Devices Now Becoming a Way for Application Providers to Connect Consumers with Apps

“We always wanted to be in the hardware business,” Google Chairman Eric Schmidt says. That comment, whether fully accurate as a description of Google's thinking or not, does seem to describe current thinking in much of the applications business.

Sony has for decades argued that ownership of content was important for selling TVs. Apple found that iTunes enabled it to create a dominant position in the MP-3 player market. The App Store has been crucial for iPad and iPhone sales, in the same way that the Android Market and Google Play have been important for sales of Android devices.

Amazon's content richness is a key reason for the success of the Kindle Fire. So though it might not be a feasible strategy for every application provider, it certainly seems true that an integrated device plus content and software strategy makes increasing sense.

In other markets, the success of the Square mobile software that turns a tablet or a smart phone into a retail point of sale terminal provides another example of how hardware enables a software or service business.

And Oracle has seen value in bundling hardware with enterprise applications.

Sprint Accelerates Roll-Out of Long Term Evolution Network

Sprint appears to be accelerating its deployment of its new 4G Long Term Evolutiion network, announcing availability in 15 cities where it had promised availability in just five cities. Those cities include:
Atlanta
Athens, Ga.
Calhoun, Ga.
Carrollton, Ga.
Newnan, Ga.
Rome, Ga.
Dallas
Fort Worth, Texas
Granbury-Hood County, Texas
Houston
Huntsville, Texas
San Antonio, Texas
Waco, Texas
Kansas City, Mo.-Kan.
St. Joseph, Mo.

Now TV Moves Users Closer to Internet TV Delivery

Dish Network CEO Charlie Ergen has said that, if he were starting today, he probably would not choose to launch a video entertainment service using satellites, and might opt for a "Netflix" style, over the top over the top delivery method. 


In the United Kingdom, BSkyB, the dominant satellite video service provider, is going to try something similar, if restricted for the moment to movie fare. 


Instant access to hundreds of the latest titles on Sky Movies, with new and exclusive premieres available each Friday, at least a year before any other online subscription service, as BSkyB launches Now TV, without a contract, using online delivery, not a satellite connection.


Now TV is launching in the United Kingdom on PC, Mac and selected Android smartphones; on iPhone, iPad within the next month, on XBox later in 2012. That is not entirely revolutionary. Online delivery of movie content is fairly well established.


The next big breakthrough will come when single TV episodes, an entire TV series or a complete TV channel or network can be purchased separately, with online delivery, without the requirement for first buying a standard TV service. 

It Isn't Yet Clear How Visa-MasterCard Settlement Affects Mobile Payments

Though it is not a specific issue in the developing mobile payments business, historically hostile retailer relationships with credit card issuers continue to underpin retailer interest in rival methods of processing payments.

The big hope, of course, is that new mobile payment systems will allow retailers to process payments at lower cost than traditionally has been the case. To be sure, friction between participants in any ecosystem can get testy when one participant's revenue stream is another participant's cost.

Relationships between video subscription providers and the programming networks provide one clear example. But that also is the case in the retail payments business. A revenue stream for an issuing bank and a payment network is a direct cost to a merchant. And those costs might be changing.

Visa, MasterCard and their issuing partners have reached a legal settlement with merchants regarding interchange fees (fees charged by issuing banks for use of a credit card), and the implications for mobile payments are not yet completely clear.

Nor are the legal challenges entirely over. The National Association of Convenience Stores, for example, seems intent on continuing the fight against the settlement, even though plaintiffs and Visa and MasterCard have agreed to a settlement.

The lawsuit by merchants claimed Visa and MasterCard were in collusion to keep those rates higher than would otherwise be the case.

To settle the suit, merchants will be compensated in three ways. First, Visa, MasterCard and their issuing partners will make a $6.05 billion cash payment to merchants to compensate them for previous interchange charges.

Second, Visa and MasterCard will lower card acceptance fees by 10 basis points for a period of eight months, providing $1.2 billion in additional relief to merchants.

The third part of the settlement may have the largest impact on consumers' day-to-day shopping experiences, some think. Merchants will now be permitted to charge higher prices on transactions paid for with a credit card, a practice that had been prohibited by the networks' earlier terms.

The mobile payments business could be affected in a number of ways. In most cases, mobile payment transactions are based on payment of such fees. For consumers, there are few immediate effects, since the fees are paid by retailers, not end users directly (though the total cost of operating a retail outlet, including such fees, is built into retail prices).

Lower fees will reduce the mobile payments revenue opportunity, and also make harder the task of creating a value proposition that is easy to understand. Lower revenue might also reduce the incentive for issuing banks, and the payment networks, to spend so much on mobile payment systems.

On the other hand, should the uncertainty be cleared up, it also is possible issuing banks and payment networks could move with more assurance on mobile payments, since they would have greater understanding of the revenue part of the operations.

Less revenue from interchange also will continue to spur thinking about other ways revenue can be earned, and that should help mobile wallet efforts, which are expected to rely on loyalty programs, advertising and promotion revenue streams.

Every Leading Tablet Supplier Will Support Multi-Screen Formats

Leading tablet suppliers are going both smaller and bigger, depending on where they have been positioned in the tablet market, in large part because, as some have suggested, there is room in the market for devices of varying screen sizes.

Most 10-inch devices get used on couches, and many tablets essentially never "leave the house." In other words, a 10-inch tablet is an "untethered" device, not a mobile device. They aren't used when people are really "on the go." There are some exceptions.

Some people do carry their iPads "everywhere." Many business people substitute a tablet for a PC. But most people also carry a smart phone, which suffices for the quick Web and app experiences one typically wants to use when out and about.

Some might argue pricing differentiation is the reason for the "smaller device" demand. In that view, less-costly tablets allow more people to buy them. There certainly is logic to that point of view. It worked really well for Apple's line of iPods.

On the other hand, over time, it is likely that application differentiation also will occur. An iPod shuffle is better suited for listening to music than a full-size iPod, if you are running, for example. In that case, the application setting drives the purchase, not the cost of the device.

Something like that eventually will be true of the tablet market as well.

Most 10-inch devices get used on couches; they are not really "mobile" devices. A greater proportion of seven-inch devices likely are carried in purses, backpacks or pockets, and one might argue that is because a 10-inch device is too big to carry everywhere, or most places.

The other argument might be that, as more people carry a smart phone, there is not such a compelling reason to carry another web-capable device "on the go."

Maybe the "Mobile Payments" Hype is Misplaced; Maybe it is Really Mobile Commerce That is the "Revolution"

Making a mobile device act like a credit card or a wallet, as important as that might be, might not be the "big" change coming to retail commerce. A potential shift from cash or credit or debit card payments would be a key change for many in the ecosystem, to be sure.

But it just is possible that such a change winds up being only part of a broader transformation of retailing. Changing the way a customer pays for purchases is important, don't underestimate that. But it might be the visible, end user tip of a whole series of changes that might ripple through the backend of a retailer's business processes.

That is a lot less visible, and a lot less sexy, than using a mobile device to pay for a purchase. But it arguably is more important to the way retailers do business, retailing and commerce, than "mobile payments" are.

Not that any of the changes will be especially easy. Changing the way people "pay" will involve investments by retailers and, to some extent, users (they will need new devices), as well as a significant change in behavior.

On the other hand, the "smarter" and contextual value of transactions and behavior that could be gleaned from use of mobile devices could allow major changes to the rest of the retail operations, from marketing to inventory management to channel.

Zuckerberg Says "Mobile First" is Biggest Challenge

Facebook Chief Executive Officer Mark Zuckerberg says his hardest job right now is figuring out how to adapt the world’s largest social network to mobile devices, Bloomberg reports. Zuckerberg said the vast difference in user experience was the big challenge.

That, as much as anything, shows why "mobile first" is a strategic challenge faced by many application providers, and arguably is a challenge faced by many service providers as well, including those who provide access services.

Just how much global wireless revenue exceeds fixed network revenue varies from forecast to forecast, though all forecasts now show that wireless is a majority of revenue, on a global basis.

According to International Telecommunications Union estimates, mobile revenue is about 4.5 times bigger than fixed network revenue, and it has been that way for several years. In a literal sense, the global telecommunications business has become a largely mobile business, with some important fixed line applications and revenue sources, the ITU data suggests.