U.S. Mobile Marketing War Might Last Another Year or Two

Once started, mobile marketing wars tend to gain momentum, at least for a while. The issue is how the structure of the U.S. mobile market might have changed, in perhaps a year or two, when the current war has ended.

In fact, as recently as the start of 2014, it would still have been possible to hear observers claim there was no price war going on in the U.S. market.

Even Verizon Wireless, normally loathe to engage in promotional efforts, has done so since Sprint started a new price attack of its own in the U.S. mobile market.

That is because the U.S. mobile marketing war might be depressing Verizon Wireless net new customer additions, suggesting that the T-Mobile US price attack has begun to poach accounts from carriers other than AT&T or Sprint.

Up until the first quarter of 2014, it was not so clear that the T-Mobile US growth was clearly coming at the expense of AT&T or Verizon. That might be changing.

In the second quarter, T-Mobile US booked virtually all net new prepaid account growth in the U.S. market, for example.

So it is that T-Mobile US has countered a Sprint promotion, which countered a T-Mobile US moves. The latest move by T-Mobile US is a new 2 GB increase in Long Term Evolution usage buckets for customers of “Simple Starter” plans.

T-Mobile US now provides “Simple Starter” plan customers to quadruple their data to a full 2 GB of LTE data, for just $5 per month. That plan was launched in May 2014 as an entry-level solution with unlimited talk and text, and 500 MB of LTE data for just $40.  

Starting September 3, 2014, Simple Starter customers can get 2 GB of LTE data for only $5 extra per month.

The move allows T-Mobile US to improve the value of its entry-level offer.

“Get Verizon’s $50 plan and use just one gig more data, and the price jumps to $65,” argues T-Mobile US CEO John Legere.

On the other hand, no marketing war lasts forever. The issue is what might happen to contestant market share or profitability and revenue, before the marketing war ends.

Study Confirms: People Hate Ads, Would Not Pay to Avoid Them

Few people really enjoy ads, but advertising revenue traditionally allows media to be provided at no incremental cost, or lower cost, than would be the case if consumers paid for the full cost of their media.

Internet advertising saves United Kingdom users $232.24 (£140) a year, according to an analysis by Ebuzzing.

Still, about 98 percent of respondents surveyed on behalf of Ebuzzing also say they would not pay that additional amount to have an “ad-free” experience. That finding is consistent with virtually all surveys that ask consumers whether they would really be willing to pay a substantial amount for an “ad-free” experience.

On the other hand, consumers are adept at avoiding or minimizing ads, so marketers will have to create more engaging forms of advertising, to have an impact, Ebuzzing also suggests. That is about what one would expect an advertising services firm to say, however much the suggestion is logical.

The study, which surveyed a nationally representative group of more than 1,400 UK consumers, revealed 63 percent of web users skip online video ads “as quickly as possible.”

For users 16 to 24, 75 percent do so.

About 26 percent of respondents said they mute their sound, while 20 percent scroll away from the video. Some 16 percent use ad blocking software.

For younger people, the incidence of ad avoidance efforts were higher in all cases.

Respondents were asked what would make them more likely to watch online video ads. Relevance was important. Some 34 percent saying the ad “should be relevant to me” and 20 percent reported “‘being able to select the ad I watch” also was important.

About 38 percent of those respondents 16 to 24 indicated ability to select ads was important.

Some 26 percent suggested ads should be ‘funny or entertaining’ and 21 percent prefer short ads (less than one minute run time). About 16 percent said ads should be relevant to the content being consumed at the time.

The study also found that 77 percent of consumers never upgrade to paid for versions of free mobile apps.

The estimated value of advertising was arrived at by calculating the average value of each Internet user by taking the amount spent on digital advertising in the U.K. last year - $10.6 billion (£6.4 billion) and dividing it by the number of Internet users in the country (45 million).

Smartphone Growth Shifts to Asia, Africa, Latin America

By 2019, the number of smartphone subscribers globally will have grown 2.5 times over the 2012 level, driven primarily by customers in Asia Pacific, the Middle East and Africa (MEA), and Latin America, according to Forrester Research.

These three regions, which are home to 84 percent of the world’s population, will contribute a significant proportion of the next 2.5 billion smartphone subscribers.

Asia Pacific is the fastest-growing region in terms of subscribers with a compound annual growth rate (CAGR) of 14 percent, followed by MEA and Latin America.

As you would guess, introduction of low-cost smartphones is fueling the change in adoption patterns.

Chinese companies such as iocean, JiaYu, Meizu, Xiaomi, and Zopo and Indian players like Karbon and Micromax are flooding the market with sub-$200 Android-based smartphones, Forrester Research notes.

More than 46 percent of mobile subscribers owned a smartphone in 2013, compared with nine percent in 2009. By 2019, Forrester Research expects that 85 percent of all mobile subscribers will have smartphones.

India now is the fastest-growing market for smartphones. Gionee, Huawei, Konka, Lenovo, Xiaomi, and ZTE have recently entered the market, and Google launched its Android One program in partnership with Indian companies to provide sub-$100 Android phones.

Android and iOS have the lead in mobile operating systems, but Windows Phone is picking up, Forrester Research says.

As a direct result, mobile Internet access will drive global 45 percent of total mobile service revenue  in 2014, according to ABI Research.

Service revenue for 2014 will grow three percent to US$1.01 trillion, mainly driven by the robust growth of the mobile Internet market, ABI Research says.

The proportion of Internet access instances originating from mobile devices will vastly outnumber fixed network access, including both fixed networks and Wi-Fi, by 2018, Cisco now forecasts.

Mobile Internet Access Will Drive 45% of Total Mobile Operator Revenue in 2014

Mobile Internet access will drive global 45 percent of total mobile service revenue in 2014, according to ABI Research. In the first quarter of 2014, global mobile service revenue increased 0.58 percent year over year to US$264 billion.

Service revenue for 2014 will grow three percent to US$1.01 trillion, mainly driven by the robust growth of the mobile Internet market, ABI Research says.

The proportion of Internet access instances originating from mobile devices will vastly outnumber fixed network access, including both fixed networks and Wi-Fi, by 2018, Cisco now forecasts.

It is likely that fixed networks still will represent an order of magnitude more total data throughput than mobile networks do, by 2018, according to Ericsson.

By 2018, there will be more than 10 billion mobile-ready devices and connections, about three billion more than there were in 2013, and about five billion global mobile users, up from more than four billion in 2013. Ericsson predicts.

The one region with a revenue issue is Western Europe. Despite global service revenue growth, the Western European market is declining. In the first quarter of 2014 mobile service revenue declined five percent, year over year, despite Internet access revenue growth.

According to ABI Research’s Market Data, the major European carriers such as Vodafone, Telefonica, T-Mobile, and Orange all suffered from gross profit decreases in the first quarter of  2014, whereas in North America mobile carriers are still demonstrating a positive outlook for gross profit.

“Facing continued price pressure driven by the competitive mobile market, mobile carriers have had to take on higher subscriber retention and acquisition costs to support their market positions. This has affected profitability,” said Marina Lu, ABI Research research analyst.  

T-Mobile US Offers its Customers 12 Months Unlimited LTE Usage for Snagging a Sprint, AT&T or Verizon Account

The thing about mobile marketing wars is that once launched, rival carriers keep rolling out new offers to counter the last promotion by rival carriers.

T-Mobile US, for example, will start offering unlimited LTE data for a full year, at no additional charge, for  T-Mobile US  Simple Choice customers who refer a new customer taken from one of the other providers. 

T-Mobile Simple Choice customers who already have unlimited LTE data receive a $10 credit each month for twelve months.

LTE-A Raises Question of Whether, When Mobile Internet Access Substitutes for Fixed Access

Once more Long Term Evolution-Advanced networks are launched, as Singapore is doing, LTE will support speeds up to 300 MHz.

That will rekindle thinking about the circumstances under which mobile Internet access can be a viable substitute for fixed network access.

There are fundamentally two ways to argue that mobile Internet access can be, or cannot be, a viable alternative to fixed network broadband.

The first objection is that mobile Internet access cannot match fixed network performance, the other fundamental objection is that mobile Internet access cannot match fixed network price.

The best way to illustrate the “capacity” argument is to look at typical usage buckets.

Where mobile Internet access typically features a monthly usage cap in double digits, fixed services often have monthly usage caps in triple digits. That might not be an issue for many lighter users or people who only want to buy one type of connection (only mobile or only fixed) and find mobile offers better value.

At one time, it also would have made sense to compare fixed network speeds with mobile speeds. That probably always will be something of an issue, but is becoming less a practical issue now that some Long Term Evolution-Advanced networks can deliver 300 Mbps per device.

For most practical present purposes, 300 Mbps usable by a single device will handle most applications.

The other objection to the notion that mobile Internet access really can be a product substitute for fixed access is price, or specifically, price per bit.

Generally speaking, mobile Internet access has cost more than fixed broadband, on a price per megabyte or price per gigabyte basis. In many markets, where fixed access costs cents per gigabyte, mobile can cost dollars per gigabyte, for example.

But that is not true in all markets. As some have noted, in Denmark and Finland, mobile Internet access actually outperforms fixed network and mobile Internet access “price per bit” in the German market, for example.

Mobile arguably has tended to be more expensive on a price per megabits per second metric as well.

Cisco has in the past estimated that peak hour capacity for mobile networks is about 25 to 100 times more expensive than fixed networks, for example.

Though the monthly recurring cost for mobile Internet access might not be so different from the monthly retail cost for a fixed service (mobile might cost about half as much as a fixed connection), the price per bit in the mobile realm is higher than in the fixed network realm.

But, as always, value matters. It might be an acceptable value proposition for some users to rely on mobile as a sole or primary form of Internet access. That will be easier for lighter users, including those whose total monthly requirment is 10 GB to 12 GB or less, per device.

Mobile-only might also be valuable for users who cannot afford both a fixed and mobile connection.

Mobile-only might also be quite satisfactory even for lighter users who watch some online video, as 300 Mbps is sufficient for nearly all consumer applications, at the moment.

One might still argue that mobile Internet access is not a full substitute for fixed access. But that might not be the relevant question.

The question is what percentage of total Internet access requirements could be met using only LTE-A?

NAB Sues FCC Over Auction:It's All About the Money

TV Broadcasters Sue Over FCC Auction of Airwaves - WSJ: The National Association of Broadcasters has filed a lawsuit against the Federal Communications Commission's auction of TV spectrum. 



One might argue what NAB really seeks is an increase in the amount of money the FCC will provide to broadcasters who have to move from present frequencies to others. 



The FCC plans to hold a "reverse auction" in 2015, where TV stations in large cities will take bids to give up their airwaves.



Stations that take part in the auction can either go out of business or move to another channel. And that might be the issue. By suing, NAB might hope to induce the FCC to increase funds provided to broadcasters who must move to new channels, in exchange for dropping the lawsuit.  

Verizon Gives Extra Free Gig for New or Upgraded Accounts on "More Everything"

Customers who activate a new smartphone or upgrade to a smartphone on a "More Everything"  plan from Verizon Wireless will receive an extra gigabyte of shareable data.

Customers must buy a data plan with at least 1GB of data to get the extra gigabyte, and they’ll get that gigabyte each month for two years, as long as the smartphone remains active, Verizon Wireless says.

Verizon Wireless tends not to discount much, as its position in the market is "highest price, but also best network." But not even Verizon can avoid some promotional activity as the U.S. mobile market has gotten more competitive recently, not only because of T-Mobile US attacks, but now also Sprint's long-awaited assault on value-price relationships in the U.S. mobile market. 

Mobile Data Speed Gap Between Verizon and Sprint is Shocking

We can debate the significance of consumer satisfaction and network performance rankings conducted on 100-point scales, when scores are very similar. Sometimes, though, scores are not similar. 

That appears to be the case for the "speed index" ranking of the four largest U.S. mobile service providers, where the range between the best performance by Verizon, at about 76, is significant, compared to the worst performance, by Sprint, at 54. 

On most other measures, though Verizon generally leads, followed closely by AT&T, there is a gap between T-Mobile US and Sprint, according to RootMetrics. 

Overall, there still is a sizable gap between Verizon, at about 82, with AT&T at about 80, and T-Mobile US at about 72 and Sprint at 70. 

One might argue a 10-point gap in any single market or industry is significant. Customer satisfaction rankings of Verizon and Time Warner video subscription services are a case in point, where there is abou a nine-point gap, on a 100-point scale. 

Typically, differences in measured customer satisfaction feature less dynamic range between the best and worst scores. A 20-point gap is virtually unheard of. 

All the four national carriers score most evenly in the area of text messaging, where the gap is just a couple of points between high and low. On most other measures, the performance gap between Verizon and AT&T on one hand, and T-Mobile US and Sprint, on the other hand, matches with the market share positions. 

At some level, customer experience with Verizon and AT&T seems to correlate with market share held by each of the four carriers. 

Canby Telecom Gigabit Service for $20 a Month Increment Over Prior "Fastest Speed" of 60 Mbps

That Canby Telcom, which has been planning to offer 1 Gigabit symmetrical Internet service to its customers in Canby, Oregon, since early 2014, has done so, is not surprising. Perhaps the most interesting angle is how the new top-end gigabit service will lead Canby to readjust prices for slower speed options.

Canby sells stand-alone gigabit access at about $100 a month (10 cents per Mbps), without promotional discounts.

The 60-Mbps offer costs $80 a month ($1.33 per Mbps), without promotional discounts. A 30-Mbps offer costs $60 a month ($2 per Mbps), without promotional discounts. A 10-Mbps service costs $50 a month ($5 per Mbps), without promotional discounts. The most-affordable 5-Mbps plan costs $40 a month ($8 per Mbps).

So the issue really is value. All the plans of 60 Mbps or less offer “per Mbps pricing” between $8 per Mbps to $1.33 per Mbps.

The gigabit access plan offers each Mbps at about 10 cents, or two orders of magnitude less, per Mbps.

You might argue that consumers will pay only so  much for Internet access, as they only will pay so much for video entertainment or voice.

But those consumer value propositions have changed over the years. Once upon a time, consumers would willingly pay about $20 a month for a dial-up service at 56 kbps, an implied per-Mbps price of about $357 or so.

Clearly, the absolute price mattered more than any esoteric “per-Mbps” considerations, and many would argue that will remain the issue, even when gigabit services are offered.

The issue will come at the margin, where a buyer of the $60 a month or $80 a month plans evaluates the value of a $100 a month plan what offers 17 times the speed for a price difference for a price about 25 percent percent higher, or 33 times the speed for a price delta of about 60 percent.

One might argue a single-user household will be hard to convince. But a multi-uer household, especially where there is lots of video streaming going on, with significant work at home happening, is quite another matter.

In that case, even a price increase of 60 percent, to gain 33 times the speed, might be quite attractive.

Canby had begun installing fiber to the home backhaul facilities in 2008 and began installation of drops in 2009.

By the end of 2009, Canby Telcom had wired about 1,000 homes.

By about 2010, the new Fiber Optic Zone (FOz) service offered three speed tiers, the lowest operating at 20/10 Mbps; the intermediate tier running at 40/20 Mbps; and the fastest tier offering 60/30 Mbps.

Canby Telcom provides information, communication and entertainment services to more than 7,000 customers over an 84-square-mile foot print in the northern Willamette Valley of Oregon.  

Canby Telcom will be able to offer gigabit services to more than 2,500 local residents and businesses already wired with fiber to the home.

Speed	Monthly Pricing
5 Mbps	Everyday Price: $39.95 Special Offer: $19.95 / month
10 Mbps	Everyday Price: $49.95 Special Offer: $24.95 / month
30 Mbps	Everyday Price: $59.95 Special Offer: $29.95 / month
FOz 60 Mbps	Everyday Price: $79.95 Special Offer: $39.95 / month
FOz 1 Gbps	Everyday Price: $99.95 Special Offer: $49.95 / month

The point is that the advent of gigabit services will eventually cause an adjustment of user expectations of what a reasonable value-price offer is for high speed access, with the greatest discontinuity at the top of historic ranges, where a $20 monthly price difference provides 17 times the bandwidth.