The Telecom Business is Getting More Like the "Internet"

One growing discontinuity in the communications business is the natural tendency to view the business through functional silos that are losing their meaning. These days, in many markets, people using smart phones are on the fixed networks for access, more than mobile access.

That discontinuity is going to grow, but should be familiar to anybody who works in the Internet ecosystem. Namely, devices and apps are agnostic to the underlying access medium. So even when a company “knows” its own revenue model is directly driven by a specific network (mobile, fixed, fixed wireless, satellite), the networks get used by people and firms with which the access provider has no direct relationship.

In other words, there is a growing disconnect between the concepts of “my customers” and “my users.” Virtually any provider of Internet access has more “users” than “customers.” To be sure, some will see that as a prod to think about ways of creating relationships with users who aren’t customers.

But the trend also explains why ISPs worry about becoming “dumb pipes.” But there is a crucial distinction: every ISP always and everywhere operates as a dumb pipe. What people want is access to the Internet.

One can argue that particular ISPs sell “smart pipe” services. There is some logic to that. But most of those smart features wrap around the dumb pipe function is some way. Traffic can be shaped to improve user experience. Content can be cached. Charging systems can be reconfigured.

And ISPs routinely also act as content or app providers (carrier voice and entertainment video are services, not “Internet” accessed apps).

It is not that the Internet access function itself is in danger of disintermediation. It is not. But the business context is morphing. Some might well argue that dumb pipe Internet access is in fact the foundation service of the future, with “carrier services” wrapped around that access.

Some telcos are trying to do what cable operators have done, namely vertically integrating (in a loosely coupled way) by becoming app or commerce providers. The trend will grow, especially for ISPs that find they cannot significantly reduce operating or capital costs to compete with lower-cost providers.

“Until three or four years ago, consumers primarily accessed the Internet through PCs and laptops but at the beginning of 2013, the picture is very different,” says Amanda Sabia, principal research analyst at Gartner.

“Consumers use multiple screens to perform various activities that require both fixed and mobile internet connectivity,” Sabia says. Consumers are screen-agnostic; they will use whichever screen is convenient, as long as it is ‘connected.’”

Gartner reckons that global mobile devices (other than smart phones with a mobile data plan) per household will increase by more than eight percent annually through 2016.

1/3 of Planet Now Online

About a third of human beings now use the Internet. And most of the growth these days now comes from people in the developing regions. Mobile now represents about 10 percent of total usage, and will grow. 

New Rumor About Verizon Buying Rest of Verizon Wireless

Verizon Communications has hired advisers to prepare a possible $100 billion bid to take full control of Verizon Wireless from its partner Vodafone, according to Reuters. The latest rumor is but the latest rumor about Verizon buying the Vodafone stake. 

Among the recent rumors AT&T and Verizon bid for all of Vodafone. Given slower growth in most mobile markets globally and very low interest rates, the merger activity in the U.S. and other markets is logical. 

When firms cannot grow organically, they typically acquire growth. 

Does LTE Create New Revenue, or Only Displace 3G?

With every recent "next generation" of mobile networks, the hope and expectation has been that new revenue-generating services and applications would be created. That was true for 3G and now is said to be an expectation for 4G networks as well. 

It's a reasonable enough hope, even if it sometimes takes quite a long time for those new revenue-generating apps to be discovered and embraced. In fact, one might argue, it was until the advent of either mobile email and mobile Internet access that "new revenue generating services" became significant. 

That might logically be expected to happen for 4G Long Term Evolution networks as well. The issue is whether the "new revenue" is generated mostly by new retail policies, totally new apps, higher data consumption and therefore bigger data plans, or some combination of all of those possible trends.

Also, though it will be hard to quantify, users will simply shift from use of 3G to 4G, so LTE revenue cannibalizes 3G. 

Many executives say the "new revenue" will come in large part from an end to "all you can eat" data plans that are instituted with 4G. In that case, the "new revenue" does not come from "compelling new apps" but only from changes in charging policies. That is helpful for a mobile ISP, but perhaps not the same thing as arguing LTE will create brand new apps. 

So forecasts of "LTE revenue" have to be viewed with some circumspection. LTE might represent a third of revenue by 2017, Juniper Research forecasts, representing more than $340 billion worth of revenue. Other older estimates suggested faster revenue growth, but that isn't unusual early in the development of any new market. 

But the magnitude of the revenue stream is not the only, or most important, new fact. Aside from cannibalizing 3G revenue, aside from representing higher data consumption, and therefore higher access fee plans, will LTE actually enable the creation of brand new applications that generate revenue? That's the big question. 

Legacy Decline is Slow, at First, in Video Entertainment, Computing or Communications

In three different legacy businesses--video entertainment, communications and computing--we see examples of how robust markets eventually mature and then decay. 

Apple. for example, might be on the cusp of transitioning from a fast-growing technology company to a slower-growing dividend-paying company, as many would argue already has happened to Microsoft. 

Canada has one of the highest pay TV penetrations in the world, estimated to reach nearly 90 per cent at year-end 2012, but like the US, IHS Screen Digest expects that pay TV penetration will be on a relentless yet shallow decline decline through 2017, as many newly formed households are less likely to take a traditional TV service. 

And AT&T seems to hitting something of a wall as well, as its recent earnings report show revenue is flat. If Long Term Evolution is doing anything other than compensating for declining revenues in other areas (parts of the consumer fixed network business or enterprise), it isn't immediately clear. 

But it also is important to note that even if firms such as AT&T, Apple and cable companies are at a point where the growth curve flattens, there is nothing to suggest inevitable rapid decline after a peak has been reached, or passed. 

In other words, transitions often build for long periods of time, with only apparently marginal and incremental changes in buyer behavior. But every big change eventually reaches an inflection point, where change is quite rapid. 

The big challenge is avoiding too much optimism about what can change in the near term, and too little optimism about the magnitude of ultimate change after the inflection point is reached. 

For suppliers, what happens, ideally, is a gradual decline, occurring over a relatively long time, allowing a firm time to reignite growth some other way. 

On the other hand, the technology business, especially the computing business, offers a rather bracing lesson for computing suppliers. 

Leaders in one era rarely survive as leaders of the next era. Some would argue the same process has been at work in the entertainment business, as it evolved from stage to radio to movies to television. 

The big question is how communications might change. Some would note that we are only now at the first big change in industry dynamics, as voice services cease to be the revenue driver. 

And though there is much logic to suggest the Internet access business largely will replace voice as the underpinning of the business, it is not axiomatic that today's suppliers of such access inevitably are so dominant in the future. We just cannot tell. 

Though Internet access will remain a capital intensive undertaking, precisely how much capital it will take, and who can do it, will be a somewhat open question in the future. 

And though one might argue that access providers these days are in a multi-product business (mobile voice, fixed voice, video entertainment, Internet access), there also are examples of "disappearance."

AT&T, for example, never was able to evolve beyond its "long distance" revenue dependence. Nor did MCI. As crazy as it sounds, we cannot say for certain, today, how Internet access will be supplied in the future, and by whom. 

Are Apple Earnings Evidence of a Coming New Era of Computing?

Students of computing history are familiar with the notion that each distinct era of computing has been lead by a different set of companies than lead the era that preceded the new era. that doesn't mean, in some mechanical fashion, that the leaders of a former era always disappear.

Some will note that IBM still exists, though as a far different sort of company. In fact, one might say other leaders in past eras, including HP and Dell, are trying to recreate themselves largely on the IBM model, which is to say as consulting specialists, not hardware suppliers. 

Its too early to say if the pattern will hold in the next era to come. But history suggests the pattern will hold. If so, household names such as Apple might cease to be seem as the trendsetters of the next era.

It is a shocking concept, to be sure. But some observers would say the recent Apple earnings call, with its predictions of slowing growth, declining profit margins and a greater emphasis on the "value" element of owning Apple equity, rather than growth, illustrate the process at work. 

As happened to Microsoft before it, Apple might be on the cusp of becoming a "value play," not a "growth play." The corollary, one might also argue, is that as Microsoft is seen in many quarters as "not leading" in computing any longer, so Apple in several years might also be seen as a past leader, not a current leader.

It's shocking, but history suggests it will happen. 

Netflix Success Challenge in a Nutshell

In a nutshell, the key challenge for Netflix is to "grow members and revenue faster than content spending," as the latest Netflix shareholder letter mentions. In other words, Netflix has effectively become a programming network, not just a content delivery service.

And as has been true for all programming networks, original and unique content is the growth driver. That doesn't mean every bit of content, or even most content, has to be unique to a particular network. But virtually all popular networks have one or more "signature series" that define the network and pull in viewers.

Netflix will have to invest to do so, and that means there is going to be a tension between doing so and then adding enough additional new subscribers to keep its profit margins intact. 

Apple Financial Results Answer No Key Questions

Apple's fiscal 2013 second quarter ended March 30, 2013 included quarterly revenue of $43.6 billion and quarterly net profit of $9.5 billion, compared to revenue of $39.2 billion and net profit of $11.6 billion for the same quarter of 2012.

Despite posting results most companies would be happy to report, such as "average weekly growth of 19 percent, Apple's quarterly results do not answer any of the strategic questions observers now have about the company. 


What is the "next big thing" to drive Apple sales and customer delight? 

Can Apple create yet another big new market? Perhaps most importantly, has Apple lost the creative edge and become a "normal company" with a "normal growth rate?

In fact, some think single-digit growth rates are where Apple is headed, in perhaps five years. 

Nor, it appears, will it be possible to resolve any of those questions until perhaps September 2013, or possibly even 2014, when Apple says it will launch the next round of new products. "Our teams are hard at work on some amazing new hardware, software, and services that we can’t wait to introduce this fall and throughout 2014," CEO Tim Cook said. 

And while the big strategic questions are not narrowly financial, financial performance is an issue. Gross margin was 37.5 percent compared to 47.4 percent in the year-ago quarter, for example. 

Apple estimates its gross profit margin will dip a bit further in the next quarter, and the company faces sharply declining rates of growth. Questions about Apple strategy also revolve around the likely impact on margins if lower-cost iPhones, despite the company's denials, are launched, as is the case for lower-cost iPads as well. 

International sales accounted for 66 percent of the quarter’s revenue, and growth was driven by the iPhone and iPad. Apple sold 37.4 million iPhones in the quarter, compared to 35.1 million in the year-ago quarter. 

Apple also sold 19.5 million iPads during the quarter, compared to 11.8 million in the year-ago quarter. 

By way of comparison, sales of sold just under four million Macs, compared to four million in the same quarter of 2012 show a slight decline. 

Apple and AT&T are Borrowing Money to Pay Dividends

In an unorthodox move that reflects relatively low interest rates and the high tax rate on bringing cash from overseas accounts back to the United States, Apple says it will begin to borrow money to fund share buybacks and a higher dividend. 

AT&T is doing so as well. In 2012, AT&T dividend payments were nearly $4 billion more than its free cash flow. And AT&T sees free cash flow being some $5 billion lower in 2013. Something has to give, some would say. 

In 2012, AT&T spent $12.8 billion to buy back shares, and another $10 billion to pay dividends. Company-wide, AT&T increased long-term debt by $5 billion in 2012. 

Given the super-low interest rates on corporate debt, there is an argument to be made for using debt to fund either share repurchases or dividends. Some might not agree it is a terribly good argument, though. 

Apple iPad Sales Growth Rate to Drop by an Order of Magnitude

No matter what results Apple turns in for the first quarter of 2013, controversy will swirl around the company and its fortunes. A loss of several hundred billion in market capitalization will do that.

At least according to eMarketer, the order of magnitude projected slowing of iPad sales in the U.S. market is one worry. 

Observers are looking for the next big thing from Apple, and there is growing concern about just how disruptive the next product category can be. 

Some worry that Apple does not promise "new products" until the fall of 2013. Some would say that is a long time in the consumer technology business. On the other hand, if Apple is planning an assault on entirely new categories, getting it right is important. 

If you have a hard time imagining a "magical" TV or wearable computer, you probably are not alone. It has been a while since Apple introduced a product that flopped, like Newton, or simply has failed to capture the imagination (Apple TV). 

What comes next might be quite important, and it will be important that Apple gets it right. It seems hard to believe a "new and improved iPhone" is going to do it. 

ESPN could cost $20 a Month, A La Carte

ESPN could cost subscribers $20 monthly if cable operators break up programming bundles and offer smaller packages of networks, Liberty Media Chairman John Malone John Malone speculates.

That estimate illustrates the reasons why a la carte access to video networks would not necessarily be more affordable for video subscribers, compared to what they already pay, in every instance. If a typical viewer watches a dozen channels, each costing about $5 a la carte, monthly bills would still amount to $60, if no expensive sports programming were offered. 

Add in ESPN and monthly bills climb to about $80. That would not necessarily represent a smaller sum than many subscribers now pay. 

Global Internet Access Speeds Up 25% in a Year, Peak Speeds Up 35%

Year-over-year, average global Internet access speeds grew by 25 percent, with nine of the top 10 countries also demonstrating growth. In fact, only the Netherlands (3.3 percent), Hong Kong (5.4 percent) and Japan (19 percent) reported growth below 20 percent between 2011 and 2012.

Year-over-year, global average peak connection speeds grew 35 percent, Akamai reports. 

Quarter-over-quarter, the global average connection speed rose five percent to 2.9 Mbps. A total of 98 countries/regions that qualified for inclusion saw average connection speeds increase from the third quarter of 2012, ranging from 0.1 percent growth in the Netherlands and Luxembourg to 23 percent growth in Côte d'Ivoire.

Global average peak connection speeds enjoyed a quarter-over-quarter increase of 4.6 percent to 16.6 Mbps. Hong Kong again claimed the highest peak connection speed at 57.5 Mbps, a rise of 6.2 percent from last quarter. 

Global broadband (>4 Mbps) and high-speed broadband (>10 Mbps) adoption improved by 2.7 and 2.1 percent respectively for the quarter. Global broadband adoption rates rose slightly to 42 percent, while high-speed broadband was 11 percent.

Mobile Money Has Implications for Commerce, Not Just Banking

In 2001, SMART Money in the Philippines, run by SMART Communications, a wireless telecom, was the one and only mobile payment system operating in the world. By 2006, there were 10 such systems. Today there are more than 150, in both the developed and emerging worlds, and 90 more are on the drawing board in the emerging world alone, according to Knowledge@Wharton and Ernst and Young. 

Today, nearly 20 percent of Kenya’s gross domestic product moves through M-PESA, the nation’s mobile-money system operated by Safaricom, its leading mobile network. 

Also, more than half of Kenya’s 22 million adults have M-PESA accounts, twice as many as have bank accounts. Most of those transactions are used to send money from urban areas to recipients in rural areas. 

Moreover, there is evidence that all those new users also are spurring the spread of ;hysical banking facilities as well.  For example, between 2005 and 2010 the number of bank branches in Kenya doubled (from 500 to 1,000), a growth that many attribute to pressure from M-PESA. 

International remittances are another area where mobile service providers have gotten into the "mobile money" business. Airtel Money, which is available in 11 countries in Africa and the Middle East, enables its 15 million users send and receive minutes of airtime, and trade those minutes for money. 

According to the Bank’s Global Financial Inclusion Database, there are 20 nations in the world where more than 10 percent of the population has used mobile money in the past year. As The Economist noted in analyzing this data, 15 of those countries are in Africa.

Potential customers for mobile money include the 1.8 billion people who, according to the World Bank, have a mobile phone but no bank account.  

The remittance market is about $400 billion a year globally through formal channels and, it’s been estimated, about $1 trillion through formal and informal channels. 



In developed economies, where banking is not a problem, as such, other values will drive mobile money, in particular the value of data about who is buying, what and where they are buying. In other cases, "owning the customer relationship" might be the value. 

Consumers, Businesses Boosted Technology Spending 35% Over the Last Year

Individuals and households report at least a 35 percent increase in spending on consumer electronics products over the past 12 months, according to the latest Consumer Electronics Association report on the consumer electronics market. 

But consumer sentiment is weakening. That would normally lead to lower spending, overall. The issue is whether technology spending will diverge from that pattern, as might be the case. Apple is a big part of the story. 

AT&T has a Problem: Dividends Exceed Cash Flow

AT&T undoubtedly will announce higher earnings per share, year over year, for the first quarter of 2013.

But there is trouble brewing. In 2012, AT&T dividend payments were nearly $4 billion more than its free cash flow. And AT&T sees free cash flow being some $5 billion lower in 2013. Something has to give. 

The problems largely are attributable to the fixed network segment, which accounts for roughly 47 percent of the company's total revenues.  From 2008 to 2012, the fixed network segment's revenues declined from $67.9 billion to $63.5 billion to $61.2 billion to $60.1 billion to $59.6 billion in past years. 

Free cash flow also might have peaked in 2012, when AT&T reported $19.4 billion of FCF. In 2013, AT&T forecasts free cash flow of a bit over $14 billion, a level more consistent with 2010 and 2011 when FCF was $15.7 billion and $14.6 billion, respectively.

In 2012, AT&T spent $12.8 billion to buy back shares, and another $10 billion to pay dividends. Company-wide, AT&T increased long-term debt by $5 billion in 2012. You do the math. 

Municipal Broadband Provider Greenlight to Go 1 Gbps

Greenlight, the municipal service provider in Wilson, North Carolina, has been selling video entertainment, voice and Internet access for some time, but now plans to add 1 Gbps symmetrical service as well. 

Pricing details are not available, but at present, the 100-Mbps service sells for $150 a month. 

U.K. EE Finds LTE a Mixed Success

Major capital spending programs undertaken by service providers have implications. Such programs, even when necessary, divert cash that might have been used some other way, for example. Long term, the investments often are quite necessary. In the near term, the programs can hit earnings. 

Also, near term, investment sums can vastly outweigh the upside from new services, customer gains or boosts to average revenue per account. That seems to be the case for U.K.-based EE, which launched Long Term Evolution services using existing 1.8 GHz spectrum. 

First quarter 2013 revenues fell by 5.4 percent, year over year.  The launch of LTE services also has had other effects, such as boosting the amount of money EE now spends on device subsidies. 

Granted, it is too soon to make a full assessment. EE is early in its launch of 4G service, and LTE customer penetration is only about 1.2 percent. 

Longer term, higher LTE revenue is expected. The issue is how much higher revenues can be lifted, and how operating costs might change. 

Few think LTE will prove a "problem" longer term, as users switch to use of smart phones and smart phone apps that consume more bandwidth. That should translate into significantly higher user spending on data services. 

On the other hand, the full business case has new device subsidy and small cell implications. Those elements will offset the higher revenue. Nobody seems to think the net result will be anything but positive. But "how positive" will be a bigger issue as competition intensifies. 

Netflix Now Bigger than HBO

Netflix, which ended 2012 with 27.15 million domestic subs, added just over two million net new subscribers in the first quarter 2013 results. 

 HBO ended 2012 with 28.7 million subscribers.  That means Netflix finally has more subscribers than HBO. 

Nor is it possible to describe Netflix as a "DVD by mail" service, given the overwhelming preference for streaming delivery. These days, it is the most successful streaming service. None of which means its challenges are over. 

You might also say Netflix is the most popular "cable network" as well.  

Netflix has faced strong doubts about its prospects several times in the past. But Netflix has surmounted every set of those challenges, most crucially questions about its business model.

Some would say the next set of challenges for Netflix will involve scaling its original programming operations and managing the heavier financial requirements that will entail. There are doubters. There always are, where it comes to Netflix. 

46% of All Smart Phone Shipments in 2018 Will be "Low End"

At some point, it has been clear, there will be very little difference between "phone sales" and "smart phone sales."

As you might also guess, shipments of lower-cost smart phones will grow the most. Devices selling for less than US$250 will grow from 259 million units in 2013 to 788 million units in 2018, according to ABI Research.

Mid-range devices costing up to $400 are expected to grow from 635 million to 925 million units by 2018.

Though observers might not have thought the point would be reached so quickly, in many emerging markets, voice profits already are low enough that selling data plans will make the difference between success and failure, in some cases.

Verizon's device Payment Plan Isn't A Great Deal

People who routinely replace their devices about every year might like Verizon's device payment plan, which separates installment payments for a device costing at least $350 from the service contract. 

But users looking to save money will be disappointed. The service plan is not discounted, so the installment plans don't appear to save users any money. In fact, since there is a finance charge, people likely will wind up spending more. 

The only advantage is that users can buy another new device in a year. Most people probably will just want to buy a subsidized device and take the contract. 

Maybe Video Won't Crash the Mobile Internet

Bandwidth growth shows it is so difficult to accurately and consistently forecast the volume of change, even when the direction of change is clear enough. Everybody expects bandwidth consumption to keep growing. But we rarely get the magnitudes right.

Nor do we necessarily and normally hit the limits linear extrapolation suggests will be encountered, because actors behave rationally. Faced with higher prices for a product, they substitute other products, especially when suppliers encourage such substitution.

One might argue the potential explosion of video bandwidth will not happen in precisely the way observers and forecasters now predict, because users and suppliers will change their behavior. In other words, when there is no financial penalty for using bandwidth to watch video, people will watch. 

When there are incremental costs, behavior will change. And that is why, in the end, even mobile video will not crash the networks, though one could make a decent argument for that eventuality, extrapolating in a linear way from today's trends.

One might explain the Internet bubble demand forecasting failures. There were false signals being sent, in part because of fraudulent activity on the part of bandwidth sellers. But even when that is not the case, we tend to overestimate the degree of bandwidth demand growth.

At least one reason is that people and service providers have learned to act in ways that alter behavior. In other words, given service provider and end user self interest, mobile bandwidth growth has slowed because both suppliers and consumers benefit financially by doing so.

By 2017, almost 21 exabytes of mobile data traffic will be offloaded to the fixed network by means of Wi-Fi devices and femtocells each month, Cisco estimates. 4G Americas says Wi-Fi offload of mobile traffic is at 35 percent today in the United States and is estimated to be 68 percent by 2016.

Without Wi-Fi and femtocell offload, total mobile data traffic would grow at a compound annual growth rate of 74 percent between 2012 and 2017 (16-fold growth), instead of the projected 66 percent CAGR (13-fold growth), 4G Americas says.

Cisco notes that tthe global average for daily data consumption over Wi-Fi is four times that of cellular, averaging 55 MBytes per day for Wi-Fi, and 13 MBytes for cellular.

 Average Daily Wi-Fi and Mobile Data Consumption

Some think the same sort of trend ultimately will characterize mobile broadband bandwidth growth rates as well, In fact, there is little reason to doubt that future trend, given historical precedents.

In March 2011, for example, AT&T projected that data bandwidth growth would be on the order of eight to 10 times over then-current levels between the end of 2010 and the end of 2015.

That forecast appears to be based on an expectation that volumes would roughly double in 2011 and then increase by a further 65 percent in 2012.

Instead, AT&T seems to be seeing something like 40 percent annual growth. To be sure, 40 percent annual growth is significant. It means bandwidth consumption doubles about every two to three years.

Cisco estimates mobile broadband grew about 70 percent in 2012, and will grow at a compound annual growth rate of 66 percent from 2012 to 2017.

Some believe Wi-Fi offload will slow the rate of mobile broadband growth. On the other hand, even such offloading, at high rates of perhaps 80 percent, would slow the rate of growth by about 50 percent.

Two Ways Predictions Go Wrong

It's hard to forecast the future. Not only do we tend to view the future through the lens of the present, we more frequently get the timing wrong. Perhaps the more common forecasting error is of timing, not direction. 

Many developments which occur, generally as expected, take a decade or more to arrive in any significant way. That might not be a crucial fact for most people and companies, but it is decisively determinant for investors in technology start ups. 

Being right about the trend doesn't help if one is wrong about the timing. 

Mobile Broadband Already Emerging as Key in India Market

India’s mobile services market will reach Rs.1.2 trillion in 2013, up eight percent from 2012 revenue of Rs. 1.1 trillion, according to Gartner analysts. As you might expect in a market where retail is quite important, the growth could prove challenging.

“The mobile market in India will continue to face challenges if average revenue per unit does not grow significantly,” said Shalini Verma, principal research analyst at Gartner. And there is no doubt competition and over the top apps are key challenges. Both are putting pressure on profit margins. 

Ironically, mobile broadband revenue already appears to be more important than voice revenue, as a driver of future growth. 

“As mobile voice services continue to get commoditized in the country with the increased use of voice over IP (VoIP) and the probable termination of national roaming charges, mobile broadband is the area of opportunity for operators,” said Ms. Verma. 

“If the prevailing conditions do not change in the Indian telecom market, India will account for 12 percent worldwide mobile connections, but just two percent of worldwide mobile services revenue (in constant USD) in 2013.”

Mobile connections will grow to 770 million in 2013, an 11 percent increase from 712 million connections in 2012. 

49% of South Africans Would Change Their Mobile Operator if They Could

A recent study commissioned by Comptel suggests that, among South African consumers, up to 49 percent would consider switching service providers. 

Those figures probably overstate churn potential. 

As always, one should take a consumer's responses to any survey with a bit of skepticism.

Consumers often say they will do something, when they really do not; or say they will not do something; and then do that. 

The conventional wisdom for most people, including executives at mobile service provider companies, is that there is a relatively direct relationship between "customer satisfaction" and customer churn. In other words, "happy customers" don't leave.

It doesn't appear that is the case. Perhaps perversely, even happy customers will churn (leave a supplier for another), and at surprisingly high rates.

Two out of three (66 percent) wireless and cable TV consumers switched companies in 2011, even as their satisfaction with the services provided by those companies rose, according to Accenture.

The paradox is that “customer satisfaction” does not lead to “loyalty.” Also, there are new precursors to churn, especially the growing pattern of consumers adding a second provider of a service, without dropping the original provider. That of course puts a potential full replacement provider into a relationship with a consumer.

The Accenture Global Consumer Survey asked consumers in 27 countries to evaluate 10 industries on issues ranging from service expectations and purchasing intentions to loyalty, satisfaction and switching.

Among the 10,000 consumers who responded, the proportion of those who switched companies for any reason between 2010 and 2011 rose in eight of the 10 industries included in the survey.

Wireless phone, cable and gas/electric utilities providers each experienced the greatest increase in consumer switching, moving higher by five percentage points.

According to the survey, customer switching also increased by four percent in 2011 in the wireline phone and Internet service sectors.

There is a new and apparently growing indicator of churn potential as well. In a growing percentage of cases, consumers are adding new providers, instead of switching entirely. That can disguise the danger of churn, as the original provider does not realize a new potential replacement provider also has established a relationship with a particular consumer.

“Companies are improving many of the most frustrating parts of the customer service experience, but they are facing a customer who is increasingly willing to engage multiple providers for a service and is apt to switch quickly,” said Robert Wollan, global managing director, Accenture Customer Relationship Management. “

Note the contradiction here: consumers were “more satisfied” and also “not loyal” because of that satisfaction.

Consumers reported increased satisfaction across each of 10 service characteristics evaluated. In fact, satisfaction rates on three customer service characteristics jumped by more than five percentage points from 2010.

However, only one in four consumers feels “very loyal” to his or her providers across industries, and just as many profess no loyalty at all. Furthermore, two-thirds of consumers switched providers in at least one industry in the past year due to poor customer service.

Spanish Mobile Market Shrinks

Some 245,000 Spaniards appear to have abandoned use of mobile phones in February 2013. 

In other words, the Spanish mobile market not only has stopped growing; it is shrinking. 

In February, 575,138 people switched suppliers, an 18 percent increase compared to the same month the year before, and only slightly lower than the record 633,616 changes recorded in January 2013.

Telefonica lost 85,161 customers to rivals, while 95,115 customers left Vodafone for other operators, the Spanish regulator reports 

Orange lost 5,757 customers to other companies. Low-cost Yoigo, the smallest facilities-based operator gained 32,424 mobile customers. 

But mobile virtual network operators gained 153,609 new customers, primarily taking them from the facilities-based suppliers.

EU Single Market Plan Accelerated

European regulators are planning to aggressively accelerate plans to create a single telecom market, releasing its plan in June 2013 instead of its original fall time table, in the hopes the plans can be put into place before the end of 2013. 

The European Commission still is working on a blueprint for a single telecoms market in the EC states, a move some tier one service providers want, but which national regulators and smaller service providers might fear.

The issue is how to create one market from 27 distinct national frameworks, as well as how to harmonize investment and operating rules across the different countries. It is not clear that such a move, if successful, actually would create a single regulator across all 27 countries. 

For a few tier one service providers, common rules and a single market would allow a more efficient and profitable approach to providing communications services across Europe. Many smaller providers would find they do not have scale to continue competing successfully, though. 

In fact, the plan might initially entail easier competitor access to tower sites, ducts and other forms of infrastructure. The objective would be to enable some European service providers to achieve greater scale. 

Android Notebooks Coming

Lenovo, Hewlett-Packard, Toshiba, Acer and Asustek Computer reportedly are launching Android notebooks, at least in part because Windows 8 machines have disappointing sales. 

Given the displacement of PC sales by tablets, one almost wonders why. 

By 2017, total tablet shipments will hit nearly 353 million,  compared to 382 million PCs. Still, volumes will continue to shift in the direction of tablets and smart phones. Given Android's huge installed base and the likelihood that Android and Chrome sooner or later will be unified, the PC vendors are hedging their bets. 

DSL Net Additions Go Negative for First Time, Ever

Net digital subscriber line customer additions were negative in the fourth quarter of 2012 for the first time ever, Point Topic says. 

The total number of DSL subscribers worldwide fell from 366.95 million in September 2012 to 366.66 million by the end of the year.

Point Topic says that signals the gradual demise of "all copper" connections, but not necessarily of fiber-reinforced copper connections, including both cable and telco very high bit rate versions of DSL. 

Still, fiber and hybrid fiber connections now account for over 20 percent of the world’s fixed broadband lines, growing by more than 26 percent in 2012.

There were 643,770,042 broadband subscribers around the world by year-end 2012, according to Point Topic. FTTx is gaining ground on other technologies, including traditional DSL, which continues to be the most dominant technology in the market.

FTTx (including VDSL and VDSL2) showed the largest annual growth over the period between the fourth quarter of 2011 and the fourth quarter of 2012, growing 27 percent overall, compared to 7.2 percent for cable modem subscriptions and 3.6 percent growth  for DSL.

Fixed wireless grew 12 percent over the year.

Looking at the current market share, fiber technologies, at 21 percent, have overtaken cable modem’s 19 percent share, globally.

At least for the moment, it appears that global consumer demand tops out at around 70 Mbps, and that level of access speed demand seems to be driven by the desire to watch online video, Point Topic researchers say.

At least so far, there are no apps that drive consumers to buy much more than 40 to 50 Mbps access, says Oliver Johnson, CEO at Point Topic. But one might argue it is the number of people per household that drives “typical bandwidth consumption.”

According to an exercise conducted by Point Topic, bandwidth consumption is almost directly related to the number of people per household, and the number of Internet-connected devices each person tends to use.

If one assumes a household is consuming bandwidth literally 24 hours of every day, all seven days a week for a whole month, then a single-person household, using two Internet-connected devices, might consume 13 terabytes a month.

A four-person household with two adults and two children might consume 29 terabytes, assuming each person has a bit more than one device each.

A “hacker” household with at least five people, and each person using at least two Internet-connected devices, could consume 134 terabytes a month.

China SMS Usage Drops 11%: OTT is the Reason

SMS usage in China (person to person) has declined nearly 11 percent in 2012, a development that suggests substitution of over the top alternatives.

Mobile Data Now 42% of Total Among Leading North American Carriers

The percentage of postpaid service revenue related to data increased to 42 percent as of June 30, 2012, up from 38 percent for the same period in 2011, among 14 leading North American mobile service providers a study by

PwC has found.

Carriers with revenue greater than $5 billion increased data revenues six percent as of June 30, 2012, to 39 percent, compared with a smaller increase in the revenue generated by data services for carriers with revenue less than $5 billion, 45 percent as of June 30, 2012 compared with 44 percent as of June 30, 2011.

Data users on average contributed $23 of total average revenue per user as of June 30, 2012, which is up from the average of $21 at June 30, 2011, or about 40 percent of total monthly recurring revenues.

Bandwidth consumption by North American smart phone users continued to grow in 2012, but at an order of magnitude slower rate, compared to 2011.

In 2011, smart phone users, on average,  consumed about 114 percent more bandwidth, the study found. But the  increase on a per-subscriber basis averaged only 27 percent in June 30, 2012, compared to usage levels in June 30, 2011, the PwC survey found.

Bandwidth consumption is bound to grow, as sales of smart phones grows. The sale of smart phone devices to new postpaid subscribers represented 60 percent of device sales for fiscal 2011, up from 41 percent in fiscal year 2010.

Smartphone users on average consumed 632 MBytes of data per month as of June 30, 2012, compared with 431 MBytes of data per month at the same time in 2011.