Samsung Impact on Device Market

The issue in the smart phone ecosystem right now is whether any of other challengers to Apple and Samsung can claim a significant and permanent role in the device market. The future issue will be whether Samsung can outgrow its hardware roots and become a software leader. 

Some think more success in the enterprise markets would provide some sign Samsung is making that turn successfully. 

Success in challenging Apple's position in tablets remains a work in progress, one might say. But it is hard to deny the impact and leadership Samsung is having in smart phones. 

Where Will Mobile Internet Behaviors Lead?

The conventional wisdom about communications is that mobile increasingly represents the future for consumers. The devices people will use are mobile phones, smart phones and possibly tablets, but certainly not PCs or fixed network phones as the primary devices.

For example, U.S. mobile data revenues have surpassed voice for the first time. In 2012, for the first time in the history of U.S. mobile communications, customers spent more money on mobile data services ($94.8 billion) than on mobile voice services ($92.4 billion), the Telecommunications Industry Association now says.

The same trend is happening globally. But among the other issues such mobile behavior raises is the future use of both mobile and. fixed networks.

U.K. Android users send and receive 78 percent of all their data over Wi-Fi networks, according to Nielsen

Data collected by Mobidia shows that Wi-Fi usage is close to ubiquitous in developed markets, where more than 90 percent of smart phone users also use Wi-Fi as a means of data connectivity. In Hong Kong and the Netherlands, use of Wi-Fi by smart phone users is over 98 percent.

So though it might not be the main issue, one potential issue is whether, as usage shifts in some markets from voice and messaging to use of the Internet and apps, business models and services based mostly on Wi-Fi access could make more sense, to more users.

To be sure, mobile access always will be vital and valuable in many instances. But the larger business issue is what proportion of value can be supplied by fixed networks, how often, and what value end uses will place on such access.

At least in principle, one could envision scenarios where some users benefit from lower-cost prepaid style “mobile usage” while relying on fixed network access for the bulk of Internet-related operations, which in some cases will become the number one reason for using a smart phone.

In a larger number of instances, even when voice and text are valued, a device will be used primarily for Internet apps, and mostly when users are stationary, rather than out and about. Just as important is the growing importance of access to the Internet as a primary value of a mobile device.

About 25 percent of U.S. teens are “cell-mostly” Internet users, who report they mostly go online using their phone and not using some other device such as a desktop or laptop computer, the3 study by the Pew Research Center has found.

Few would extrapolate in linear fashion to future behavior when those teens grow older and join the workforce. But, as always, youth behavior tends to be a strong indicator of what their preferences will be in the workplace.

So the “money quote” is that “the nature of teens’ Internet use has transformed dramatically, from stationary connections tied to shared desktops in the home to always-on connections that move with them throughout the day,” says Mary Madden, Senior Researcher for the Pew Research Center’s Internet Project.

About 74 percent of teens ages 12 to 17 say they access the Internet on mobile phones, tablets, and other mobile devices at least occasionally, but the 25 percent who say they do so “mostly” on a mobile phone is higher than the 15 percent of adult users who say they are “mobile mostly.”

By comparison, 55 percent of adults use the Internet from a mobile device. However, this gap is driven primarily by adults ages 65 and older.

Adults under the age of 50, on the other hand, are just as likely as teens to be mobile internet users. Fully 74 percent of adults 18 to 49 access the Internet on a mobile  phone, tablet, or other mobile device.

In some cases, teens might use a mobile because they do not have access to a desktop or laptop computer. About 80 percent of teens have their own computer at home.

Among the 20 percent of teens who do not have their own computer, 67 percent have access to one they can use at home. Taken together, this means that 93 percent of teens have a computer or access to one.

The implication there is that teens mostly use mobile to access the Internet because they prefer to use such access. Among teen smart phone owners, 50 percent say they use the internet mostly using their mobile phone.

The findings show not only the prevalence of use of mobile data, but also that mobile access is disproportionately more important for lower-income adults. Adults with an annual household income of less than $50,000 per year and those who have not graduated college are more likely than those with higher levels of income and education to use their phones for most of their online browsing. 

Who Benefits From Growing Unlicensed Spectrum Inventory?

The Federal Communications Industry says it has identified more than 700 MHz of spectrum that is available in the United States for mobile broadband use on a nonexclusive basis, as well as an additional 345 megahertz that is either in the pipeline or has the potential to be used in such a manner.

You might argue that there could be lots of winners or losers as more unlicensed spectrum is made available. Licensed carriers and existing major ISPs might lose, to the extent new competition is enabled. New competitors, and smaller competitors, might win.
The big issue in some quarters is how much of that unlicensed spectrum might prove useful of fixed broadband as well. So far, most of the hope has centered on the potential use of “TV white spaces.”

As Google's white spaces data base suggests, many of the best places to use white spaces spectrum for fixed operations are in the rural areas where most wireless ISPs operate.

To be sure, most of the attention and business models using unlicensed spectrum have been for Wi-Fi and other personal area or in-home or in-office signal distribution, not for access, as provided by most ISPs.

But the white spaces spectrum probably is the biggest block of spectrum useful for access, rather than local distribution, as valuable as that might be.

As always, the business case is among the biggest issues. And one argument in favor of use of white spaces is the non light of sight propagation, a huge advantage for wireless ISPs who have in the past had to work with line of sight frequencies.

Right now, white spaces are in trial in the United States, South Africa and Kenya. All of that is useful, but widespread deployment will hinge on sustainable revenue models. In that regard, consumer models may hinge on traditional “access services.” Some enterprise models might work in the more traditional private network sense that many larger organizations have built and operated their own access and transport networks.

A Reflection in Income Inequality

Income inequality is a difficult issue to sort through, in part because how one measures, and what one measures, can lead to different conclusions.

It nevertheless is possible to argue that excessive income inequality is a bad thing, while arguing that some amount of income inequality is a positively good thing (to the extent it encourages people to invest in training, and further to note that some income inequality is justly deserved.

At the same time, one also should note that one reason income equality in some countries, which arguably has increased recently, is caused by "returns to wealth," and not necessarily by excesses on the "executive pay" front, which it might be easy to argue do exist.

The average annual income of the top one percent of the population is $717,000, compared to the average income of the rest of the population, which is around $51,000.It also is fair to note that there is a logarithmic difference. 

The top one percent of the top one percent have incomes of over $27 million. But the real disparity between the classes is not income but net worth. The top one percent are worth about $8.4 million, or 70 times the net worth of "regular folks."

As a simple look at the Dow Jones Industrial Average will suggest, owners of equities should have done very well since the early 1980s. Since dividend income counts as income, that will show up in the income indexes as well. 

Here's the point:  "The richest one percent earn roughly half their income from wages and salaries, a quarter from  self-employment and business income, and the remainder from interest, dividends, capital gains and rent."

About 16 percent of the top one percent in income were in medical professions and eight percent were lawyers.

Some 18 percent of the top one percent in 2005 worked in the financial industry. 

But the ranks of the one percent also include highly paid atheletes and entertainers, as well as the people leading firms that innovate in the Internet ecosystem. The point is that the vague sense that people "did not earn their money" covers a smaller range of people than commonly suspected. 

All that noted, the graph shows why returns to equity have had such an large impact. Equity owners would naturally benefit from the huge run up in equity values, irrespective of any changes in income trends.

What 1 Gbps Means for Netflix

Don't get me wrong: where it comes to broadband access speeds, faster is better. But "faster is better" really makes a difference when the entire Internet ecosystem has adapted to faster speeds. 

Changing just one element, such asdding Google Fiber on one end, doesn't buy as much "better experience" as you might think. In February, according to Netflix, its average speed for streamed Netflix content was about 3.35 Mbps on Google Fiber. It ranged in the 2.35 Mbps to 1.25 Mbps range for 17 different large ISPs. 

Right now, 1 Gbps translates into about 1 Mbps better speed, on average, when people use the streaming Netflix service, compared to most other major ISPs. 

But the Google Fiber experience also includes access speeds about twice as fast as some major DSL services. 

RANK	CHANGE	ISP NAME	AVG SPEED (Mbps*)
1	–	GOOGLE FIBER	3.35
2	–	CABLEVISION - OPTIMUM	2.35
3	–	SUDDENLINK	2.19
4	+5	COX	2.12
5	–	VERIZON - FIOS	2.10
6	-2	CHARTER	2.08
7	-1	COMCAST	2.06
8	-2	MEDIACOM	2.04
9	–	TIME WARNER CABLE	2.04
10	–	BRIGHT HOUSE	2.02
11	–	AT&T - U-VERSE	1.91
12	–	CENTURYLINK	1.68
13	–	WINDSTREAM	1.61
14	–	FRONTIER	1.54
15	–	AT&T - DSL	1.43
16	–	VERIZON - DSL	1.37
17	–	CLEARWIRE	1.25

FCC Approces T-Mobile USA Purchase of MetroPCS

The Federal Communications Commission has approved T-Mobile USA's purchase of MetroPCS, finding that the transaction will serve the public interest. The approval will not likely come as a shock, as there were no indications the FCC had serious objections related to the changed structure of the U.S. mobile market.

Among the benefits are the positive effects the merger could have on T-Mobile USA construction of a new Long Term Evolution network as well as enhanced ability for T-Mobile USA to compete in the national market.

T-Mobile USA, headquartered in Bellevue, Washington, is the fourth largest wireless service provider in the United States in terms of network coverage, number of subscribers, and revenues.

The network reaches 283 million people and covers approximately 1.2 million square miles. At the end of the fourth quarter of 2012, T-Mobile USA reported a total of 33.4 million U.S. subscribers, and service revenues totaling $4.1 billion.

64% of U.S. Commercial Buildings Do Not Have Fiber Access

You might think that after decades of activity by service providers to provide direct fiber connections to business customers, more than 36 percent of U.S. commercial buildings already would have been reached. You would be wrong.

Some 64 percent of U.S. commercial buildings do not have direct fiber access, according to Vertical Systems Group.

To be sure, business fiber availability has more than tripled since 2004, when the penetration rate was 10.9 percent. But the distance yet to be covered shows the work which remains. To be sure, the use of copper connections does not necessarily mean most businesses are “underserved.”

One can make the argument that for most small businesses, business class Internet access using either cable modems or digital subscriber line facilities supplies enough value to be workable today.

And most businesses do buy Internet access service, according to the U.S. Small Business Administration. In 2010, 90 percent of small businesses used the Internet. Excluding small businesses that do not have any computers, the level of broadband adoption jumps to 95 percent.

That might not be so true everywhere, though. 



That is not to say small businesses, or other businesses, “do not need” or “would not use” an optical access service if it were available, only that, at the moment, other copper access networks seem to work well enough.

"The U.S. fiber gap has been steadily closing each year and this trend will continue,” said Rosemary Cochran, principal at Vertical Systems Group.

On the other hand, service providers only have incentive to extend direct fiber connections to business when the demand exists, or the demand can be supplied profitably, and for most small business locations, either “willingness to buy” or “ability to supply at a profit” is lacking.

One might therefore expect slow, but continued progress on the “fiber to business” front, but no major leaps.

20% of U.S. Residents Do Not Use the Internet

Quite often, our assumptions about broadband access or Internet usage is that we have failed in some way to provide it. For the most part, that is not the current "problem" with use of the Internet and broadband access services.  But value, not availability, is the main barrier now, in the U.S. market.

More than 20 percent of U.S. adults above the age of 18  do not use the Internet today. Some don’t feel Internet access is essential for meeting their information or communications needs, while others simply don’t know how to use it.

But that's a different problem than "supplying" access. Making the service available requires that a person sees value there, and wants to use such access. 

ARCEP Warns it Might Prosecute Skype

ARCEP, the French communications regulator, says it might prosecute Skype for failing to register its "SkypeOut" service as an " electronic communications operator" in France. 

Regulators operate by one simple principle: if something quacks like a duck, and walks like a duck, it is a duck. 

One Recurring Problem for Mobile Service Provider Innovation

There is a recurring and major issue where it comes to new lines of business mobile service providers might like to launch, namely the smallish size of the opportunity. Some might point to location-based services as obvious candidates for mobile service providers. 

That is a reasonable assumption at a high level. At a practical and granular level, it is more difficult to achieve revenue commensurate with effort, in many cases. Consider the "new $300 million"  network-based location information opportunity. 

“We see a range of new "location information services" emerging around insurance, banking, analytics, M2M/MRM, advertising, hospitality and IVR," says ABI Research senior analyst Patrick Connolly.

That might be true, but will not immediately be so attractive to any single tier-one service provider. More likely, third parties will take the lead. 

Tablets Will Generate 35% of $25 Billion App Revenue

Tablet apps will generate $8.8 billion in revenue in 2013, compared to the $16.4 billion expected from smart phone apps, according to ABI Research. 

Of the combined $25 billion, 65 percent will come from Apple’s iOS ecosystem, 27 percent from Google’s Android, and the remaining eight percent from the other mobile platforms.

Tablet apps will steadily increase their share of the market over the coming years, in 2017 nearly matching the amount of smart phone application revenues and surpass them in 2018, when the combined revenue base will reach $92 billion, ABI Research says. 

Location's Role in Mobile Ad Effectiveness

It is drop dead simple why mobile has a unique advantage in the advertising and promotions business. Simply stated, people are more likely to interact with ads or messages or promotions when they are physically in proximity to a particular business using mobile for messaging. 

Telecom Capital Investment 2013 to 2030 will be $9.5 Trillion

If one assumes a global requirement to invest $57 trillion in non-telecom infrastructure between 2013 and 2030, about 60 percent more than was invested in global infrastructure in the most recent 18 years, there are some rather obvious conclusions for telecom investment.

Competition for capital roads, power, bridges and other infrastructure will be severe. The telecom itself will need to invest about $9.5 trillion  between 2013 and 2030, McKinsey Group estimates.

Given debt loads most countries face, it is not likely there will be too much extra funding available to help service providers create all that new infrastructure. So the growing trend of serious regulator thinking about how to create incentives for investment is not misplaced.

Each Cloud Segment Has a Different Leader

At least so far, each of several cloud services segments seems to have a different market leader, with the caveat that what one means by "cloud" service can vary.  

Cloud infrastructure service revenues grew 15 percent between the fourth quarter of  2011 and the fourth quarter of  2012 to reach USD$12.5 billion. 

Amazon continues to lead the infrastructure and platform as a service portions of the cloud  services market.

While revenues associated with the IaaS and PaaS segments account for only 15 percent of the overall market, over the past yea IaaS revenues grew 55 percent while PaaS revenues grew 57 percent

The more mature managed hosting part of the business grew six percent (some people might not classify traditional hosting as a cloud service). 

The co-location segment grew 13 percent. Combined, co-location and hosting account for 74 percent of total "cloud" revenues. Synergy also considers content delivery networks part of the cloud services market. 

Not all observers would consider either hosting or colocation, or content delivery networks, to be part of the core cloud computing market. 

Cloud Infrastructure Service Market Leaders by Segment, Q4 2012

Source: Synergy Research Group/TeleGeography

Mobile Growth Shifts

Between now and 2017, the global installed base of mobile subscriptions will grow to 8.9 billion, and 80 percent of those subsciptions will be added in developing countries, according to Strategy Analytics.

Subscriptions in developing countries will grow at a compound annual rate of 7.5 percent, substantially faster than the 2.8 percent growth that will be seen in developed countries. 

With worldwide mobile service revenue growth slowing to about two percent per year through 2017, developing countries like Nigeria, where revenue is growing at twice that rate, can be very attractive markets to international players, according to Phil Kendall, Strategy Analytics director. 

The Middle East and Africa, for example, will generate 28 percent revenue growth between 2012 and 2017. 

The developing countries are changing dramatically as markets for communications devices and services in large part because disposable income is growing.

The African Development Bank estimated that in 2010 more than a third of Africa's population - some 350 million people - could be counted as middle class, up from 220 million in 2000. That will drive broadband services growth, as well as mobile services adoption.