Telecom Italia Network Sale?

Telecom Italia SpA should sell its fixed-lined network, said Marco Fossati, whose family’s Findim Group SA owns about five percent of the company. 

“This opportunity should not be wasted as the right conditions may be now, in the next two or three months, or never.”

To be sure, the interests of major shareholders and end users or Telecom Italia do not always line up in the same way. Telecom Italia, like other European telcos, needs to reduce its debt load and make investments in newer lines of business. 

One can argue that what is good for Telecom Italia as an asset, and what is good for Italy, Italian consumers or Telecom Italia as a going concern, can be different. 

In a larger sense, there is a small but growing divergence of opinion among tier one service providers about the value of network asset ownership. 

In some cases, service providers have concluded that they can live with a future as non-facilities-based providers, or have traded their facilities ownership for other opportunities. That is the case in Australia, New Zealand, Singapore and Malaysia, for example. 

In a broader range of cases service providers have concluded they can do so out of region, while continuing to operate as facilities-based providers in region. Increasingly, there is understanding that specific elements of the network can safely be outsourced or shared. 

Telecom Italia might ultimately look for some way to bring in other investors, which would raise liquidity, while retaining management control of the network, though. 

TeliaSonera backs off plan to charge for VoIP

Swedish telecommunications company TeliaSonera has reversed an earlier decision to implement an additional fee plan for its customers who want to use over the top VoIP services, choosing instead to simply raise mobile data plan rates across the board. 

TeliaSonera first announced plans to charge for use of over the top mobile VoIP apps in February 2012, A plan similar to one it had already implemented in Spain. 

There, subscribers pay EUR6 a month for 100 megabytes worth of VoIP calls, equivalent to between five and 10 hours of talk time.

The problem is that VoIP "is likely to replace traditional phone calls," according to TeliaSonera Chief Executive Lars Nyberg. "Eventually, all voice calls will be made over IP."

"If all our customers suddenly decided to switch over to VoIP, and we charged them only for the data traffic usage, we would lose about 70 percent of our revenue," Nyberg said.

That's an obvious observation, as all service providers ultimately will face the diminution of the traditional voice calling revenue stream, at current levels of gross revenue and profit margin. The issue is how to transition to "data access" revenue models most elegantly. 

Lots of observers would note that charging extra for use of some apps is not elegant. In this case, TeliaSonera probably has chosen the better approach, namely simply matching value to pricing. 

More Smart Phone Users in Latin America than Developed Regions by 2017?

Telefónica has 208 million customers in Latin America, of which 173 million are mobile. Some would argue that in the next five years the region will surpass established markets by number of smart phones and their IP traffic will be multiplied by seven, with an annual growth rate of 49 percent.

In fact, Brazil has more smart phone users than Germany or France do.  In fact, with about 27 million and 23 million smart phone users respectively, Brazil and Mexico both have more smart phone users than Australia has people (Australia’s population is around 22 million).

Google's Mobile Planet also revealed that Argentina has 24 percent smart phone penetration.

These numbers defy the common perception that these large Latin American markets are far behind the rest of the world in smart phone adoption, Google argues. They in fact already possess larger absolute numbers of smartphone users than many other countries, and above-average usage patterns in many areas, Google says.

Some 65 percent of Mexican smart phone users search on their phones every day, compared to 57 percent in the U.S. market.

Some 90 percent of Argentine smart phone users use their phones to access social networks, compared to 63 percent in Japan, and 29 percent of Brazilian smartphone users have changed their minds about a purchase while in a store due to research conducted on their phone, compared to 15 percent in Canada.

Latin America’s smart phone sales picked up in 2010 when smart phone sales in the region grew 117 percent and total handset sales grew 17 percent.

In 2011 smartphone sales were predicted to represent 17.9 percent of total handset sales and will continue to be the fastest growing category, increasing at a compound annual growth rate of 30 percent in the next five years, compared with a seven percent CAGR for overall handset sales during the same period.

By 2016,  Pyramid Research expects smart phone sales to account for roughly 46 percent of total handset sales in the region.

Others might point to China as the driver of growth in emerging markets. Research firm Ovum says emerging markets in 2011 accounted for 160 million of 450 million smartphones sold worldwide. China accounted for about 66 percent of smartphones sold in developing markets, Ovum says.

Latin America smartphone sales as percentage of total handset sales, 2008–2016

Bango, Facebook Use Carrier Billing for Virtual Goods

Carrier billing is not new. It has been available since about 1983, as was made necessary by the breakup of the former monopoly AT&T into separately-owned and independent long distance and local businesses. Basically, local service providers needed a way to allow long distance carriers to bill local telephone service customers for their long distance calling. 

As a byproduct, carrier billing has been available to other third parties, and primarily has been used to support third party sales of content or virtual goods such as ringtones, songs and more recently, mobile apps or in-app products.  

Bango says it now is providing Facebook carrier billing services  in Germany, the United Kingdom and United States, and will be expanded to other countries during the remainder of 2012.

Bango now provides Facebook users the ability to easily purchase digital content without the use of premium text messaging services or credit cards. Instead, purchases appear on the mobile customer phone bills. 

Has BlackBerry Subscriber Base Gone into Decline?

A decade after Research In Motion Ltd. introduced its first smartphone, the tribe of BlackBerry users has stopped growing stopped growing. The bigger question is whether something worse than that has happened over the last quarter, namely an actual decline in the user base. 

Some would point that although it has faced huge challenges, Research in Motion has until recently been able to show sales growth, albeit at rates that do not match those of Apple iOS, Samsung or other Android devices.

In August, 2011 RIM had 70 million BlackBerry subscribers worldwide, and in June 2012 reported 78 million users globally. 

Some analysts now believe the total number of BlackBerry users is now declining, or about to start declining. This contrasts with first weekend sales of the new Apple iPhone 5 of perhaps five million units. And some analysts appear to be disappointed at that sales level, which is more than for the similar first weekend of any other version of the iPhone, but less than some had anticipated based on pre-order activity. 

U.S. "Falling Behind" Rest of World in Spectrum Auctions?

One has to be skeptical at times about claims that a specific country is "falling behind" on some measure of communications intensity.

That might apply, in some ways, to claims the United States "has quickly fallen behind the world" in  auctioning off spectrum that can be used to support wireless communications.

It is argued that Germany and Spain have auctioned about 50 percent more spectrum for broadband than the United States has. It is said that France has auctioned about 40 percent percent more spctrum, while Italy and Japan have auctioned 30 percent more spectrum.

"Specifically, the U.S. has auctioned about 410 MHz, Germany about 615 MHz, Spain about 600 MHz, France about 560 MHz, Italy roughly 510 MHz, Japan an estimated 500 MHz, and the United Kingdom preparing to auction about 600 MHz, Precursor principal Scott Cleland says. 

Some skeptics will argue that one would expect Cleland to take that view, as one virtually always will find Cleland taking positions that are "against" Google and "for" telcos. And there is little doubt that mobile service providers virtually always seem to be looking for more spectrum as they add more customers. 

The new reality is that each of those new customers are starting to consume network bandwidth at unprecedented rates, compared to past usage of narrowband voice and messaging apps. 

That isn't to deny that more spectrum will be needed, in most countries, as mobile broadband adoption increases. Nor are U.S. regulators unmindful of the need to clear unused former TV broadcast spectrum for mobile use. So the "auction gap," like many other past "gaps," will close over time. 

Also, what isn't immediately so obvious is what other spectrum assets already exist that can be "re-purposed," as U.S. mobile service providers are decommissioning older 2G or iDEN spectrum for new use by fourth generation networks. 

And then there is spectrum Clearwire already has deemed surplus, the potential Dish Network, LightSquared and Nextwave spectrum, for example. 

Long term, most service providers will need more physical spectrum. What isn't so clear is that there really is a spectrum auction gap that means anything terribly important at the moment. 

Conventional Retail Wisdom Might be Wrong for Online Retailing

Conventional wisdom in the retail business is that the longer a retailer can keep a customer in the store, the more the typical customer will buy. Paradoxically, small retailers operating online e-commerce sites might find the converse is true: the longer a user stays on a site, the less the chance that user will buy something.

Dane Atkinson, CEO of Sumall, an analytics company CEO, said that many online businesses tend to think of traffic in monolithic terms, namely that more traffic equals more money. That's wrong. 

“There’s a sweet spot where you’re getting someone to do a transaction,” Atkinson said. Using the company’s data, which includes more than 10,000 e-commerce stores and $1 billion transactions, Sumall noted that, for most businesses, that sweet spot is around 3 minutes and 20 seconds, adding that if a customer is on the site for 14 minutes, they’re more likely to browse that visit than buy.

Some might suggest there is a logical explanation for such behavior. Many users go online when they already have decided to buy a particular item, and simply are looking for which particular supplier will handle the transaction.

In such cases, a short session indicates a user has concluded that one specific online provider has the best combination of value and price, or at least, "good enough" to trigger an immediate purchase. 

A longer session might indicate a prospect has not yet decided to buy a specific item, but is doing product research. 

Transaction Fee Part of Mobile Payments Looks Like Replay of VoIP Business

Groupon has launched a new mobile payments service, after trialing the service with 150 businesses in San Francisco. The service allows merchants to accept credit and debit cards by swiping them through a card reader attached to an iPhone or iPod touch.

For some observers, the activity in the mobile payments business will bring to mind the changes in the voice business wrought by over the top VoIP.

In a general sense, an attacker in an established market will always find the logic of the “same product, lower price” value proposition quite compelling. It answers the question of why a customer should buy the product (the transaction processing service). It answers the question of “what is the customer value proposition?”

Groupon Payments clearly is seeking to grow by offering cost savings. That’s the same approach taken by most VoIP providers, including both facilities-based cable operators and over the top suppliers as well.

Of course, you know where that story leads. Over time, we should expect to see pricing pressures in the payments processing business become more pronounced.

In other words, the amount of revenue transaction processors can make should fall, over time, as has been seen in the voice calling business, for example.

Groupon’s move is the latest bit of evidence that mobile payments are going to transform the retail payment process overall, in the same way that over the top VoIP has transformed voice communications globally.

To be specific, the profit margin is going to be wrung out of the business.

Mobile Drives Revenue Growth; Broadband Drives Mobile

It has been obvious for some time that mobility and broadband are driving virtually all growth in the global telecom business. By International Telecommunications Union estimates, about $4.5 is earned, globally, for every $1 of fixed network revenue. And even if those ratios are higher in "developing" regions than in "developed" regions, the trend is clear even in those parts of the world with the most well developed communications infrastructure.

Both Verizon and AT&T, for example, earn a majority of their total revenue from wireless sources.

Insight Research Corp. has noted that wireless revenue will grow by 64 percent from current levels, while wireline revenues show only modest growth.

Nearly all of the growth in both sectors is expected to occur in broadband services, with wireless 3G and 4G broadband services projected to grow at a compounded rate of 24 percent over the forecast period and wireline broadband services projected to grow at a 13 percent compounded rate over the same forecast horizon.

Those trends are as evident in the Asia-Pacific region as elsewhere globally. Telecom service provider retail revenue in the Asia–Pacific region is predicted to grow at a compound annual growth rate of seven percent between 2011 and 2016, according to Analysys Mason. For the most part, that growth will be driven almost exclusively by mobile services.

Total telecom service revenue will grow by 29 percent from $229.7 billion in 2011 to $323.7 billion by 2016. But note the composition of revenue contributors. About 90 percent of the voice connections in the entire region will be mobile by 2016, up from 84 percent in 2011 and from 73 percent in 2008.

Overall, the number of voice connections in the region will increase by 45 percent, to 3.9 billion connections, with most of this growth coming from China and India.

Perhaps the most significant implication of the Analysys Mason forecast is that, over the next five years, the key drivers will be 3G and 4G services, which will account for 46 percent of mobile connections in the region by 2016 and the growing demand for Internet access, driving mobile broadband.

Mobile and fixed wireless will account for more than a third of broadband connections in the emerging APAC region in 2016, and for the vast majority of connections in rural areas where fixed-line infrastructure is unavailable.

Analysys Mason also predicts that active mobile penetration rates in the region will rise to 95 percent by 2016, a 32 percent increase over 2011 levels. 

The number of active SIMs will increase from 2.33 billion in 2011 to 3.7 billion by 2016 as well. 

In the last twelve months, 118 million mobile phones were sold across the seven key markets in the Southeast Asia region (Singapore, Malaysia, Thailand, Indonesia, Vietnam, Cambodia and the Philippines), representing $13.7 billion in device revenue, according to GfK Asia.

Some 10 million feature phones were purchased, about 12 percent more than a year ago. 

The rate of smart phone purchases increased by 78 percent across the seven countries. 

Though feature phones still are prevalent, smart phone sales are growing at rates between 42 percent and 326 percent, ” said Gerard Tan, GfK Asia account director. Indonesia is the region’s largest smart phone market, with smart phone sales growing 56 percent. 

In the Philippines, smart phone sales grew 326 percent. "Unlike the more developed countries like Singapore and Malaysia, smart phone sales in Thailand and Vietnam are still relatively low at 19 and 11 percent respectively.

Smart Phones, Tablets Changing Way People Get Sports Content

In June 2012, 12.3 million people engaged with sports info on their mobile phones in the United Kingdom, jumping 36 percent in the past year. That should not be surprising. Sports news is a prime example of a "real time" application with high value to some consumers. 

Of these 12.3 million people, 3.6 million of them accessed sports content on their phones nearly every day, up 41 percent from just a year ago, according to comScore.

And news content is even more important to some U.S.  tablet users. In June 2012, nearly half of U.S. tablet owners accessed sports information on their device, compared to 38.6 percent of smartphone owners. 

Tablet owners were also slightly more likely to access sports content on a daily basis, with 17.3 percent of tablet users doing so compared to 14.1 percent of smartphone owners.

Machine-to-machine (M2M) Market Remains Small

Machine-to-machine service revenues represent 0.5 percent of total mobile operator service revenues at the moment,  according to Informa Telecoms & Media.

Mobile network M2M connections totaled 132 million as of June 2012, up 22 percent year over year and generated US$5.68 billion over the preceding 12 months, according to the latest data from Informa Telecoms & Media.

The M2M market represents an important new growth area for mobile operators. To put the M2M numbers into perspective, total global cellular connections were 6.28 billion at the end of June and annualized operator service revenues totaled US$1.14 trillion.

This means just one M2M connection exists for every 50 “human” connections and $1 of M2M revenue is generated for every $200 of service revenues, Informa says.

“M2M connections and M2M revenues are neither as high nor growing as rapidly as some are anticipating”, says Jamie Moss, senior analyst for M2M at Informa Telecoms & Media.

That should not come as a surprise. Name one area of new services growth (other than mobile data access) that actually has “moved the revenue needle” for mobile service providers over the last few years. Cloud computing? Mobile advertising? Mobile payments or banking? Mobile apps? App stores?

Any new revenue opportunity large enough to be interesting for a tier-one service provider also is likely to be complex enough that the value chain is incomplete at first. That is perhaps one reason why much current success is being seen in “fleet tracking” apps, which are by no means “new.”

It simply is easier to sell a new M2M service by positioning it as a solution that works better or costs less than the older ways of doing things.

Even many “newer” emerging service markets, such as digital signage, also are examples of applying “new” M2M techniques to an older and existing business.

The volume of sales in the M2M market remains in the lower-value areas such as smart metering, Informa says. And smart metering isn’t “new,” either.

Virgin Media Wi-Fi Strategy Shows "Untethered" Implications

Virgin Media has decided not to bid for new fourth generation network spectrum in the United Kingdom, something it had been considering, in light of its wholesale provider EE getting a go-ahead to build such a network using existing spectrum.

In essence, Virgin Media also says it has decided to remain a mobile virtual network operator, and not become a facilities-based provider. Like any other business decision, there are any number of reasons why capital is deployed in support of one strategy, and not another. 

A rational executive in the fixed network business might well wish to avoid becoming a fourth provider in a highly-competitive market, especially when there are other uses for investment capital in the arguably core fixed network. 

One other angle is that the value of an "untethered" (Wi-Fi) network as a "spot" overlay to any other wireless or untethered services provider (essentially, any fixed network operator using Wi-Fi as the local distribution) is growing. 

As Virgin Media sees matters, the financial return from creating new metro and other "hotspot" service as a wholesale service, sold to other service providers, could well provide a better return on investment than building a new facilities-based mobile network. 

That isn't to say public Wi-Fi is a substitute for mobile service, only that public Wi-Fi can be a very useful complement to mobile service. Virgin Media also believes some mobile service providers will want to buy such service wholesale, instead of building their own small cell networks, at least in some locations. 

HBO A la Carte Decision Could be the Tipping Point

Any future decision by HBO to sell HBO by itself, over the top and online, could well be the tipping point for a massive wave of online video disruption in the U.S. market, as it would signal the first major break from current industry business models and distribution practices.  But that decision is not yet imminent. 

The reason any such decision could be a tipping point is that it would signal a clear belief at Time Warner that the gains from doing so, namely selling more over the top subscriptions and making more money, are greater than the inevitable friction with HBO's major distributors, namely cable, satellite and telco video subscription services.

"If, in the long run, there's a clear development of enough people that need an a la carte offering of HBO, we'll look at it," Bewkes says. 

HBO executives note that there are roughly 105 million multichannel TV households in America, of which 77 million do not subscribe to HBO. So for logical reasons, current subscribers to video entertainment services would seem to be a logical prospect base. 

By way of contrast, there are only about three million U.S. households with broadband connections and reasonable amounts of money but no multichannel TV service. In other words, from one perspective, the potential upside for online versions of HBO would not seem to be as lucrative as marketing to existing video service customers. 

The best evidence for such thinking is HBO's current willingness to sell HBO online in Sweden, Norway, Finland and Denmark. In those markets, HBO believes it can reach more potential customers using both video distributors and over the top mechanisms. 

But there are other issues, as well. What might work better, an over the top subscription to the full channel, or sales of individual programs? Ignore for the moment the fact that HBO does not want to sell programs one by one. Where's the demand?

In the U.S. market, about 30 million subscribers to basic cable also buy HBO. Could HBO do better with an over the top strategy? 

Netflix has about 27 million subscribers that some would argue represent a similar market, and evidence that demand for streamed products is substantial. And Netflix uses a consumption model more akin to video on demand than a "channel."

And demand for streaming services is clear, especially when compared to traditional VOD. 

Bill Niemeyer, The Diffusion Group senior analyst, estimates in in the fourth quarter of  2011, Netflix U.S. subscribers watched 80 percent more streaming video hours than were viewed in the same period on all U.S. video on demand services. "Viewing hours" are not a direct proxy for subscriptions or revenue, but are indicative of the relative popularity of VOD and streaming. 

In fact, TDG estimates that all VOD consumption is just one percent of U.S. viewing hours. 

Disruption seems inevitable at some point. A move by HBO could be the trigger for a wider set of moves by other programmers as well. Why HBO? Simply because HBO already has gone with a dual distribution strategy in the Nordic region, and because HBO prides itself on being an innovator in the business. 

PriceCheck Shows Mobile Commerce "Steering"

Price comparison service PriceCheck offers a mobile app that allows users to scan bar codes of almost any supermarket product and see comparative prices at competing stores. 

That's one more aspect of mobile commerce, allowing consumers to comparison shop while inside retail outlets. It isn't just "showrooming," where users check out merchandise in a store and then order online. It is a form of "steering," where a potential customer is maneuvered to a course of action, in this case buying a product at another outlet. 

“Fifty percent of consumers are spending more than half of their total shopping time researching products online or using their mobile device," says Andre De Wet, PriceCheck CEO.

Verizon CFO says "Share Everything" Works Because People Know They Don't Use Much Data

Unlimited data customers are flocking to Share Everything, says Fran Shammo, Verizon CTO, because many of them realize they don't consume much data, and like the idea of sharing a single data plan across multiple devices. 

True, overall bandwidth consumption is growing briskly.

At a global level, Analysys Mason predicts that mobile data will grow at a 41 percent compound annual growth rate. That would be quite a slower rate than had been the case in 2011, for example, when growth was about 90 percent, on average, in the U.S. market. 

But most users don't actually consume that much data.

According to a 2011 Nielsen monthly analysis of cellphone bills for 65,000 lines, smart phone owners, especially those with iPhones and Android devices, were consuming about 435 megabytes in the first quarter of 2011, up from about 230 Mbytes in the first quarter of 2010. 

Data usage for the top 10 percent of smartphone users was up 109 percent, as you would expect. The top one percent of users increased their usage by 155 percent from 1.8 GBytes in the first quarter of 2010 to over 4.6 GBytes in the first quarter of 2011, Nielsen said. 

Still, though growth is occurring across the board, at the 80th percentile and below, users consumed 500 Mbytes or less each month. In the 60th percentile, users consumed 250 Mbytes or less each month.