U.K. Mobile Operator Three Launches M2M Platform

m2m revenue forecast worldwide in billion EUR

U.K. mobile operator Three has launched a wholesale machine-to-machine (M2M) platform designed to bring down setup costs and speed time to market for M2M retailers.

Ericsson is providing the platform, said to enable MVNOs launching M2M services to do so in just two weeks time.

Three partners get their own branded portal, the ability to activate and deactivate their own connections, apply data caps and track data usage.

Most researchers believe M2M will be a big market for mobile service providers.

Mobile Service Provider Capex Will Shift to Small Cells by 2014

Joe Madden of Mobile Experts thinks the global mobile service provider industry is about to enter a period where capital investment shifts to smaller cells. To be sure, 2012 seemed to see a waning of capital investment, with 12 percent lower RF transceiver shipments than 2011.

Madden says that fits a pattern of investment in transmission facilities that has been typical of second generation and third generation networks.

He calls the pattern a "two hump camel.” The first hump reflects the initial build. About four years later, those initial systems are upgraded with additional radio capacity and additional towers, and the second "hump" begins.

Of course, many service providers globally are on the cusp of major investments for Long Term Evolution. But global economic uncertainty appears to be causing a delay in capital investment, either in the form of additional 3G base stations or new LTE base stations, Madden argues.


The next big upsurge in investment will occur about 2014 or 2015, when consumers start to complain about performance. At that point, mobile service providers will turn to small cells for their 3G and LTE networks. Madden predicts more than nine million carrier-grade capacity small cells will therefore be deployed during 2017. 

How Much Mobile Traffic Can be Offloaded to Wi-Fi?

How much smart phone traffic can be offloaded to Wi-Fi is uncertain, at this point, though it already is clear that perhaps a majority of at-home smart phone usage routinely is shifted to Wi-Fi access. 

The bigger question is how much "out and about" usage might be shifted to Wi-Fi, particularly in urban areas. That might affect the deployment of small cells that also support Wi-Fi. 

Softbank in Japan has tested the offload potential of dense Wi-Fi deployments and apparently has concluded that less than 25 percent of mobile data traffic can be offloaded to public Wi-Fi in the long term.

Those estimates correspond with figures Boingo suggests. Boingo believes about 22 percent of mobile traffic will be offloaded to Wi-Fi by about 2016.

Others might disagree. Cisco analysts say as much as 30 percent of mobile traffic could occur on Wi-Fi networks. And analysts at Juniper Research think more than 60 percent of mobile device traffic could be offloaded to Wi-Fi means by about 2015.

Others say studies show as much as 70 percent of smart phone traffic uses a Wi-Fi connection.

Service Providers Don't Always Pick Technology Winners

For those who can remember widespread cable operator interest in "interactive TV," dating back to the 1980s, there is a lesson. Service providers are not always "right" about what consumers want, or how to supply the demand.

The early thinking was that people wanted, and would use, interactive features built around the video experience, using the TV, remote control and cable box as enablers.

As it turns out, people do "interact" or "augment" video programming, but in a way not foreseen: they use their PCs, tablets and smart phones to multitask. In other words, they "do other things" while watching TV. 

But they do not really want to interact directly with video content. The lesson is that suppliers do not always understand what it is that people might want to do. So the instinctive response is to ask people what they want, what they might pay for experiences and how they want those experiences delivered. 

But consumers nearly always have a tough time figuring out how they might use a product they never have seen. In such cases, asking doesn't help. Steve Jobs, former CEO of Apple, perhaps was the foremost practitioner of a skeptical approach to asking people what they want. 

Android, Apple iPhone: Key Mobile Shopping Differences

IBM’s Digital Analytics Benchmark reported U.S. Black Friday sales and the news is reasonably good. Overall online sales grew by 17.4 percent while mobile sales grew to make up 24 percent of traffic. That probably does not come as a surprise. 


The study suggests 75 percent of the activity was from PCs. Of the mobile activity, a highly disproportionate share was conducted by owners of Apple iPhones. That is more notable. 

Apple iPhone owners were nearly four times more likely to conduct transactions using their devices, compared to Android owners. 

What nobody can tell, at this point, is whether those differences are due to some key difference in user interface, activity preferences or are more related to differences in end user personal wealth, or something else. 

Google Rumor: 13-inch Chrome OS Touch Notebook?

The launch of a rumored touch-enabled Chrome OS touch notebook might suggest Google is tiptoeing even further towards offering its own branded devices, as Microsoft has done with its branded "Surface" tablet. 

As always, the move would increase the odds of channel conflict for both Google and Microsoft. 

European Smart Phone Penetration Hits 54%

Smart phone penetration in EU5 (France, Germany, Italy, Spain and UK) is now at 53.7 percent, with nearly 130 million people using smart phones in the three month average ending September 2012, according to comScore.

Out of this smart phone audience, 15.5 percent also own a tablet, compared to 9.3 percent last year.

Deutsche Telekom Faces Same Challenge as Many U.S. Service Providers

Most telecom executives, especially those facing growing competition from cable operators, have had to ask hard questions about their options for upgrading access networks. The simple fact is that a full replacement of the network to fiber to the home technology is expensive. 

Japan's Bank Nomura estimated the cost of a digital subscriber line upgrade, in areas where Deutsche Telekom needs more speed to counter cable operator high speed access offering, at around 4 billion euros ($5.1 billion), while a full upgrade to fiber to the home, across Germany, could cost around EUR80 billion, or perhaps $102 billion.

So Deutsche Telekom plans to selectively upgrade, using a faster form of digital subscriber line technology, in those areas where competition is most fierce. The vectoring approach provides a dramatic boost in speeds. 

Some would argue that Deutsche Telekom should simply rebuild its network using fiber to the home, essentially creating a "future proof" network. 

The problem, some would say, is that the financial return from doing so is questionable, at some level. Mobile substitution is one issue. The bigger problem is that the basic business case, overall, is much tougher. 

A shift of end user spending to mobile services means less potential revenue from a mix of services, ranging from voice to high speed access to video. Also, incumbent market share is far lower than it once was. In many cases, established operators have 30 percent to 40 percent market share, where they once had virtually 100-percent share. 

That means a complete upgrade is bound to "strand" a significant portion of those assets, which will not have revenue attached to the lines. 

How Much Further Can Fixed Network Broadband Grow?

It almost seems impossible that fixed network broadband Internet access could have become a “legacy product” so soon, at least in the U.S. and other developed markets, but that is what has happened.

In the U.S. market, most potential consumers already buy broadband. Leichtman Research Group points out that  the 17 largest cable and telephone providers, representing about 93 percent of the total market, acquired about 580,000 net additional high-speed Internet subscribers in the third quarter of 2012.

Collectively, these service providers now account for over 80.7 million subscribers. Cable companies have 46.2 million broadband subscribers, and telephone companies have 34.5 million subscribers.

The issue is how close the U.S. market is to full saturation. By some estimates, U.S. fixed network broadband penetration is near 80 percent of homes. You might argue that leaves room to grow, and there is, but not much.

The reason is that not every home requires broadband. Not every home owns computers. Not every home has users that want to use at-home Wi-Fi to support tablet and smart phone access, or game consoles or Internet-connected TVs.

Also, some households substitute mobile access for fixed connections. Perhaps six percent of U.S. homes using broadband already seem to rely exclusively on mobile connections.

When asked what device they normally use to access the internet, 25 percent of smart phone owners say that they mostly go online using their phone, rather than with a computer. 




While many of these individuals have other sources of online access at home, roughly one third of these “cell mostly” internet users lack a high-speed home broadband connection, according to Pew Internet & American Life Project. That implies about an eight percent of households that only use mobile broadband. 

Many studies show that income is directly correlated to PC ownership and broadband usage. Households with annual incomes of at least $75,000 buy broadband at at least an 87 percent rate. Homes with annual incomes of $30,000 to $49,999 buy broadband at a rate of about 64 percent.




The top cable companies added about 575,000 subscribers, while the top three telephone companies added about 5,000 subscribers, in large part because AT&T and Verizon actually lost customers.

AT&T and Verizon added 749,000 fiber subscribers (U-verse and FiOS) in the quarter, while having a net loss of 799,000 DSL subscribers.

The slow pace of net additions simply reflects a market that is nearly saturated. We will know when the market is completely saturated when net additions hit zero, or very close to it. .

Global Telecom Business: No "One Size Fits All" Strategy Exists

Once upon a time, all communications service providers pretty much "looked alike" in terms of strategy. That is less true now, and will probably be much less true in the future, as service providers adapt to the realities of many different segments of the communications business.

These days, strategies are diverging. That might especially be true in developed markets, where actual practices have lead to more strategic diversity over the past couple of decades.

Those differences are driven, in large part, by a bifurcation of opportunity in the global telecommunications business, which is predicted by virtually all analysts to be growing, but unevenly.

There are lots of places where phone penetration is 22 percent, for example, or where use of the Internet is about 23 percent, despite the fact that mobile penetration, in terms of “accounts,” now is as high as 79 percent, even in the “developing” countries.

Of course, usage even within a single country or region, and revenue prospects for service providers, are not distributed evenly. Generally speaking, growth opportunities are disproportionately found in the Asia-Pacific region, though Africa and Latin America are growth areas as well.

The obverse is true in much of of the developed world, where classic markets for voice and messaging are saturated, and even mobile broadband, the current growth driver, will face maturation not so long from now. That of course explains the serious and even furious pursuit of new growth drivers by executives in the mobile and fixed network service provider industries.

The European telecom service market decreased for the third year in a row, by 1.5 percent, the European Telecommunications Network Operators Association reports. You might blame a tough economy for the contraction, but ETNO points out that in the most-recent year, in a context of moderate economic recovery (+4.2 percent for current gross domestic product in the region), the lagging performance suggests structural changes, not just cyclical economic impact.

But some observers might argue that economic woes are having an impact.


The decline in fixed telephony revenues is accelerating (-8.3 percent in 2011 and –31 percent over the last five years), driven in part by a negative five percent growth of fixed lines in service. Since 2005, fixed line subscribership is down 22 percent.  The bad news is that mobile revenues, long the driver of industry growth, also are declining (-0.6 percent)

Mobile voice revenues were down 4.7 percent in 2011 (–13.2 percent over the past three years), a decline driven by significant drops in some large countries: Spain (-8.3 percent),
France (-8.2 percent) and Germany (-7.1 percent).

Fixed network broadband revenue is the bright spot, as revenues were up 6.5 percent in 2011.

Mobile services, though, remain the bulk of telcos revenues, accounting for 52 percent of the total market (142.7 billion EUR in 2011).

The report also shows the divergence between European and the United States market, where it comes to revenue growth. Since 2006, U.S. service providers have done better than their European counterparts.

Precisely why that should be the case is not always so clear. One might argue that European markets are more competitive. One might argue European markets are more fragmented. One might argue that calling and texting tariffs have been higher, since there is more international roaming across Europe, compared to the continent-sized U.S. market.

Certainly, regulators have been squeezing revenue by mandating lower charges for cross-border roaming. Those lower tariffs of course will put pressure on gross revenue.

Moreover, Europe's share of the global telecoms market has been declining regularly over the recent years, from 31 percent  in 2005 to just over 25 percent in 2011 as the gap between
global growth (+3.2 percent in 2011) and growth in Europe widens.
So different business strategies will make sense in different markets and parts of markets. Service providers in high-density markets with high per-capita income will be the first to find they must “outgrow” reliance on voice, messaging and even broadband access.

Service providers in low-density, high per-capita income areas will find they can rely on “basic” services for quite some time to come.

Service providers in high-density, low-income areas increasingly will be looking at ways to boost average revenue per user, while providers in low-density, low-income areas generally will be looking at ways to provide basic access services.

In telecom, there is no “one size fits all” strategy.

Does Movie Piracy Actually Increase Movie Revenues?

Does illegal file sharing of movie content actually increase movie box office revenues? One study suggests that might actually be true, though the magnitude of the revenue lift might be tough to determine. 

Researchers say the illegal file-sharing spreads information about content that encourages some users to pay, when they might not otherwise have done so. Content owners won't be impressed, as the self evident fact is that piracy does drive significant revenue loss. 

In fact, piracy affects many industries. In this one example, the revenues in red represent estimated losses because of piracy. 

Why Technology Companies Should Not Pay Taxes

Though it is counter intuitive, consumers actually are better off when corporations do not pay any taxes at all.

They collect taxes on behalf of the taxing authority, but that's it. Taxes are a cost of doing business, like any other, so some other stakeholder winds up paying. The only issue is which stakeholders those are.

A tax requires that the wallet of some human being gets lighter; the study of exactly whose purse it will be is the study of tax incidence.

With respect to the incidence of corporation tax, we have known since 1899 (when Seligman first pointed it out) that the company itself does not ultimately carry that burden. In theory it's some mixture of the customers (who end up with higher prices), the workers (who get lower wages) or the shareholders (who see lower returns).

But there is an argument to be made that it is the workers and the shareholders who, in the end, take the hit.

So to the extent that a person actually cares about economic growth, this matters. To be sure, some people do not apparently actually care about growth, but economic growth is what allows people to earn a living, and supports all government spending. So economic growth really does matter. 

A some level, taxes are necessary. But some taxes are harmful because they depress the growth that supports all jobs. Corporate taxation is one of those harmful taxes. 

Usage-Based Pricing Actually is Better for End Users

The most economically consumer friendly retail payment model for end users might actually be "usage based" billing, even though people rather instinctively prefer "unlimited" or flat fee models. 

And many consumer advocates think usage based billing inherently is unfair to end users.

To be sure, there are advantages to flat rate pricing. Flat fee means users know what to expect, which helps with budgeting. 

And flat rates mean no danger of bill shock, as could happen, and does happen, when users are roaming, or using streaming video.

But flat rates are not the same as "unlimited usage" plans. These days, pricing is moving to "banded" ranges, or "buckets of usage" that have usage and pricing roughly correlated within some ranges. 

So some modified way of rating usage, using "buckets" rather than actual per-byte usage, arguably is better for buyers than unlimited flat rate pricing.

There are issues, even from a service provider perspective. There always is a tension between operational simplicity and sophistication in retail customer packaging and network management. Simple approaches often are cheaper, but at the cost of forfeiting creation of more-nuanced subscriber plans.

Likewise, policy management tools that can prioritize and shape bandwidth consumption can help service providers alleviate congestion and provide higher end user experience, where regulators allow such tools to be used. But there appear to be lots of trade offs.

Most executives would agree that flat-rate billing for unlimited use is a difficult and likely unsustainable retail packaging model for broadband access, especially in the mobile services realm. But what should be the replacement? That seems to be a tougher question.

As a corollary, executives must weigh “pricing by value,” or “pricing by application,” which means more complexity for consumers, or some simpler “pricing by consumption” approach.

Likewise, methods for managing mobile networks to avoid peak-hour congestion arguably can be viewed with circumspection. And the issue there similarly seems to be a mix of concerns about imposing more overhead on operations, irritating customers and adding complexity to the marketing and billing process.

Mobile service provider executives say they prefer to charge subscribers for data based on tiered usage plans, rather than by application, an on-line survey of some 300 mobile service provider respondents suggests, according to Connected Business Research.

For example, a large number of operators were considering changes to billing plans in 2012, but a substantial number of executives also are concerned that market perception and competitive considerations might prevent them from adopting their preferred billing schemes.

Retail billing preferences have to be balanced against market realities, in other words.

Mobile Payments Surge on "Black Friday"

A huge surge in mobile payments seems to have occurred on the U.S. "Black Friday," the day after the Thanksgiving holiday that historically marks the start of the Christmas and holiday shopping season. 

Somehow, it doesn't seem surprising. IBM analysts estimate that mobile shopping activity rose about 21 percent on Black Friday, year over year. But mobile purchases also surged on Thanksgiving day itself. 

At some point, reporters and analysts will stop noting such occurrences, and that's when we'll know mobile commerce (shopping and payments) simply has become another form of "e-commerce," like online shopping, which largely and justifiably is considered unremarkable these days. 

But some would say there is little correlation between the size of sales on Black Friday and overall sales during the crucial Christmas and holiday shopping season. So there's even more reason not to get worked up over the size of Black Friday sales. It is not actually a very consistent predictor of ultimate seasonal sales volume, as it turns out. 

Can Microsoft Become an Ad-Supported Technology Company?

Traditionally, Google has been the primary and leading example of a technology company supported by advertising. But others are at least thinking about what could be possible. Ad-supported tablets might be one example. 

Perhaps more common is ad-supported software ad-supported software, with most people thinking of mobile apps, perhaps, though there also are examples of business software supported by advertising. 


Microsoft has been looking at ad-supported software since at least 2005. And some say Windows 8 will mark an expansion of that effort, integrating advertising into the operating system itself. 

Some think that could lead at some point in the future to ad-supported versions of the operating system, possibly a freemium model, for example.

Up to this point, software has been the type of product most readily adapted to advertising support, one might argue. 

In addition to Google, Facebook, Pandora, Yahoo and AOL have had predominant ad revenue models.

For Microsoft, the "Office" suite has driven about 30 percent of revenue.