The Way "Disrupters" Think

I recently had an instructive conversation with a colleague I hadn't actually seen for more than a year, that amply illustrates how would-be "market disrupters" think. Keep in mind that "disruptors" have different business objectives than traditional executives might. A conventional approach might have companies N+1 and N+2 entering a market lead by company N because N+1 and N+2 believe they can take significant market share away from N.

Venture capitalists might fund company N+1 because the firm has technology that is 10 times better than that of company N that leads the market.

But here's another way of looking at the matter. There is an existing market worth 100x revenue and 300y usage. Disruptor firm N+1 has a business plan aimed at boosting usage to 400y but shrinking revenue to 10x. N+1 will do well because it will get a share of the 10x where N+1 now has no revenue.

N+1 knows it does not have to take share in the traditional way to disrupt the market, any more than Skype had to take away much existing international long distance to affect pricing across the entire market.  N+1 simply has to gain enough recognition as a viable supplier, with dramatically-lower retail pricing, in the customer base.

The difference is in the notion of "growing" a market compared to "destroying" a market.

"End of Profit" for Mobile Service Providers in 4 Years?

Mobile service providers in developed regions of North America, Asia, Pacific and Western Europe markets could face they are no longer profitable in about four years, according to a new study by Tellabs.

Researchers looked at mobile service provider financial performance across the globe, and the fact that the study is called "The End of Profit" should tell you most of what you need to know about the fundamental trend.

See a summary here..

The study shows that widely-held industry beliefs about rising costs and falling revenues are correct. If the trends assumed in the model do not change significantly, if the assumptions are correct, and if service providers do not change, carriers in each region can expect to see an end of profit within a four year window.

That bears repeating. In the absence of relatively significant changes, mobile service provides, arguably in a better position than fixed-line providers to capture growth, will cease to be profitable within four years. The median expectation is that U.S. mobile service providers will reach "zero profitability" by the fourth quarter of 2013.

Service providers in developed nations in the Asia and Pacific region could reach zero profitability by the third quarter of 2014.

In certain regions, this point could be reached much sooner, Tellabs believes. It is clear that carriers are facing significant challenges in balancing cost and revenue. Mobile service providers in Western Europe could reach zero profitability by the first quarter of 2015.

Western operators should position mobile broadband as a complement to fixed broadband, not a substitute, says Analysys Mason - Press releases - News | Analysys Mason

Attempts to sell mobile broadband as an alternative to fixed broadband are likely to fail in European and U.S. markets because there is a strong, and correct, perception among consumers that mobile broadband is slower, less reliable and more expensive than fixed broadband, say researchers at Analysys Mason.

Where consumers have a choice between fixed and mobile broadband, mobile broadband should not be sold as the primary means of access, but as a complement. This is based on the findings of the Connected Consumer survey 2, a study of the telecoms and media activities of 6000 consumers across Europe and the United States.

More than 70 percent of respondents who expressed an opinion agreed with statements that mobile broadband was slower, less reliable and more expensive than fixed broadband.

Customers are also becoming increasingly happy with their fixed broadband service. Of respondents who said they were not interested in mobile broadband, 72 percent said it was because they are happy with their fixed service (up from 65 percent last year).

Western operators should position mobile broadband as a complement to fixed broadband, not a substitute, says Analysys Mason - Press releases - News | Analysys Mason

Consumers Will Pay for Quality-Enhanced Service: Too Bad U.S. Consumers Can't Buy It

More than 60 percent of 2,000 consumers polled n the United Kingdom, France, Germany and United States are now ready and willing to pay for a higher quality of experience. About 74 percent of respondents who are willing to pay for a higher QoE said that they are prepared to spend more money for faster download speeds as well. Oddly enough, U.S. consumers might not be able to buy those sorts of features, though it appears consumers in most other countries will be able to.

The reason is the Federal Communications Commissions "network neutrality" rules, which forbid such services outright on fixed connections, and are for the moment more lenient about mobile features, but which ultimately are likely to be harmonized with the fixed network rules.

The survey was sponsored by Comptel Corporation, a provider of operations support system software. Read more here..

About 61 percent of respondents indicated that they want their communications service providers to offer service and price plans that are based on their individual broadband consumption habits. At the same time, consumers want these plans to be simpler; more than 80 percent of respondents prefer to have just one bill or data plan that covers all of their broadband access needs, across networks and devices.

"Eighty-seven percent of consumers see QoE as the driver that will influence their allegiance to their CSP, and the majority of them would not only move but also pay more money for faster and personalized services," said Ms. Arnhild Schia, senior vice president, global alliances and strategic marketing, Comptel. "This consumer-driven demand for a better mobile broadband experience is a tremendous revenue opportunity for CSPs. Policy and charging control can help them optimise QoE-smoothing data usage more evenly across their networks, while dynamically adapting and simplifying service bundles based on individual customers' wants or needs, and introducing progressive pricing strategies that monetise this consumer demand."

About 66 percent of the consumers surveyed in the U.K., France and U.S. reported accessing the Internet most frequently from smartphones.  An exception was Germany, where laptop dongles were the most popular mobile broadband-enabled device, with 56 percent of consumers utilising them.

About 58 percent of respondents already have two or more broadband connections, and of those, four percent have four or more connections.

Consistency in terms of quality of service, more flexible service and price options and unlimited data download plans are bigger issues in the U.K., France and Germany, respectively, than anywhere else. Almost a third of U.S. respondents said that improvements were needed all round.

Given access to unlimited broadband, regardless of location and cost, more than half of respondents would use the extra bandwidth to watch more online TV, especially in France. In the U.S., respondents reported a preference to staying more connected to family and friends.

T-Mobile USA to Buy Clearwire Spectrum?

Deutsche Telekom AG’s T-Mobile USA unit, which badly needs new spectrum to build its own Long Term Evolution network, may be close to a deal to buy wireless spectrum from Clearwire Corp., Businessweek reports.

T-Mobile USA is the only potential bidder and the sale of the spectrum could happen by the end of the first quarter, Businessweek says. That there is only one bidder speaks to the lack of demand for the excess spectrum Clearwire wants to auction off.

Also, T-Mobile USA has just activated an HSPA+ network that actually will run as fast, and in some cases faster, than other 4G networks. T-Mobile USA doesn't need the spectrum "immediately."

Deutsche Telekom Said to Be Closer to Clearwire Deal - Businessweek

Video Cord Cutting Now a Global Phenomenon

Video cord-cutting now is a global phenomenon, according to Informa Telecoms & Media. But U.S. consumers are disproportionately represented, 36 percent of all global video cord cutters are in the United States. But the revenue impact so far has been quite limited, and the total numbers are small in relation to the base of video subscribers.

Informa estimates that there were 1.2 million "cord-cutters" who have canceled their multichannel video subscriptions in favor of over-the-top video alternatives  in 2010, equivalent to just 0.18% of the multichannel video subscriber base. See more detail here.

"While the impact of cord-cutting on pay TV has been extremely limited to date, this will change as OTT services will continue to improve and become increasingly attractive," said Adam Thomas,  Informa Telecoms & Media senior analyst.

The number of cord cutters will grow to 16.1 million in 2015, the firm says. That's about two percent of the total pay TV subscriber base," said Thomas.

There are about 426,000) video cord cutters in the United States, about 395,000 in Europe, 251,000 in the Asia and Pacific region and 113,000 in the rest of the world. It is possible that less developed markets could ultimately be most vulnerable to the allure of OTT, as several of these markets are characterized by higher broadband penetration than that of multichannel video service penetration.

"We are already seeing significant numbers of cord-cutters in China, as households are attracted away from cable and IPTV by OTT services such as Tudou and Youku," said Thomas.

Overall, Informa does not seem to expect a massive disruption of the linear video business anytime soon, despite the growing expectation in many quarters that this will be the case.

Motorola Inventory Management on a Mobile

An Experiment In Cord Cutting from Hill Holliday on Vimeo.
Global Bay created the app.