Margin Impact: Online Vs. DVD Distribution

Factoid: Video on demand “day and date” sales--when content is available on the same release day as the same content released on DVD--has gross profit margins of 60 to 70 percent. DVD sales sold on the same "day and date" window have margins of 20 to 30 percent."

Keep that in mind as more and more experimentation with highly-popular movie and TV programming occurs. Even though gross revenue might be lower for digital delivery, so are costs. And the margin for digital products beats physical delivery by a three to one ratio.

Senate Passes Immunity Bill

The U.S. Senate voted July 9, 2008 to grant retroactive immunity to telephone companies that participated in the White House's warrantless domestic surveillance program. The House of Representatives earlier had approved the bill, which now goes to President Bush, who is expected to sign the bill.

Some people think "warrantless" means "unwarranted." I don't. Carriers acted in good faith in complying with government requests.

Has BT Bought Ribbit?

Lots of smart and experienced people think application developers will not find a warm reception in the tier one carrier community. I think that's dead wrong. Never have "telco" executives been more aware that they need partners to create compelling new applications.

So VentureBeat reports that BT has purchased Ribbit, a voice platform company playing in the "communications enable business processes" space. Think of the way voice gets integrated with Salesforce.com.

Techcrunch says Ribbit has been bought by BT for $55 million. But there's still some speculation that the deal isn't done yet.

No matter. The important thing is that the deal illustrates a trend: telcos no longer have a "not invented here" attitude about applications and services invented by third parties.

There is lots of room for application developers to create interesting features service providers will want to offer.

For my friends at Qwest: talk to Fonolo.

WeFi One-Touch Wi-Fi for Windows Mobile Devices

WeFi Inc., creator of an open, community-based global Wi-Fi network, announced today the launch of a new ‘one-touch-internet’ feature for Windows Mobile, providing mobile users with seamless access to the best Wi-Fi connection relative to their location at the simple click of the touch-screen.

WeFi’s one-touch-internet feature gives the Windows Mobile user a convenient interface to launch any application or webpage from the “Today” screen, automatically finding the best Wi-Fi connection available when this application is launched.

In addition, each application can be configured in advance to use only Wi-Fi, or revert to 3G or 2.5G data connection if no Wi-Fi access point is available – so that a seamless connection is constantly maintained.

WeFi says its network now includes 1.5 million access points.

Windows Mobile users can also register the WeFi software on their personal computers.

Mobile Video Forecast

Consumers are demanding more personalization and entertainment content on their mobile phones, driving mobile video revenue to exceed $3.5 billion in 2008, according to recent research by MultiMedia Intelligence.

By 2012, the mobile video and mobile TV market will exceed $15 billion, including direct customer payments and advertising. But most of the money is in subscriber fees. Total Mobile TV and Video advertising revenue will exceed $1 billion by 2012.

Those numbers illustrate something about the relative importance of various revenue streams. Some observers think video, advertising and other related revenue streams ultimately will represent most network service provider revenue.

I'm a bit of a contrarian, perhaps, but I continue to believe voice and data services will constitute the clear majority of "legacy" telecom service provider revenues for the indefinite future. That doesn't mean "dumb pipe" or "simple access" services are the only revenue components former telcos will have.

It is to argue that most of the revenue will continue to come from access and the services that are built rather directly on access. I'd argue that will continue to be true on both wireless and wired networks.

With the combination of a large wireless subscriber base and free-to-air alternatives, Asia has the vast majority of mobile TV subscribers. By 2012, Asia will have two thirds of all mobile TV subscribers.

For that reason alone, mobile TV is unlikely to represent a very large revenue stream for network service providers. And what revenue there is will come in the form of recurring subscription payments or on-demand fees.

Harmonizing WiMAX and LTE

Participants from both the WiMAX and LTE camp and IEEE and ETSI 3GPP standards organizations seem to be of a mindset that a common air interface for both Long Term Evolution and WiMAX would be a good thing. Vodafone, for example, is calling for the merging of WiMAX and LTE.

Count Intel as a proponent of such harmonization as well.

These proposals point out a key fact about both WiMAX and LTE: they simply are wireless broadband platforms. The differentiation will come only as differentiated business models can be created. It probably is inevitable that in the early going the volume will be in "DSL and cable modem substitution" and "alternative to 3G mobile broadband."

LTE, though, is in a different strategic position. Its backers can assume they essentially are looking at a next-generation network that will, over time, port existing customers and business models over to the new platform.

WiMAX, in North America, has to create space for itself by stealing some share from other existing contestants. That's why the pressure to position on one hand as a fixed line alternative and on the other hand as "better 3G" will be irresistable. If that is all WiMAX does, it will not be as successful as many hope. The compellingly different positioning is "mobile Internet," with all that implies about openness, applications heterogeneity, pricing and packaging.

U.S., Italy Lead in Moble Internet

Mobile Internet has become a mass medium in the U.S. and Italian mobile markets, say researchers at Nielsen Mobile. As of May 2008, there were 40 million active users of the mobile Internet in the United States.

Perhaps more interesting is the fact that 95 million U.S. mobile users have subscribed to the service but do not necessarily use it.

According to Nielsen, 144 million (57 percent) of U.S. mobile subscribers were data users in the first quarter of 2008 (any data activity from text messaging to mobile Internet).

Some 95 million (37 percent) of U.S. mobile subscribers paid for access to the mobile Internet, either as part of a subscription or transactionally.

About 40 million subscribers (15.6 percent in May 2008) were active users of mobile Internet services, using those services at least once on a monthly basis.

It's a small point, but in recent days studies have shown that penetration of global positioning satellite services and now mobile Internet are highest in the U.S. market. Over time, that distinction means little. But it's worth keeping in mind that different services propagate at different rates in different countries and regions, often because of value drivers specific to each region, sometimes because of regulation, other times because of pricing and packaging policies.