How Will Mobile Service Providers Cover Fixed Costs as Voice Usage Drops?

There will be predictable griping if U.S. and other mobile service providers change retail packaging of voice services in the future, perhaps dropping the "buckets of minutes" plans of various sizes with "one size fits all" unlimited plans.

From a service provider perspective, the ways revenue is offered at retail include both a usage and a fixed cost recovery component. In that sense, how much consumers get charged for a bundle of features and services is partly a matter of traffic sensitive and fixed costs that basically don't change much.


The potential shift of voice calling to unlimited plans is a response to the "fixed costs" part of the cost recovery issue. One can debate whether all network and other fixed costs are appropriate or not. But those fixed costs don't change much based on which services--ranging from text messaging to voice to broadband data--users decide to use.

The simple fact is that the sunk costs of running the network must be recovered, no matter what the usage-sensitive patterns are. And if users are shifting from voice to Internet apps, or from text messaging to over the top messaging, the fixed costs still must be covered.

So a shift to "unlimited" calling is simply one way of recovering the fixed cost portion of providing the full package of features people associate with mobile phones, especially smart phones.

Precisely how those charges are levied will vary from time to time and carrier to carrier. The point is that fixed costs don't change because usage of some apps, services or features changes over time.

Not everyone will be happy with how retail features are priced. Some will complain that profit margins on some products are "too high." That doesn't actually matter much, either. All multi-product retailers sell products with varying margins, some high, some low, some in between. From a mobile service provider's perspective, the main issue is ensuring that the fixed costs get covered.





 

InMobi Says Tablet Ad Impressions Grew 88% Last 6 Months

Tablet ad impressions on the InMobi North American ad network grew 88 percent over the last six months, illustrating the way the new device is creating a new market for mobile advertising.

In fact, tablet impressions have been growing nearly twice as fast as smart phone impressions in North America.  Anne Frisbie, InMobi VP and Managing Director, North America, attributes the tablet growth in part to the appeal of larger screen sizes and growing tablet ownership.

The report finds that Apple clearly dominates, with iOS tablet devices currently commanding 71 percent of the overall impression share, followed by Android with 29 percent. Since those percentages roughly correspond to the installed base of devices, the findings are not unexpected.

North America Tablet OS ad impressions
OS	Q4 2011	Q1 2012	Pt. Change
iOS	81.6%	70.8%	-10.8%
Android	18.2%	28.9%	10.7%
Others	0.2%	0.3%	+0.1%

Despite entering much later to the market than many of its competitors, the Amazon Kindle Fire performed second (9.2 percent) to the Apple iPad (70.8 percent) in the first quarter of 2012.

North America Top Performing tablets, total ad impressions
OS	Q4 2011	Q1 2012	Pt. Change
Apple iPad	81.6%	70.8%	-10.8
Amazon Kindle Fire	N/A	9.2%	N/A
Asus Eee Pad Transformer TF101	2.7%	5.2%	2.5%

Are Mobile Platform Wars Just About Over?

It's a provocative question, but looking at adoption of mobile operating systems, you have to wonder whether the smart phone platform wars are just about over. Microsoft would argue otherwise, and lots of people seem to think that is not an empty boast. Research in Motion might say the same thing, but more people are skeptical about a RIM comeback. 




 

85% of Mobile Users Will have 3G by 2017

Though fourth generation Long Term Evolution networks tend to get most of the attention these days, third generation GSM will, by far, be the dominant network for most people who use mobile networks or mobile broadband.

By 2017, 85 percent of the world's population will have 3G coverage, Ericsson says.

About 75 percent of the HSPA networks worldwide have been upgraded to a peak speed of 7.2 Mbps or above and around 40 percent have been upgraded to 21 Mbps.

And though, by 2017, 50 percent of the world's population will be covered by 4G networks that doesn’t mean that most people who have access to LTE actually use it. It takes time for new handsets, working with the latest air interface, reach critical mass in any market.

For many people around the world, the mobile phone also will be the only means of accessing the internet. According to Ericsson, 85 percent of the world's population will have internet coverage from a  3G network by 2017, and there will be close to nine billion mobile subscriptions in use, compared to six billion by the end of 2011.

Smart phone subscriptions expected to reach three billion in 2017, about a third of all users globally, and global data traffic to grow 15 times by the end of 2017, Ericsson also says.

Mobile broadband subscriptions, meanwhile, are forecast to reach five billion in 2017, compared to one billion by the end of 2011.

Android and iOS Platforms Growing, All Others Shrinking

More than 107 million people in the U.S. owned smart phones during the three months ending in April, up six percent over January 2012, according to comScore. 


Google Android ranked as the top smartphone platform with 50.8 percent market share (up 2.2 percentage points). Apple’s share of the smartphone market increased 1.9 percentage points to 31.4 percent. RIM ranked third with 11.6 percent share, followed by Microsoft (4.0 percent) and Symbian (1.3 percent), comScore says. 

Top Smartphone Platforms 3 Month Avg. Ending Apr. 2012 vs. 3 Month Avg. Ending Jan. 2012 Total U.S. Smartphone Subscribers Ages 13+ Source: comScore MobiLens
	Share (%) of Smartphone Subscribers
	Jan-12	Apr-12	Point Change
Total Smartphone Subscribers	100.0%	100.0%	N/A
Google	48.6%	50.8%	2.2
Apple	29.5%	31.4%	1.9
RIM	15.2%	11.6%	-3.6
Microsoft	4.4%	4.0%	-0.4
Symbian	1.5%	1.3%	-0.2

Apple and Google Map War is about Ad Revenue

Mobile ads associated with maps or locations are estimated to account for about 25 percent of the roughly $2.5 billion spent on mobile ads in 2012, according to Opus Research, up from 10 percent in 2010. That is reason enough for a battle over map applications. 


The reason maps get so much advertising is that geo-location is a fairly serious indicator of purchase intent when a retailer is searched for, within a map app. 


Up to this point, Google Maps is used by more than 90 percent of U.S. iPhone users, the Wall Street Journal reports. 


But if you believe location based advertising is going to be a big deal, then control of inventory is important. On Google's search engine, 20 percent of searches are for local information. 


Digital ad spending by local businesses in 2011 reached $21.2 billion, a figure that is expected to increase by more than 12 percent annually, according to BIA/Kelsey. 


The Apple move comes as Google has started to charge app providers a fee  for use of  Google Maps. 

Larger Screen Devices Don't Always Get Better Click Through Rates

As a rule, people will tend to use the largest screen available to them when interacting with web content. 

Also, one tends to find that larger screens lead to better display ad effectiveness.

But the rule isn't iron clad. 

Jumptap recently found that screen size doesn’t always matter when it comes to mobile ad performance.

The Amazon Kindle Fire, which measures seven inches in length, had a 1.02 percent click-through rate (CTR) while the slightly larger, 9.7 inch iPad had a 0.9 percent click-through rate. 

While tablets tend to have higher CTRs than smartphones, screen size isn’t always a predictor. 


Jumptap also says Millennials tend to prefer Apple iPads, while their parents tend to prefer Kindle Fire devices. 


Data from comScore and Jumptap show that ownership of tablets is heaviest among older Millennials between the ages of 25 and 34. 


But Millennials as a whole (people 18 to 34) are most likely to use an iPad while Baby Boomers are the heaviest users of the Kindle Fire.