For Mobile Web, "Developed" and "Developing" Markets Are the Same

Is “Developing Market” a meaningless term where it comes to use of the mobile Web? Declan Lonergan, Yankee Group analyst, thinks so. That doesn't mean the markets are identical. Developing markets rely on handsets whose monthly cost is $5, developed market users often pay $40 to $80 a month.

Despite those differences, consumers everywhere want access to the mobile Web. When they get it, their usage profiles are surprisingly consistent, Longergan says.

The top 10 countries for Opera Mini usage during June 2009 were Russia, Indonesia, India, China, Ukraine, South Africa, U.S., U.K., Poland and Nigeria. India continued to move up the rankings, overtaking China for third place, Opera reports. These results demonstrate the huge appetite for access to the mobile Web in developing markets.

Yankee Group in 2008 found use of the top-10 most popular mobile phone services were almost identical in developed and developing regions.

Penetration of mobile Web browsing in the Gulf (11 percent) and in Europe (14 percent) was also very close.

América Móvil (AMX) as a point of reference. AMX is a leading provider of mobile services in Latin America, with subsidiaries in 18 countries including Brazil, Argentina and Colombia. As of June 30, 2009, it had more than 190 million mobile customers and three million land lines in the Americas. In most countries, AMX targets primarily low-ARPU prepaid customers. It has 42 percent mobile customer market share in Latin America. Its closest challenger is Telefonica with 29 percent.

The differences between developed and developing markets are small, Lonergan says. The most successful services are consistently messaging (dominated by SMS), mobile broadband, personalization (ringtones) and mobile Web. Mobile Web use is being driven by consumers accessing social networking sites like Facebook.

AMX is emphasizing mobile social networking by providing access to brands like Facebook, MySpace and Orkut (Google) in Brazil. It also offers branded chat, photo and video blog services. AMX’s subsidiaries Telcel and Comcel provide public photo- and video-sharing sites.

Telcel offers a B2C interface that allows amateur contributions to be uploaded and purchased.

The most frequently visited sites by customers using Vodafone’s mobile Internet service are Facebook, Google, BBC, YouTube, Windows Live, Bebo and eBay "We can conclude, therefore, that operators in developing and developed markets are offering broadly similar MI service portfolios," says Lonergan.

But some differences will persist, particularly when we focus on the least advanced markets. The use of SMS is one example. In sub-Saharan Africa, SMS remains a critical platform for service innovation and will continue to be the focal point for local entrepreneurial initiatives.

Mobile data services account for 15 percent of AMX’s revenue today while European operators typically achieve 20 to 30 percent.

"In our conversations with various players throughout developing regions, we have heard evidence of average consumption of up to 1.5 GB per month per user," says Lonergan. "This is close to levels generally seen among low-end users on land line connections."

How Long Before Mobiles Eclipse PCs as Internet Platform?

It long has been the conventional wisdom that mobile phones will be the way most people in developing markets access the Internet. And though that likely will not prove true in developed markets, it does seem inevitable that a significant percentage of total Internet and Web usage originates from smart phones.

Whether it is ultimately 25 percent or 50 percent of usage that is initiated from mobiles is not clear. What is clear is that the percentage of Web and Internet application usage from mobiles is growing with no natural limit in sight.

And at least some observers think 2010 could be the year more sessions originate from mobiles than from PCs. To be sure, that prediction assumes heavy use of social networking, instant messaging and other communications activities, plus Web-based entertainment, will drive mobile Web activities.

The prediction likely would not be correct if one counted the length of sessions or Web browsing activities. But social networking is an application growing fast, and which is ideally suited for mobile sharing and updating.

Demand for smart phones will make up 70 per cent of new device sales by 2012, while sales of "mid-tier" feature phones declines, according to researchers at Gartner.

Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, but smart phone sales surpassed 40 million units, a 27 per cent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market.

Leap Wireless Applies for Stimulus Funds

Though major telcos and cable companies, as well as many independent rural telcos seem to be passing on applying for broadband stimulus funds, it appears wireless firms are active.

Leap Wireless says it has applied for a grant to supply 23,000 low-income families in Baltimore, Houston, Memphis, San Diego and Washington, D.C. broadband access and digital literacy training.

Yonder Media, a Reno-based wireless broadband provider to rural communities, also has applied for funds to deploy 150 3G rural wireless broadband networks, serving 400 communities.

Qwest, Comcast, AT&T and Verizon did not apply, and that was not unexpected. The Rural Utilities Service rules generally bar firms such as Qwest from applying for support for their rural operations if they also serve at least one metro market in a state. And none of the major providers were too happy about strings attached to the receipt of funds, which affect the business models and practices the companies can use.

Level 3 Communications likely will apply for funds to support middle-mile facilities that can be used by local access providers.

Sprint Launches 4G in Las Vegas, Atlanta and Portland, Ore.

Sprint Nextel has launch its 4G mobile broadband service in Las Vegas, Atlanta and Portland metro areas. The service offers peak downlink speeds of more than 10 Mbps and average downlink speeds of 3 Mbps to 6 Mbps, three to five times faster than the 3G service offered by any carrier today, based on average download speeds, and without bandwidth caps, for $70 a month.

If you are a typical 3G user the unlimited service won't mean that much. Few 3G users use anywhere near the 5 Gbyte monthly cap, costing $60 a month.

Heavy video users might want to consider it, though. The additonal bandwidth is more than adequate for quality video viewing, and the lack of a cap means you won't have to worry about blasting through your cap.

Of course, the decision also depends on where you live, and where you use mobile broadband. If you are a road warrior, the coverage simply isn't wide enough to be of exceptional use, though the modem also will allow you to use the Sprint 3G network anyplace there is 3G service.

For users who normally use 3G, Sprint Nextel offers a $10 a day pass that allows 4G access when a user is in an activated market.

DirecTV Launches Broadband-Only Sunday Ticket

Broadband access providers rightly are concerned that their big broadband pipes over time will allow users to bypass service provider voice and video services, and DirecTV just fired a limited shot in that direction.

Though direct competition from Hulu and other sites is a bit muted since those services typically make sure online content is not made available at the same time the same content is showing on the linear networks, the new Sunday Ticket package will do precisely that.

Though I frankly don't know how DirecTV is going to ascertain which consumers, in which locations, actually cannot get a DirecTV signal, users who are in that predicament will be able to buy the National Football League "Sunday Ticket" package as a stand-alone, without paying for a subscription to DirecTV's other linear video offerings, and have that programming delivered over their broadband Internet access connections.

There will be some locations where landlords or property associations may not allow satellite dishes, which might be easier to ascertain. But it will be harder to determine, without a site visit, where direct line of sight is not available.

The new offering is an "over the top" service that does not require DirecTV to pay a cent to the broadband access providers whose access services are used to support it.

The package will sell for $349, $100 more than most DirecTV subscribers pay.

O2 Germany Now Fully Supports Mobile VoIP

Generally speaking, potentially-disruptive innovation in the mobile business happens when a smaller provider launches new assaults. That appears to be the case in the German mobile market, as Telefónica's O2 Germany business launches mobile Internet packages that allow users total access to VoIP services at no extra charge.

The operator is pushing two data plans in particluar: Internet-Pack-M and Internet-Pack-L. Pack M gives the subscriber a data limit of 200 MB per month for 10 euros. The larger plan, Internet Pack L, increases this limit to 5 GBytes for 25 euros a month. Neither of the plans actually cuts users off when they hit those limits, but connection speeds are reduced.

“We operate one of the most modern and most rapid mobile data networks in Europe and our customers are to experience it without limitations, no matter whether they surf, email, use instant messaging or make phone calls”, says Lutz Schüler, Managing Director Marketing & Sales, Telefónica O2 Germany. “By opening our mobile high-speed network for VoIP services, we set new standards in the area of the mobile internet.”

The issue in the U.S. market is probably when, not "if" some provider ultimately will decide to take that gamble as well. And it might not even be an upstart provider, though that likely makes the most sense. At some point, leading providers with their own termination facilities and backbone networks might well conclude that it makes sense to do so.

When AT&T launched its "Digital One Rate" plan, which eliminated the distinction between local and long distance calls, it revolutionized pricing industry wide.

Sprint Nextel and Clearwire would seem perennial candidates to launch a disruptive attack, in part because they have no landline voice revenues to cannibalize.

That was one reason AT&T thought Digital One Rate would work (before its acquisition by or merger with SBC Communications, AT&T had no significant local access customers, and none supported over owned facilities).

Right now the leading providers probably are right in concluding they are better off avoiding such disruption. Voice revenues still are too important to risk. But that will change with time. And then an O2-style move will make more sense.

Is Qwest VOD Coming?

Qwest Communications is a laboratory of sorts for incumbent telcos that do not have the resources and customer heft to justify launching IPTV services. Many small, rural telcos with small subscriber bases find that most customers already subscribe either to a satellite TV service or a competing cable TV service, for example.

Qwest has decided to rely on partner DirecTV for its multi-channel video offering, but has been interested for years in ways to use its broadband access plant to supplement linear TV with true video-on-demand services. Now that Qwest has upgraded many of its metro networks to operate at 40 Mbps in the downstream, with plans to serve 23 metro markets with services that fast, we might finally see some movement in that direction.

That would have important ramifications for many smaller and independent firms as well. If it works, if revenue for a true VOD service, built in conjunctionw with DirecTV does prove financially interesting, the same approach can be taken by many smaller operators as well.

That is not to say IPTV cannot work. AT&T and Verizon are prime examples of firms with enough customer base and resources to do so. And many indpendent telcos have concluded that IPTV still makes sense. But IPTV remains a tough proposition for many smaller providers. On-demand video might offer a solution. But Qwest likely will be the key test of that theory.

Qwest's approach also might prove helpful if cannibalization of linear multi-channel video actually does start to happen on a significant level. In that case, Qwest will have preserved scarce capital for robust access bandwidth upgrades, and then will be in positiont to push ahead aggressively with a VOD plan without risk of cannibalizing its linear video base.

That would challenge the conventional wisdom, which is that a stand-alone VOD effort will fail without the ability to offer linear TV as well. Of course, Qwest already has that covered, with its DirecTV partnership.