Apple Thinks Mobile Service Providers Will Not Cut iPhone Subsidies

Mobile service providers globally are unhappy about the impact to earnings and cash flow phone subsidies are causing. Most undoubtedly would prefer not to subsidize devices at all. But it is a complicated issue. How many consumers would be so happy to buy an iPhone if it cost $500 to $600?

We might soon find out as prepaid service providers start to offer Apple iPhones in conjunction with prepaid service, with no device subsidies.

Apple's CFO Peter Oppenheimer, and head of Internet services, Eddy Cue, don't believe carriers actually will cut subsidies for iPhones. They argue that iPhones are important reasons why customer churn is lower, among iPhone users, than among users of other devices.

And in a saturated market where gaining a customer essentially means taking that customer away from another mobile service provider, anything that measurably reduces churn is a very-helpful tool indeed.

Apple believes that the iPhone, which has the industry's lowest churn rate of under two percent is in part a result of customer affinity for the device, and also drives higher adoption of family service plans, which further reduces churn.

Though service providers might not agree, the typical iPhone $400 subsidy also is the foundation for service provider data revenues of about $1920 over a two-year period when signing up a customer to a typical $80 monthly plan.

Naturally, Apple argues that any carrier than abandoned subsidies would lose lots of customers to other carriers who do offer subsidies.

But carriers are unlikely to keep experimenting with ways to avoid the subsidies. Vodafone allows users to pay in installments for phone purchases, with zero interest charges, over a period of a year or two.

In fact, service providers now are effectively trying to dissuade consumers from upgrading phones, by adding upgrade fees of perhaps $30 to $35 when existing customers want to buy a new phone. That might seem counter-intuitive, but an existing customer who can be persuaded to continue service with a device that already has been amortized does improve a service provider's lifetime profit margin and revenue from that account.

Citrix Systems Buys Bytemobile to Go "Mobile First"

In yet another example of how cloud computing and mobility are essential parts of the new computing architecture now emerging, Citrix, a leading provider of cloud-based collaboration and virtualization capabilities, is acquiring Bytemobile, a leading provider of data and video optimization solutions for mobile network operators.

This acquisition gives Citrix a key strategic foothold in the core infrastructure of more than 130 mobile operators in 60 countries around the world, Citrix says.

By joining forces, Citrix and Bytemobile will be able to offer mobile service providers, globally, with  combined solutions that deliver a high quality user experience to mobile subscribers, while helping operators manage the growth of mobile network traffic.

The acquisition builds on a strategic partnership announced earlier this year that combined the Bytemobile Smart Capacity technology with the Citrix NetScaler line of cloud networking solutions.

It isn't yet clear what name eventually will be adopted for the next generation of computing, but beyond the "PC" or "Internet" area lies an architecture based on cloud mechanisms and mobile devices. In fact, many would argue that mobile computing and cloud computing are virtually inseparable.

Biggest Consumer Trend is Lower Discretionary Spending, but Video and Communications Products Could Still Gain Value

Among top trends affecting the consumer market, perhaps the most important, for providers of communications and entertainment products, is the reduction in discretionary spending, Gartner analysts say.

In mature markets, many consumers have cut back on discretionary spending in the wake of successive financial crises. But there is potential for service providers, globally.

Even as they generally practice restraint, consumers seem to put a higher value on media and communications products. In fact, that is congruent with traditional thinking within the U.S. cable industry.

The rationale is that, when other alternative forms of entertainment outside the home become relatively less desirable, video entertainment provided by a cable subscription offers quite a lot of value for a reasonable amount of money.

The Gartner survey would seem to confirm that sort of thinking about value and price.

Tough times create "buyer's markets," meaning that service providers might have an opportunity to protect or even gain market share and revenue, but must adjust their operations to accommodate changing consumer expectations.

This involves switching to more recession-friendly marketing messages, a greater range of "affordable" or "value" product options, more-strenuous customer engagement efforts, and improved customer experience, Gartner argues.

That sort of business climate might also provide benefits for application providers and services able to supply entertaining content that consumers deem to have a reasonable value to price relationship.

Executives Expect Economic Downturn in 2012, But Still Invest for Growth

They might be wrong, but global executives think there will be an economic downturn in 2012, and the sentiment is pervasive. Some 85 percent of CEOs surveyed said they believe their enterprises will be affected by an economic downturn in 2012, according to Gartner analysts.

The Gartner CEO and senior business executive survey of more than 220 CEOs in user organizations from more than 25 countries was conducted in November and December of 2011, from organizations  with annual revenue of $500 million or more.

Concerns are less severe in the Asia/Pacific and North America regions than in Europe and Africa, it is the dominant point of view within each of the three geographies. But there is an important qualification.

“Costs are now the second biggest priority area, the highest ranking in our surveys since 2009,” said Mark Raskino, vice president and Gartner fellow. The number one priority remains growth.

That might be why CEOs said they will increase IT investment in 2012, rather than cut it.

What Might TV Business Look Like "After" the Collapse?

It is hard to ignore the potential danger to the traditional TV distribution business posed by Internet distribution. It is much harder to predict when Internet distribution will begin to disrupt existing business models, as the Internet has disrupted virtually every other form of media. As significant as the hurdles are, one probably would not bet that change can be forestalled forever.


Henry Blodget  apparently believes a change is imminent. "We still consume some TV content, but we consume it when and where we want it, and we consume it deliberately. In other words, we don't settle down in front of the TV and watch "what's on," Blodget says. 


Blodget isn't alone Consumer behavior has changed. Nor is Blodget alone in thinking something like a "wholesale collapse" of behavior already has occurred. What hasn't yet followed is a decisive change in content distribution business.


Earlier in 2012, for example, Accenture presented results from a new survey of consumer behavior indicating that that traditional television viewership is experiencing a "wholesale collapse."

The number of consumers who watch broadcast or cable television in a typical week dropped to 48 percent in 2011 from 71 percent in 2009, for example. Viewing on mobile devices are a major contributor.


In a typical week, 33 percent of consumers now watch shows, movies or videos on their
PCs, and 10 percent are watching such programs on their smart phones, Accenture found.


Blodget believes those changes will break the existing TV business. The prediction would not be unusual. That he believes a break is imminent is the news. At risk: affiliate fees paid by distributors to networks, network advertising, and revenue earned by just about everybody involved in creating content.

Also, "networks" will change. Netflix and iTunes will become virtual networks, displacing entirely many smaller specialty networks.

The cost of traditional subscription TV also will have to drop, he insists.


Users will have to get more for less, or they'll stop paying for much at all. The eventual price points aren't so clear. But a drop of half to 80 percent is not inconceivable.

Ultimately, the distinction between "TV" and other forms of video content will disappear, he argues. As other content industries already have found, that will wring all sorts of overhead out of the TV business. People in the business won't like it, but consumers likely will.

Is There a Social Media Bubble?

Whether you believe there is a social media valuation bubble, or not, here's a look at metrics. Run the other way if you hear people saying "it's different this time."
 

Faster Speeds, Clearer Plans Will Boost Mobile Broadband Usage, Ericsson Says

Some 40 percent to 45 percent of respondents from key global markets said they would use internet on their mobile phones more if they had access to better speed, a study by Ericsson ConsumerLab has found. 


The study also indicated that several issues, including 
1. network quality and coverage
2. data service pricing
3. how easy it is to understand the data plan


were key adoption factors, the study by Ericsson ConsumerLab, conducted in four countries and including more than 2,300 interviews in United States, United Kingdom, Indonesia and Brazil has found.