MVNO Business to Grow Outside North America, Europe

The mobile virtual network operator business is headed for growth, and most will come from regions other than North America and Western Europe, says TeleGeography.

Globally, growth in wireless subscribers has been driven predominantly by explosive growth in a small number of developing countries, such as China, India, Russia, Brazil, Indonesia, Vietnam and Pakistan. These are countries in which MVNOs are either prohibited or at a nascent stage of development, so the ultimate impact on the MVNO market is not yet clear.

In 2003 MVNOs accounted for seven percent of subscribers in Western Europe and North America. At the end of June 2009 wireless subscribers had grown by almost 60 percent in these two regions to reach 800 million, and MVNOs’ share had increased to over nine percent.

In contrast, from 2003 to mid-2009 the number of wireless subscribers in regions other than Western Europe and North America more than quadrupled to reach some 3.5 billion. However, MVNOs have yet to make much impact in these higher growth markets: outside of Western Europe and North America, their share of the market remains less than 0.5 percent.

So while MVNOs have been growing strongly in Western Europe and North America, those two regions account for an ever-smaller portion of the world’s wireless subscriber base – it slipped from almost 40 percent to less than 20 percent. That suggests that future MVNO subscriber growth necessarily will come from other regions.

In 2003, Western Europe and North America accounted for well over 90 percent of all MVNO subscribers and, despite some growth elsewhere, these two regions still account for over 80 percent of the total.

TeleGeography’s latest research predicts that MVNO growth will gain momentum all around the world over the coming five years, as MVNOs are legalized in new countries where they are not allowed at present.

Will Net Neutrality Lead to Higher Prices?

One can make some reasonable guesses about likely outcomes as the Federal Communications Commission weighs new network neutrality rules.

If new proposed rules disallow traffic shaping measures such as slowing peer-to-peer or other traffic at times of peak congestion, the problem of alleviating peak-hour congestion will still have to be dealt with.

If the goal is to manage peak traffic load, and service providers cannot shape traffic by slowing some protocols, or slowing all traffic for users who have exceeded their usage caps, then other available mechanisms will be used.

And price is one of the most-likely tools.

Customers might not like it, but it always is possible to discourage usage by raising prices. And it always is possible to boost usage by lowering prices. And it is wireless plans where the price hikes--or user policing of usage--will be most felt.

If usage caps are tightened, consumers will have the option of spending more, or using less.

That doesn't mean "unlimited" service packages will disappear. Some customers will want to buy them. But the price of such packages likely is going to rise. For similar reasons, usage-based charging is likely to increase for most other plans as well. That will encourage users to monitor their usage and make choices that will alleviate peak hour strain on networks.

As a practical matter, wired network operators already refrain from blocking access to lawful applications, and traffic shaping rules already are tweaked so the policies do not constitute "blocking" or "slowing" of lawful traffic.

But wireline operators have more access bandwidth than wireless providers do. So Oppenheimer financial analyst Tim Horan suggests that wireless usage caps will become more stringent.

Among other possible strategies is structuring pricing to encourage more usage off-peak, as is the case for voice plans.

Application blocking is less an issue than most assume on wired networks, and is a relatively minor irritant for most wireless users, but a significnat irritant for some users on wireless networks.

The real trick is how service providers will handle peak hour loading under new conditions where traffic priorities cannot be applied, as typically is the case for many private enterprise networks.

One other observation also is in order. As was the case the last time a major change in communications regulation was made, with the Telecom Act of 1996, there will be a period of legal wrangling to test and flesh out the rules.

Though most within the communications business would vastly prefer more predictability of business environment, that is not what they are likely to get.

Broadband Stimulus Bridge to Nowhere?

Since applicants have asked for $28 billion, when the broadband stimulus funds available in the funding round total around $4.3 billion, one already can predict that there will be more entities unhappy than happy about the final awards. Especially unhappy are rural telecom providers who cannot apply because of the definitions used to describe "remote" locations.

For that same reason, it might not be rational to look at where proposals are from, on a state-by-state basis, except for purposes of assuring that some funds are disbursed in every state. Nor will it make sense to evaluate proposals based on ubiquity of platform.

Mobile or satellite networks might have wide footprints. But there still are places where broadband buying lags the national average.

It likely makes more sense to look at proposals at the county level or community level. Even the satellite proposals are specifically targeting a limited number of jurisdications and areas where broadband penetration is low.

Some proposals will be better than others. But most of the proposals seem to ask for relatively small amounts of money. That likely is a good sign, as few small organizations can manage a sudden infusion of money and work very efficiently.

Some proposals do seem weak on the "cost-benefit" front. But that's why the evaluation process is so important. Reviewers are supposed to sort better proposals from weaker ones. Reviewers likely also know their decisions will come under very-close scrutiny. One therefore can hope for a rational outcome.

Publishers Moving to Mobile Distribution

Nearly 52 percent of print executives surveyed by the Audit Bureau of Circulations are distributing or formatting content for viewing on a mobile device. Newspapers are leading the charge, with almost 58 percent already formatting their Web sites for mobile devices. Business and consumer magazines are following closely behind with 45 and 42 percent, respectively.

The changes are driven by a believe that users will be getting more content from mobiles in coming years. More than 80 percent of respondents believe people will rely more heavily on mobile

devices as a primary information source in the next three years, the study finds.

Nearly 70 percent of respondents say that mobile is receiving more attention at their publication this

year than last. Of companies that track mobile impact, 45 percent report that mobility has boosted Web site traffic by up to 10 percent.

Half believe mobile traffic to their Web sites will increase by five to 25 percent in the next two years.

Among senior executive respondents, 56 percent said their publication has plans to develop

a smartphone application in the next 24 months, in addition to the 17 percent of respondents who already have an app in production.

Nearly a third of respondents believe that mobile will have a significant impact on their publication’s revenue in just three years.

What Changes Have Mobile Users Made Because of Recession?

It isn't clear whether users actually followed through with their stated plans and inclinations, but an October 2008 survey by Getjar suggests users were planning significant changes in mobile consumption. So far, we can document the slowdown in replacement phone behavior. Users, at least in Europe, have slowed the pace at which they upgrade their handsets, as 78 percent of respondents to the survey suggested they might.

The suggested parsimony on the usage front remains a bit more difficult to quantify. About 76 percent of mobile phone users who partcipated in the survey suggested they planned to reduce the amount they spend on phone usage as well.

When asked whether they had reduced spending on mobile phones in the last 12 months, more than 50 percent of respondents had not reduced their spending at all, or by as little as 10 percent, during that period.

For those people who had reduced their spending, the economy was the reason given by just over one third of respondents, while 20 percent changed their usage habits to lower expenses, and a further 28 percent had switched to using free applications to avoid charges.

But the planned reductions could have taken any number of forms. Some 35 percent of respondents said SMS accounted for the greatest proportion of their mobile phone bill. So less texting is one possible user response. So is substituting texting for calling when the tariffs favor such choices.

About 18.5 percent said voice services was the biggest cost driver and about 17 percent identified data services as the top usage cost driver. Less calling and less use of data services are other possible responses.

Premium services accounted for the largest part of the monthly mobile spend for 12 percent of the survey participants. For many users, this should have proven the easiest way to reduce spending.

Wireless Net Neutrality Will Spur Mobile VoIP

This forecast of mobile VoIP, like most forecasts, probably needs to be pushed out "to the right," but is one concrete example of what is likely to happen if the Federal Communications Commission does manage to push through rules applying wired network application non-discrimination rules to the wireless realm.

The first thing that will happen is an immediate increase in marketing of mobile VoIP apps.

Carriers, of course, can react in ways to shape adoption. For many users, lower calling prices would dampen interest in VoIP over mobile services.

Carriers also would have incentive to create their own mobile VoIP offerings, and that might offer them a way to boost data plan sales as well.

The most immediate impact of any new wireless non-discrimination rules will be to hasten the day when voice no longer is the key revenue driver for mobile operators. Mobility executives are anything but dumb. They know that day is coming. They just aren't in any hurry to see it.

Who Uses "Push to Talk"? Who Wants To?

About seven percent of U.S. mobile subscribers use the push-to-talk feature, representing about 18 million subscribers, and most of those users are in a few business verticals, says Compass Intelligence.

While 12 percent of respondents to a Compass Intelligence survey currently use PTT, nearly 69 percent indicated no interest in the service, indicating that there is a limited addressable market for this service, Compass Intelligence says.

In a 2007 In-Stat survey, for example, PTT was the only category out of six that declined between 2006 and 2007 about 17.5 percent. Researchers argue that text messaging supplies a similar value for many users.