News Consumption Now is an Indirect Concern for More Telcos

Until the past couple of decades, changing trends in news consumption would have had tangential, if any relevance, for telcos and mobile service providers. That began to change when telcos became video entertainment service providers, making TV news consumption at least a minor point of interest.

To the extent that consumers shift news consumption from print to television, that indirectly drives demand for video subscriptions.

Over the past couple of years, a shift to online consumption of news began to be more important, at least to an indirect extent, first as PC consumption created needs for broadband access, and more recently as "on the go" consumption has become an indirect driver of smart phone and mobile data service plans.

The percentage of Americans saying they saw news or news headlines on a social networking site "yesterday" has doubled from nine percent to 19 percent since 2010, for example. 

Among adults younger than age 30, as many saw news on a social networking site the previous day (33 percent) as saw any television news (34 percent), with just 13 percent having read a newspaper either in print or digital form, the Pew Research Center says. 

For an Internet access provider, that is indirectly of interest since such habits drive sales of fixed network and mobile Internet access, as well as use of public Wi-Fi hotspots. 

The proportion of Americans who get news online at least three days a week has leveled off, after a period of dramatic growth, though. 

Currently, 46 percent say they get news online or on a mobile phone or device at least three days a week, unchanged from 2010. About a third (32 percent) of the public gets news online every day, the Pew Center says.

Mobile Marketing More Used than Mobile Payments, at the Moment

At least so far, use of mobile devices to "pay for purchases" remains a less frequent activity than using devices to compare prices or check product reviews, as you might expect at this point in the development of a range of mobile commerce, mobile advertising and mobile operations options for retailers and consumers. 

When asked whether they have used a mobile to compare prices and look at product reviews while out shopping, 61 percent of U.S. respondents 18 to 34 and  51 percent of U.K. respondents reported they had done so.

But there are key age differences.  Only a minority of shoppers in older age group brackets said they had done so, Econsultancy reports. 

The results also suggest the importance of mobiles when shoppers are out and about. When asked what they would do if a particular store did not have what they were looking for, 45 percent of U.K. respondents and 46 percent of U.S. respondents indicated they would try and find the item at another store.

Some 32 percent of U.K. respondents would go home and then search online, while 32 percent of U.S. respondents would do the same. About five percent of U.K. respondents would use their mobile device to try and find the item, while eight percent of U.S. respondents said they would try that approach. 

Shoppers are turning to their phones for price comparison and reviews while out shopping, according to the survey. The survey found half of U.S. shoppers have used their mobile to compare a price or read a review when out shopping, along with 43 percent of U.K. shoppers.

Dish Talks to Viacom About Over the Top Delivery, Not Tied to Subscription

Dish Network Corp. reportedly is talking to networks such as Viacom, Univision and Scripps Networks Interactive about licensing some content to a new Dish over the top video offering that would not require purchase of a Dish Network video subscription, Bloomberg says. 

That would be a break with "TV Everywhere" packages that require customers to buy a linear video subscription first, before being able to use the TV Everywhere feature. 

The expectation is that Dish could create lower-cost online services that virtually any U.S. consumer with broadband access could buy. The issue is whether an appealing package, costing perhaps $20 a month, for users watching on tablets and smart phones, for example. 

35% of Smart Phone Data is Consumed Using Wi-Fi

On average, smart phones are making eight Wi-Fi connections per day and offloading as much as 35 percent of total data consumption to a Wi-Fi network, while heavy users offload as much as 70 percent , according to DeviceScape. 

You might think such statistics point to heavy smart phone data consumption, but that seems not to be the case. 

The overwhelming majority of customers on AT&T, Sprint, T-Mobile and Verizon networks studied by NPD Connected Intelligence don’t even use 2 GBytes worth of mobile data per month, which suggests most consumers do not need “unlimited” service plans. 


NPD Connected Intelligence tracked users on 1,000 Android smart phones as part of the study. T-Mobile USA has users who consume more, though. Some 11 percent of T-Mobile USA customers use more than 3 GBytes per month, compared to four percent of AT&T and Sprint customers who consume more than 3 Gbytes a month. 

About three percent of Verizon customers use more than 3 Gbytes a month NPD Connected Intelligence analyst Eddie Hold says Apple iPhone usage is pretty similar to that of Android users. 

From a consumer standpoint, there often therefore is little to no actual difference between an “unlimited” and a “big enough” service plan for voice, messaging or Internet access. 

The reason is simply that most people don’t actually use enough of any of those apps to “need” unlimited usage. On the other hand, there frequently are good reasons for a service provider to offer “unlimited” access to voice, messaging or Internet access. 

That especially is the case when the carrier’s own usage statistics indicate that most people will not use unusual amounts of capacity, whether that is voice, messaging or Internet access. 

Under such conditions, provider safely can offer “unlimited” service with no danger of unusual stresses on the network. In other words, “unlimited” is an excellent marketing platform when a service provider knows it can safely make the offer. 

The "Real-Time Cloud" has Implications for Mobile, Fixed Service Providers

The coming era of" real-time cloud" services will have clear implications for access providers. Real time services include apps such as voice and video, for example, as well as any number of business processes. If those services are hosted in the cloud, one would have to assume the existence of access mechanisms that can support real-time applications well.

One also would assume real time cloud services would be consumable by any device with Internet access, especially mobile devices, with low latency a virtual requirement for user experience. And, of course, any real time cloud environment would be ideal for over the top real time applications.

That means more competition for carrier-supplied voice and messaging. 

52% of U.S. Households are "Mobile Only" or "Rarely Use" Landline Phone

Just over 38 percent of U.S. consumers surveyed by iGR indicate they do not have a landline phone, with service from any telco, ISP or cable company (they are mobile only households). 

Of those respondents who do buy fixed network telephone service, just 24 percent of consumers said they use their landline phone "a lot." 

Another 23 percent said they use it "sometimes."


About 14 percent reported having a landline they used "rarely or never." Add that to the 38 percent of wireless-only households and a majority of U.S. households might now be functioning exclusively or nearly exclusively in mobile mode. 

The 38 percent of mobile-only users are more likely to be under 35 years old, as you might expect. 

At the moment, a higher percentage of households headed by older people use landline phones. There are at least a couple of ways to characterize that finding. One might argue that users find new uses for landline phones as they get older. 

Or, one might argue that a shift of demand is taking place, and that older consumers are heavier users of landline phones out of habit. In that view, younger users will not suddenly find themselves "needing" fixed lien phone service as they get older. 

The analogy here might be cable TV service. Decades ago, many observers would have questioned why a household would pay for TV when they could get it free over the air. For some decades after the adoption of cable TV began, one could still see a demographic difference in adoption rates, with the older demographic groups adopting at lower rates than other households. 

To use the somewhat non-artful phrase, "some people don't buy my product, but they're dying." 

Survey respondents over 55 years old were 76 percent more likely to say they have a landline they "use a lot," for example. compared to all other users. But that might be a strong habit originally developed at a time when the only phones were fixed network devices. 

Millennials have grown up in a world where "everybody" uses a mobile for voice and messaging, and where that is seen as the preferred mode of communicating. 

The annual survey by the Centers for Disease Control found in 2011 that 32 percent of homes are wireless only. The cord cutting trend seems less advanced in Canada, though, where a recent survey found about 15 percent of homes had cut the cord and become mobile-only households.

"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.