Is Apple's Business Model About to Change?

Though it remains for the moment an unanswerable question, it is probably not too early to ask whether Apple's business model might change in the future, and at what pace.

Until recently, virtually all of Apple's profits were built on hardware sales. Everything else, system software or iTunes music revenue only mattered as a way to drive hardware sales.

The iPhone and iTunes are the best examples of how and where the change might come.

Apple might make $200 to $300 or so selling an iPhone, but $600 to $850 is more like the additional service revenue Apple receives from an AT&T iPhone sale, the difference being the value of the recurring service revenue Apple gets from AT&T, some analysts say.

For the 2009 quarter ending in June, Apple sold 5.2 million iPhones for a recorded revenue of $1.7 billion, or about $324 per iPhone.But iPhone-related service revenue was about$4.4 billion, compared to $3.3 billion in Mac sales. So at least for the moment, iPhone service revenues are a bigger revenue contributor than the Mac PC product line.

One wonders what will happen if Apple gets into the e-book reader business. What percentage of revenue might be earned from selling readers, or iPhones, compared to the recurring content business?

Apple could become a distributor and micro-payment agent for goods and services. All of this remains speculative, of course. It is not clear Apple always will be able to claim some portion of service provider revenues. But other content or application-related revenue streams might emerge to replace those recurring service revenues.

Big Changes In Mobile Business Last 2 to 3 Months

Piper Jaffray analyst Christopher Larsen has cut his rating on Sprint Nextel, arguing that industry dynamics have shifted significantly over the lat two to three months.

The trends of most importance are the higher subsidies service providers are providing on handsets as well as lower prices for attractive pre-paid offers that are likely to put pressure on postpaid pricing, especially as more data intensive handsets become available at lower price points.

The other trend of note is that although the prepaid business has traditionally been viewed as a segment comprised of lower-income or credit-challenged customers, that is likely to change. Already we see more smart phones available for use on prepaid plans, a departure from past practices.

To be sure, mobile service providers will continue to use handsets as a differentiator, but wider availability of capable handsets used with pre-paid plans seems inevitable. At the same time, $45 and $50 prepaid plans that also feature unlimited usage are going to destabilize postpaid pricing.

Facebook Can Get You Fired

About eight percent of corporate executives surveyed by Proofpoint say they have terminated

employees for disclosing confidential, protected or simply embarassing information put up on socialnetworking sites such as Facebook or LinkedIn, up from four percent who reported doing so in 2008.

About 17 percent of respondents said they had incidents of that nature this year, compared to 12 percent in 2008.

But email still seems to be a more-common reason for terminations of this sort. About 43 percent of respondents reported they had investigated an email-based leak of confidential or proprietary information in the past 12 months.

Nearly a third of them, 31 percent, terminated an employee for violating email policies in the same period, up from 26 percent in 2008.

About 18 percent of respondents say they had investigated a data loss event from a blog or message board in the past 12 months. About 17 percent disciplined an employee for violating blog or message board policies, while nearly nine percent reported terminating an employee for such a violation, up from a disciplinary rate of 11 percent in 2008 and a termination rate of six percent in 2008.

More respondents also reported investigating video-related exposure events. This year, about 18 percent have had to do so, up from 12 percent in 2008.

About 15 percent of respondents have disciplined an employee for violating multimedia sharing or posting policies in the past 12 months, while eight percent reported terminating an employee for such a violation.

Even short message services like texts and Twitter pose a risk. About 13 percent of respondents

investigated an exposure event involving mobile or Web-based short message services in the past 12 months.

About 38 percent of respondents say they now read or analyze outbound email before it is sent.

As more U.S. companies reported their business was affected by the exposure of sensitive or

embarrassing information (34 percent, up from 23 percent in 2008), an increasing number say they employ staff to read or otherwise analyze the contents of outbound email (38 percent, up from 29 percent in 2008).

In addition, companies are regularly ordered to produce employee email as part of legal actions,

exposing its contents to outside scrutiny. Nearly a quarter (24 percent) of large US companies report that employee email was subpoenaed in the past 12 months.

Malaysia Open Access Network Challenges Business Model

Service providers, end users and policy advocates will be keeping close watch on Malaysia's open access fiber network Jalenasn which will begin building as early as October, says Comms Day International.

Based on an open access model, Jalenas will only own and control the fiber infrastructure, leasing access instead to broadband service, applications and content providers who in turn will offer end user services.

The model probably is not directly applicable to U.S. markets, in part because measurable government support is required, in part because of massive service provider opposition.

But the plan will provide new real-world data about the economics of such methods, which require extreme operational efficiency by the infrastructure provider.

A similar wholesale access approach is being undertaken in nearby Singapore, and both Australia and New Zealand are weighing somewhat similar approaches as well.

The Jalenas network is owned by Pahang state-backed High Speed Broadband Technology.   
 
Ericsson will manage the project for at least the first five years, in yet another new twist. The Malaysian access network will be owned by one entity, managed by another, while retail services will be provided by other third parties.

FairPoint Unhappy About Broadband Stimulus Competition

FairPoint lobbyists and officials say the University of Maine System is unfairly competing with them for federal funds available as part of the American Recovery and Reinvestment Act "broadband stimulus" program.

“The fact is, we are competing with the University of Maine,” says Severin Beliveau, an Augusta, Maine attorney representing FairPoint. “I am concerned at what the university is proposing here, because it is receiving a form of subsidy, no, they are in fact receiving a subsidy from taxpayers, in competing with the private sector.”

Jeff Letourneau, the associate director of information technology at UMS, said the proposal is not the university’s but is from a private-public partnership and that the UMS is just one member.

FairPoint is developing a $20 million proposal that builds on its existing Internet infrastructure, the company indicates. FairPoint says the project will bring broadband access to 90 percent of Maine by 2013.

Though the first of the funds have not yet been awarded, organizations and companies now are starting to complain about the rules. FairPoint Communications, librarians and FiberNet in West Virginia are among those who have voiced complaints about the rules.

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Video Tipping Point in 2010?

The mass-market tipping point for online video will occur in 2010, when online video will be viewed by 50 percent of U.S. consumers, says eMarketer.

Online video also will achieve a 59 percent penetration rate in 2013, up from 47 percent in 2009.

The number of U.S. online video viewers will grow to 188 million in 2013, up from 144 million in 2009, says eMarketer.

Online video viewers will make up 85 percent of Internet users in 2013, up from 72 percent in 2009.

“This will put online video within range of Web activities such as search and e-mail, which are nearly at saturation points among U.S. Internet users,” says Paul Verna, eMarketer senior analyst.

The ability to share video through social networks, blogs, microblogs, e-mail and other social platforms will play a role. So will mobility.

All of that will hasten the day when changes must be made--especially on mobile networks--relating to end user consumption and pricing.

Is the USPS a Natural Monopoly?

Just thinking out loud, but is mail a natural monopoly?

The U.S. Postal Service has seen a precipitous drop in volume lately.

So they raise their prices, making other alternatives more attractive, which further depresses volume. It sort of looks like a death spiral.

Of course, "mail" can mean messages, so email is a functional substitute, as was facsimile.

And mail and packages can be delivered by any number of competitors (FedEx, UPS and others). To the extent that FedEx, UPS, the Internet and other alternatives aer widely available, perhaps "mail delivery" is not a natural monopoly.

Still, without large subsidies, the network is not profitable. It could not provide universal delivery without subsidies and it certainly does not ever make money. So it is one of the other models one has to look at when thinking about the future of the communications network business.