As a result, annual app revenues will grow from $1.94 billion in 2009 to $15.65 billion by 2013.
An order of magnitude growth (roughly 10 times) in users and app store sales in four years would be steep, indeed.
Saturday, March 6, 2010
10 Times More Smartphone Users and App Store Sales in 4 Years?
As a result, annual app revenues will grow from $1.94 billion in 2009 to $15.65 billion by 2013.
An order of magnitude growth (roughly 10 times) in users and app store sales in four years would be steep, indeed.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Friday, March 5, 2010
What Does 100 Mbps for 100 Million Homes Imply About Monthly Prices?
There are only two major problems with the Federal Communication Commission's upcoming National Broadband Plan, says Dan Hays, PRTM director. The aspirational goal of 100 Mbps service provided to 100 milliion U.S. homes by 2020 is a fine aspirational goal, but it isn't clear how it can be implemented, he says.
The other big initiative is in the wireless area, specificially the effort to get TV broadcasters to give up 500 megahertz worth of spectrum so that wireless service providers can use it.
And there are just two problems there: buyers and sellers. Are there willing buyers? Are there willing sellers? Hays says the broadcasters already have said they are unwilling to sell. Even if they do agree to sell, the cost to acquire that much spectrum would be quite expensive, coming at a time when service providers are straining to justify further investments in their fixed plant.
The 100-Mbps access plan likewise has just two problems: who will pay for the investments, and whether end users are willing to pay substantially more than they now do for the upgraded speeds.
Estimates of how much that might cost range from a wildly-low $25 billion up to $350 billion, says Hays.
Commercial organizations aren't terribly interested in investing now to provide speeds that high, as there is little consumer willingness to pay much more than what people pay today, Hays says.
The percentage of household income spent on communications in the United States is in line with the rest of the world today, he says. So it does not make sense to assume a step level change in spending even if much-higher speeds are made available.
Beyond that, there is a generational and cultural issue at work. A good percentage of broadband non-adopters are older than 65. But as younger users who "cannot live without broadband" move up the age cohort, that particular non-adoption issue fixes itself, says Hays.
Once upon a time one could hear many doubters about why people would buy cable TV when they could get off-air video for no incremental cost. Over time, people decided they really did need it. The same thing has been at work with mobility services and will be true of broadband as well.
None of this is to argue that, over time, access speeds will increase. But investment capital cannot be raised unless there is a plausible business case. So the catch is that investors will want to see some plausible evidence that $300 billion worth of investment will lead to a return on investment.
Assume there are 65 million U.S. households spending $40 a month, on average, for broadband. That works out to about $2.6 billion a month, or $31 billion a year.
Assume a base of about 115 million U.S. households. Assume 90 percent broadband penetration, or 104 million connected homes. That would represent about $4.2 billion in monthly spending, or about $50 billion in consumer revenue.
How much incremental revenue would an investor want to see to justify investing $300 billion? Assume a 15 percent return as a hurdle rate and 104 million customer households.
The debt service implied is $45 billion a year. Assume borrowers also want to repay the principal over a 10-year period. That would very roughly imply a need to earn an incremental $75 billion a year.
Assume 40-percent margins. That implies gross incremental revenue has to be about $187.5 billion a year, or $1630 per customer, or an additional $136 per customer, per month. That implies a monthly price of at least $175 a month.
Do you really think every broadband customer in America, at 90 percent penetration of homes, is willing to pay $175 a month for broadband access?
Of course, maybe I have blown the math here. If not, I think 100 Mbps access, using networks built with private capital, are unlikely to happen. It would require consumers to do something history and logic suggests they will not do.
The other big initiative is in the wireless area, specificially the effort to get TV broadcasters to give up 500 megahertz worth of spectrum so that wireless service providers can use it.
And there are just two problems there: buyers and sellers. Are there willing buyers? Are there willing sellers? Hays says the broadcasters already have said they are unwilling to sell. Even if they do agree to sell, the cost to acquire that much spectrum would be quite expensive, coming at a time when service providers are straining to justify further investments in their fixed plant.
The 100-Mbps access plan likewise has just two problems: who will pay for the investments, and whether end users are willing to pay substantially more than they now do for the upgraded speeds.
Estimates of how much that might cost range from a wildly-low $25 billion up to $350 billion, says Hays.
Commercial organizations aren't terribly interested in investing now to provide speeds that high, as there is little consumer willingness to pay much more than what people pay today, Hays says.
The percentage of household income spent on communications in the United States is in line with the rest of the world today, he says. So it does not make sense to assume a step level change in spending even if much-higher speeds are made available.
Beyond that, there is a generational and cultural issue at work. A good percentage of broadband non-adopters are older than 65. But as younger users who "cannot live without broadband" move up the age cohort, that particular non-adoption issue fixes itself, says Hays.
Once upon a time one could hear many doubters about why people would buy cable TV when they could get off-air video for no incremental cost. Over time, people decided they really did need it. The same thing has been at work with mobility services and will be true of broadband as well.
None of this is to argue that, over time, access speeds will increase. But investment capital cannot be raised unless there is a plausible business case. So the catch is that investors will want to see some plausible evidence that $300 billion worth of investment will lead to a return on investment.
Assume there are 65 million U.S. households spending $40 a month, on average, for broadband. That works out to about $2.6 billion a month, or $31 billion a year.
Assume a base of about 115 million U.S. households. Assume 90 percent broadband penetration, or 104 million connected homes. That would represent about $4.2 billion in monthly spending, or about $50 billion in consumer revenue.
How much incremental revenue would an investor want to see to justify investing $300 billion? Assume a 15 percent return as a hurdle rate and 104 million customer households.
The debt service implied is $45 billion a year. Assume borrowers also want to repay the principal over a 10-year period. That would very roughly imply a need to earn an incremental $75 billion a year.
Assume 40-percent margins. That implies gross incremental revenue has to be about $187.5 billion a year, or $1630 per customer, or an additional $136 per customer, per month. That implies a monthly price of at least $175 a month.
Do you really think every broadband customer in America, at 90 percent penetration of homes, is willing to pay $175 a month for broadband access?
Of course, maybe I have blown the math here. If not, I think 100 Mbps access, using networks built with private capital, are unlikely to happen. It would require consumers to do something history and logic suggests they will not do.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Mobile Service Providers Jockey to Maintain Relevance in Value Chain
Oddly enough, mobile service providers and device manufacturers are being forced to redefine their value and roles in the mobile ecosystem they long have shaped and dominated. The reasons are not hard to fathom.
The mobile industry's center of gravity is shifting from hardware to software, from voice to data and services, and from traditional telecom stakeholders to new entrants, says Thomas Husson, Forrester Research analyst.
But it is more than that. The mobile industry is reinventing itself, and the biggest changes are the addition of new providers in the value chain. The new and independent role of handset suppliers is one example, but so are software and content providers now parts of the value chain.
In fact, "the mobile environment as we knew it at the end of the 20th century is disappearing," says Husson. Firms such as Apple and Google now are playing huge roles in the business, for example.
That creates new tension as value--and revenue--shares now also are rearranged. In fact, access providers must contend with rapidly-changing shifts in value creation. That does not necessarily mean ISPs are destined to become low-value suppliers of commodity access, though that could happen.
It does mean all the contestants now are in an extended and crucial race to secure their own roles within the value and revenue chains.
Service providers face a limited window of opportunity to reinvent their business models and become smart enablers, says Husson. In part that is because software innovation, rather than hardware, is driving the business. Increasingly, that innovation is coming from new participants in the business, not the legacy participants.
Global growth also will center on China, India, and emerging markets, as has been the case over the last several years.
In developed markets, the issue will be selling more services and applications to a relatively fixed number of users, as children, seniors, and technology pessimists, the remaining untapped user segments, largely have been tapped. Broadband and data services are the clear focus.
The big question is how well service providers will compete with new value chain participants to create and maintain direct relationships with end users, which traditionally has been the province of service providers. These days, application and device suppliers increasingly are poised to create direct retail relationships on their own.
The mobile industry's center of gravity is shifting from hardware to software, from voice to data and services, and from traditional telecom stakeholders to new entrants, says Thomas Husson, Forrester Research analyst.
But it is more than that. The mobile industry is reinventing itself, and the biggest changes are the addition of new providers in the value chain. The new and independent role of handset suppliers is one example, but so are software and content providers now parts of the value chain.
In fact, "the mobile environment as we knew it at the end of the 20th century is disappearing," says Husson. Firms such as Apple and Google now are playing huge roles in the business, for example.
That creates new tension as value--and revenue--shares now also are rearranged. In fact, access providers must contend with rapidly-changing shifts in value creation. That does not necessarily mean ISPs are destined to become low-value suppliers of commodity access, though that could happen.
It does mean all the contestants now are in an extended and crucial race to secure their own roles within the value and revenue chains.
Service providers face a limited window of opportunity to reinvent their business models and become smart enablers, says Husson. In part that is because software innovation, rather than hardware, is driving the business. Increasingly, that innovation is coming from new participants in the business, not the legacy participants.
Global growth also will center on China, India, and emerging markets, as has been the case over the last several years.
In developed markets, the issue will be selling more services and applications to a relatively fixed number of users, as children, seniors, and technology pessimists, the remaining untapped user segments, largely have been tapped. Broadband and data services are the clear focus.
The big question is how well service providers will compete with new value chain participants to create and maintain direct relationships with end users, which traditionally has been the province of service providers. These days, application and device suppliers increasingly are poised to create direct retail relationships on their own.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Thursday, March 4, 2010
Global Mobile ARPU Now Depends on Broadband and Data Services
Mobile end-user average revenue per user dropped between six percent to nine percent globally, in the third quarter of 2009, says ABI Research.
In the U.S. market, overall ARPU decreased by $0.45. Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53, according to mobile analyst Chetan Sharma.
By the end of 2009, average voice ARPU was less than $10 a month while data ARPU was about $15 a month. But average blended ARPU has been flat at around $49.50 since 2003.
ABI Research estimates that ARPU decline is likely to flatten out in developed markets in Europe and North America as mobile data revenue increasingly replaces falling voice revenue, as it has in the United States.
Globally, the growth in minutes of use has also peaked, and is expected to grow at a compound annual growth rate of only 1.4 percent between 2009 and 2015, with much of this growth driven by developing markets in Africa, Asia, and the Middle East.
Minutes of use in the U.S.market are growing at about a three percent rate, says CTIA: The Wireless Association.
Whether in the U.S. market or elsewhere, broadband access and data services are the clear way forward for mobile ARPU, gross revenue and profit margin.
In the U.S. market, overall ARPU decreased by $0.45. Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53, according to mobile analyst Chetan Sharma.
By the end of 2009, average voice ARPU was less than $10 a month while data ARPU was about $15 a month. But average blended ARPU has been flat at around $49.50 since 2003.
ABI Research estimates that ARPU decline is likely to flatten out in developed markets in Europe and North America as mobile data revenue increasingly replaces falling voice revenue, as it has in the United States.
Globally, the growth in minutes of use has also peaked, and is expected to grow at a compound annual growth rate of only 1.4 percent between 2009 and 2015, with much of this growth driven by developing markets in Africa, Asia, and the Middle East.
Minutes of use in the U.S.market are growing at about a three percent rate, says CTIA: The Wireless Association.
Whether in the U.S. market or elsewhere, broadband access and data services are the clear way forward for mobile ARPU, gross revenue and profit margin.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Half of Mobile VoIP Accounts will be Over the Top, 45% Supplied by Carriers in 2013
Not everybody agrees with that forecast. Disruptive Analysis in the past has argued that a majority of VoIP offers would be supplied directly by mobile operators or in partnership with third parties.
That basically illustrates the issue VoIP poses for fixed and mobile service providers. On one hand, VoIP is the future of voice. On the other hand, voice no longer will be a monopoly, high-margin revenue source for today's service providers.
That isn't to say voice is destined to become a complete "no incremental cost" application. Many providers will make some continuing revenue on voice, for quite some time.
It is just that VoIP represents a mixed blessing. It clearly is the future for voice. But the future of voice is that of an experience that sometimes does not require incremental fees, sometimes does; sometimes is bought as a service and often is used as an application.
On a geographic basis, mobile VoIP will be heavily biased towards the Asia Pacific region, particularly among the online mobile VoIP services.
“The near-term opportunity for mobile VoIP is closely linked with the growing success of dual-mode phones and other Wi-Fi connected devices,” says Frank Dickson, In-Stat analyst. “However, mobile VoIP still poses a direct threat to operator voice revenue and operators are navigating how to balance new opportunity with the threat.”
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Net Neutrality Would Increase Likelihood of Content Discrimination, Phoenix Center Says
at some future date, seek to extract profits from the content segment of the Internet marketplace, and
net neutrality aims to stop it," says a new white paper issued by George S. Ford, Phoenix Center for
Advanced Legal and Economic Public Policy Studies chief economist, and Michael Stern, Assistant
Professor of Economics at Auburn University.
Net neutrality supporters that fear surplus profit extraction will take the form of “exclusionary” practices
such as unfair or discriminatory access prices, “fast lanes” and “slow lanes” where preferential delivery is given to content firms willing and able to pay more, or outright monopolization of content, the authors say.
Such concerns about business advantage, whether "unfair" or not, are different from the separate issue of whether currently-envisioned network neutrality rules actually provide incentives to engage in such behavior, the authors say.
Some observers might be shocked to learn that net neutrality rules could actually encourage such
business behavior, not restrain it.
In fact, the latest Phoenix Center analysis suggests that net neutrality regulation actually increases
incentives to engage in exclusionary conduct in the content sector.
"Firms always have an incentive to take those steps, which increase their profits," the authors say.
"Ironically, net neutrality rules, which are supposed to suppress privately profitable exclusionary conduct,
will actually have an effect opposite of what is intended."
Because net neutrality regulations now under consideration will not reduce the profits associated with monopolization of content, but only those associated with the participation in a competitive content market, the proposed rule encourages broadband service providers to take steps to reduce the diversity of voices on the Internet to the detriment of the public interest, Ford and Stern argue.
The point is that network neutrality rules impose pricing rules, and the issue is whether such
pricing rules are likely to encourage or discourage business policies that increase or restrict content
options.
An important question is whether or not the proposed price regulations “promote consumer
choice and competition among providers of lawful content, applications, and services” by
addressing an ISP’s alleged motivation “to exclude independent producers of applications,
content, or portals from their networks.”
The answer is “no,” the authors say. "Net neutrality rules of the type proposed by the FCC and the
Markey-Eshoo Bill encourage exclusionary behavior rather than impede it."
The policy implications of this analysis are numerous, but can be summarized at a very
high level as follows: the analytical foundation for net neutrality remains in its infancy and the
concept needs more time to evolve, the authors argue.
Since even the advocates of net neutrality regulation admit that there exists a “de facto net neutrality
regime” today, there seems to be little reason for a headlong rush into bright-line regulatory
rules when so little is known about the issue.
The rules proposed by both the FCC and Congress create incentives that may not even exist absent the regulation, and increase whatever incentives do exist for ISPs to behave badly in the content market.
Most troubling about the proposed rules is that net neutrality, it now appears, has become little
more than a quibble over profits between providers, a far cry from the origins of the concept wherein the focus was on the freedom to distribute and consume information without undue interference.
source
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Canada's Telecom Market Faces Deregulation
That could potentially allow majority control by foreign investors. Observers say that if the liberalization moves succeed, it likely will drive a major wave of consolidation among Canadian providers, driven in part by the need to bulk up in advance of an expected wave of new entrants, many of whom will have significant resources.
The Canadian telecom business is about a $40 billion a year business and only recently allowed Egyptian-backed Globalive Communications Corp. into the mobility market.
Some speculate that any new rules would cap such control to firms controlling about 10 percent of the total Canadian market. One logically would expect the major interest to be in wireless assets, as wireless is the segment of the business with the strongest growth prospects.
Canada's leading service providers, such as Rogers Communications, BCE and Telus have criticized the Globalive decision.
Some financial analysts are not so sure there will be too much interest, though. "Even if foreign ownership restrictions were lifted today, we do not see much foreign strategic interest in Canadian incumbents," says Dvai Ghose, Genuity Capital Markets analyst.
AT&T, Verizon and Comcast still seem focused on domestic operations. In addition, Canadian telcos and cable companies currently trade at significant premiums to U.S. and European peers.
Still, mobile challengers are likely to attract some interest. That likely means more cap[ital will be available for mobile upstarts Wind, Public Mobile and Dave. Incumbents are likely to consider mergers as a defensive move, says Jeff Fan of Scotia Capital.
"We believe opening the doors to foreign investment in Canada will benefit the new wireless entrants in the near term by providing them with greater access to capital and allowing them to simplify their business structures," says Phillip Huang, UBS Securities Canada analyst.
source
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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