Strong Tablet Adoption Changes Device Behavior

That shipments of tablets are expected to grow from 72.7 million units in 2011 to 383.3 million units by 2017, according to NPD, would not surprise many observers.

Growth in emerging markets, expected to account for up to 46 percent of worldwide shipments by 2017, an increase from the 36 percent share in 2011, might be more surprising.

The tablet forecast also illustrates an important change in connected appliance trends. In the past, “PCs” have been one category of appliances, while MP-3 players, phones and digital organizers, game devices, cameras and e-reading devices have been distinctly different categories.

These days, many of those devices have overlapping functions. Taken as a whole, the changes suggest the crucial role “content consumption” now plays as a lead application for most devices. Though PCs, cameras and organizers still largely have “work or business” use cases, virtually all the other devices are oriented around content consumption.

If results of a U.K. consumer poll are any indication, tablet PCs are about to change Web browsing, gaming and reading preferences.

According to survey conducted by Cooper Murphy Webb, Apple’s iPad is the preferred method of reading newspapers and magazines among consumers already owning the device. Tablets change behavior

The poll also found that a plurality of iPad owners prefer the device for reading books and gaming. Perhaps surprisingly, respondents indicated they used their dedicated gaming consoles and iPads about equally when gaming. If that holds up, it could mean trouble for game console suppliers.

And a significant percentage prefer the iPad for Web browsing as well. That finding is less surprising, if one assumes the tablet device is designed to be used as a content consumption device.

Worldwide Tablet PC Emerging vs. Mature Market Shipment Forecast Breakout

No Surprise: Internet Value is at App Layer

A new Boston Consulting Group perspective piece about the inescapable role of the Internet in economic life raises obvious questions about where value now lies, as “every business needs to “go digital.”

By 2016, there will be three billion Internet users globally, and the Internet economy will reach $4.2 trillion in the G-20 nations, BCG argues.

“No company or country can afford to ignore this phenomenon,” BCG says. But that doesn’t mean every part of the ecosystem benefits equally, one might argue.

On one hand, a trillion devices will need to be connected to the Internet, which obviously implies the need for access services. Many of those devices will be sensors, which is why mobile service providers see such potential for machine-to-machine services.

But the business now is “about ecosystems,” BCG says. “The Internet is increasingly being shaped by ecosystems orchestrated by companies such as Amazon, Apple, Facebook, and Google, Baidu, Tencent and Yandex, BCG argues. .



And that is the concern service providers have, generally expressed as the fear of being reduced to a “dumb pipe” provider in a business where most of the value gets created elsewhere in the ecosystem. But it is hard to argue with the fundamental underlying logic.

Across the G-20 nations, the Internet economy amounted to 4.1 percent of GDP, or $2.3 trillion, in 2010 and is contributing up to eight percent of gross domestic product. So when service providers ask “Where is the value in the Internet ecosystem?” they often don’t like the answers.

The BCG shows one element of the concern, namely that even in the “access” business, value has shifted from fixed line to mobile. 

BCG argues that all contestants need to understand and strengthen their “digital balance sheets” to succeed.



The Internet also conveys sizable economic benefits that do not get captured directly by calculations of GDP. In the G-20 nations in 2010, consumers researched online but purchased offline more than $1.3 trillion in goods, the equivalent of about 7.8 percent of consumer spending in those nations.



In addition, in many leading G-20 nations, the Internet generated a consumer surplus of about four percent of GDP. This consumer surplus is the value that consumers place on the Internet above what they pay for it in device, application, and access costs.



Further economic benefits include business-to-business e-commerce and collaboration within and across companies, for example.



The good news is that demand for access services now is ubiquitous. By 2016, the three billion Internet users will represent 45 percent of the world’s population. But, by 2016, mobile devices will account for about 80 percent of all broadband connections in the G-20 nations.



Of course, much of the growth is happening in emerging markets rather than developed markets. The Internet economy of China will approach the size of the U.S. Internet economy in 2016.

Social media have taken hold everywhere, especially in emerging markets. That, of course, drives value for application providers, though indirectly for access providers.



Indonesia has the second-largest number of Facebook users. More than 90 percent of Internet users in Argentina, Brazil, and Mexico participate in social media, a higher percentage than in any developed nation.



Across all nations, social media are responsible for most of the new time spent on the Internet, including 22 percent of total Internet minutes. At the same time, social communications are starting to displace email, another historic reason for use of Internet access services.



And change is not likely to stop. As recently as 2005, the broadband access business was almost exclusively a “fixed network business.” That won’t be the case in the future.



The bigger problem remains that much of the new created value happens at the application layer.

But even within the “access” business, revenue sources are changing. Time Warner Cable fourth quarter 2011 earnings show that broadband and other new services now are the revenue driver for cable and telecom providers.



Broadband revenue grew to $4.4  billion, a 8.6 percent increase over 2010. Commercial revenues grew 32.7 percent increase to reach $1.4 billion. 


By way of contrast, Time Warner Cable lost 53,000 basic video subscribers, despite adding 79,000 net new customers from acquired cable firms.



In other words, actual losses were more on the order of 129,000 customers. In the fourth quarter of 2010, Time Warner Cable lost 141,000 basic video subscribers. For the full year, the cable company lost 453,000 video subscribers.



But Time Warner Cable gained 117,000 broadband subscribers in the fourth quarter, up 31.4 percent from the previous quarter and up 40 per cent from the fourth quarter of  2010. For the year, TWC gained 437,000 broadband subscribers. The cable giant also gained 133,000 residential digital voice subscribers for the year.

Those results, along with declining voice customers at AT&T, Verizon and most other fixed line telecom companies, show that specific communications services are products like any other.

Most executives are familiar with the notion of a “product life cycle.” What might be a more provocative idea is the notion that collectively, the global communications industry might be entering a period where communications  itself hits something of a industry life cycle peak.

“The telco voice and messaging business is on the verge of going into meltdown,” muses industry consultant Martin Geddes. By that line of thinking, so much revenue and profit is about to be drained away that the replacement revenue streams (based largely on broadband access for the near term) cannot prevent some significant shrinkage of the overall business.



One doesn’t have to agree with all elements of the analysis to sense the danger. In some markets where the leading edge of the trend seems to be emerging (Europe), there is a palpable sense that voice and messaging revenues are about to become over the top apps, with an implied hit to the dominant provider revenue streams.



“I strongly believe the business model for voice and messaging is about to go into reverse,” says Geddes. “The value is going to drain out of minutes and messages charged to users.”



Many would agree with the fundamental challenges, without necessarily agreeing on the timing and magnitude of the revenue changes. In the near term, most also would agree that commercial services are the important new revenue driver for cable companies, while mobile broadband drives telco growth.



At some point, even those growth drivers will slow, which is why telco executives are working on new initiatives in cloud computing, machine-to-machine services and mobile commerce. The key issue is whether those, or other services not yet on the horizon, are big enough to offset the huge potential telco losses in voice and messaging and video losses for cable operators.

Can Broadband Access be Segmented and Differentiated?

MetroPCS is among the few U.S. mobile operators that have embraced the idea of application-based charging, at least to the extent of offering plans aimed at light video consumers, heavy video consumers, and those in between.

Though it remains unclear precisely which new charging systems might gain favor, a survey of some 30 tier one service providers, sponsored by Tekelec and conducted by Heavy Reading, suggests several approaches are being considered.

Though the emphasis has been on simplicity and buckets of usage, there has been a change in thinking over the last two years, about the necessity of using differentiated charging mechanisms and plans to better manage and “monetize” mobile networks, in particular, says Mark Ventimiglia, Tekelec director.

“Usage problems and average revenue per user” are the main drivers of the new thinking, says Ventimiglia. But operating cost reduction also is part of the new thinking, especially as the dominant mobile service providers increasingly face upstart competitors willing to underprice existing tariffs.

“The higher end carriers can’t compete with ‘Free’ in France, for example, without innovating,” says Ventimiglia. Indeed, one has seen over the last decade an increase in segmentation in the French fixed network broadband business.

“Tunable networks” is one way to look at what marketing staffs want to create. But service providers also want simplicity, so consumes have clear value propositions and customer service personnel have an easier job supporting those offers.








The good news is that some marketing offers that might be more complex are not necessarily more complex “in the network,” says Ventimiglia. Lots of differentiated retail plans can be created that do not impose a new burden in terms of network managment complexity.

Some might say that if mobile or fixed network access providers do not want to be known as “dumb pipe” providers, then they just have to stop acting that way. And one way to do that is to tailor retail plans.

Even toothpaste and mouthwash now are sold to market segments with different lead values. There is no reason, in principle, why broadband access plans cannot be segmented the same way.

In any industry long accustomed to “usage-based billing,” it will come as no surprise that bandwidth caps prompt thinking about ways to offer temporary “overage protection,” for a fee.

More controversially, executives also are looking at application-based tiers, where customers pay based on the types of applications they want to use. Highly bandwidth intensive apps such as entertainment video or gaming might have one rate and usage quota, while email access and light web surfing might be billed at a different rate.

Plans that are optimized for social networking are another example of how retail plans can be tailored for users with different app profiles.

Speed-based tiers are common in the fixed line business, but might also find application in the mobile realm. Aside from different rates for faster and slower access, users might be offered various types of “speed boost” offers for users who only occasionally need high speed access, but most of the time can get by just fine with slower speeds.

Time-based tiers might charge more at peak hours and less at off-peak hours.

Family data plans of the sort now used for voice and messaging for multiple users and devices on a single account also are likely, allowing users on a single account to use multiple devices that share a single bucket of broadband usage.

One example might be a plan that supports each device with enough bandwidth to view 20 videos a month, with unlimited social networking and web browsing, and 200 hours of voice over Internet protocol calls per month, the study suggests.

In other cases, service providers might look at ways to create plans with “top ups” or “roll over” features on such family plans.

“Casual plans” that are easy to start and stop are another area where charging could change.

Services might mimic the out of home “hotspot” charging method, where users would be able to buy access for a day, for example.

Loyalty mechanisms also might be more common in the future, including birthday and service anniversary bonuses, free service top-ups twice a year, speed boosts, unlimited bandwidth during off-peak hours, or an extra five Gbps of data for six months with the purchase of a new tablet.

Special promotions to accelerate the adoption of new services or encourage
different mobile usage patterns might include unlimited access to a new application for three months, funded by advertisements, discounts on service tier upgrades, or unlimited services at certain times or days when the network is not congested.

Service providers might also want to “zero rate” some apps, while charging a premium for apps that require more bandwidth or will operate at peak hours.

ESPN Goes Mobile First

You'd expect ESPN Mobile to emphasize mobile content. But the more-important change would be if all of ESPN had that same perspective. It might be a bit early to say that has happened, but there is little doubt thinking is changing.

The thinking at ESPN is to "program and design from the mobile standpoint first, then extrapolate what could be applied for the PC, television and print experience,” says Michael Bayle, ESPN Mobile VP. Mobile First at ESPN 

That is a shift of perspective.

50% of Adults Used Mobiles In-Store While Shopping

More than half of all adult mobile phone owners used their devices for some shopping-related purpose during the last while they were in a store Christmas and holiday shopping season, the Pew Research Center reports.

Some 38 percent of mobile phone owners used their phone to call a friend while they were in a store for advice about a purchase they were considering making. Some 24 percent of mobile device owners used their phone to look up reviews of a product online while they were in a store. The rise of in-store mobile commerce

Some 25 percent of adult mobile owners used their phones to look up the price of a product online while they were in a store, to see if they could get a better price somewhere else. That is the aspect of mobile in-store shopping that seems to worry most brick and mortar retailers.

Taken together, just over half (52 percent) of all adult mobile phone owners used their phone for at least one of these three reasons over the Christmas and holiday shopping season and one third (33 percent) used their phone specifically for online information while inside a physical store, either to check product reviews or get pricing information.

Millennials Trust UGC

About 51 percent of Millennials (born between roughly 1977 and 1995, by some estimates) say that recommendations from strangers through user-generated content on a company website are most likely to influence their opinion when making a purchase, compared to 49 percent who say that recommendations from friends and family is most influential, according to Bazaarvoice.

In contrast, Boomers (born between roughly 1946 and 1964, by some estimates) are almost twice as likely to favor recommendations from friends and family over user-generated content.

Some 66 percent of "Boomer" respondents say friends and family are influential when consumers are weighing purchases, compared to 34 percent who say recommendations from people they don't know are favored. Millennial Trust in UGC High

Yahoo Goes "Mobile First"

You can add Yahoo to the list of companies that have said their business strategy is "mobile first." Google executives have been saying that company's strategy is "mobile first" for some time. Most leading telecom service providers have been "mobile first," in terms of revenue, for some time as well.

Now Yahoo says "we’re moving forward with a 'mobile first' mindset."  Mobile first is simply a response to where revenue opportunities and growth now exist.


For Google, mobile first means new applications and initiatives are centered on mobile devices rather than PCs, mobile Internet rather than PC access to the Internet, and the mobile context instead of PC context.

That's why Android, Motorola Mobility and Google Wallet are associated with Google, where it might not have made so much sense in the past.