Ultrabooks "Versus" Tablets? Sorta

I might be a complete contrarian, but I don't believe notebooks and tablets are "product substitutes." Most people do think about it that way, and there is a clear logic for doing so.

Will people spend incremental cash on a tablet or a PC? Yes. Will tablets displace many PCs in the workplace? Yes. Will tablets displace many PCs in consumer environments? Yes.

Given my agreement with all those propositions, why do I think tablets are, in fact, not replacements for PCs? For the same reason a high-end Lexus is not a product substitute for a SmartCar. It is true that both provide "transportation," but so do skateboards, bicycles, mopeds, motorcycles, buses, airplanes and trains.

My point is that we have had, for decades, a multi-purpose device, the PC, that has gotten more portable, and now mobile form factors over time. There are some instances where some users have considered even a BlackBerry smart phone a functional substitute for a notebook PC.

I know a few people who claim that, on business trips, they compose articles on BlackBerries. I wouldn't. Most people probably wouldn't, but some do. Smart phones as content consumption devices

Still, there will be many more people who routinely use a tablet as a substitute for a PC, some of the time, most of the time, or nearly all the time. But the notion of "substitute" implies, rather directly, than one product provides equivalent satisfactions for some problem or need.

It might be viewed as a technicality or just "semantics," but I'd argue that, for decades, the ways people use PC devices have changed, though our portals have not, quite so much.

If you at the "birth" of the PC, you will discover that a particular application, namely the spreadsheet, lead to rapid adoption of PCs as ways to enable scenario and modeling exercises by accountants and financial personnel. That generally remains the case: it is applications that create the demand for devices.

What some of us might say is that the tablet starkly illustrates the principle that devices get used because people want to use applications. And what tablets illustrate is the massive shift of application consumption from "work" or "content production" to "entertainment" and "content consumption." Content consumption

It's just that, up to this point, we have not made attractive content consumption devices available. To be sure, most tablet users do some amount of content creation on tablets, but it mostly takes the form of answering emails. Most of the other activities are one form or another of content consumption.

It's a matter of latent user behavior being "uncovered," more than the creation of a new product category, though clearly, that also has happened. As it turns out, most of us, most of the time, seem to use connected PCs to consumer content, and little time "creating" it. Ultrabooks vs tablets

The point is that PCs increasingly get used for content creation ("work"). Tablets get used for most of the other things people do on the Internet, which is consume content. 

Tim Tebow's "Immaculate Reception" in Overtime Against Steelers

Some still are skeptical about Tim Tebow's future as a star National Football League player. On the first play of overtime, with a new rule barring "sudden death" victories, Tebow took the first snap and did the only thing a team can do, on offense, to win a game "sudden death" style: score a touchdown.

He's got the problems many say he has. But he's clearly progressing fast. There's something else, though. The whole team plays better when he's on the field. It's a total team effort. It's an intangible, but it seems to be "real."

6 Most Important Non-Profit Communication Channels

Half of the top-six marketing and donor communications activities non-profits will use in 2012 require the use of broadband access. The other three partially use broadband access. Non-profit Marketing in 2012

Cutting the Video Cord Sounds "Good" to Some, But Isn't a Perfect Substitute

Around 80 percent of what most Americans watch on TV can be had for free, some would argue. Some of us would say that is a pretty big and overly-broad generalization. But keep in mind there is an 80-20 rule.

The 20 percent of programming people really cannot get "for free" includes what many would consider the "most valuable" programming.

Also, few people really seem to be willing to live with their video subscriptions, at the moment.

About nine percent of U.S. respondents to a Deloitte  survey say they have stopped buying video entertainment subscriptions from cable, telco or satellite providers, while another 11 percent report they are considering doing so.  Nine percent have cut the video cord

Cable providers lost about 1.77 million subscribers over the past year, similar to 1.76 million lost in 2010, according to Leichtman Research Group. But cable industry losses are virtually directly balanced by subscribers gained by telco and satellite providers.

The implication is fairly clear: video cord cutting remains largely a potential danger, not a current reality.

Telcos added 1.53 million video subscribers in 2011, compared to 1.61 million in 2010. Satellite providers added about 480,000 subscribers in 2011 and 930,000 in 2010. 2011 video market was stable, overall.

One complicating factor, Leichtman notes, is that growth traditionally has come from new housing starts. Since housing construction is down, the opportunity to grow the universe of subscribers is stilted. On the other hand, customer churn generally increases when people are moving. To the extent that people are not moving domiciles as much as they have in the past, that should contribute to lower churn.

What those figures do not shed light on is whether average revenue per accounts is stable, rising or dropping. One might argue that new features such as digital video recorder or HDTV are pushing average revenue up, while a desire to save money could be leading some customers to drop premium channels such as HBO.

Evidence seems to have been mixed in the third quarter of 2011. Comcast's basic video ARPU remained flat $72.7 during the period while broadband ARPU increased 2.2 per cent to $42.6. Telephony ARPU declined 2.4 percent from the previous quarter's $31.9.

DirecTV ARPU increased almost two percent from the previous quarter, reaching $92.20. Third quarter 2011 ARPU

Time Warner Cable had declines across the board in ARPU, with the sole exception of broadband.

DISH saw its ARPU decline two percent from the previous quarter, marking the company's first consecutive quarter ARPU decline since the recession in 2009.

AT&T U-verse and FiOS TV ARPUs continued to grow, however. FiOS monthly ARPU increased two percent from the previous quarter and U-verse's monthly ARPU was up 2.5 percent.

The larger point is that though service provider market share is changing, and average revenue per account is mixed, with no clear pattern, there is, at least according to Leichtman Research, no evidence that video cord cutting is happening on anything more than an insignificant level.  
But it always has been clear that some content is "more valuable" to consumers than others. Cable TV executives used to say that "nobody watches more than seven channels; the problem is that each person watches a different seven."
That is why distributors continue to argue that, for all its problems, a "bundled" approach still makes the most financial sense for consumers and suppliers. Cord cutting still minor

Verizon Fixed-Line Divestiture?

It might never happen, and wouldn't happen soon, but Goldman Sachs Group analysts think Verizon Communications might actually split in two, divesting all of its fixed-line assets to become a pure-play mobile operator.  

That would clear the way for some eventual combination of the wireless company with another partner. In recent years, Verizon's growth has been lead by its Verizon Wireless unit.

In many ways, such a decision would be driven by the simple economics of the landline business. By about 2016, it is conceivable that only half of U.S. households will be buying fixed line voice services. If you assume there are two dominant suppliers in most markets, and that market share is split evenly (it will probably be more like 60-40 or 70-30), then no single contender will have more than about 25 percent of homes passed as customers.

If you know anything about the economic of capital-intensive networks, you will sense the problem. A supplier builds a network reaching every location, then is able to generate revenue from only a quarter of the locations. That means 75 percent of the investment is simply stranded, unable to produce revenue.

That also means the 25 percent of users have to pay for all of the capital investment. And where the per-customer investment is that high, retail prices would have to be three to four times higher than if nearly everybody bought the product.

There are other products, though, including video entertainment, broadband access and other smaller revenue contributors that could include advertising and other services. That is a primary reason revenue will not fall as much as penetration would indicate. 

It also would be reasonable to point out that few companies have Verizon's assets or problems. AT&T, for example, has vastly more scale in terms wired network customer base, and in a scale business, that makes a difference. 

Also, Verizon's smaller footprint means it has a larger "out of region" opportunity than does AT&T, for example, in terms of "wired network services." In wireless services, AT&T and Verizon compete virtually head to head in all  U.S. markets. 

But Verizon has been signaling for some time that it might have new plans based on its new fourth generation Long Term Evolution mobile network. With some limitations, Verizon Wireless would be able to provide broadband access, voice and messaging to most consumers across the United States using only the 4G mobile network. Verizon Fixed-Line Divestiture?

Verizon already has business agreements with DirecTV to provide video entertainment, meaning Verizon Wireless could provide a quadruple play using only its wireless assets and business deals with other suppliers. Resale deals with leading cable operators

The challenging news here is the growing disconnect of sorts between the costs of a fiber to home network and the revenues that can be generated from deploying such a network, under competitive conditions.

That suggests we might once again hear calls for rather-substantial changes in regulatory framework that would somehow better "rationalize" competitor access to fixed networks. At some point, structural separation, robust mandatory resale and cable operator inclusion in such a framework will be on the agenda.

As important as facilities-based competition has been, there is a growing disconnect between investment cost and revenue opportunity for landline fiber networks, at a time when revenue growth is moving to a "mobile first" pattern.

Any future Verizon "divestiture" would be the first indication that matters are reaching a potential tipping point. Certainly there are continuing reasons to ponder the economics of the fixed network business.

By 2016, U.S. household  voice penetration will be about 52 percent, according to Pyramid Research. And that will be the highest penetration rate in the world.

In the Asia Pacific region fixed-line voice will be used by 24 percent of households.

In Western Europe, 21 percent of households will have a voice line. Revenue, on the other hand, will grow, in aggregate, on the strength of broadband access services.

“According to our estimates, global narrowband line penetration of households decreased from 45 percent in 2007 to 37 percent in 2011, and it will decline to 27 percent by 2016,” says Sylwia Boguszewska, Pyramid Research senior analyst.

Fixed services in every region are losing ground fast to mobile services, with mobile data capturing an increasingly substantial share of total telecom revenue, she says.

In 2007, U.S. voice penetration was about 97 percent of households, and seems to have peaked about 2000.

So penetration will have fallen in about a decade and a half. Those sorts of changes seem to be more common these days, as the volatility of the business reaches new heights.

Nor would that be the first such change, at about that time frame. In 1997 long distance revenue represented about half of fixed line network revenue in the U.S. fixed-line market.

By 2007 long distance had fallen by half. At the same time, and over the same time period, mobile services had grown to represent half of industry revenue.

And it is revenue, more than service penetration or usage, that seems to be important. Pyramid Research also suggests that fixed line revenue will be stable, or even grow slightly, as penetration falls.

That will be due in part to new revenue sources such as video entertainment, one might argue, and higher spending for broadband access and related products.

At the same time, it has over the last decade also been clear that the enterprise customer segment has become more crucial, not only for Verizon Communications but for most other tier-one service providers. Verizon Fixed-Line Divestiture?

Some skeptics will note that such ideas, which spawn transactions, always get speculated about because there are firms that make a good living advising clients about such transactions.

While true, it also is true that the fundamental industry drivers change quite dramatically over time. In 1999, tehre still were "Personal Communications Service" and "Cellular" segments of the wireless business. These days, the term is never used, because there no longer is any distinction between what used to be thought of as "PCS," and "cellular" service. U.S. telecom in 1999

In 1999, there still was an independent "long distance" industry. There was a company named "WorldCom."

A company known as "America Online" had a $125 billion market capitalization. Other Internet service provider firms, including "@Home," had market valuations of $100 billion.

In 1999, reasonable people would have argued that newer contestants in the "local" telecom business, namely competitive local exchange carriers, had a bright and substantial future.

Cable TV companies did not provide voice services at a significant level. But AT&T owned TCI, the biggest U.S. cable company. As I recall, US West owned Media One, another leading U.S. cable company.

Against that backdrop, it might have appeared that the former "Baby Bells" would have a hard time competing. Just a bit over a decade later, many of the "upstarts" have disappeared. The differences between leading cable TV companies and leading telcos are mostly of a regulatory sort, rather than any fundamental differences in product line.

The point is that if, barely more than a decade ago, the largest U.S. long distance company could own the largest cable TV company, if the wireless business was still thought of as having distinct personal communications service and cellular segments, if whole segments of the business can virtually disappear (long distance), then all sorts of other changes are conceivable.

Verizon deciding it has to get bigger on a global basis, and get out of the landline business, is not unthinkable.

Top 1% of Mobile Users Use Half of World’s Wireless Bandwidth - NYTimes.com

Just one percent of mobile consumers use half of all bandwidth, reports Arieso, which also notes that the top 10 percent of users consume 90 percent of wireless bandwidth, according to a study of the habits of 1.1 million customers of a European mobile operator during a 24-hour period in November 2011. Extreme bandwidth users

The gap between extreme users and the rest of the population also is widening over time, according to Arieso. In 2009, the top three percent of heavy users generated 40 percent of network demand. Now, Arieso said, just three percent of users represent 70 percent of the traffic. Top 1% of Mobile Users Use Half of World’s Wireless Bandwidth

Video is a likely reason for the explosion of usage by the heaviest users.

 

How Might "Mobile First" Apply?

Google has talked for nearly two years about a development strategy it calls "mobile first." The notion has much to do with cloud-based applications and much to do with the growing importance of mobile devices as a key platform for application-based businesses.

“It's clear that we're experiencing a fundamental shift in how we access information,” said Google VP Vic Gundotra, in 2010. “Clearly, the mobile phone is the iconic device of the moment, and we're encouraging a new rule: Mobile First.” Mobile is the key

“When we announce new services for desktop computers, such as real-time search, we will debut an equally powerful mobile version,” said Gundotra.

That rule might not make as much sense for most other businesses whose products are physical rather than virtual. That isn’t to say that the mobile context is irrelevant.

Most firms conduct some marketing activities, and the mobile venue increasingly is important, even if indirectly much of the time (perhaps 40 percent of all Facebook interactions now occur on mobiles rather than PCs, for example).

For any firms using Facebook, that means being aware that a growing percentage of activity occurs when people are out and about, on devices with small screens, and in a context that is distinct from a desktop PC environment.

In a growing number of cases, that means being alert to the mobile commerce, comparison shopping and other activities that pertain directly to people engaged in the act of shopping.

The notion of “mobile first,” not too strictly interpreted, might make sense for any firm contemplating the ways it markets and communicates with prospects or customers. For retailers, the imperatives might be more stark. People already are using their mobiles to compare prices when inside stores.

The point is that, for many firms, it is a reasonable question to ask how  "mobile first" might apply in product development, sales, marketing, customer service or fulfillment.