Are Broadband, Voice, TV and Mobile Services Really Commodities?

Both industry executives and consumers might sometimes be accused of viewing mobile, voice, broadband and multi-channel TV services as "commodities." Whether that is true, and to what extent, is, and ought to be, a matter of debate, not certitude.

Consider Verizon and DirecTV, for example. You might say that both provide services that other key competitors also provide, and that the features and prices are, at some level, comparable and even similar.
But their offerings are not identical with the offerings of their key competitors, and that appears to be by design, not accident.

DirecTV is the biggest satellite pay-TV provider in the United States and competes with other satellite and cable providers.  But that doesn't mean it competes for an identical set of customers, even though there is much overlap.

The company is not exceptionally distinct in aiming to grow revenues in the future by focusing on average revenue per user growth more than growth in the number of subscribers. Indeed, virtually every provider expects to do that.

Nor is DirecTV distinct in that regard. In a competitive, multi-product market, virtually every provider seeks to get more revenue by selling more things to existing customers, not simply adding new customers.
But DirecTV and Verizon seem to be focusing on higher-spending customers, compared to the other competitors in each of their markets.

DirecTV focuses on "higher-quality" subscribers who tend to pay extra for its advanced services like high-definition and digital video recorder  service. In the fourth quarter of 2009, about 70 percent of new DirecTV subscribers signed up for HD and DVR services, for example.  Overall HD-DVR penetration amongst DirecTV’s subscriber base amounting to about 60 percent.

Some observers expect DirecTV’s HD-DVR penetration to increase to 80 percent by about 2016.
DirecTV plans to offer new services include mulit-room viewing and new broadband applications as well. DirecTV Cinema is a movie service that will allow subscribers to watch certain films through DirecTV as soon as they are released on DVDs.

Verizon likewise tends to focus on higher-spending customers as well.

The point is that even as broadband, mobile, voice and multi-channel TV services are highly competitive, they are not, in the strict sense, "commodities." It might not matter whether a sugar product was made from beets or sugar cane. It can, and often does matter, that a firm's customer service, features, devices, packaging or pricing are distinct.

Is "Access" Where Most of the Revenue Is?

Fretting over whether people will pay for content is based on a mistaken assumption: that people have ever paid for content in the past, says Forrester Research VP. "They actually haven't," he says.

 Instead, people have paid for access to content.  You have to think about this some. People buy newspapers, so isn't that a content purchase? Well, he argues, not really. The cost of the newspaper purchase never covers the full cost of the content, which is mostly paid for by advertising.

One had to think about a "newspaper" as a distribution channel and a content aggregator, not an actual "content product" in that sense.

So what about cable TV? McQuivey argues even monthly video subscriptions are about "access" to content, not direct content purchasing. "Pay per view," where a show or movie is bought a la carte, on the other hand, is a content purchase.  Subscriptions to linear channels are a form of access, he argues.

If one looks at matters that way, "access" constitutes 77 percent of what the average household spends for "content" each month is spent on content access, not content itself.

Some will argue with the notion that a cable, telco video or satellite video connection is "access" rather than content. On the other hand, having linear video streaming in the background, even when one is not watching, is somewhat akin to voice "dial tone" or broadband Internet access. It's there, one can use it when one wants, but it is not a discrete "content"purchase.

I'm not sure I'd go so far as to classify cable TV as "access" rather than content. People pay for their voice services using a flat-fee subscription, as they pay for linear video. Some of us might not think a different payment method, or retail pricing plan, changes the nature of the product.

But it is an interesting way of looking at the relative value of various revenue streams. Back in the early days of the tramnsition from dial-up to broadband, I gave a speech to a group of ISPs very concerned about the difficulty of the business model.

At that time, most of the actual revenue was earned by providing access. There was some amount of value-added service and products.  For better or worse, I said then, "access" was where most of the money was, despite the difficulty of the business case.

The business ecosystem was simpler then. Google had not grown to its current state, for example.  Looked at broadly, it may no  longer be true that most of the money is in access.

U.S. is "Most Mobile" Workforce

The U.S. workforce is the most mobile in the world, according to researchers at IDC. As early as 2008, about 72 percent of U.S. workers worked at least part of the time on a mobile basis.

The percentage of mobile workers will grow to about 76 percent by 2013, IDC projects, representing about 120 million workers.

 The world's mobile worker population will pass the one billion mark in 2010, IDC says,  and grow to nearly 1.2 billion people,  more than a third of the world's workforce, by 2013.

The most significant gains will be in the emerging economies of Asia and the Pacific region.

The Asia and Pacific region, excluding Japan, represents the largest total number of mobile workers throughout the forecast, with 546.4 million mobile workers in 2008 growing to 734.5 million or 37.4 percent of the total workforce in 2013. At the end of the forecast, 62 percent of the world's mobile workforce will be based in the APeJ region.

Western Europe's mobile workforce will reach 129.5 million mobile workers, about 50 percent of the workforce, in 2013, surpassing the total number of mobile workers in the United States.

Japan's mobile worker population will total 49.3 million in 2013, representing 75 percent of its total workforce.

The rest of the world will see its mobile worker population grow to 153.2 million by 2013. But mobile workers will represent 13.5 percent of all workers in those markets.

NARUC Calls for Controls on "Unreasonable" Packet Discrimination, Not "All" Packet Discrimination

The National Association of Regulatory Utility Commissioners has called for protecting “the right of all Internet users, including broadband wireline, wireless, cable modem, and application-based users, to have access to and the use of the Internet that is unrestricted as to viewpoint and that is provided without unreasonable discrimination as to lawful choice of content.”

The key language there is "unreasonable" discrimination. NARUC is not calling for network neutrality rules that ban "all" packet discrimination.  The problem is that some traffic types are  "latency sensitive" and can suffer at times unless packet discrimination mechanisms are used. Applications such as video, gaming and VoIP would suffer, at times of peak congestion, without priority mechanisms that users themselves may wish to have in place.

NARUC therefore has asked that policymakers and regulators keep in mind that "unreasonable restrictions or unreasonable discrimination" be areas of protection, not "all" forms of packet discrimination.

NARUC also asks for rules and regulations that will give providers incentive for continual innovation and a fair return on their investment, without jeopardizing consumer access to, and use of, affordable and reliable broadband services.

Discrimination that is solely, or primarily intended,  to protect business advantages, is an area of valid concern for policymarkers. But the Internet has changed. It is a network increasingly used to support isochronous applications (real-time applications) that are highly susceptible to degradation from latency, for example.
NARUC's position will seem to many a well-reasoned and balanced approach.

http://www.digitalsociety.org/2010/02/naruc-resolution-on-net-neutrality/

What Kinds of Online Content Will Consumers Pay For?

Consumer willingness to pay for online content seems to be shaped by their current experience with existing media.

Online content for which consumers are most likely to pay—or have already paid—are those they normally pay for offline, including theatrical movies, music, games and select videos such as current television shows, a new survey by Nielsen suggests.

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Content users might pay for tends to be professionally produced, at comparatively high costs, and definitely not user-generated content, including social community content, podcasts, consumer-generated videos and blogs.

Respondents had mixed willingness to pay for newspaper, magazine, Internet-only news  and radio news and talk shows that are created by professionals, relatively expensive to produce and commonly sold offline.

After surveying 27,000 consumers in 52 countries, Nielsen also found 85 percent prefer that existing free content remains free.

Whatever their preferences, consumers worldwide generally agree that online content will have to meet certain criteria before they shell out money to access it. If respondents already pay for a product in physical form, 78 percent believe they should be able to use online versions of the same content at no additional charge.

At the same time, 71 percent of global consumers say online content of any kind will have to be considerably better than what is currently available free before they will pay for it.

About 79 percent say they would no longer use a Web site that charges them, presuming they can find the same information at no cost.

 Only 43 percent of respondents say an easy payment method would make them more likely to buy content online.

About  47 percent of respondents say they are willing to accept more advertising to subsidize free content. Some 64 percent say that if they must pay for content online, there should be no ads.

Killer Apps and Devices of 2020 Are Not Knowable

What will the killer apps and devices of 2020 be? About  80 percent of experts surveyed by the Pew Center's  Internet & American Life Project agreed that the “hot gadgets and applications that will capture the imaginations of users in 2020 will often come ‘out of the blue.’”

"The experts’ record is so lousy at spotting key technologies ahead of time that there is little chance they will see the killer gadgets and applications of 2020," Pew says. "If you had asked this question a decade ago, no one would have predicted the iPhone."

In other words, we don't know.

But some trends are clear, because they already have begun: Mobile connectivity and location-based services will grow in the next decade.  Still, it takes a generation to figure out which technologies have real impact and which are just fads, so many other application and device trends we now see might, or might not, be actual "killer apps."

 Significantly, just 61 percent of respondents suggested the Internet would remain a place where any user can communicate directly with any other user. About 33 percent think “the Internet will mostly become a technology where intermediary institutions will control the architecture and content, and will be successful in gaining the right to manage information and the method by which people access it.”

A significant number of respondents they argued there are too many powerful forces pushing towards more control of the internet for the end-to-end principle to survive. Governments
and businesses have all kinds of reasons to control what happens online, Pew reports.
There will be alternative networks for companies and individuals that prefer to have a more controlled environment for sharing and consuming content, many believe.

The future will produce a hybrid environment with a bit more control exercised in the core of the internet for some purposes, but for other purposes will enable end-to-end practices, researchers at Pew conclude, based on the responses. "Some things will have to be managed, especially if the capacity of the current internet becomes strained," Pew analysts say.

"The dictates of business will shape large parts of the online experience and more pay-to-play business models will affect information flows online," Pew says.

"The needs of users themselves will sometimes drive changes that bring more control of online material and less end-to-end activity," Pew notes. There will be “content service providers” who are gatekeepers of many users’ online experiences.

The point, one might argue, is that although the "open, end-to-end" Internet will continue to exist, so will many relatively closed experiences, sites, networks, applications and devices.

Telekom Austria Looks to Wi-Fi for Offload

Mobile broadband is cheaper than fixed-line access in Austria, and also the single largest method of access. In some ways, that is good for iTelekom Austria, if success is defined as dominant market share.

On the other hand, it entails capacity issues, since PC users consume far more bandwidth than smartphone users.  So it is not surprising that Telekom Austria CEO Hannes Ametsreiter says the company is looking hard at ways to better use Wi-Fi connections to offload much of that traffic.