Tablets Increasingly are Video Consumption Devices

Video is one of the main reasons people use tablets, according to Business Intelligence. That has been true for a couple of years. 

Watching videos and sharing them are among the top-10 activities tablet users engage in on their tablets,

For smart phone users, neither activity cracks the top-10 list.

Tablet owners are far more likely than the average U.S. consumer to disconnect their video subscriptions and use streaming and download services such as Hulu, Apple TV, iTunes, Netflix, and Google TV.

The U.S. Digital Video Benchmark 2012 study from Adobe showed growth of mobile video views of 300 percent. 

Among U.S. Millennials 14 to 23, tablets are nearly as popular for watching TV shows as Blu-rays or DVDs. That might be a trend that changes as Millennials age, but it is too early to say for certain.

Some 25 percent of respondents in this age group say they watch TV shows on tablets every day or weekly, compared to 24 percent who do so on DVD or Blu-ray.

A 2011 Ooyala study found that tablet users watch videos nearly 30 percent longer than those who watch video on desktops and that tablet users complete videos at double the desktop rate.

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How Much Competitive Advantage Did T-Mobile USA Gain from "Jump?"

“Sustainable competitive advantage” is a difficult challenge in competitive markets, and especially when the advantages are new retail packaging concepts. T-Mobile USA has gotten confirmation of that difficulty.

T-Mobile USA had unveiled its “Jump” program just a few days ago. Jump allows customers to trade in their existing phone as much as twice a year, with payment of a $10 a month fee. That innovation was intended to differentiate T-Mobile USA from the policies of the other three national carriers, which have restricted “new phone upgrades” to about once every 20 months or so.

That move is part of T-Mobile USA’s “Uncarrier” campaign, designed to position T-Mobile USA as different than AT&T or Verizon Wireless.

But AT&T already has countered with its own similar program, and Verizon will unveil the details of its new plan shortly. Sprint’s response is not yet known.

Firms can obtain a competitive advantage by “implementing value-creating strategies, not simultaneously being implemented by any current competitor,” strategists might say. But it often is too easy to claim such advantage.

Competitive advantage really only is possible when strategies provide value that is rare, valuable, and non-substitutable.

“Sustainable competitive advantage” is obtained when those advantages that are not easily copied by other contestants and can be maintained over a long period of time.

If a firm’s competitors can counter quickly, there is no sustainable advantage. In fact, one might argue whether there is much advantage.

In the mobile service provider business, one might ask whether there is any such thing as sustainable competitive advantage. From time to time, a firm can gain some ground. AT&T having a monopoly on the Apple iPhone provides a recent example.

Verizon Wireless building out its Long Term Evolution 4G network might provide another example of a tactical advantage.

But it is hard to point to sustainable sources of advantage in the mobile business, in the sense of “rare” and “non-substitutable.”

AT&T “Next,” to be available July 26, allows AT&T customers to buy their devices on installment plans that pay off the device cost in 20 months, as does the T-Mobile USA plan.

AT&T customers also can upgrade after a year by turning in their old phone and beginning payments on a new phone.

Verizon is expected to detail its "VZ Edge" upgrade option in the near future as well.

Using AT&T Next, a customer buying an Apple iPhone 5 with a retail price of $650 would make monthly payments of $32.50 a month. Under a traditional AT&T two-year contract plan, the same device would cost about $200 upfront.

The shift of all three carriers to new device payment plans will arguably be more transparent and will allow customers the freedom to upgrade devices on a more timely basis.

But the moves by Verizon Wireless and AT&T to match the new T-Mobile USA device programs also shows how hard it will be for T-Mobile USA to mount and sustain any marketing initiatives that truly distinguish T-Mobile USA from either AT&T and Verizon Wireless, when those carriers think the new initiatives, offers or retail packaging actually will resonate with customers.

A Look at LTE Prices Across Countries

The folks over at Phone Arena have put together an interesting analysis of Long Term Evolution rates and plans across the United States, Canada, United Kingdom, Germany, South Africa, India and Australia.

The analysis plotted the cost, as it relates to the size of data plans, generally for the largest service provider in each country. As you might expect, there are wide differences in price, especially for entry-level plans.

That would be expected when comparing countries such as India or South Africa with the United States, Germany or Australia, where average incomes and prices are higher, across the board.

Some of the findings you would expect, such as the lower cost per megabyte of use as the customer buys in greater volume. One also would expect prices to vary between countries, and that also was found to  be the case.

There is much less correlation of plans and prices between leading service providers across countries. 

One suspects the results would be far more consistent (cost per month) if nominal prices were adjusted for living costs in each country, so that the cost of using LTE was measured as a percentage of income, for example.

The reason for that adjustment is that living costs, and therefore wages and income levels, are quite different in India or South Africa and North America, for example. So all nominal prices for similar or identical goods will vary accordingly.

It therefore will cost more to build an LTE network in North America than in India or South Africa, one might argue.

There are also regulatory costs and scale effects that vary from country to country, and the level of competition arguably will play a role in prices as well. 

On the other hand, those same competitive dynamics probably will suggest that all competitors in a single market will have prices that are fairly closely correlated.

Why Web Apps are Slow

Thosse of you who are developers, or at least "technical," will enjoy this detailed analysis of why mobile apps are destined to underperform mobile web apps for quite some time. 

Why Does AT&T Want to Buy Leap Wireless Now?

Why does AT&T want to buy Leap Wireless now? That’s a different question than asking why AT&T might want to buy additional assets.

AT&T has been among the list of potential Leap Wireless acquirers for some time, along with T-Mobile USA and Sprint.

There are lots of reasons for the expectations of further acquisitions by the U.S. market leaders. Organic growth has become quite difficult in a saturated market, making acquisitions within the core market, and acquisitions in new markets, the fastest way to obtain additional subscribers and revenue growth.

And though top-tier mobile service providers are not unduly enamored of prepaid accounts, as opposed to postpaid, prepaid remains one of the few places in the domestic market where growth is expected.

And since the major carriers have tended to favor separate brands when participating in the prepaid business, the Cricket business works for AT&T.

One motivation that was behind the ill-fated bid for T-Mobile USA--spectrum assets--also is an attraction here. Getting additional customers is helpful, but spectrum assets also are helpful, especially when complementary to AT&T’s current holdings.

Still, there is the issue of timing. Assuming regulatory issues are not an issue, and market conditions are neutral to favorable, why make the bid now?

Maybe because other potential rivals are preoccupied. T-Mobile USA continues to digest MetroPCS, while Sprint has combined with SoftBank and Clearwire. Verizon Wireless has little interest in becoming a bigger force in prepaid.

But there is Dish Network.

AT&T to Buy Leap Wireless

AT&T is buying Leap Wireless, including its five million subscribers, the Cricket brand and spectrum, network and retail assets, though the deal is subject to regulatory approval.

Leap's network covers 96 million people in 35 U.S. states, most of whom use Leap’s CDMA 3G network. But Leap also has a 4G Long Term Evolution network covering 21 million people.

AT&T says it will retain the Cricket brand name, provide Cricket customers with access to AT&T's 4G LTE mobile network, use Cricket's distribution channels and expand Cricket's presence to additional U.S. cities.

The move arguably offers the primary advantage of a new platform to gain share in the prepaid market.

But the proposed acquisition also includes spectrum in the PCS and AWS bands covering 137 million people and is largely complementary to AT&T's existing spectrum licenses.

AT&T says that Immediately after approval of the transaction, AT&T plans to add Leap's unutilized spectrum, covering 41 million people, to AT&T’s LTE network.

Regulatory approval might take as long as nine months, if past precedent applies. The deal would not change U.S. market share in a material way, one might argue. Leap Wireless has market share of less than two percent, and lower average revenue per user than typically is the case for a postpaid service provider.

EE in the United Kingdom typically sees postepaid average revenue per user that is as much as six times the value of a prepaid account.

One Immediate Benefit of New Competition in Myanmar: SIM Cards 2 Orders of Magnitude Cheaper

Competition is supposed to bring new consumer benefits. And that appears to be what new mobile service providers have planned for their new networks in Myanmar.

Norway's Telenor and Qatar's Ooredoo say they will charge around 1,500 kyat ($1.53) for a SIM card. Consider that, at present, SIM cards can cost more than $200 each. So SIM cards will be available at two orders of magnitude less than at present.

What Does Google See in Chromebooks?

Google’s Chromebook initiative initially was derided by many as “too little, too late,” coming at a time when the market was turning to tablets as the growth category in computing devices.

Google obviously did not agree then, and sales results now suggest Google was on to something. Though Chromebooks still represent a small portion of the total U.S. market for laptops and netbooks, Chromebook market share, and apparently growth rate, is increasing.

The devices had about four percent to five percent market share in the first quarter, though that was up from one percent to two percent in 2012, according to Mikako Kitagawa, Gartner analyst.

On the other hand, there is little question that tablets are leading consumer interest in computing devices at the moment. Global PC shipments dropped to 76 million units in the second quarter of 2013, a 10.9 percent decrease from the second quarter of 2012, according to preliminary results by Gartner.

This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market’s history, Gartner says.

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” said Mikako Kitagawa, Gartner principal analyst.

“In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC,” Kitagawa says.

What does Google see in the PC market that others might not? As with Android, Google’s revenue model benefits from increasing the ways Google can steer users to its own apps, devices and operating systems.

Though it might be hard to quantify directly, the more touchpoints Google has, the more places and times it can display ads that underpin its current revenue model. That is the same reason Google has been so proactive in pushing for faster broadband access, lower cost broadband access and ubiquitous access.

In addition to the “always connected” angle, future web apps might act much like launch “native apps” on devices, even when those devices momentarily are not connected.

Chromebook might seem like a distraction. But it is a piece with Google’s support of Android, maps, office suites, YouTube and other apps, devices and operating systems. All of that contributes to creating an ecosystem where the ability to sell ads based on detailed knowledge of people, their behaviors and activities is possible.

Internet Users, Everywhere, are Sophisticated Consumers of Access

People are sophisticated consumers of Internet access services, a global impact study suggests. 

Teenage users in South Africa, for example, use their mobiles and fixed network access in ways that minimize costs, maximize convenience and use the strengths of each method at different times and places.

Among low-income users, free use (such as that in a library) supports resource-intensive content creation or work operations where storage, time, bandwidth and bigger screens are key requirements or at least more conducive to achieving the Internet session goals.

But users avail themselves of their mobiles for Internet access for time-sensitive pursuits, interpersonal communication and low-bandwidth media consumption.

Shared access venues are seen as better for consumption of media and working with large-format documents, while mobile access supports everyday social connections and messaging.

In South Africa, of 8.5 million Internet users in South Africa, 7.9 million accessed the Internet on their phones in 2011, and that 2.48 million of these used only mobile phones for their Internet access.

Also, among a population of 49 million people, ITU estimates suggest there are 725,000 fixed broadband subscriptions, but over 50 million mobile subscriptions.

One possible conclusion is that Internet users, rich or poor, are sophisticated consumers of Internet access services. In developed nations, end users likewise mix use of mobile Internet and fixed network access (Wi-Fi, typically) during the course of a day, in ways that similarly provide value at lower cost.

But it appears cost is not the only dimension upon which consumers are sophisticated.

Internet access speed might be a major reason large number of developing market public access users use shared computing services, even when they also have computers and Internet connections at home, a study suggests.

In other words, people are smart. They use Internet access tools the way they might use other tools, each with a purpose.

In Brazil, home Internet penetration at home among shared venue users was 40 percent, compared with the 24 percent national average. In other words, a significant percentage of people with at-home connections still use shared Internet access centers.

In Chile, 33 percent of public access users had Internet connections at home, as

did about 25 percent of users in Ghana and the Philippines.

Users said “better equipment,” “faster connections,” and availability of “help” were key reasons for using a shared center.

In other words, the Global Impact Study of Public Access to Information & Communication Technologies study suggests users are aware of the benefits of using different access networks and services, in different ways, for different reasons that provide higher value.

Projections of Developing World Internet Adoption are Wrong, as Voice Projections were Wrong

Current projections about developing world use of the Internet generally feature a linear growth pattern. That is a rational way of think about it. 

But it also is likely to be wrong. Forecasters looking at use of voice communications in the developing world likewise were linear. 

But those forecasts were quite wrong. Why they were wrong is a story about deregulation, competition, using "capital-rational" networks and changing consumer perception of value. 

Voice communications, provided by mobile networks, became non-linear and exponential over a brief period of not even a decade.

Based on that precedent, one also would predict that Internet adoption in the developed world also will be non-linear. It is hard to predict, as the impact of mobile communications was hard to predict. 

But one clear implication is that the massive adoption wave happened only when service providers switched from expensive fixed networks to more-affordable wireless networks. In fact, from 1997 to 2007, world fixed lines were up relatively slightly. 

As with voice, mobility and wireless are likely to be the foundations for a similar upsurge of Internet access in developing nations. 

BT to Offer 300 Mbps by end of 2013

Sometimes slowly, fixed network access speeds are climbing towards a gigabit standard. 

BT now says it will launch a 300-Mbps service in about 50 exchanges by the end of 2013. Those exchanges already have fiber to home networks in place. 

Existing customers on the fiber to home network will also be able to upgrade to the faster speeds by switching to the £50 "Unlimited" package, which comes without any usage limits and is free from traffic management. 

Are Mobile Broadband and Smart Phone Internet Distinct Market Segments?

Strictly speaking, observers consider the use of dongles as "mobile broadband," while use of smart phones for Internet access is considered something else.

In the U.K. market, for example, about five percent of surveyed respondents say they use mobile networks for Internet access to their PCs. 

About 33 percent say they use their smart phones for Internet access. Of course, many smart phones feature personal hotspot features, making the distinction fuzzy, at best. 

But it always is possible to identify "market segments" that some might say are distinct, and others believe are parts of a single market. Are triple-play services a distinct market from the markets for constituent services?

Is business high-speed access a different market from consumer high-speed access? Is 3G data access a different market from 4G data access?

The answers are more difficult because there always are some customers who use their services as though the choices (mobile broadband or smart phone access versus fixed network access, for example) are in fact clear substitutes.

In other words, some consumers make their own decisions about what products are functional substitutes, and which are not, even when regulators and service providers consider the products separate markets. 

Ofcom, for example, does not consider fixed wireless access a functional substitute for fixed high speed access supplied by either cable companies or over BT's network, since Ofcom is largely concerned with wholesale offers. 

And fixed wireless networks are not especially well suited to wide scale wholesale operations, Ofcom believes. "Deployment of broadband services using fixed wireless access so far has been limited to specific geographic areas or specific circumstances," Ofcom says. 

"In the short term, given the costs involved in providing fixed wireless access and the lower quality of the service, it is unlikely that an increase in the price of wholesale broadband products will lead a substantial number of CPs (communications providers) to switch to fixed wireless access at the wholesale level," Ofcom says. 

The point is that although there are reasons to consider mobile broadband as a distinct product from smart phone Internet access, the boundaries are fuzzy, and likely will become more fuzzy, as personal hotspot capabilities obliterate the differences in capability. 

Mobile and Autos are Made for Each Other, But App Providers Will Make Most of the Money

Five years from now, there will be over 60 million connected cars on the road globally, according to estimates from the GSMA.

Car-focused telecom, hardware and software services will drive some 40 billion euros ($51 billion) in annual revenue by 2018, Business Intelligence estimates.

Pandora, for example, is now being used in 2.5 million cars and 100 car models through one of its 23 partnerships with auto brands and eight partnerships with stereo manufacturers.

But some things do not seem to change. As with other ecosystems, ranging from electricity to water to roads, most of the ecosystem revenue is earned by third parties that build their own businesses on top of the infrastructure.

App providers will earn most of the money, a story by now familiar to service providers of all types.

Voice over LTE Getting Traction?

Service providers often face business model issues when transitioning from an older network to a new network, especially when the new networks have to support legacy applications. Consider the case of a telco upgrading its digital subscriber line network to a fiber to home or fiber to neighborhood network.

The business problem often is that capital has to be invested to support applications that offer no incremental value, or little perceived incremental value, over the older network versions. Fiber to the home offers faster speeds than DSL, but many consumers often do not see the need for the higher speeds, initially. Stranded capital results, in other words.

Up to this point, Long Term Evolution support for voice has been a similar case in point. Service providers have been relying on workable 3G voice while using new LTE bandwidth for Internet-based services.

Though there arguably are new features supported by Voice over Long Term Evolution (VoLTE), there have been some technology issues to be overcome. But an equally important issue is that it has not been clear any incremental revenue can be earned by deploying VoLTE.

To be sure, it is simpler, and more elegant, to deliver voice using the same network used for Internet access.

Some also believe VoLTE will offer additional features, compared to legacy forms of mobile voice. What operators are hoping for is that a combination of VoLTE, high definition voice and Rich Communications Suite will create a differentiated voice value proposition.

Also, at some point, supporting voice on LTE networks will allow operators to decommission the 3G networks, freeing up spectrum.

But as a practical matter, lots of mobile service providers have opted to rely on 3G for voice, using 4G primarily for Internet access operations.

"Operators are using another solution called circuit-switched fallback CSFB, and my understanding is that has worked better than operators had dared hope for,” said Mark Newman, chief research officer at Informa Telecoms & Media.

Some argue VoLTE adoption has been slower than anticipated in part because 3G voice still works, and because shifting more data access operations to 4G has the effect of freeing up more bandwidth on the 3G networks as well.

Stéphane Téral, Infonetics Research principal analyst, argues that VoLTE adoption will accelerate now that SK Telecom has shown how well VoLTE works in a national deployment.

Infonetics Research now expects 12 commercial VoLTE networks and eight million VoLTE subscribers by the end of 2013, with about three-quarters of those in Asia Pacific region.

At the same time, any number of observers might say there remains the possibility that over the top mobile voice could have bigger impact.

“While Skype dominates the over-the-top mobile VoIP space, the market is seeing other applications such as Fring, KakaoTalk, Line, Nimbuzz, WeChat and Viber gain in strength,” said  Diane Myers, Infonetics Research principal analyst.

“But the fact remains that most over the top mobile VoIP providers are making very little money per user,” said Myers. “In 2012, the average revenue per user was a meager US$7.13 annually.” That is an unsustainable business model, if not augmented in other ways, she said.

The number of global OTT mobile VoIP subscribers shot up more than 550% in 2012, to over 640 million, and is expected to approach the 1 billion mark in 2013, Infonetics Research estimates.

But Infonetics Research also projects the number of VoLTE subscribers to grow at a 145 percent compound annual growth rate from 2012 to 2017.

U.K. Mobile Ops Get Permission to Refarm 3G Spectrum for 4G

Though it might not have immediate implications, U.K. mobile service providers will be able to “refarm” their 2G and 3G spectrum for Long Term Evolution 4G, without applying for specific permission to do so, under new rules promulgated by regulator Ofcom.

Previously, only EE (and 3, which purchased some spectrum from EE, but has not yet been able to deploy that spectrum) had been given permission to conduct such redeployment operations, though all the major operators won new spectrum in the LTE auctions as well.

Under an Ofcom rule, EE was allowed to repurpose its 1.8GHz GSM frequencies in 2012, allowing EE to launch LTE before its rivals could acquire spectrum and build new networks.

The current 900 MHz and 1800 MHz licenses held by Vodafone and Telefónica

permit the use of 2G and 3G technologies.

The 1800 MHz licences held by EE and 3 now allow use of 4G technologies as well as 2G and 3G.

The new move by Ofcom moves away from the specific licensing rules that specified not only the purposes for which spectrum could be used but also which technologies (air interfaces) could be employed as well.

The new rules are more flexible, and allow carriers to make business choices about how to deploy networks, rather than being restricted to specific network options.