66% of New Devices Purchased in U.S. are Smart Phones

Some 66 percent of U.S. consumers who bought a new mobile phone in the second quarter of 2012 bought a smart phone, Nielsen reports.

The installed base of U.S. devices now includes  54.9 percent smart phones at the end of June 2012.

Android continues to lead the smart phone market in the U.S., with 51.8 percent of people using an Android OS handset. Some 34.3 percent of smart phone owners use an Apple iPhone.

In Competitive Markets, Lowest-Cost Provider Wins

In a competitive market, the provider with the lowest operating costs wins, one might argue. And if there is one statement that virtually all contestants might agree upon, it is that, as a rule, the tier one telecom service providers have the highest costs.

Cable companies virtually always have lower overall costs, in both capital and operating areas. Contestants that base their businesses on wholesale access, either mobile or fixed, tend to have lower costs than the companies from which they buy that wholesale access.

Internet-only firms have lower costs than all the above. Of course, that is the easy part. Telecom executives are anything but dumb. They know their cost structures, and those of their competitors.

The practical issues are how to continue wringing costs out of their operations. And that means identifying cost drivers.

European service providers have, for example, been attacking operating costs since at least 1996. And though you might think converting increasingly to IP-based services would wring out cost, in some cases, it might increase operating costs, at least in the customer service area, contrary to expectations.

So where can telcos look for savings? According to researchers at Deloitte, telco operating costs can be classified into three categories. As a figure of merit, “non-process costs” account for 25 to 30 percent of the cost base (35 to 40 percent for wireless carriers).

That includes interconnection fees, taxes, customer premises equipment and uncollectible items. Deloitte researchers think it will be difficult to cut those costs very significantly.

Support processes typically account for 20 to 25 percent of the cost base (15 to 25 percent for wireless carriers), and include marketing, HR, IT, finance and other administrative costs. While savings opportunities may exist in support process areas, most telcos have done a better job of controlling these costs, so far.

Operational processes typically represent about 50 to 55 percent of the cost base (40 to 45 percent for wireless carriers). Those  process costs include customer service, sales, billing, and network-related processes.

It is these costs that carriers are challenged to control as the market changes, and this is where carriers should first focus on finding efficiencies and savings, Deloitte argues.

Network-related process costs (installation and repair, operations, and design) can typically account for 60 to 75 percent of operating expenses. Deloitte argues that 18 percent to 29 percent in savings in two main areas, including reducing dispatches and improving productivity of installation and repair technicians.

Reducing dispatches can save five to eight percent of total network operating expense,
achieved through better screening of tickets to reduce “no-trouble-found” dispatches, improved scheduling to reduce “no-access” dispatches, better management policies to reduce “non-demand” dispatches, and an increase in fi rst-pass resolution of tickets.

Deloitte also has  seen savings of 12 to 18 percent of total network operating expense achieved by increasing the use of “Good Jobs in Eight” (a metric that measures the number of good jobs in eight hours per technician), and moving to a pay-for-performance model.

But it is non-network operations which  can account for 35 to 45 percent of operating expense,
and Deloitte has seen changes in those areas yield 28 to 44 percent in costs. Telcos should focus on non-network operational process areas, such as call centers, field sales, retail stores, and the “order to cash” processes to get savings in those areas.

O2 Network Crashes, O2 Really Doesn't Know Why

The O2 mobile phone network in the United Kingdom crashed July 11, 2012, and company executives said they didn't actually know why it happened.

Separately, In France, the France Telecom mobile network had a national outage of the voice and text messaging network affecting 28 million users on July 6 and July 7, 2012.

Of course, millions of U.K. customers (O2 has 23 million customers in the United Kingdom) were affected. But that's not even the most important fact about the outage.

O2 said it did not know when the problem would be fixed, in part because it wasn't exactly sure what was happening, in the core of the network, to block calls and access, other than that it appeared to be a signaling issue.

Viacom Pulls its Content from Online Sources

Perhaps it has occurred before, but some of us cannot remember a programmer yanking its content from online sources, depriving all potential users of access, in order to put more pressure on one distributor.

But that is what Viacom has done, removing full episodes of shows like "SpongeBob Squarepants,"  "iCarly," "Jersey Shore" and "The Daily Show" from online sites. DirecTV had been telling its customers how to watch online.

Viacom obviously is hoping that move will prevent DirecTV customers from watching some of their favorite shows online, while the dispute remains unresolved.

There are potentially significant ramifications for DirecTV, Viacom, other distributors and programmers, not to mention potential online alternatives.

Consider the oddity of a video services provider telling its customers where they can watch the same programming they pay for on online sites, for no additional charge. Strategically, that is the disruption many fear, and many expect, at some future date, in any case.

Other distributors, of course, face the same programming cost pressures as DirecTV, though they doubtless would not mind gaining defecting DirecTV customers, should the blackout become permanent, something virtually nobody expects.

All other programmers, especially those with less market power than Viacom, have to worry that a DirecTV "victory" would put more pressure on the programming networks to control their own costs, so the upward cost pressures for distributors can be braked.

You might say it is equally odd for a programming network to "want" to control its own costs, to stave off asking distributors for contract rate increases. But all programming networks are starting to face a business climate where the health of the entire industry is becoming a real question.

Global Text Messaging from Twilio

Twilio, the cloud-based service which provides any app provider the ability to add text messaging capabilities, announced global text messaging (short message service, or SMS) capabilities that allow apps to connect users on over 1,000 mobile networks, globally, in 150 different countries.


Twilio SMS is now also multi-lingual, with support for a variety of languages, such as Arabic, Chinese, Japanese, Greek, Russian and dozens more. 


Twilio allows application developers to integrate voice and text communications directly into virtually any app that uses the Internet. 


Twilio already supports international voice calls, but the task of getting agreements with many separate mobile service providers was complicated. 

Mobile Payment Provider LevelUp (Scvngr) Tries to Disrupt Pricing

Price disruption is both a possibility and likelihood when new entrants try to reshape a large existing industry, and it appears credit and debit card payments are no exception. 


LevelUp, a mobile payment app provided by Scvngr, says it will drop all "interchange fees," the percentage of gross revenues paid by merchants to card processors as a transaction fee.


It remains unclear whether the gambit will succeed. But if it does, and other competitors start to match the pricing, the importance of marketing, loyalty and advertising revenues as a driver of the former payments business will grow. 


That sort of disruption is quite familiar to service providers in the communications business, where per-minute prices for use of voice services, or per-message pricing for short message service (SMS, or texting) has been dropping for decades. 


As access providers already have discovered, new revenue streams must be created to replace lost legacy revenues, and that will happen in the credit and debit card payments business, using mobile mechanisms, if the LevelUp strategy works very well. 


While it has been common for competing providers to offer lower interchange fees, LevelUp appears to be the first to try and abolish the fees entirely, thereby gaining business advantage, compared to rival processors.


Scvngr previously had charged merchants two percent interchange fees for each payment, but it says that it will drop the fee to zero. 


That raises the obvious question of how Scvngr will rebuild its revenue model. Marketing services apparently are viewed as a viable new model. 


According to Seth Priebatsch, Scvngr CEO, LevelUp will run special campaigns for merchants, probably or typically running promotional campaigns for merchants, who will pay a fee for a customer taking advantage of the offer. 


It appears that Scvngr still is responsible for paying an interchange fee to the issuing banks that use the LevelUp platform, though. But Scvngr says its fee deals are affordable enough to allow trying such an approach. 


Such pricing disruption seems a perennial feature of the way new competitors try and disrupt pricing in a market, and has been a feature of applications and service competition in the messaging and voice markets for quite some time. 

Gartner Says Cloud Adoption in Europe Will Trail U.S. by At Least Two Years

European privacy rules, multicountry business processes, a deep euro crisis and a lingering recession will conspire to delay cloud computing adoption in Europe by at least two years when compared to the U.S., according to Gartner, Inc. Gartner said that although interest in cloud is high in Europe, the diversity of Europe’s 44 different nations will result in slow cloud adoption in this region.