92% of Consumers Want A La Carte Video: Won't Get It

About 92 percent of consumers want some type of a la carte programming offering from their video subscription  providers, but they're not willing to pay much for it, according to RBC Capital Markets. The upshot is that they aren't going to get a la carte programming. 


About 92 percent of respondents said they would be at least "somewhat likely" to switch to a full a la carte option, the RBC Capital survey of more than 1,000 consumers found. 


Some 82 percent said they would subscribe to at least 11 channels and 40 percent indicated they would subscribe to more than 20 channels, with a weighted average of about 19 channels. 


That sounds about right: most people watch seven to 12 channels on a regular basis, a rule of thumb suggests. 


Of the respondents who would prefer a la carte service, and would pay for the services, about 51 percent said they would pay at least $1 per month per channel, with the weighted average being $1.47 per month.


That works out to about $28.50 per month, or about a third the average monthly video subscription bill. Some programmers might be able to build a business case on an a la carte basis, but most likely would not fare as well. 


Granted, programming rights costs appear low for many channels, in the cents per month range. But that is based on volume discounts and represents only licensing fees, not marketing, operations, billing and other costs of delivering content to a customer. 


Consumers seem to be using the same sort of logic they use in assessing the "right cost" for a single downloaded song. People seem to divide the retail cost of a CD by the number of songs and assign a value. Users might be doing the same thing with their video service, essentially dividing the monthly recurring cost by the number of channels in their packages. 


Service providers would rightly argue that there are sunk overhead costs that are not "channel based." All those costs would, in a full a la carte regime, need to be amortized over a smaller number of revenue units (channels). 

More Deregulation for Landline Voice

In a significant development for the landline telecommunications business, states are passing or considering laws to end the requirement that phone companies provide "universal service" to every potential customer in competitive markets. Definitions might vary, but the Indiana version of the law defines what we might call effective competition as situations  "where at least two other companies provide voice service, whether it's wired phone, Internet services such as Skype, or mobile access."


Indiana and Wisconsin are the two most recent states to end the requirement, and many others, including Alabama, Kentucky and Ohio, are considering it, USA Today reports.

In California, a State Senate bill to deregulate VOIP services has passed the Senate Energy, Utilities and Telecommunications Committee by a vote of 11-0.  

The bill,  SB 1331, would eliminate the power of the state’s Public Utilities Commission to regulate VOIP services, which historically has had regulatory authority over public utilities, including telephone companies.

In some ways, the move was inevitable. California deregulated nearly all landline service six years ago. 

Broadband Saves U.S. Start-Ups $16,000 Each

High-speed broadband saves U.S. start-ups and entrepreneurs $16,550.52 in costs when a new business is started, according to a report published by the Internet Innovation Alliance and the Small Business and Entrepreneurship Council. Here are the top 10 ways high-speed Internet, including wireless broadband, saves American entrepreneurs money


Top 10 Ways Broadband Saves American Entrepreneurs Money

Category	Traditional	Online	Amount Saved on Start-up Costs	% Saved
Accounting: Online Services and Software vs. Traditional Accountant Services	$2,101.00	$267.30	$1,833.70	87.28%
Printing Services	$875.22	$497.15	$378.07	43.20%
Telephone Line	$696.00	$264.00	$432.00	62.07%
Website Design and Hosting	$2,397.84	$299.64	$2,098.20	87.50%
Mobile Apps and Business Owner’s Time	$35,027.20	$31,524.48	$3,502.72	10.00%
Logo Design	$500.00	$42.00	$458.00	91.60%
Office Space vs. Home Office	$6,180.00	$0.00	$6,180.00	100.00%
Incorporating a Business	$394.67	$98.67	$296.00	75.00%
Newspaper Subscriptions	$348.71	$0.00	$348.71	100.00%
Travel Costs: Air Travel vs. Online Video Calls/Conferencing	$1,083.00	$59.88	$1,023.12	94.47%
TOTAL	$49,603.64	$33,053.12	$16,550.52	33.37%
Cost of Broadband Connection	$490.00
Total Saved, with Broadband			$16,060.52

Savings may also be greater for businesses that tap into broadband for a host of other needs not covered in the study, including purchasing equipment and furniture, utilizing cloud services, or marketing products and services.


 According to the Kauffman Foundation, young firms were responsible for nearly all the net job creation in the United States between 1980 and 2005.  Kauffman estimates that new firms create approximately three million jobs each year, and have created 40 million new jobs since 1980.

Amazon About to Overtake Best Buy Revenue

You might argue that Amazon's Kindle launch was an inflection point for Amazon e-commerce. The other observation is that Amazon is about to pass Best Buy in sales volume. Think Best Buy needs to hone its online strategy? Yup. the "big box" format no longer seems to be working so well for Best Buy. 


For some of us, though, the key point illustrated in this chart is not the sales volume, but the revenue inflection point. Whether there is only a correlation, or some "causation" is at work, the Kindle launch looks like a classic inflection point. 

Will Global Telecom Revenue in 2019 be Higher or Lower than in 2011?

Historically, global telecom revenue, with a few minor and temporary dips, has gone in just one direction: up. Given growth in developing regions such as India and China, a reasonable person might argue that the trend will remain in place, despite potential stresses in some regions.


Many observers still believe that is the most likely outcome, between now and 2020. Still, 
we are entering a period of unprecedented revenue uncertainty in regulated services, argues Alan Quayle. 


And that uncertainty seems to be causing a divergence of views about overall industry revenue. 


Surveying industry participants about what they expected, in terms of revenue sources and volumes between now and  2019, optimists expected revenue growth between one percent and 1.75 percent, with mobile and fixed data driving the bulk of the growth, while mobile voice remaining flat and fixed voice declining. That easily would pass for today's conventional wisdom. 


Optimists expect total regulated revenue of $1.6 trillion in 2019, a relatively sanguine outcome in a business with lots of challenges. 
                                                            
But there are pessimists who expect a flat revenue environment through about 2014, while others think revenues could decline by 2019 by about two percent, yielding annual global revenue of about $1.4 trillion. 


In either scenario, though, new and unregulated services are critical for future revenue growth. 


Unregulated revenue, in either the optimistic or pessimistic scenario, could be key. Quayle estimates that unregulated businesses will have three percent to six percent annual growth rates over the near term. 


On the other hand, mobile data will grow faster, at a six percent to nine percent range. Fixed network data revenues will grow at three to four percent annual rates in the near term. 


Mobile voice will be flat to up by about two percent annually, while landline voice will continue to contract at negative five percent annually to seven percent annually, over the next couple of years. 

Though the possibility of recessions in some regions is one source of uncertainty, there are structural trends of more importance. Over the top messaging will create revenue pressure for mobile service providers. 

For fixed network providers, mobile broadband increasingly will become a viable alternative to fixed network broadband, especially in market segments such as young singles, Quayle argues.

Long Term Evolution and family data plans are expected to accelerate this trend.

Market saturation and aggressive price competition from non-incumbent service providers will create pressure as well, especially in the mobile segments of the business. For fixed network providers, facing losses of voice accounts, the issue is not so much competition as shrinking demand. 

On the other hand, even in regions such as Western Europe that seem to face more pressure in mobile voice and messaging, much could hinge on service provider moves in the retail packaging area. One should not discount packaging innovations that boost revenue, though it might be reasonable to worry about profit margin on that higher gross revenue.

U.S. States Moving to End Universal Service

There are important regulatory developments regulatory developments occurring at the state level in the United States these days. 


In a significant development for the U.S. landline telecommunications business, states are passing or considering laws to end the requirement that phone companies provide "universal service" to every potential customer in competitive markets.


For anybody who has been in the telecom business for a while, that is a startling notion, though the practical implications, in an immediate sense, could vary, based on how each of the statutes are worded, and what service providers believe they can do in their local marketplaces.


Definitions might vary, but the Indiana version of the law defines what we might call effective competition as situations "where at least two other companies provide voice service, whether it's wired phone, Internet services such as Skype, or mobile access."


Indiana and Wisconsin are the two most recent states to end the requirement, and many others, including Alabama, Kentucky and Ohio, are considering it, USA Today reports.

European Mobile Operators are Retrenching

Deutsche Telekom is considering exiting its ventures in the UK and The Netherlands next year, according to sources who spoke to Financial Times Deutschland Deutsche Telekom is not alone. 


Other European mobile service providers, including KPN, for example, are looking to divest assets that now have become "non-core" holdings, though cross-border expansion has been an important growth strategy over the last couple of decades.


The "grow through acquisition" and "grow outside the footprint" strategies have been important for fixed network telcos and cable companies as well, for obvious reasons. The fastest way to gain revenue often is to "do what we do, in more places," or "buy an asset to get bigger." 


What has happened, though, is that it makes less sense to invest in highly competitive Western European mobile markets, and much more sense to invest in faster-growing markets in Eastern Europe and Central Europe, as well as other regions. 


DT originally had hoped to parlay its sale of T-Mobile USA into investment in Central Europe and Eastern Europe, for example. Having failed to do so, DT now must reinvest in the U.S. market where it trails AT&T, Verizon Wireless and Sprint, in precisely the sort of market it now wishes to avoid, namely highly-saturated developed markets. 


Though many believe DT still would eventually prefer to divest the U.S. assets, that seems unlikely in the near term. Regulators seem to have signaled that the U.S. mobile market already is not competitive enough, so none of the three larger national operators likely would be allowed to buy T-Mobile USA. 


Cable companies, in theory, might have been considered buyers, but a few key leading firms, including Comcast, Time Warner Cable and Cox Communications, seem to have decided to partner with Verizon Wireless, which takes them out of consideration as buyers. 


The larger point, though, is that a growth strategy that made sense a decade ago has ceased to make as much sense, given higher growth opportunities elsewhere.