Will AT&T Use LTE to Upgrade Rural Lines?

AT&T on or about November 7, 2012 is supposed to reveal its decision about 18 million rural fixed network lines that either require broadband upgrades, or might be sold. 

Most observers now believe AT&T cannot sell those assets, as there are not willing buyers. That means AT&T will have to upgrade facilities, observers would say. 

How to do the upgrade is the issue. Some of those lines are expected to be candidates for U-Verse upgrades. Some lines might get fiber to home upgrades. 

But some of us would not be surprised to see a major focus on using Long Term Evolution mobile upgrades as the actual solution for many of those lines. 

NFC Mobile Payment Transaction Spend to Hit the $100 billion Mark in 2016

ABI Research forecasts that the total value spend of near field communications mobile payments will rise from $4 billion in 2012 to $191 billion in 2017, breaking the $100 billion mark in 2016. 

The volume of those retail transactions hinges in part on the number of NFC devices used by consumers, partly by the prowess of mobile payment system providers, partly by retailer adoption and partly by the value consumers come to attribute to such payment systems. 

Online Advertising Going Mobile

Offline local media companies seem to have reached some sort of equilibrium, compared to shares of local advertising that have gone to newer players such as Google, Yahoo or Groupon, Borrell and Associates says. Some might argue that means online advertising has reached a sort of mature stage. An important stage, to be sure, but still a mature segment. 


In 44 of more than 200 markets tracked, Groupon or Autotrader.com generates more revenue than the largest local newspaper, TV or radio station online operation in that market. 

Online media accounted for $13.5 billion, or 14.9 percent of all local ad spending in 2010.

But the next big change in market shares might come as mobile advertising starts to get more traction. 

Borrell projects that mobile advertising will grow in 2012 by 17.8 percent. Without mobile advertising, “local online” (basically banners and search advertising served up on Web pages) would likely be flat for the foreseeable future, signaling the maturation of what is now a 15-year-old medium and the emergence of a new one to steal the attention. 

By 2015, the majority of all “online” advertising will become untethered from desktops and will be delivered to mobile devices such as iPads and other tablets, smart phones, and GPS-enabled laptops, Borrell predicts. 

By 2015, Borrell projects that newspapers will be toppled as king of the local advertising marketplace, ending a run that has lasted since anybody first started counting such data.

Online will, by then, be a $24 billion dollar market, representing a 22.7 percent share of all local advertising. 

Faster Wi-Fi for Mobile Devices Important: 93% Use Smart Phones at Home

Almost every smart phone shipped in 2012 will offer some form of Wi-Fi capabilities. However, a new Wi-Fi protocol will begin to dominate mobile devices soon. The Wi-Fi (802.11ac) standard might be available on 70 percent of devices by 2015, according to ABI Research. 

“The Wi-Fi 802.11ac protocol offers several advantages over the current and most commonly used 802.11n protocol,” says senior analyst Josh Flood. “Firstly, the wireless connection speed will be quicker; the new protocol also offers better range and improved reliability, and superior power consumption. It’s also capable of multiple 2X2 streams and should be particularly good for gaming experiences and HD video streaming on mobile devices.”

What that means is that use of Wi-Fi to offload smart phone and tablet Internet apps will be faster than ever. 

57% of U.S. Broadband Connections 4 Mbps or Faster

As with just about any particular metric related to broadband access, "average" doesn't mean much. New Akamai data suggests 57 percent of U.S. broadband access customers get minimum speeds of at least 4 Mbps. That suggests the Federal Communications Commission will, in fact, boost its definitions of "broadband" in the future.

But top speeds are quite variable, from place to place. "Average" speeds can range from 8 Mbps to 12 Mbps, with peak speeds in the 30 Mbps to 40 Mbps range. 

Over time, the statistics will have be considered in a more nuanced fashion, though, as more of the actual access connections shift to mobile, rather than fixed, networks. Generally speaking, mobile connections do not operate at fixed network minimum, typical or top speeds. 

Moon was Formed of Earth Fragments After Another Planet Smashed into Earth

The traditional theory that the Moon was formed out of fragments of Earth blasted into space after a massive planetary collision 4.5 billion years ago has gained support from two new studies. 



Previous theories have suggested that the Moon could have been made from pieces of another planet that crashed into Earth, but recent studies showing that Earth and the Moon have the same isotopic composition discount that idea. In fact, the Moon is of the same substance as the Earth.

Matija Cuk of SETI and Sarah Stewart of Harvard reckon the Moon was formed by the rapid spin of the ancient Earth. If its rotation rate at the time of interplanetary dust-up was significantly speedier, giving a "day" of just two to three hours, the planet would have thrown off the necessary material to form the Moon.

If the Earth was spinning through a day of just two hours, it would be near the point when it would start to fly apart itself from rotation forces, making it much easier to throw away loose bits of itself.

Sprint Quietly Gains Control of Clearwire

Sprint Nextel Corp.will gain control of Clearwire Corp. without an acquisition, the Wall Street Journal predicted, and so it has happened.

Sprint will pay Eagle River Holdings LLC, the investment firm owned by McCaw, about $100 million for 30.9 million of Clearwire’s Class A shares, or 4.5 percent of the total, and 2.73 million of its Class B stock, according to a regulatory filling today. McCaw, who co-founded Clearwire, retired as chairman of the company two years ago.

Sprint, which already held 48 percent of Clearwire, thereby would own fully 52.5 percent of the class A shares.

By doing so, Sprint which already owns a 48 percent stake, will gain control of Clearwire without having to acquire all of the company.

You might say that ends any immediate speculation about any potential rival Clearwire acquisition with a whimper, not a bang. To be sure, Sprint has not had any particular interest in buying all of Clearwire in the past. But that has changed, apparently, with the SoftBank purchase of 70 percent of Sprint.

The move will make sense for observers who assumed Softbank would want clear control of Clearwire as part of its purchase of 70 percent of Sprint. Most observers think SoftBank wanted control of the Clearwire spectrum assets. 

OTT App Network Effects Might Decide RCS Success

Network effects might ultimately decide whether mobile service provider investments in “Rich Communications Suite” are successful in competing with over the top voice and messaging apps supplied by third parties.

The obvious example is Skype, which now has such a large community, and provides sufficient value, that it is doubtful RCS will damage Skype. RCS services might be more effective against smaller communities, but Skype simply has gotten to the point where scale issues are fairly minimal. Most users assume other users have Skype and know how to use it.

ARCchart expects that instant messages will exceed text messaging (short message service, or SMS) volumes by 2014 and continue growing rapidly thereafter, accounting for 65 percent of all message traffic pushed over mobile networks by 2016.

The issue is whether RCS can reach critical fast enough to stop that migration. Rational observers might say the answer is “no.” So the issue will then become whether RCS can take back share carrier messaging already has lost to other providers.

The hope is that a standards-based RCS service will provide the needed “everybody else can get a message using this app” problem.

ARCchart anticipates a strong uptake of RCS-e, with around 35 percent of mobile VoIP users going through an RCS-e solution by 2016 and 19 percent of mobile IM users choosing RCS-e.

“Nonetheless, several mobile OTT communications providers have critical mass and the evidence shows that even when SMS and voice are priced comparatively cheaper than IM and VoIP, many customers continue to use their OTT solutions because of the richer experience,” says ARCchart.

In other words, there is reason to question how much success RCS actually will obtain.

Gartner Says Big Data Will Drive $28 Billion of IT Spending in 2012

Big data will drive $28 billion of worldwide IT spending in 2012, according to Gartner.  In 2013, big data is forecast to drive $34 billion of IT spending.

Most of the current spending is used to adapt traditional solutions to the big data demands (machine data, social data, widely varied data) and only $4.3 billion in software sales will be driven directly by demands for new big data functionality in 2012.

Big data currently has the most significant impact in social network analysis and content analytics with 45 percent of new spending each year. 

Western Europe, U.S. Mobile Markets Heading in Opposite Directions

Significant regional variations can and o exist in the global telecom business. The largest U.S. mobile providers, for example, seem to be able, at least for the moment, to turn in predictable growth in revenue, quarter after quarter, as third quarter 2012 Verizon financial results indicate.

In Western Europe, competition is having the opposite effect, reducing revenue. In fact, argues STL Partners, mobile service provides in Spain, Italy, France, Germany and the United Kingdom stand to lose as much as 50 billion euros over the next seven or so years. 

Verizon, in contrast, reported double-digit increases in operating income and earnings. Wireless segment revenue grew more than seven percent, year over year, while prepaid wireless revenue grew nearly 43 percent, year over year. Fixed network revenue in the consumer segment also grew, despite the ongoing trend of voice line abandonment. 



Most observers expect AT&T will report earnings that likewise show continued growth. 

Internet Now Affects Most Businesses in Same Way as "Deregulation" Used to Affect Some Businesses

Historically, formerly highly-regulated industries have faced major deregulation with some predictable results. Virtually all highly-regulated industries, whether formal monopolies or not, have had high cost structures, typically because rates and service quality were regulated. 

Deregulation has lead to needs for lower cost structures because competitors attack with lower prices. Typically, profit margins also drop, even when gross revenue does not.

Industry boundaries also tend to change, as new suppliers enter the market, as entities are allowed to compete in new geographies, serve new customers or provide products prohibited in the past.

As a result of revenue, profit margin and other competitive pressures, legacy market leaders are never completely happy with their share of ecosystem revenue in a business that either is contracting, or undergoing major restructuring, as the global telecom business surely is experiencing. 

You might say that a major business impact of the Internet is that it effectively represents a "deregulation" of just about any business it touches. It leads to all the functional marketplace changes a highly-regulated industry faces upon deregulation.

New competitors enter the market, profit margins fall, industry boundaries are changed, products and pricing strategies are altered as new pricing competition is introduced.

In fact, of the dozen or so changes a newly deregulated industry will face, competition from players outside the industry is commonplace. These days, the effective impact of the Internet is that it “deregulates” all industries, businesses and processes.

In the global telecom business, there have been complaints for years from telecom executives that third party app providers build businesses on the back of telco-provided access services, but that the access providers do not share in the revenue created.

In a potentially new development, some application providers might be taking a similar view, sensing that they create huge value for telcos, but do not participate in the access revenue stream, for example.

Strand Consult now speculates on whether Facebook, for example, is willing to look beyond advertising as a source of revenue, and whether Facebook would become a mobile virtual network operator, as a way to create a new revenue stream, as well as recapture some of the value it believes it is creating in the ecosystem.

As some have speculated about the value of Facebook creating its own branded smart phone, Strand Consult now speculates about the value of Facebook becoming a service provider.

Becoming an “MVNO is a logical step for Facebook the world’s largest communication platform,” Strand Consult analysts argue.

One billion users already consider Facebook as their de facto telephone book for friends and family and use the platform for communicating by SMS, text, image and video, the firm argues.

Aside from its huge user base, Facebook has credit card credentials on file already for millions of its users, many of whom purchase premium games, driving one sixth of Facebook’s revenue.  

How much could Facebook earn as an MVNO? Facebook currently earns annual revenue per user of $4.  An MVNO can earn between $10 a month and $50 a month per customer with an operating margin between 20 percent and 25 percent.

The global telecom industry has over the last few decades been formally deregulated. But most industries eventually will discover the Internet has effectively deregulated their industries as well.

Sprint to Take Control of Clearwire

Sprint Nextel Corp.will gain control of Clearwire Corp. without an acquisition, Wall Street Journal reports. Apparently, Sprint will simply buy stakes held by selling shareholders Intel and Comcast. By doing so, Sprint which already owns a 48 percent stake, will gain control of Clearwire without having to acquire all of the company. 

You might say that ends any immediate speculation about any potential Clearwire acquisition with a whimper, not a bang. The move will make sense for observers who assumed Softbank would want clear control of Clearwire as part of its purchase of 70 percent of Sprint. 

Retail Contactless Mobile Payments Volume $640 Million in 2012

Retail mobile payments using any form of contactless technology will total just $640 million in 2012, eMarketer estimates. That’s an increase of 283 percent over 2011, and eMarket predicts such payments will grow even  234 percent in 2013. 

By 2016, proximity mobile payments transaction value will hit $62.24 billion.

That adoption forecast assumes that, at least initially, most consumers will experiment with mobile payment for low-dollar purchases. A smaller segment of heavy users will habitually buy products such as coffee.

The significant jump in total and per-user spending over the forecast period will be driven by consumers adopting mobile payments for medium-priced purchases such as groceries, gas and fast-casual dining, eMarketer predicts. 

France may oppose SFR Transaction

The French government may oppose a sale of SFR to French cable operator Numbericable, telecoms minister Fleur Pellerin said. 

"SFR is a sensitive and strategic company for France," Pellerin said, according to Reuters. 

"We will do everything in our power to make sure this company does not end up in the hands of unscrupulous shareholders," he said.

Some might find the language a bit odd, but the transaction would not reduce the number of major players in the French market, for example. That might normally be expected to be an issue, if the proposed transaction reduced the number of leading mobile providers to three, for example. But that isn't the case. 

Nor would it seem to be a problem if a leading cable company and mobile company were to combine. Many would call that a reasonable move in a highly-competitive market where the ability to sell multiple products to the same customer is an advantage.

Separately, the Financial Times says Vivendi also is in talks about a possible sale of GVT, its Brazilian fixed-line telephone company, and its stake in Maroc Telecom, Morocco’s biggest telecoms operator.

Vivendi’s directors have said asset sale proceeds would be used to pay down €14bn of net debt.

How Much Can Consumer Communications Spending Grow?

How much can consumer spending on communications, including mobility services, broadband and other services continue to grow, as a percentage of total household spending? The answer to that question could well determine the health of the global telecom business.

And there are clear indications that household spending on a range of communications services and appliances has been growing over the past couple of decades. In fact, a spending rate below three percent was the norm until the recent Internet and mobile era.

In part, you might argue, that is logical. People now are buying multiple services (broadband access, video entertainment, mobile telephone service, fixed telephone service) where in the past they were only buying a single service, namely fixed network telephone service.

There also are some indications that overall spending on devices and services is reaching unprecedented levels.

U.K. household spending on communications, broadly defined, are as high as 12 percent of total household spending, the U.K. government says.  That figure seems unprecedented and out of line with historic percentages in most markets. If such levels can be reached, then there is room for overall spending on devices and services to more than double.

In the U.S. market,  household communications and information technology spending has recently been in the five percent of spending range. That includes both “communications” subscriptions and devices such as computers and other “office” technology.

And there are clear indications that consumers are spending a greater percentage of their disposable income on mobile services, in particular. Even there, though, there are nuances. People surveyed on behalf of the Cisco nternet Business Solutions Group seem to find mobile broadband a discretionary item. 

Cisco Internet Business Solutions Group found that despite consumers’ fondness for smart phones, they do not prioritize their mobile data spending accordingly. 

Most consumers in all countries surveyed would cut mobile data services first or second if they needed to reduce their household communication and entertainment expenditures.

Why haven’t consumers adapted their spending priorities to favor mobile data? Possibly because when consumers do use their smart phones for data access, the research shows that about 80 percent of mobile Internet activity is not truly mobile, but nomadic. 

That has potential implications. In future recessions, might consumers try to save money by cutting back on mobile data, in addition to subscription video and fixed network voice service? The data suggests there is a possibility of such behavior, as fixed network broadband and mobile voice are the most-important services. That suggests the last services to be cut would be fixed broadband access and mobile voice.

U.S. consumer spending on phone services rose more than four percent in 2011, the fastest rate since 2005, according to Department of Labor statistics.

And mobility now drives much of that spending. In fact, families with more than one smart phone sometimes pay more for mobile service than they pay for cable TV and home Internet access.

The longer term issue is how much more spending can grow, as a percentage of total household spending. The question assumed more importance recently during the Great Recession of 2008, but is an on-going question in light of robust consumer adoption of smart phones and tablets, for example. In principle, widespread use of those devices could change spending on communications.

Though surveys taken in 2009 and 2010 seem to indicate that consumers were cutting back on communications and multi-channel video entertainment spending, other data from the Bureau of Economic Analysis suggests that did not happen; in fact, such spending increased between the start of 2008 and the middle of 2010, for example.

Since the recession started in the fourth quarter of 2007, U.S. consumers have apparently been cutting back on their spending. But Bureau of Economic Analysis data suggests that consumers have been cutting more in some areas than others, and actually have increased spending on many communications services.

BEA show aggregate personal consumption expenditures were up 2.9 percent, or $285 billion, between the fourth quarter of 2007 and the end of the second quarter of 2010, for example.

Mobile device spending was up almost 17 percent since the fourth quarter of 2007. And spending on communications and multi-channel video services was up by five percent.