Unanticipated Consequences from Stimulus Spending

One of the frustrations many of us have with governments substituting themselves for the market is that nobody is smart enough to figure out all of the unanticipated consequences. Without making any judgments about the broader theory of pump priming Keynesian theory suggests now are appropriate, externalities seem the order of the day.

The undeniably popular U.S. cash-for-clunkers program may be drawing money from other consumer purchases and could also undermine future car sales, U.S. economists now warn. The latest Commerce Department retail sales figures show U.S. retail sales fell 0.1% in July, as opposed to expectations sales would gain 0.8%. Excluding autos, retail sales declined 0.6% versus an expected gain of 0.1%.

So it is hard to discount the notion that spending was diverted from other retail items and towards autos. Worse, many assume the new car sales simply shifted fixed demand forward: people bought cars now when they were planning on doing so later in the year or early in 2010, suggests

Joshua Shapiro, chief US Economist at MFR.

“Anyone thinking about buying cars in the next several months might as well do it now when the government is giving away $4,500,” he says.

“It’s a nice success, but there’s a macroeconomic risk going forward,” says Joseph Brusuelas of Moody’s Economy.com. In "the first quarter of 2010, the stimulus will begin to wither, and consumption which would have otherwise occurred next year will have occurred in the second half of 2009.”

One wonders what other sorts of externalities now are occuring elsewhere in the economy, and will happen when broadband stimulus funds start to flow sometime in early 2010.

Will Broadband Stimulus Work, If So, How Well?

An argument can be made that the "broadband stimulus" program, which has yet to award its first funds, will change very little. Most people who use the Internet already buy broadband services.

People in "underserved" areas might already have several providers (wired and by satellite and terrestrial broadband); the real barrier being lack of PCs, lack of training or simple lack of interest.

In rural areas, there are perhaps hundreds of thousands of locations with no terrestrial access at all, though satellite service might be available. An argument easily can be made that funds should be focused on locations that literally have no terrestrial access at all.

But those locations will be expensive to reach, meaning fewer households will benefit.

Also, building facilities will only improve broadband usage to the extent those new locations have consumers who want to buy broadband. A good percentage will not want to, because they don't use the Internet, do not own computers or cannot afford the incremental cost of broadband service.

That said, even if funds are targeted very precisely, overall broadand usage in the U.S. market will not change much, if only because the number of new subscribers in rural areas will, by definition, be limited. Even in most rural areas, an overwhelming majority of locations already are reached by one or two wired networks, plus satellite and terrestrial broadband in many cases.

The number of truly isolated locations is quite limited, in comparison to all U.S. locations and current broadband subscribers.

Good policy reasons underpin the drive to connect the unconnected. But a "passing" (facilities are in place) is not the same thing as "a user" (a household that buys service). It's good to build facilities to isolated locations. But that doesn't mean people always will buy, or that the number of new subscribers will move the needle.

http://techdirt.com/articles/20090811/0058095834.shtml

Microsoft, Nokia to Challenge RIM

Microsoft and Nokia are working together to bring native versions of Microsoft Office to Nokia smart phones, in a challenge to Research in Motion.

Over time, the companies plan to release applications for Nokia phones (using the Symbian operating system) that include the ability to view, edit, create and share Office documents on more devices in more places with mobile-optimized versions of Microsoft Word, Microsoft PowerPoint, Microsoft Excel and Microsoft OneNote.

The initiative also includes enterprise instant messaging and presence, and optimized conferencing and collaboration experience with Microsoft Office Communicator Mobile.

The collaboration also will lead to mobile access to intranet and extranet portals built on Microsoft SharePoint Server.

Apple and Android Gaining, Nokia and Microsoft Losing Share in Smart Phone Market?

Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 percent decline over the year earlier quarter, but smart phone sales rose 27 percent over the same period, surpassing 40 million units for the first time (40.96 million), says Gartner research director Carolina Milanesi.

Apple saw the largest rise in its share of the global smart phone market, rising from a 2.8 percent share in the second quarter of 2008 to 13.3 percent in the same quarter of 2009. Apple is the third most popular provider of devices, with Nokia number one, despite losing new sales share from 47.4 percent to 45 percent. Research in Motion is third.

In the area of operating systems, Nokia's Symbian has 51 percent installed base share, down from 57 percent a year ago, while RIM and Apple grew their shares year-on-year.

Google's Android platform accounted for just under two percent share in the second quarter.

Microsoft's share continued to drop year-on-year to account for nine percent of the market in the second quarter.

ESPN to Limit Social Networking

New technologies, especially those that arrive in the enterprise space from the consumer space, eventually reach some point where corporate managers feel the need to establish policies that serve enterprise business requirements.

In the latest example, ESPN has issued 12 guidelines to its employees about social networking.

The guidelines say that on-air talent, reporters and writers are prohibited from having sports-related blogs or Web sites and that they will need a supervisor’s approval to discuss sports on any social networking sites.

They will also be restricted from discussing internal policies or detailing how stories are “reported, written, edited or produced.”

“The first and only priority is to serve ESPN-sanctioned efforts, including sports news, information and content,” the new rules say.

Violating the new guidelines could lead to suspension or dismissal.

Similar struggles occurred when mobiles started appearing in the workplace, when email started being used and when Web access moved into the workplace as well. In many cases, employees tried blanket prohibitions, before gradually figuring out how to protect business information and interests while still allowing employees to use the new tools.

The same will happen with social networking tools.

http://www.nytimes.com/2009/08/05/sports/05espn.html?_r=4&ref=sports

So far, Mobile, Broadband Revenues Compensate for U.K. Fixed Voice Losses

In 2008, 49.6 percent of U.K. retail revenues were earned providing mobile and data services, while 33.8 percent of revenues were earned from fixed and mobile data services, says Ofcom, the U.K. communications regulator.

The long term challenge is that even a majority of current mobile voice revenues are likely to shrink as mobile VoIP services become more widespread.

That doesn't necessarily mean voice usage has been falling. Instead, we essentially have productivity effects, as the per-unit cost of using voice has fallen as volumes have grown. That doesn't necessarily mean voice revenues will disappear, but that voice will be a smaller percentage of total revenues on both the fixed and wireless networks.

And though mobility has been the revenue source primarily responsible for telecom providers managing the transition away from classic fixed voice, that will not always be the case. Mobile voice revenue growth has slowed significantly as penetration has saturated and prices have fallen.

Mobile voice revenue growth was just 1.6 percent in 2008, compared to an average of 7.7 percent annual growth over the previous five years, Ofcom says.

As voice services generate nearly three quarters of total mobile revenue, there was a similar

slowing in the growth of total mobile service revenues, to 2.2 percent in 2008, compared to the

annual average of 9.6 percent growth over the previous five years and 15.5 percent over the previous ten years.

Fixed voice revenues have been in decline since 2000 when they reached £12.3 billion, and had

fallen by 26.9 percent in nominal terms from this peak to £9.0 billion by 2008. Growth in mobile voice revenues, which more than tripled from £3.6 billion to £11.5 billion between 1998 and 2008, ensured continued growth in total voice telephony revenues until 2008, when they declined for the first time.

All of that is important for one salient reason. Some have argued that telecom providers would collapse as their core businesses were undermined by new IP-based alternatives. And while the danger remains, so far service providers have proven adept at creating new replacement services and applications at nearly the pace the legacy revenues are falling.

The possibility of disruption exists, of course. But at least so far, telecom providers have proven themselves rather more adept at structural change than many had expected. IP is disruptive to many industries. Whether it is fatal remains to be seen.

Mobility, Broadband Drive U.K. Service Provider Revenue Growth

In 2008, 49.6 percent of U.K. retail revenues were earned providing mobile and data services, while 33.8 percent of revenues were earned from fixed and mobile data services, says Ofcom, the U.K. communications regulator.

The long term challenge is that even a majority of current mobile voice revenues are likely to shrink as mobile VoIP services become more widespread.

That doesn't necessarily mean voice usage has been falling. Instead, we essentially have productivity effects, as the per-unit cost of using voice has fallen as volumes have grown. That doesn't necessarily mean voice revenues will disappear, but that voice will be a smaller percentage of total revenues on both the fixed and wireless networks.

And though mobility has been the revenue source primarily responsible for telecom providers managing the transition away from classic fixed voice, that will not always be the case. Mobile voice revenue growth has slowed significantly as penetration has saturated and prices have fallen.

Mobile voice revenue growth was just 1.6 percent in 2008, compared to an average of 7.7 percent annual growth over the previous five years, Ofcom says.

As voice services generate nearly three-quarters of total mobile revenue, there was a similar

slowing in the growth of total mobile service revenues, to 2.2 percent in 2008, compared to the

annual average of 9.6 percent growth over the previous five years and 15.5 percent over the previous ten years.

Fixed voice revenues have been in decline since 2000 when they reached £12.3 billion, and had

fallen by 26.9 percent in nominal terms from this peak to £9.0 billion by 2008. Growth in mobile voice revenues, which more than tripled from £3.6 billion to £11.5 billion between 1998 and 2008, ensured continued growth in total voice telephony revenues until 2008, when they declined for the first time.

All of that is important for one salient reason. Some have argued that telecom providers would collapse as their core businesses were undermined by new IP-based alternatives. And while the danger remains, so far service providers have proven adept at creating new replacement services and applications at nearly the pace the legacy revenues are falling.

The possibility of disruption exists, of course. But at least so far, telecom providers have proven themselves rather more adept at structural change than many had expected. IP is disruptive to many industries. Whether it is fatal remains to be seen.