Telefónica Sees Huge Upside in M2M, Carrier Billing

Telefónica might be a bit optimistic, but the firm believes it can generate annual revenues of €5 billion (US$6.2 billion) by 2015 from initiatives that leverage the carrier's billing and charging capabilities as well as machine-to-machine services.

Those are important assertions for one principal reason. When a tier-one service provider decides to target its human and financial resources to a new revenue growth initiative, scale matters. In other words, a large telco cannot afford to waste time chasing small revenue opportunities, but has to look for opportunities that make a difference.

The shorthand way you can think about it is that when a service provider earns scores of billions worth of revenue each year, small opportunities do not “move the revenue needle” enough to be worth pursuing. As a very-simple rule of thumb, a tier-one service provider has to look for opportunities that generate at least a billion dollars a year.

Telefónica Digital believes its new global "Direct to Bill" agreements with Facebook , Google , Microsoft Corp. and Research In Motion Ltd. will do so.

Those deals allowTelefónica customers to buy content and services from Facebook, Google, Microsoft and RIM application stores, for example, using their mobile accounts. The charges appear directly on the subscriber phone bills, and do not require use of credit cards.

The operator believes this could prove very popular in Latin America, where, according to Telefónica, "credit card penetration is low and 60 percent of the population do not have bank accounts."

Telefónica also has entered a strategic partnership with service provider Etisalat that extends Telefónica's M2M reach into 17 new countries (in Africa, Asia/Pacific and the Middle East). The two operators plan to "jointly develop business opportunities in Machine-to-Machine (M2M), financial services, cloud computing, eHealth, mobile advertising and over-the-top [OTT] communications."

A La Carte Video Would Destroy Most Channels, Study Suggests

If the U.S. government mandated that TV channels be sold individually, only five to 10 traditional TV networks would survive, destroying up to $300 billion of value, endangering some one million jobs and curtailing consumers' video choices, according to an analysis by Needham and Company.

According to Needham's analysis, with unbundling, TV subscription revenue would decline 15 percent to 20 percent and ad revenue would plummet 75 percent. Meanwhile, if content companies delivered content directly to consumers, they would incur customer service costs estimated at $50 per customer per year, or $5 billion nationally.

Little is 'Trivial' Where Mobile Payments are Concerned

Though some might scoff at the notion that applications, such as contactless payments in transportation or parking, or wallet applications such as “time to refill your prescription” notifications using text messaging that every mobile device can receive, are “trivial,” such applications are important, for a number of reasons, says Diarmuid Mallon, Sybase 365 head of product marketing.

For starters, applications that are not drop-dead simple, widely available and which do not provide “obvious” and immediate value will not be adopted quickly or broadly. Given growing fragmentation in both the mobile payments and mobile wallet spaces, that is an important issue.

But there is a reason apparently trivial applications are important. They often are the places where clear value is provided.

Can Carrier “App Stores” Beat Apple App Store or Google Play?

Carriers such as AT&T and Verizon may very well get into the app store space to compete with Apple and third-party app stores like Getjar, argues Infonetics Research analyst Shira Levine.

The carriers' differentiation would be the ability to offer Android and browser-based applications in a one-stop-shopping environment. "AT&T learned a valuable lesson with the iPhone," says Levine. "They’re not part of the revenue value chain."

As a result, she says, "[carriers] are envisioning OS-independent app stores, which consumers could access no matter what device you had and even do so across multiple devices."

That’s part of the thinking behind the Wholesale Applications Community. Will it work?

How Can Mobile Service Providers Compete with Facebook, Apple, Google "Messaging?"

Some would argue that a war over “interpersonal communications,” separate from the earlier messaging formats of email, instant messaging, chat and text messaging, is about to break out among three of the over the top application platforms, namely Google, Facebook and Apple.

For mobile service providers, that poses an issue, namely the future of their text messaging revenue streams, since historically mobile service providers have not make money directly from email or chat.

Facebook’s unified Chat / Messages / Email; Apple’s cross-device iMessage system and Google’s Gmail / GChat / Hangouts are something different, some would argue, as those platforms blend email, messaging chat and even video conferencing.

For mobile service providers, “how to compete” is the issue. A reasonable person might argue that no mobile service provider is fully equipped to compete in the “interpersonal communications” space dominated by those three application providers.

But mobile service providers can compete.

Video Audiences are Fragmenting

Men 18 to 34 are now spending more time streaming video than watching live TV, one third visit YouTube multiple times a day, half subscribe to a YouTube channel, and two thirds shared YouTube videos in the past week, according to Generation V, a YouTube study of consumer video trends.

The study also finds that 40 percent of women 25 to 49 have subscribed to a YouTube channel, half shared a video this past week, and one third regularly share online video with their kids or parents.

Those changes in viewership illustrate just one aspect of the range of underlying changes that are needed before over the top online video can seriously challenge traditional TV and subscription video services. There are many.

Would You Pay $600 for an Apple iPhone?

Leap Wireless and Virgin Mobile are betting that users will pay $500 to $600 for an Apple iPhone, at full retail prices. AT&T thinks they will not do so. It is possible, perhaps likely, that the actual answer will be that some users will do so, but that most will not want to do so.

The answer obviously matters greatly for Leap (Cricket) and Virgin Mobile, as well as for all other mobile service providers that clearly would prefer to reduce the amount of money they tie up in device subsidies.

Leap Wireless has committed to buy nearly $1 billion of iPhones over the next three years that it hopes to sell at a partially subsidized price of at least $400 for the iPhone 4 and $500 for the iPhone 4S.

BTIG Research believes that $200 will continue to be reasonable price point for high-end phones, though. If that proves to be true, Cricket and Virgin Mobile might take a hit to earnings, and mobile service providers will have to figure out some other way to attack the subsidy problem.