Gen Y First Native Online Generation

Forrester Research says Gen Xers use technology when it supports a lifestyle need, while technology is so deeply embedded into everything Gen Yers do that they are truly the first native online population.

"Gen Y is the audience that most companies are struggling to understand right now because it's key to their future revenue growth," says Charles Golvin, principal analyst at Forrester Research.

Although Gen Y,18- to 28-year-olds, represent only 38 million U.S. adults, it sets the pace for technology adoption. Nine in 10 Gen Yers own a PC, and 82 percent own a mobile phone. But it's technology use that sets this generation apart: Gen Y spends more time online — for leisure or work — than watching TV.

Seventy-two percent of Gen Y mobile phone owners send or receive text messages, and 42 percent of online Gen Yers watch Internet video at least monthly.

In contrast, Gen X, which is comprised of 29- to 42-year-olds — 63 million US adults — uses technology when it intersects with a personal need or fulfills a desire. For example, 32 percent of Gen X households own an HDTV, and 29 percent have a DVR.

In the past three months, 69 percent of online Gen Xers shopped online, and 65 percent banked online, higher percentages than any other generation. Gen X is also ramping up its Internet and mobile activities, including reading blogs (21 percent of online Gen Xers do it at least monthly, up from 15 percent in 2007) and texting (61 percent of Gen X mobile subscribers do it today, up from 49 percent in 2007).

Most of the Money Still is in Legacy Media

PricewaterhouseCoopers reported in its Global Entertainment and Media Outlook that as of 2007, digital and mobile distribution made up only five percent of total spending on entertainment and media.

PWC projected that this percentage will increase to 11 percent by 2012. No doubt, digital media is growing, in some cases, growing fast.

But even with momentum, 11 percent is still a small percentage of the $2.2 trillion annual spending on media and entertainment, especially when market share is held by a wildly fragmented cast of contenders.

Sometimes, it makes sense for large providers to place bets on "legacy" video even when everybody acknowledges that the market is changing. That doesn't mean wisdom is not found in spreading a number of bets on legacy and emerging media. It does mean that a rational investor with the ability to attack the existing revenue streams would be rational to do so.

A small percentage of a big number is a big number. A small percentage of a small number is, well, a smallish number. Large companies do not have the luxury of chasing small number markets. Small companies can, and do.

If recent AT&T quarterly results are an indication, it will ultimately prove to have been wise to invest heavily in "legacy" video, despite the coming shift of much video to alternate delivery methods. The issue right now is that the emerging markets still represent small amounts of revenue.

That will change over time as revenue at stake shifts and the scale economics emerge. At that point, one would have to expect consolidation of the market to create some large distributors able to capitalize on the scale economics.

That does not mean that, in the interim, large returns from legacy services should be ignored.

Vonage U.K. Launches Lower-Cost Plans for North America Calling

Vonage U.K. has launched two new "value" call packages for consumers concerned about their phone bills, as well as a new £6.99 plandesigned for the high percentage of Vonage consumers who call North America. The two new call plans offer Vonage’s lowest ever tariffs and are priced at £5.99 per month for unlimited calls to the U.K. and £6.99 per month for unlimited calls to the U.K., United States and Canada.

The £6.99 plan also includes an option that for £1 extra a month providing unlimited calls to mobile phones in the United States and Canada.

Vonage’s £7.99, £14.99 and £18.99 plans incorporating up to 45 countries remain unchanged.

Wireless Powers AT&T Results

As expected, AT&T wireless services revenues excluding handset and accessory sales, were up 14.5 percent to $10.9 billion for the quarter. Total wireless revenues were up 15.8 percent to $12 billion.

The company also continued to grow its AT&T U-verse TV subscriptions. AT&T had a second-quarter net gain of 170,000 customers for a total of 549,000 subscriptions in service. AT&T has a goal of connecting more than 1 million subscribers by year’s end.

Text Messaging Still Dominates Mobile Data Use

Voice continues to be the dominant application most mobile customers use on a daily basis. Text messaging remains the dominant data application, according to researchers at the Yankee Group.

Teenagers, as you would expect, are the one demographic that uses text just a bit more than voice. About 63 percent of teen users surveyed say they use text on a daily basis, while voice is used daily by 61 percent of users in that age group.

Growth rates for mobile Internet access, mobile video and mobile email are strong, but are growing from a relatively smaller base of users.

Mobile email use grew 71 percent between 2006 and 2007, for example, while mobile Internet use grew 57 percent.

Satellite Broadband Penetration Now a Bit over 10%

Satellite broadband now is the growth focus for providers such as Hughes Network Systems and WildBlue, and the stated opportunity often is said to be rural users as well as residents of suburban or urban areas not yet wired either for digital subscriber line or cable modem services.

According to data from the Pew Internet & American Life Project, that might not be completely correct. Though 16 percent of respondents to a recent Pew survey reported they have satellite broadband, so did 10 percent of urban users as well as 10 percent of suburban users.

The usual assumption is that the remaining urban and suburban areas ultimately will be wired, with potential loss of nearly all the urban and suburban users, depending on the definition of "suburban" one uses.

In the separate video entertainment business, one can make a reasonable argument that availability of the wired alternatives is less an issue, as the satellite providers compete not only on "availability" but on image quality and program diversity.

Satellite broadband providers do not have that opportunity, as satellite generally offers speeds slower than DSL and cable modem services, for slightly to meaningfully higher prices. Satellite services clearly win when there is no other alternative but dial-up service.

Nor does satellite fare as well on price in wired areas. Both cable modem and DSL prices have dropped since 2004, Pew reports. The price drops arguably have been highest for "value" priced packages, as new "premium" services featuring more speed continually have been added at the high end.

Still, Pew researchers report that 62 percent of surveyed dial-up users say they "do not want" broadband. Overall, the remaining pool of dial-up users iucludes just about 36 percent of users who say they are willing to switch to broadband. One expects the base of resisters will continue to dwindle over time.

AT&T to Change Broadband Marketing Language

At the Federal Communications Commission Pittsburgh broadband hearing, AT&T Senior Federal Regulatory Vice President Robert Quinn is reported by Broadband Reports to have said the company would in the future stop advertising speeds "up to" a specified rate, and would instead "strive to provide service within the speed tier purchased by the customer."

When AT&T finds it is not providing service within the ordered speed tier, AT&T will take action either to bring the customer's service within the ordered tier or give the customer an option to move to a different tier," he said.

Today, customers can order service "up to 7Mbps" tier, while plant conditions limit them to lower real-world bandwidth. Under the new scheme, customers will be offered the expected speed the plant supports, and then supplied with the higher speeds actually possible on their chosen plans.

AT&T also says it will supply customers information about how much bandwidth various applications consume, so they can choose the right plans. To Broadband Reports, that sounds like a precursor to some form of usage-based billing. It may well be. AT&T has been pretty clear that usage will play a bigger role in future access plans. That is an issue many will argue about.

But giving users a better understanding of their bandwidth requirements is a good thing, as is the policy of selling actual service that matches the marketing claims.