Which User Segments are Most Likely to Switch to Prepaid?

Prepaid wireless has been on a tear of late, growing to 55 million U.S. users and about 17 percent of all U.S. wireless accounts in service. And though prepaid traditionally has been centered on "banking challenged," "low income" or "youth" market segments, that is starting to change as consumers from a wider range of segments seem to be opting for

Often thought of as a "consumer" option, one also has to wonder whether at least some business users might consider switching to prepaid, for at least some employee segments.

That, at least, is what Compass Intelligence thinks could be happening at smaller firms, for example. A recent change that could be driving such interest are new "unlimited" talk and texting plans from firms such as AT&T.

In a recent survey, Compass Intelligence found that a high percentage of respondents indicate plans to give new prepaid devices to one or more employees.

Another segment Compass Intelligence found was interested in prepaid plans are "larger families."  The larger the family, the more mobiles they currently use and the more likely they will replace postpaid wireless devices with prepaid options, Compass Intelligence says.

Users with multiple mobile devices also are more likely to indicate they plan to replace a postpaid wireless account with a prepaid option as compared to other segments.

About 11 percent of the respondents with three or more mobiles are willing to replace one or more of their postpaid mobiles with prepaid, while only three percent of the respondents with only one mobile device indicated plans to do so.

When adding a new device, 22 percent of respondents indicate they will add prepaid mobile.

The apparent relationship between prepaid demand and family size and number of devices is likely the result of U.S. consumers and businesses seeing wireless devices as "nice-to-have" items that are useful for more members of families and employees, along with the ability to limit financial exposure.

One of the advantages of prepaid service is that it can be terminated easily, allowing parents and business managers to quickly cut back on such service if necessary.

AT&T Launches New $60 Unlimited Prepay Plan

 AT&T has launched a new $60-a-month unlimited talk and text plan. AT&T's "Unlimited Talk and Text" plan for GoPhone is available October 12, 2009 and offers unlimited nationwide calling and unlimited texting to anyone in the United States, plus texting to Mexico, Canada and more than 100 other countries worldwide, for an additional fee.

“We recognize GoPhone customers have a need for unlimited calling or texting without the commitment of an annual contract,” says Judy Cavalieri, vice president of Prepaid Products for AT&T Mobility and Consumer Markets.

The prepaid offer comes without contract, and can be paid for completely "as you go" or as a monthly rate plan, without a contract, credit check or deposit.

The offer is evidence of a new level of competiton in the wireless prepaid business, which now is starting to compete more directly with postpaid offers. Handset limitations are emerging as the key difference between postpaid and prepaid offers, to an extent, not usage charges or even form of payment.

Lots of Changes in Mobile Business

"In our conversations over the past month, we noticed a potential shift in the relationships and economics between wireless carriers and video content providers," says Rajeev Chand, Rutberg & Co. managing director. And that might be the least of the changes of interest to end users.

"For example, several executives noted to us that certain U.S. carriers reduced or decoupled video content bundles from basic or unlimited data plans," he says. "The result has been a short-term reset in the video content provider economics: rather than carriers pay licensing fees for proprietary or bundled content, to assist in subscriber marketing and growth, carriers are paying licensing fees associated with separate video packages which have different consumer buying processes and patterns."

In other words, instead of using video content as a carrot to drive mobile broadband adoption, it is being marketed as a stand-alone application for which addtional fees are required. Oddly enough, at least some mobile operators might be concluding that it doesn't pay to encourage packaged video consumption, at least at lowish prices, especially when the additional load on networks is considered.

“The threat from over-the-top is now and has never been greater,” says Chand. For wireless carriers, the risk is greatest from the incumbent Internet firms, rather than the startup mobile Internet firms, as consumers know the incumbent brands and navigate directly to them.

In that regard, recent movement in the partnership area between Google and Verizon, and Google and Sprint, is interesting.

Though the potential trend will clarify only when a few more moves are made, it appears that AT&T and Verizon are moving in different directions in terms of mobile Web strategy. Sprint, meanwhile, seems to be taking an approach akin to that of Verizon.

The changes could reshape operating system market shares, strategic role of browsers and the ways "open" network platforms can lead to differentiated service experiences.

The potential shift of strategies has been brewing for some time, and perhaps the most-visible sign has been the debate about whether Verizon would embrace the Apple iPhone once AT&T exclusivity ends.

The equally important, but less visible piece of the puzzle is the development relationship Google already has struck up with Sprint Nextel and Clearwire. As part of those efforts, the Android operating system has gotten a boost.

But AT&T might be distancing itself from Google and turning to a range of partners usually more associated with European operators, from Opera to Nokia. That would explain the rather cryptic remarks overheard at the CTIA Wireless I.T. and Entertainment about Symbian "having a resurgence in the U.S. market."

That belief would be hard to explain in the absence of some major push by one of the major U.S. carriers to support Symbian-based devices and applications. Right now, the thinking seems to be that AT&T is considering such a move.

But it would likely be a mistake to characterize the shifts as merely instrumental or confined to market shares for various ecosystem participants.  The more important change is the differentiated end user experiences that would be possible.

Though details are sketchy at the moment, the new Google-Verizon collaboration might lead to a distinctive set of user interfaces, applications and devices optimized for the mobile Web, and for users with different key interests.

In the new scenario, carriers would be able to compete on differentiated experience, not just unique handsets, payment models, package elements or device features.

Though one line of thinking is that "open" networks will lead to service providers becoming "dumb pipes," the new approaches aim to create differentiated and packaged experiences that have service providers acting in a more traditional role.

As Verizon seems to be positioning its Google collaboration, the service provider would create Android devices carrying the operator's brand and software portfolio, though other Android devices with less integration also would be available.

What is intriguing here is the use of third party and open development, in conjunction with carrier packaging, to produce a flourishing of end user options. Instead of commodity-like devices with a a set look, feel and function, one might see devices optimized for particular end user verticals.

FCC Opens Inquiry into Google Voice Blocking

The Federal Communications Commission has opened an inquiry into Google Voice's call blocking of traffic to some high-cost numbers used by free conference calling services.

Google does not deny blocking access to those numbers, but argues it is a Web service offering an optional call connection service, and does not have a common carrier obligation to deliver calls to virtually any phone number.

AT&T obviously believes Google Voice has to terminate those calls, even though it is an application, not a common carrier provider of voice services.

Google says its phone management service isn't subject to common carrier telephone rules because it is free and consumers can use it only if they have a traditional telephone line.

AT&T and other carriers say they don't want to pay high access charges either, and do not believe any providers of termination services should be able to selectively block calls.

It isn't yet clear where the inquiry might lead, but it is another reminder that the regulatory framework that treats common carriers differently from application providers is intellectually incoherent.

The only issue is whether we are yet at a regulatory tipping point where some drastic revision is needed.

For at least three years, regulators have debated--without clear conclusion--where voice services over the Web fit in. Web services, which can include Skype, maybe Google Voice, and Comcast Digital Voice, are for now viewed as information services and not subject to the more heavily regulated treatment "service providers" are subjected to.

What is clear is that the old distinctions are becoming unworkable.

"Much as the FCC wishes there was still a clear distinction between 'the Internet' and 'the telephone network,' technology has obliterated that difference," Larry Downes, a non-resident fellow at the Stanford Law School Center of Internet and Society, notes.

He proposed the FCC wipe the slate clean: "Hold everyone to the same rules regardless of what information they are transporting-whether voice, video, television, data. Because regardless of who's doing what, these days it's all bits."

Such a sweeping reform necessarily would mean ending the way the nation now regulates cable TV, telephony and the Internet. That will ruffle lots of feathers, but it has been clear for some time that the differing regulatory frameworks increasingly are old of step with market realties.

To wit, we use one set of rules for "telcos," a different set of rules for "cable companies" and a third set for application providers, even when they offer similar, iidentical, overlapping or functionally similar services and applications.

"If it walks like a duck, talks like a duck, it's a duck" is a non-technical way of dscribing how the FCC traditionally has looked at resolving questions within the common carrier world. As more providers enter that business, but with different regulatory treatment, there has to be pressure to treat all ducks as ducks.

3% Consume 40% of Mobile Bandwidth, AT&T Says

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

Telemedicine Spending to Approach $3.6 Billion Annually by 2014

Wireless service providers likely will be key beneficiaries of increased spending on tele-medicine services and devices will generate nearly $3.6 billion in annual revenue within the next five years, says Pike & Fischer Senior Analyst Tim Deal.

The need to control health care costs, along with the development and expansion of faster wireless broadband networks, smartphones, and data compression solutions, will drive the market growth, Deal says.

Wireless applications, devices, and services solutions will account for more than 70 percent of the total market spend within five years.

Driving that spending is the economic stimulus law that President Obama signed earlier this year. That initiative includes $20 billion for health information technology, with a specific focus on electronic medical records and telemedicine, Deal says.

"We project that at least 25 percent of the $20 billion in stimulus funds earmarked for health information technology will be applied toward broadband-enabled telemedicine services such as remote patient monitoring and mobile access to medical records, and consumer applications such as interactive fitness guides and mobile health-related videos," says Deal.

AT&T will have the largest presence in this market, followed closely by Verizon and Sprint Nextel, Deal projects.

AT&T Chief Warns About Heavy Users

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.