"Closed Versus Open," "Context or Distribution" Debates Never Die

Remember "Videotext?" Few now do. Before there was a public Internet, before browsers and the World Wide Web, AT&T and other telcos, as well as cable companies were experimenting with what we might today call multimedia.

And the approaches illustrate how some fundamental business and technology challenges oscillate over time, but never really are firmly settled. The "Viewtron" system was closed. The service providers were in charge of programming the service just as video entertainment service providers select which channels to carry. 

At the time (early 1980s), that might have appeared the only feasible way to aggregate and present electronic content on a widespread basis, as the PC had yet to clearly emerge as a mass market device. 

Later, we saw the first iteration of the "open versus closed" approaches to software or hardware platforms, a debate that never seems fully settled. 

Likewise, executives and observers of the video entertainment business have in the past argued about whether "content or distribution is king," a phrase that nicely captures the characterization of influence within the ecosystem. At times, it has seemed as though either content or distribution were "king." Recently, Apple's products have been the chief examples of instances where "distribution" (device ecosystem, in this case) seemed to be paramount. 

Apple also has emerged as the chief exemplar of the "closed" approach to development of software and hardware, at least in terms of end user experience. Recently, Android has emerged as the latest example of an open approach. 

It often seems, for a time, that one approach has decisively "won." In the PC era, it seemed open had clearly beaten closed. In the early mobile era, closed seemed to be the only model. In the smart phone era, open is emerging again.

In the video entertainment business, content initially was king. But with the advent of cable TV, power shifted towards distribution. With the arrival of the Internet and broadband, influence is shifting back towards content. 

The point is that these debates never are "finally" settled. Perhaps the reason is that a variety of business strategies will work. 

Amazon Could Be Working On A Square Competitor

As each new mobile payment service launches, the number of suppliers offering lower transaction fees grows. The latest rumor has Amazon readying a mobile payments product that could compete with Square, Intuit GoPayment and PayPal Here, TechCrunch reports.

Amazon is said to be targeting smaller chains of retailers, a logical positioning given the value of a smart phone or tablet dongle approach for a smaller retailer.

Amazon could be offering significantly lower credit card processing fees for merchants as part of its pitch. Rumors are that Amazon could be offering a rate as low as 1.9 percent. Current offerings include fees of around 2.7 percent.

Such a move would put Amazon into the physical retailing environment in a new way, and also shows why growing competition in the payments processing business is leading to lower fees for retailers who use the services. 

A survey by the National Retail Federation in 2011 found that while only six percent of retailers said they used mobile point-of-sale devices, half of the respondents said at the time that they planned to adopt such devices over the next 18 months. 

Eric Schmidt, Gangnam Style

Dish Laucnhes 5 Mbps, 10 Mbps Satellite Broadband Access Services

Dish Network Corp. has annoucned the launch of DishNet, providing 5 Mbps and 10 Mbps satellite broadband access largely aimed at rural customers.

The service will start at $49.99 a month for download speeds of 5 megabits per second, and  $59.99 for stand-alone service at 10 Gbps.Combining DishNet with Dish’s satellite TV service saves customers $10 a month on either plan. 

ISPs Want to Tax App Providers, Now Newspaper Wants to Tax ISPs

Internet access providers have floated the idea of new business models that essentially charge large app providers a fee for imposing "load" on access networks, a move aimed primarily at apps that involve video, ranging from FaceTime on a mobile network to Netflix on a fixed network. 

In a twist, a writer at the Guardian newspaper goes the other way, suggesting that ISPs be taxed to support user consumption of newspaper products. 

"A small levy on UK broadband providers – no more than £2 a month on each subscriber's bill – could be distributed to news providers in proportion to their UK online readership," the article argues. "This would solve the financial problems of quality newspapers, whose readers are not disappearing, but simply migrating online," The Guardian argues. 

Both arguments rest on the assumption that value is being delivered in the Internet ecosystem without "reasonable" participation in the created revenue streams.

But the arguments are advanced from different positions. The Guardian argues that "people willingly pay this money to a handful of telecommunications companies, but pay nothing for the news content they receive" In other words, an app provider argues the access provider should pay the app provider for value created.

Access providers argue the reverse, that the access creates the distribution platform an app provider builds a big business upon. 

In a U.S. context, the newspaper argument can be opposed on freedom of speech grounds, namely that the media has to be free of government control or influence, and any regulation that shifts revenue from an access provider to an app provider therefore makes the app provider dependent on the government for its existence.

That might not be so relevant in a U.K. context. But it is striking that a content and app provider now argues it is the ISPs that are making the money in the Internet ecosystem, and that newspapers provide value for which they are not being compensated. 

Others might argue that "newspapers" are failing in many countries because it is a product people do not want to buy. There are important revenue issues, one cannot deny that. 

But the problem is a decline in demand for the product, which is disrupting the existing revenue model. ISPs are not causing that problem, "people who want to read newspapers" and "advertisers who spend elsewhere" are creating that problem. 

Comcast Using FTTH Overlay to Deliver 305 Mbps Residential Service

Comcast Corp. is using the fiber-to-the-home (FTTH) capabilities of its "Metro Ethernet" platform to power a new residential broadband service with a maximum downstream speed of 305 Mbps and a potential 65 Mbps upstream, not DOCSIS 3.0. 

In other words, Comcast is using an overlay approach, running a discrete new fiber from a transceiver node directly to a home, instead of using the cable modem standard and network. 

The move suggests Comcast believes demand for the 305 Mbps service will be relatively limited. If high take rates were anticipated, Comcast would simply move to Docsis 3.0. At low penetration, the fiber direct overlay means the entire spectrum plan for each local network can operate without disruption, while still accommodating some growth of the 305 Mbps tier of service. 

Netflix "Watch Instantly" Dominates On-TV Streaming Video

Netflix "Watch Instantly" is the dominant application for U.S. household Web-to-TV video, NPD says. Of people viewing online video on the TV, 40 percent use their connected TVs to stream video from Netflix, 12 percent access HuluPlus, and four percent connect to Vudu. 

Over the last year, the number of consumers reporting that the TV is their primary screen for viewing paid and free video streamed from the Web has risen from 33 percent to 45 percent,  according to The NPD Group. 

During the same period, consumers who used a PC as the primary screen for viewing over-the-top (OTT) streamed-video content declined from 48 percent to 31 percent. 

This shift not only reflects a strong consumer preference for watching TV and movies on big screen TVs, but also coincides with the rapid adoption of Internet-connected TVs, NPD argues. Up to this point, it has more commonly been a game console that has served as the gateway to watching streamed video on a TV set. 

Fitch Cuts Forecast for Global Growth, will Mobile be Affected?

Communications and entertainment services are not immune to broader economic downturns, though consumer spending on communications and video services seems to have been affected in subtle ways during the Great Recession of 2008 and its aftermath which has seen sluggish growth in many regions, and an actual contraction in Europe. 

The impact of the Great Recession beginning in 2008 is easy enough to describe. According to TeleGeography Research, revenue growth slipped from about seven percent annually to one percent in 2009, returning to about three percent globally in 2011.
It isn't clear yet whether another recession, of broader scale, is coming. But it is reasonable enough to assume stubbornly tough conditions will endure for a few years. 

That should mean less spending, on a typical account, but not fewer subscriptions. 



Fitch Ratings has pared back its forecasts for global gross domestic product growth to 2.1 percent, citing “persistent weakness” in the global recovery. That is down from Fitch’s June view of 2.2 percent. For 2013, the forecast was reduced to 2.6 percent from 2.8 percent.

Fitch  lowered its 2013 GDP growth expectations for the United States to 2.3 percent, but kept its 2012 forecast at 2.2 percent. Persistently high unemployment and the uncertainty surrounding fiscal policy are expected to continue to challenge the U.S. economy.

U.S. growth in the second quarter also has been adjusted downward. Growth was 1.3 percent, down from a previous estimate of 1.7 percent, due to less consumer spending and business investment than previously estimated.

Fitch predicts the eurozone economy will contract 0.5 percent in 2012. Growth of only 0.3 percent and 1.4 percent is predicted for the next two years.

Spectrum Strategy Comes to the Fore

Spectrum issues are not always primary strategic issues in the communications business. Most of the time, other concerns dominate executive thinking. But spectrum issues now are emerging in a variety of ways as strategic matters, as typically is the case early in a new era of business and network deployment. The U.S. mobile duopoly, for example, was broken by the issuance of new "Personal Communications Service" spectrum.

New blocks of Advanced Wireless Service and Wireless Communications Service spectrum are underpinning the emergence of U.S. Long Term Evolution networks, for example. In Europe, major spectrum auctions of former broadcast TV spectrum will create the foundation for LTE in Europe.

Also, though, periods of intensive spectrum purchases also are times when debt loads become an issue. In fact, European service providers were widely in danger after many overspent for 3G spectrum.

In recent years much of the spectrum auction activity has been for LTE spectrum in the 2-GHz bands. But attention now is turning to 700 MHz and 800 MHz  "digital dividend" spectrum, including bands formerly used for broadcast TV.

World Previous Spectrum Auctions

The Federal Communications Commission, for example, is preparing to approve an AT&T request of use 20 MHz of its spectrum in the 2.3-GHz Wireless Communications Services (band for a new LTE network, after AT&T agreed to use 10 MHz of its spectrum as guard bands to avoid interference with Sirius XM services.

Separately, Sprint and Dish Network are fighting over a Federal Communications Commission proposal to shift 40 megaHertz of Dish Network AWS-4 spectrum about five megahertz in frequency, to allow Sprint to consolidate some of its existing spectrum to support LTE.

Dish Network cannot move forward with its own LTE network plans until the FCC changes its regulations on the AWS-4 spectrum, which originally was licensed for “Mobile Satellite Service.” But one issue is the request by Sprint to have the AWS-4 band shifted upwards in frequency by 5 MHz.

The Sprint proposal would shift the band up 5 MHz from 2000-2020 MHz to 2005-2025 MHz, and a similar 5 MHz on the upper paired band, allowing that spectrum to be put up for auction.

Sprint wants the FCC to shift the frequency plan so that if it wins the frequencies at auction, its adjacent Sprint-owned “PCS” spectrum in the 1915 to 1920 MHz and 1995 to 2005 MHz blocks could be used to create a bigger block of contiguous  spectrum for its LTE network.


Dish argues that the spectrum shift would delay its plans to build a new LTE network.

Additionally, AT&T has been a major spectrum-buying spree to support its own LTE network. And Verizon Wireless recently received clearance to buy chunks of LTE  spectrum from Comcast, Time Warner Cable, Cox Communications and Bright House Networks.

Without a doubt, spectrum issues have moved to the forefront of wireless carrier strategy in the U.S. and other markets. That also means a key boost for capital spending, since spectrum costs are long-term assets, and for management of debt loads.

Can Rival Mobile Operating Systems Beat Android at Low End?

Google’s Android smart phone operating system will have about 62 percent share in 2013, and clearly leads as the operating system for lower cost devices. 

But there are challengers, including those backed by Huawei, ZTE, Samsung, Mozilla and Nokia. But it always is tough to unseat a supplier that has such dominant market share. 

Strategy Analytics notes that the Firefox OS, Mozilla’s mobile effort, will get one percent of all global smart phone shipments in 2013, compared to 67 percent for Android. 

Mobile Service Providers Should Use Pricing to Counter Over the Top Apps

At least for the moment, mobile service providers can and should use pricing as a tool to improve the appeal of operator messaging and discourage the use of competing over-the-top communication services, Strategy Analytics says. 

In some cases, one might say, service providers can price messaging or domestic voice so attractively that the value of using an over the top app to save money simply evaporates. That doesn't address the value of an OTT app when different functionality is the attraction, though.

So over the longer term, Strategy Analytics offers the advice that pricing alone will be insufficient, and additional changes to the user experience will be needed "to keep customers within the operator communication ecosystem." says Nitesh Patel, Strategy Analytics senior analyst. Patel says Rich Communications Suite is needed to add more functionality. 

That's conventional wisdom and generally good advice, one might argue. The issue is whether RCS can become established fast enough that users have not already become accustomed to using third party apps. 

Google Play to Hit 50 Billion Downloads Early in 2013?

Google Play, the app store formerly known as the Android Market, expects to hit the 50 billion downloads milestone early in 2013. In March the company said it had had 13 billion downloads. 

The Play Store now has 675,000 applications and games available, which is within distance of the 700,000 applications Apple claimed earlier this month. Apple does have the edge on media, however, stocking over 26 million songs, 190,000 TV episodes, and over 45,000 films.

Others Will Drive Mobile Payments, Not Telcos

Mobile (including communications, commerce, platforms, and software and applications) comes a close second to cloud computing in its potential to shake up consumer and enterprise markets, a survey of 668 global technology executives, conducted by KPMG, has found. 

As you might suspect, in a specific market, namely mobile payments, respondents believe Internet companies, technology companies, credit card companies, payment specialists and commercial banks are likely to lead the market, ahead of telecom companies. 

That is one illustration of the concern telecom and other access providers have about innovation within the ecosystem, namely that most of the value is being provided by third parties who use access to the Internet as an input, but are not especially dependent in any fundamental way on access providers to get to the potential customers. 

Three key findings highlight the "mobile anytime, everywhere" nature of the coming potential market disruptions.  Smart phones and tablets lead as top tech breakthroughs, followed by cloud and storage.

What is truly transformational is the combination of the mobile Internet connected to the cloud as an enabler of new business models, KPMG says. 



When it comes to their home country, respondents feel that mobile device manufacturers (such as Apple) outrank other types of businesses for tech innovation leadership.

Roughly a third of respondents say that Internet companies are the emerging champions in the fast-developing mobile commerce ecosystem.

These trends are led by the advanced mobile communications markets of Japan and Korea, big and growing mobile bases in China and India, and the fast uptake of next-generation mobile standards around the globe.


More than half of respondents point to the cloud (SaaS, IaaS and PaaS) as the next indispensable consumer technology and the greatest driver of business transformation. Smartphones and tablets lead as top technology breakthroughs that will result in the biggest business transformation for the time being.


Nearly half (44 percent) forecast mobile as the next indispensable consumer technology while more than one-third (36 percent) predict mobile will be the leading game-changer in the enterprise market. Of the four mobile sub-categories, mobile communications leads the pack.

Select geographic markets favor mobile over the cloud as the top change agent. In Israel, for instance, 64 percent believe mobile will lead the next generation of consumer technologies while 58 percent feel the same way about the enterprise market. 

Additionally, in the Europe, Middle East and Africa region (EMEA), 54 percent foresee mobile as the most likely technology to shake up consumer markets in the next three years.

In one more measure of mobile’s impact, smart phones and tablets lead as the next technology breakthrough that will provoke the greatest business transformation four years from now (according to 22 percent of respondents), followed by cloud and storage, at 18 percent.

U.K. Domino's Pizza Gets 18.5% of All E-Sales from Mobile Devices

In its U.K. market, Domino’s Pizza in its most recent quarter saw online sales accounting for 58.4 percent of U.K. delivered sales, compared to the 2011 level of 46.5 percent for tthe 13 week period leading up to Sept. 23, 2012.

Total online sales for the period rose by 39.3 percent to £62.8 million (2011: £44.8m) and have
reached £184.9m for the year to date (2011: £129.9m).

But it is mobile sales that are the most significant number, some would say. In fact, mobile sales were up by 46.9 percent, and now account for 18.5 percent of total online sales. That's a significantly higher percentage than would be expected in the U.S. market, for example.

Does Twitter Have a Role in E-Commerce?

Twitter is looking at ways it might play in the e-commerce business, which might suggest to some how heated the e-commerce space has gotten. Others might say there is a direct relationship between distribution of perishable inventory and real-time offers that Twitter might provide. 

Twitter CEO Dick Costolo says Twitter is looking at ways to “participate” in transactions that take place on the social network.

“It’s particularly interesting in areas where you’ve got things like perishable inventory, like tickets,” Costolo says.

In the past, for example, Google tweeted a promotion code that people could use for tickets to its IO conference, and about 100 tickets sold in a little over 10 minutes. 

“That’s $55,000 with one tweet in 13 minutes,” said Costolo . Separately, the San Diego Chargers tweeted about tickets that were left for a game, and in a little over half an hour they were gone. Those are concrete examples of how Twitter might build a new business based on liquidating high perishable excess inventory.