More Amazon Moves into Ecosystem Adjacencies Shows Market Disruption Often Comes from "Outsiders"

Movement into adjacencies always is a key competitive issue within any ecosystem, as it turns former customers into competitors. That happens with chipsets, applications, access, transport, advertising and other support services.

Movement into adjacencies within an ecosystem also is common in retailing, as when major retailers sell “house brands,” for example.

Now it appears Amazon could introduce its own clothing brands, to sell merchandise some brands will not allow to be sold using Amazon channels. And some argue Google, for example, should buy AIG, the giant insurance firm, to create the basis for a financial tech business.

Such potential moves illustrate one key principle of markets that are disrupted either by technology, new pro-competitive regulations, or both.

It often is the case that the most-dangerous competitors come from “outside” the traditional domain.   

Skype, Amazon, Alibaba, Netflix, Google Fiber, cable TV entry into voice and business services, XBox, PayPal, M-Pesa, Amazon Web Services and iTunes are among the obvious examples.

They will not be the last entries into existing markets by “non-traditional” providers.

Some now think Amazon, for example, will make a big further move in the e-commerce business will happen, as logistics functions perhaps are internalized.

source: Bloomberg

No ecosystem now seems safe from movement into adjacencies. In the U.S. mobile market, entry by Comcast and other cable TV operators will be an important example. In the high speed access, growing presence of Google Fiber and other third party Internet service providers is going to challenge prevailing notions of how many providers are sustainable, long term, in the fixed network business.

We once widely believed the answer was “one.” Over the last couple of decades, the number has become “two.” What Google Fiber and others pose is a new question. In some markets, is the viable number actually “three?”

That would represent a major business model challenge for the incumbent suppliers, as any major change in market structure always entails.

In addition to the urgency of creating new revenue sources, operating costs have to be taken down even more than had seemed possible in the past.

The broad point is that market disruption, in the Internet era, typically is a result of entry by non-traditional entities into domains dominated by others.

That is why service provider executives, when asked about their key competitors, often say “Google,” rather than “other telcos” or even “cable TV competitors.” The perception is warranted.

India Start-Ups See Regulation, Taxation are Key Challenges, International Expansion a Key Opportunity

Indian startups cite regulation, taxation and human capital as their greatest challenges, according to InnoVen Capital.

The size of the internal Indian market is viewed as quite appealing. But some 27 percent also see “international expansion” as a key opportunity.

source: InnoVen Capital

App Developers Aren't in it for the Money

Developers often are quite different from Internet service provider or telecom executives, and that has implications for how ISPs work with developers.

Only about 34 percent of survey respondents say “money” is the primary motivation for developing. Non-material motivation accounts for fully 66 percent of the primary motivations for developing.

So, in working with developers, it might often be the case that the desire to be rich takes a back seat to creativity, peer recognition and fun. Unless ISPs emphasize recognition, fun and ability to be creative, they often will face cultural issues when trying to work with and woo developers.

Almost 75 percent of the developers surveyed by inMobi have been in the industry for less than three years. And most work solely or very small firms.

Just eight percent of firms have more than 20 employees. In fact, some 47 percent of respondents work by themselves. the inMobi survey suggests.

Games and entertainment are the two largest categories of developer interest, across all regions (Asia, North America, Europe).

Some 42 percent of app developers have one to three apps on Google Play, while 28 percent of have one to three apps in the Apple App Store.

Java, JavaScript, HTML5 are the most preferred languages for designing and developing apps.

And few make significant money developing apps. Some 55 percent of developers make $1000 per month.

Monthly average mobile app revenue globally is under $6,000.  

About 63 percent of developers say advertising is the revenue model for their apps, while a third say in-app purchases are the revenue model.

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Reliance Jio Market Entry Will Drive Revenue-Per-Megabyte Lower by 30% to 40%

Reliance Jio's launch of 4G services could disrupt data pricing in the Indian mobile service provider market, causing revenue-per-megabyte prices to tumble 30 percent to 40 percent this year, according to the India Ratings and Research (Ind-Ra).

At the same time, given expected lower prices, data services average revenue per user also will decline, although the number of accounts should increase, while data consumption also climbs, over time.

Revenue per megabyte declined by 4.5 percent to 5.5 percent, sequentially, in the third quarter, for Bharti Airtel and Idea Cellular.

Ind-Ra believes expects a further softening of data tariffs in the current year of perhaps negative eight percent to 10 percent.

Those are among the least controversial observations that could be made about Reliance Jio’s entry into the Indian mobile services market.

India Ratings and Research (Ind-Ra) “expects the launch of Reliance Jio Infocomm Limited (RJio) to intensify competition which will squeeze the market share, EBITDA margins and credit metrics of incumbents.”

At the same time, debt burdens will increase, as competitors and Reliance Jio itself invest heavily in their networks and spectrum.

Ind-Ra also expects voice revenue to decline. Airtel and Idea reduced voice tariffs by eight percent to 10 percent last year.

source: Brookings

In addition to price drops over time, price-per-megabyte also drops with volume purchased.

source: GSMA

Open Cable Boxes? Less Impact Than You Might Think

The recent move by the U.S. Federal Communications Commission to “open up” set top box information flows to third parties ostensibly leads to consumer ability to buy and use third party boxes instead of renting such decoders from their linear video suppliers.

The three information flows include service discovery (information about what programming is available to the consumer, such as the channel listing and video-on-demand lineup, and what is on those channels).

Information on customer entitlements (information about what a device is allowed to do with content, such as record it) also would be provided to third parties.

Finally, content delivery information (the video programming itself, along with information necessary to make the programming accessible to persons with disabilities) would be available to third party devices.

On its face, the move creates more potential competition for the conditional access function, which also represents perhaps $20 billion in annual rental fees paid by consumers to their video providers.

At one level, it is hard to argue that authorizing more competition is a bad thing. But the move might also not be so consequential, long term, much as the Telecom Act of 1996, in defining competition as “competition in voice services” missed the mark.

Over time, more consumers are going to use services and appliances that are Internet based, obviating the use of any such decoders. In the interim, however, as the FCC earlier had tried (and failed) to create a third party market for decoders, there could be some opening for use of existing devices (game players, mobile phones or dongles) as functional substitutes for the “cable box.”

Scale always is an issue, as the actual market for decoder hardware is fairly small, by consumer electronics standards. So it is unlikely many new suppliers really would want to enter the market for stand-alone decoders.

One reason existing decoders are relatively costly, compared to many other consumer devices, is that volume is limited.

The upside might come for app providers who could leverage existing mass market devices such as smartphones or cheap dongles to provide the tuning and access functions, while also garnering more information about consumer behavior.

That is one reason why Google supports the rule change.

Three Makes Blockbuster Ad Blocking, Sponsored Data Policy Change

In a momentous decision, mobile operator Three, after having instituted ad blocking at the network level, plans to add the capability on all of its networks, everywhere, in a way that notably will institute sponsored data for virtually all advertising content, across all Three networks, in a first for any tier one mobile operator anywhere in the world.

The decision has several important--even historic--implications.

The most far-reaching implications affect mobile advertising business models on the Three network, and any other mobile services that decide to move in a similar direction.

The universal ad blocking feature essentially means that all advertising will require that the advertiser pays for bandwidth consumed to deliver the messages.

In other words, Three customers will not pay data charges to receive ads. The policy also means that all advertising instantly becomes “sponsored data.”

In a policy that also should help shape the nature of advertising in direction it had already been moving, Three’s policy aims to promote advertising content that is “relevant and interesting” to each user.

At the same time, the new Three policy will seek to block “excessive, intrusive, unwanted or irrelevant ads.

This is a huge shift, with implications for all apps that are ad supported, which is to say nearly all the important and widely-used apps. The policy also will force advertisers to recraft their ads, and significantly, pay for the bandwidth used when consumers view those ads.

The ultimate implications are not clear, as it remains to be seen whether the leading mobile providers in any market will follow the example. If the other contestants do not adopt similar policies, Three might simply find it gains consumer subscription market share, at the cost of losing some attractiveness for ad-supported apps and advertisers.

Three might well consider that a reasonable trade off.

Three UK and Three Italy have implemented the Shine Technologies ad blocking system, with intent to enable the feature on all Three networks in all countries.

“Our objective in working with Shine is not to eliminate mobile advertising, which is often interesting and beneficial to our customers, but to give customers more control, choice and greater transparency over what they receive,” Three says.

Precisely how Three will work with the advertising community to achieve those goals is not yet clear.

“Over the coming months Three will announce full details of how it will achieve these objectives and will work with Shine Technologies and the advertising community to deliver a better, more targeted and more transparent mobile ad experience to customers,” Three says.

"Irrelevant and excessive mobile ads annoy customers and affect their overall network experience,” said Tom Malleschitz, Three UK CMO. “We don't believe customers should have to pay for data usage driven by mobile ads.”

The question now is how successful Three will be. Though few leading app providers are likely to block access to Three customers, they are going to have to figure out how to mollify advertisers, or simply forego some ad revenue earned from views on Three networks.

It will be complicated. Three is gambling, likely reasonably, that no leading app provider will block use of its apps by Three customers. But the new policy immediately raises revenue issues for all ad-supported app providers, with new cost issues for those app providers and their advertisers.

Firms Announce Efforts to Create 3.5-GHz CBRS Ecosystem

Federated Wireless, Google, Intel, Nokia, Qualcomm Incorporated and Ruckus Wireless say they will work to build a robust ecosystem of industry participants around use of the U.S. 3.5 GHz Citizens Broadband Radio Service (CBRS), the first band expected to support commercial shared spectrum access in spectrum formally licensed to government users.

The companies are participating in the Wireless Innovation Forum’s efforts to develop standards suited to the CBRS band.

The CBRS band represents 150 MHz of spectrum (3550-3700 MHz) that can be opened for commercial use.

Indoor access--initially focused on support of Long Term Evolution 4G networks,  is expected to be a key use of CBRS spectrum, but some believe there also could be access applications (wireless local loop).

Blocking Sponsored Data Programs Also Blocks Innovation, Limits Consumer Benefit

Anti-competitive behavior by Internet service providers might be said to be a theme for many who oppose zero rating or sponsored data.

Ironically, rules banning zero rating or sponsored data actually work to reduce access options for consumers who either cannot afford--or do not wish to buy--full mobile data usage plans, Syntonic argues.

“Connecting the unconnected is really important,” says Gary Greenbaum, Syntonic CEO.

Also, different methods for furnishing Internet access in new venues, ranging from automobiles to wearable devices and wide variety of Internet of Things apps, might be blocked if zero rating or sponsored data is outlawed, Greenbaum argues.

In other words, “all or nothing,” “one size fits all” access models do not work, argues Syntonic. Syntonic Wireless “urges the Commission to avoid prophylactic rules that would prohibit the creation of new, potentially consumer-friendly products and services.”

For consumers, sponsored content increases the value of a wireless subscription, by offering additional content that the consumer may enjoy in addition to whatever data is consumed under the consumer’s traditional monthly data plan, Syntonic argues.

Consumers can also “sample” sponsored content without the risk that they are stuck paying for a suboptimal product or service.

And technophobic consumers who are unsure whether to purchase a mobile broadband service can potentially access a broad array of sponsored content on a minimal data plan, to decide whether to upgrade to a more comprehensive service.

Consumers should have access to all lawful applications, just as service providers, app providers and brands should be free to innovate with new business models that deliver more consumer value, at less direct cost to those consumers.

Verizon Best U.S. Mobile Network Nationally, Rootmetrics Says

With the caveat that any network will be better than another at any specific location, RootMetrics  says that in the second half 2015, Verizon's performance across the United States continues to set the pace, leading the mobile network race in nearly all aspects of testing.

“This was Verizon's fifth consecutive time receiving the United States Overall Performance RootScore Award,” Rootmetrics said.

For the fourth consecutive national report, AT&T was the only carrier other than Verizon to win or share a RootScore award at the national level.

The overall national scores:

1 – Verizon (94.5)

2 – AT&T (91.3)

3 – Sprint (86.0)

4 – T-Mobile (80.9)

Sprint showed improvements in the second half of 2015 at the national level, Rootmetrics says.

While the carrier didn't win any RootScore Awards on the national level, Sprint gained the second-place spot for call performance, beating AT&T. Sprint also continued to hold third place in both overall performance, network reliability, and text performance categories.

While T-Mobile finished fourth for overall performance, the carrier continues to show steady data and network speed performances at the national level holding onto its third-place titles in both categories.

During the second half of 2015, RootMetrics testing staff drove 231,941 miles, visited 6,607 indoor locations, and conducted about 3.9 million tests across all 50 states and 125 metro areas using the same phones consumers can buy from the carriers' stores, statistically reflecting performance across 100 percent of the U.S. population.

The tests used phones enabled for 4G Long Term Evolution  spectrum bands for each of the four carriers, including T-Mobile's Extended Range LTE.

Flat Revenue for Western Europe Mobile Operators to 2019

A revenue forecast for Western Europe mobile operators shows the extent of product maturation in some mobile markets.

Between 2015 and 2019, aggregate revenue will be flat. By 2019, total revenue will actually have fallen slightly, by about one percent.

That will be a problem for public companies, which tend to be judged by revenue and profit growth. Lack of revenue growth is going to be a problem.

source: 451 Research

Jana Gets New Funding for Sponsored Data App and Platform

Advertising traditionally has provided the business model allowing consumers to get “no additional cost” or “free” access to content, and has become an important business model for over the top Internet apps as well.

Jana prefers the term “unrestricted” Internet access to the controversial term “sponsored” access or sponsored data, but the fundamental concept is the same. User access is underwritten on behalf of the user, by an advertiser or sponsor.

Jana just announced a $57 million Series C round led by new investor Verizon Ventures and participation from existing investors Spark Capital and Publicis Groupe.

“Over 30 million users have benefited from Jana’s free, unrestricted internet access, but our goal is to reach the next billion,” said Nathan Eagle, CEO of Jana.

Following Jana’s success in India and expansion into additional key markets, such as Indonesia and Brazil, the company has ambitious plans to launch its mCent program in China.

Jana’s mCent Android app offers “free data in exchange for brand engagement, allowing users to earn data that can be used anywhere on the internet.

As the second largest mobile advertising platform in India next to Google, Jana has twice the reach of users than Free Basics (formerly Internet.org) and surpassed Facebook’s growth revenue in nine months after launching mCent in India, Jana says.

Amazon, Saavn, Twitter, and WeChat and 311 mobile carriers are partners.

Syntonic Sponsored Data Platform Launches Across Southeast Asia

“Freeway,” the sponsored data app produced by Syntonic, is launching across Southeast Asia in the first quarter of 2016.

The market expansion will enable leading mobile operators the opportunity to offer subscribers in the region with free mobile access to Clash of Clans and an inaugural list of popular messaging and social media applications.

WhatsApp, BBM, WeChat, and Twitter also will be part of the program. This catalog of sponsored data offers will only be available in Southeast Asia.

Sponsored data will become a US$6b market opportunity in Asia and a US$23b opportunity worldwide by 2019, Syntonic argues.

Indonesia, Philippines, Thailand, and Malaysia represent the world’s highest concentrations of smartphone devices as well as prepaid data plans, making it the most attractive market for sponsored data services.

In Indonesia, 98 percent of mobile plans are prepaid, normally meaning that data usage allotments are quite modest.

Prepaid markets will see mobile data traffic increase 14 times from 2015 to 2021. In many such markets, data costs can represent two percent to six percent of median household income.

AT&T was among Syntonic’s first carrier partners for the Syntonic sponsored data app, while Expedia was among the first content providers to take advantage of the platform.

Sponsored data allows brands to pay for mobile data usage on behalf of an individual mobile subscriber. Syntonic believes the markets where such features will be most valuable are those where data plans are relatively expensive and consumer ability to pay is more limited.

The sponsored data capability  increases app reach and opens up a host of new acquisition, engagement, and monetization opportunities for mobile service providers.

In that sense, sponsored data is an enabler for sponsored advertising, which some experts estimate will make up 23 percent of mobile ad spend by 2017.

AT&T, T-Mobile and Verizon have already launched, or are in the process of launching, sponsored data offerings in the United States.

Outside North America, where pre-paid mobile data plans force data rationing, the market opportunity for sponsored data is even more significant, Syntonic believes.

Using Freeway by Syntonic, eligible AT&T customers gain unlimited access to a growing number of premium applications and content, all without incurring data charges.

Will AT&T Phase Out U-verse TV in Favor of DirecTV Access?

AT&T Inc. is phasing out the U-verse TV service, a Bloomberg report argues, citing analyst Chris Ucko of CreditSights. “AT&T is going to actively get out of the U-verse business,” said Ucko. AT&T predictably denies the report.

Ucko argues that AT&T is shifting linear video operations to DirecTV, a strategy some had suggested would be the case in territory, as well as out of region, while others believed DirecTV would be relied on primarily where AT&T did not have fixed network footprint.

As evidence, Bloomberg notes that AT&T has stopped building U-verse set-top boxes.

That might be a premature conclusion, though it clearly makes financial sense for AT&T to serve new linear video customers using the DirecTV network.

As an example, per-subscriber content costs are about $17 a month higher for U-verse customers than for DirecTV subscribers, Chief Financial Officer John Stephens has said. That is a meaningful difference for a service that has pressured profit margins and likely faces continued decline.

That is a function of subscriber volume, as programming contracts feature lower prices as volume builds. DirecTV has about five times as many customers as AT&T has U-verse video subscribers.

In part, that is a result of relatively limited U-verse access network coverage.

Of the 57 million households AT&T passes with its broadband service today, only 13 million have U-verse, and only about half could receive U-verse TV, where all 57 million can be sold TV now as part of a bundle from AT&T that uses DirecTV for linear video delivery.

source: Beyond Devices

It generally makes sense to harvest cash flow from any declining legacy business, so that would be one explanation for why AT&T might prefer to use DirecTV as the linear video delivery platform of choice.

Of course, capping the incremental revenue from linear video makes the business decision on upgrading the access network more difficult. In essence, high speed access has to carry the load, where it comes to incremental revenue from deploying a next-generation network.

But AT&T might see other alternatives in that area as well. New fifth generation mobile networks might provide another way to supply high speed access, without a full fiber to home upgrade.

Likewise, there might be new opportunities to use fixed wireless, in 5G spectrum, for fixed high speed access as well.

The other angle is that if linear video bandwidth can be repurposed--as cable TV operators already do--then U-verse networks will be able to support higher Internet access speeds as well.

source: Bloomberg   

DOCSIS 3.1 Full Duplex Will Support Symmetrical 10 Gbps High Speed Access

CableLabs has embarked on a new development effort to craft a “full duplex” use of hybrid fiber coax networks that breaks significantly with the traditional frequency division method used to support high speed access on cable TV networks, where one set of frequencies is reserved for upstream, and a different set of frequencies for upstream communications.

In full duplex communication, the upstream and downstream traffic use the same spectrum at the same time, roughly doubling efficiency, CableLabs says

A DOCSIS 3.1 full duplex network provides the peak speeds and flexibility of time division duplex solutions, but outperforms both time division and frequency division multiplexing in terms of bandwidth efficiency.

Full duplex will help evolve cable-provided high speed Internet access to support symmetric multi-gigabit service up to 10 Gbps on 1-GHz HFC networks, with the potential for even higher performance by utilizing spectrum that is currently available for future expansion above 1 GHz.

Today’s Technology Duplex: Time Division Duplex

Today’s Technology Duplex: Frequency Division Duplex

T-Mobile Reports Strong 4Q 2015 Results, Predicts Strong 2016

T-Mobile US had another strong fourth quarter of 2015. In fact, T-Mobile US CEO John Legere argues that T-Mobile US acquired 108 percent of all industry net account growth over the year.

T-Mobile US added 2.1 million total net accounts in the fourth quarter (8.3 million in 2015). Among those gains were 1.3 million branded postpaid accounts (4.5 million in 2015), a metric widely considered the most-crucial “type of account” metric.

Service revenues grew a strong 11.7 percent year over year in the quarter and 10.9 percent, year over year, for all of 2015.

Total revenues grew 1.1 percent, year over year for the quarter and  8.4 percent for the full year.

Adjusted earnings (EBITDA) of $2.3 billion in the fourth quarter and $7.4 billion for the full year represented growth of 30.2 percent for the quarter (year over year) and 31.2 percent for the full year.

T-Mobile US expects branded postpaid net customer additions for 2016 between 2.4 million and 3.4 million.

For the full-year 2016, T-Mobile expects Adjusted EBITDA to be in the range of $9.1 to $9.7 billion.