything Everywhere a market lead of perhaps a year or two over all the other providers of Long Term Evolution in the United Kingdom. 

It's an "Untethered" World

A new study conducted by Cisco of more than a thousand U.S. mobile users suggests that the amount of Wi-Fi usage each day is so prevalent that smart phone, tablet and e-reader device usage now is more “nomadic” than mobile; more untethered than mobile; less “on the move” than just “unplugged.”

What’s more, the Cisco survey also suggests 25 percent of users “see no difference” between the mobile and Wi-Fi networks. The implied 75 percent of users who do see differences perhaps is the measure of the importance of voice communications and quick Internet operations or use of social networks and other communications apps.

At some point, such trends could lead to some specialized revenue models within the broader mobile and untethered access business, focusing purely on “data connections,” not mobile voice, much as the Wi-Fi hotspot business has been a specialized “data access” service.

That could ultimately be more important in developing regions where full mobile access is relatively expensive and bandwidth constrained, and might well rely on use of unlicensed spectrum and well as “self organizing” network nodes of some sort.

A separate study conducted by Ipsos suggests the typical employed person, in a wide range of countries, is connected to the Internet nearly 10 hours a day, often by Wi-Fi, with mobile devices used inside the home about 2.5 hours a day, as well.

All consumers use their mobile devices at home, the Cisco  study found, averaging more than 2.5 hours of usage in a typical day, more than double the time that “mobile” devices are used “on the go,” which is about half an hour a day, the study also found.

A quarter of consumers surveyed by Cisco “see no difference” between the mobile and Wi-Fi networks. Consumers consider Wi-Fi easier to use and more reliable than mobile.

“We may be on the verge of a “New Mobile” paradigm, one in which Wi-Fi and mobile networks are seamlessly integrated and indistinguishable in the mobile user’s mind,” the Cisco study says.

Almost 60 percent of consumers were “somewhat” or “very” interested in a proposed offer that provides unlimited data across combined access networks for a flat monthly fee.

Separately, an Ipsos survey suggests people who work are connected to the Internet 9.8 hours a day, on average. That multi-country study surveyed users in in Argentina, Australia ,Belgium, Brazil, Canada, China, France, Germany, Great Britain, Hungary, India, Indonesia, Italy, Japan, Mexico, Poland, Russia, Saudi Arabia, South Africa ,South Korea, Spain, Sweden, Turkey, the United States and Hong Kong. The detailed tables are here.

The survey conducted by Cisco’s Internet Business Solutions Group (IBSG) suggests
mobile users are connecting their devices predominantly using Wi-Fi. In fact, most mobile users are connecting their devices using Wi-Fi at some point, including 70 percent of smart phone owners.

About 50 percent of tablets, laptops, and e-readers are connecting exclusively through Wi-Fi. Although 30 percent of smartphone owners are connected only using the mobile network, the remaining 70 percent are supplementing mobile connectivity with Wi-Fi, the Cisco study suggests.

In fact, on average, smartphone users use Wi-Fi a third of the time to connect their devices to the Internet.

With the exception of smart phones, users would prefer to connect all of their devices usingWi-Fi. More than 80 percent of tablet, laptop, and e-reader owners either prefer Wi-Fi to mobile access or have no preference.

Just over half of smartphone owners would prefer to use Wi-Fi, or are ambivalent about the two access networks.

If given a choice between access networks, mobile users choose Wi-Fi over mobile across all network attributes, with the obvious exception of coverage. That leads Cisco researchers to conclude that “we may be on the verge of a ‘New Mobile’ paradigm, one in which Wi-Fi and mobile networks are seamlessly integrated and indistinguishable in the mobile user’s mind.”


                                           Network Connectivity Type (by Time)

                                        Source: Cisco IBSG, 2012


The Cisco research shows that 75 percent of Americans now have laptop computers, while 52 percent of respondents own smartphones, versus 48 percent who use traditional mobile phones.

Also, some 20 percent of Americans now own some kind of tablet, and 20 percent own an eReader.

With the exception of smart phones, Wi-Fi now is the predominant access technology for mobile devices. More “nomadic” devices like laptops, tablets, and e-readers almost exclusively connect to the Internet through Wi-Fi, with only approximately 20 percent of these devices having any mobile connectivity capability.

                                            Device Network Connectivity (owned device)

                            Source: Cisco IBSG, 2012


Almost half of all mobile users regularly consume all forms of video, music, books, and games on their devices.

One of the insights is that while they may be called “mobile devices,” devices typically are used at home. All consumers use their mobile devices at home, averaging more than 2.5 hours of usage in a typical day, more than double the time that they spend using them at work.
While two thirds of people still use their devices on the go, the world of mobile devices is changing from a “mobile,” on-the-go world (average usage of 0.5 hours per typical day) to a “nomadic” world dominated by the home. And, people expect to increase their home use of mobile devices even more.

Cisco IBSG conducted its online study  of 1,079 U.S mobile users in March 2012. The study was also undertaken in Brazil, Canada, Mexico, and the United Kingdom.

Will Fixed Network Voice Connections Drop to Zero?

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?

That seems highly improbable. There would seem to be some good reasons for predicting a perpetual demand for fixed voice connections, not the least of which is that voice quality likely always will be higher, and more consistent, on fixed connections, compared to mobile or forms of VoIP that do not use managed connections.

But that isn’t the only reason. Much might hinge on how voice services are packaged and priced.

In principle, service providers can package fixed network voice service in ways that impose little incremental cost over not buying the service, or in fact tie the purchase of another network service to the voice service. That is not to discount the “add value” approaches, but simply to note that the easiest path forward is simply to make fixed voice service so affordable there is no reason to drop it.

Service providers will not like the gross revenue implications, but the simple matter is that if the value of fixed voice keeps dropping, compared to mobile voice, erosion will continue. On the other hand, if voice and perhaps other features are bundled with the “lead” broadband access service in ways that users find reasonable, massive erosion might be avoided.

Under the new Verizon Wireless pricing scheme, for example, though users can still use over the top messaging and voice, there is no financial incentive to do so, at least for domestic calling.

At some point, fixed network providers will probably reach the same conclusion, and package “broadband access” with voice features in ways that make paying for fixed network voice a reasonable and preferable option. You might argue that Charter Communications and Verizon’s landline business already have moved in that direction.

A new policy by Charter, and the Verizon “Share Everything” plans simply make voice a feature of a broadband service.

Charter is going to stop selling voice subscriptions as a discrete product, and will in the future only sell voice in conjunction with at least one other service, either entertainment video or broadband access.

Verizon, for its part, also requires bundling of a voice line with DSL. Charter is adopting similar policies.

"Going forward, we will not offer Charter Phone as a standalone product," a Charter spokesman apparently has confirmed.
    source: Allied Telesis

In principle, the bundling is akin to the ways consumers buy many other products. When you buy a PC, a tablet, a smart phone, an iPod or an automobile, you get a battery as part of the device. Both Charter and Verizon Wireless now are making “voice” part of a product bundle, a feature, essentially.

If, as some of us suspect, voice and messaging eventually will be features of a network access service, then the number of voice “lines” in service will stop falling, in line either with the number of broadband access or video entertainment accounts in service.

The point is that landline voice accounts will not decline, without end, even if consumer prefer to use mobile voice, so long as retail policies tie the use of other valued network services to a bundle that includes a voice service.