Google's Relationship with Telco Mobile Payments is Complicated

To say Google has a complicated relationship with mobile service providers in the mobile wallet or mobile payments space is an understatement. Google both competes directly with some efforts and also appears to be looking to partner with others.

Deutsche Telekom is in discussions with Google, credit-card networks and banks about becoming partners to Deutsche Telekom’s new mobile payment system, Business Week reports.

Deutsche Telekom already had said it is working with MasterCard in Europe, allowing the Deutsche Telekom mobile payment system to use point of sale terminals accepting Mastercard payments.

So far, the talks are exploratory. “We’re talking to other players in the market, and even a cooperation with Google is theoretically possible,” said Thomas Kiessling, Deutsche Telekom chief product and innovation officer.

In principle, Google could supply credentials and loyalty features, as Google Wallet already works with Mastercard payment terminals and systems.

Separately, Google’s Save to Wallet APIs allow developers to add features allowing visitors to bank and merchant websites to save payment cards and offers to Google Wallet.

The “Save to Wallet API for Payment Cards” enables banks to integrate any credit or signature debit card into Google Wallet in a relatively simple manner. Google provides card-issuing banks with two options: 1) a “no integration” option that allows banks to provide us card art, and co-market Google Wallet, or 2) a light integration option, which enables banks to push cards directly from their websites into Google Wallet, with user consent.

The “Save to Wallet API for Offers” enables merchants to publish offers that can be saved to Google Wallet as well. Offers can be redeemed by consumers using a mobile device either using SingleTap NFC at the point of sale, or by showing and scanning the offer during checkout.  

The benefit of the API to the merchant is that website visitors easily can save an offer from the retailer’s website so that they have it with them when they visit your store.  Google Wallet will also remind customers to use offers before they expire.

But Google’s current relationship to telco-owned mobile wallet or mobile payment systems is complicated. In the U.S. market, Google Wallet faces Isis, the consortium owned by AT&T, Verizon Wireless and T-Mobile USA, as a competitor.

In the United Kingdom, Google and PayPal both have warned that a proposed joint venture between Britain’s five biggest mobile service providers could stifle growth of the nascent market, the Financial Times reports.

The “Project Oscar” mobile payments initiative involves Vodafone, Telefónica’s O2 and Everything Everywhere, the merged U.K. businesses of Deutsche Telekom and France Télécom.

On the other hand, Google obviously is interested in mobile partners, as it has been working with Sprint as part of its U.S. Google Wallet operations.

Separately, China Telecom also has announced a new mobile banking service more oriented towards mobile bill payment and money transfers, rather than retail payments.

Deutsche Telekom aims to make mobile payments a reality for Deutsche Telekom’s 93 million mobile customers across Europe, beginning in Poland in 2012.

In Germany, Deutsche Telekom will conduct trials using tags and cards rather than NFC-capable (near field communications) devices, a simple solution to the relative lack of NFC devices in the installed base.

Deutsche Telekom will issue the MasterCard products via its subsidiary company ClickandBuy, which has the mandatory “e-money license” required to operate a mobile payment system.

Cable, Satellite, Telco TV Providers Will Have to Do Something About Programming Costs

AT&T and AMC Networks have settled on a new contract, after going to the brink of non-renewal.


Dish Network, which has been engaged in a contract dispute with AMC Networks, appears ready to drop AMC from the Dish line-up, giving AMC’s channel positions away to  HDNet Movies. That unusual move illustrates the growing tensions within the video subscription business between distributors and content owners.

Though cable, satellite and telco TV distributors often risk consumer ire over monthly bills that almost routinely grow every year, faster than the overall rate of inflation, distributors maintain, not without reason, that such price increases are driven by higher carriage fees paid to the programming networks.

By its own estimates, about 41 percent of Time Warner Cable operating expense is content acquisition fees. About 57 percent of on-going cost is all other operating cost, including network operations, marketing, customer service and other overhead.

A la carte programming, with consumers able to buy single programs as they wish, or whole channels, if that is what they wish, is the great fear of executives in the video distribution business (cable, telco, satellite video services).

But some might argue that if consumer prices for such services continue to grow consistently at rates far above the background rate of inflation, latent demand for such services will grow.

3 Sets of Challenges for Mobile Service Providers

Mobile service providers face at least three different sets of challenges related to bandwidth consumption. Skyrocketing consumption is outrunning revenue earned from supplying that demand. That is a capital investment issue.

At the same time, there is growing pressure on lucrative narrowband services, especially text messaging and voice, from over the top alternatives and declining voice usage in many markets. That represents a gross revenue and profit margin squeeze.

Third, the customer perception of value of carrier-provided voice, texting and mobile broadband access needs to be enhanced. At least in the near term, that is arguably the fastest way mobile service providers can boost both revenue and profit margin.

How Big is the Cloud Computing Opportunity, for Telcos?

One frequently hears these days of high service provider interest in cloud computing as a potential driver of service provider revenue, and the thinking is not without merit. Likewise, one also hears that data centers and content delivery networks are logical opportunities that leverage what service providers already do. All that makes sense.

The hard part is figuring out how big the opportunity might be, what other opportunities might exist, and then making hard decisions about which initiatives to pursue. No organization can pursue an unlimited number of growth opportunities, in other words. So the issue is whether cloud computing offers enough revenue upside to be worth spending time and resources to chase the opportunity.

To be sure, if we are indeed moving to a next wave of computing architecture based fundamentally on cloud computing, then there will be much greater reliance on remote data and computing resources and bandwidth. That's the general notion.

The added “secret sauce” is that use of mobile and untethered devices will be an integral part of the architecture. And that has upside for mobile service providers as well. But is the revenue upside substantial enough for a tier-one service provider to chase, compared to all other potential growth alternatives?

Will Apple Become a Service Provider?

Will Apple become a service provider? As complicated a move as that might be, some think it is not "unthinkable."

Complicated and fast-evolving ecosystems often feature some amount of “jockeying” between contestants in formerly-distinct parts of the ecosystem. Google becoming a mobile operating system supplier and a handset manufacturer provide examples. Now Microsoft has become a branded supplier of tablets, potentially competing with its operating system licensees.

In prior years, we have seen any number of over-the-top application providers becoming suppliers of voice or text messaging services, voice mail or video apps, for example.

The nagging concern many mobile service providers logically have is whether one or more application or device suppliers might one day decide to become service providers in their own right. Historically, one might have argued that doing so would not make much sense.

Channel conflict is the issue. If you want all service providers to sell your devices, it might not make sense to compete with those distributors. But the ecosystem is a very complicated place these days.

In fact, it might be complicated enough that Apple might eventually decide to become a mobile virtual network operator, or perhaps even consider owning its own network, not so much for the voice revenues, but for the ability to optimize its network for support of mobile devices. It would not be an easy decision.

But if streaming video becomes important, Apple might want the same level of control over quality of experience as cable, satellite and telco TV providers already have.

Are Consumers Buying Full Price iPhones?

BTIG Research says its random and admittedly limited channel checks suggest there is not yet any indication that large numbers of people are anxious to buy a full-price Apple iPhone, to avoid a service contract.

Of course, it does not appear that Virgin Mobile, which has begun selling such full-price iPhones, has swung serious marketing effort at the new program.

Until a full marketing push, it will be hard to assess demand. And it might not be the case that the market demand will come largely from traditional "prepaid" customers. In fact, the demand might actually turn out to be customers that in the past would have opted for a traditional postpaid plan, have the money to pay full retail, but simply want the lower month recurring charges.

So far, it is too early to conclude much of anything about the actual level of demand.

Anyfi Networks Helps Fixed Networks Support Wi-Fi Access

Anyfi Networks thinks it can help fixed network service providers add a "mobility" or "untethered" capability outside the subsciber's home, using software.

"By remotely upgrading your home gateways with our patent pending software you can transform your existing infrastructure into a mobile broadband network, license exempt and Wi-Fi compatible, literally overnight," Anyfi says.

"Anyfi.net Simple"  lets a fixed-line broadband operator extend the home Wi-Fi user experience outside the home, the company says. "Since devices always authenticate against the home gateway the connection is automatic and completely secure," Anyfi Networks says.

"The trick is combining Wi-Fi with IP, Internet Protocol, to break the tie between logical network and physical infrastructure, much in the same way as Voice over IP separates your phone service from the physical line. You can think of it as Wi-Fi over IP," the company says.

Anyfi claims that a fixed-line operator having a high density of broadband subscribers in certain urban areas could actually become mobile operators overnight, just by upgrading the modem software remotely, transforming the infrastructure into a radio access network.

Anyfi says that the ability to offload mobile traffic to any Wi-Fi access point depends on a business relationship between the "home" ISP and the operator of the remote Wi-Fi hotspot. In other words, Anyfi does not enable access to Wi-Fi hotspots whose owners do not agree to cooperate.