Square Near a Deal to Value It at $3.25 Billion

Square, the mobile payments supplier, is close to raising roughly $200 million in new funding, with an implied valuation of $3.25 billion, the NYTimes reports.


The funding represents the company’s third significant capital raising round in less than two years. In 2011, Square raised $100 million, valuing the company at $1.6 billion. Several months before that, Square had an investment at a $240 million valuation. All told, the company’s valuation has grown by 13.5 times in less than two years.


You can make your own determination about the appropriateness of the valuation. 

Apple: the Company that Used to Make Computers

These days, phones and other portable devices are what Apple makes and sells. The really surprising number, for some of us, is the dominance of "phones" in the revenue picture. 

Can 4G be Successful in India Even While 3G Isn't Established?

If India's Reliance Industries (Reliance Communications) does move ahead and build a national Long Term Evolution fourth generation mobile network, it will have to leapfrog third generation mobile networks just getting established in the Indian market.


By some estimates the total number of 3G subscribers in India is just about two percent of the total number of mobile phone users. India has 893.8 million cellphone users according to TRAI (Telecom Regulatory Authority of India).


So the big gamble is whether Reliance can leapfrog a whole generation of technology. Reliance's 4G network would be the largest of any outside the U.S. and Japan. 


India is expected to have more 4G wireless subscribers in four years—37 million—than Brazil, Russia or Indonesia, according to consulting firm Ovum. 

Looking at the broadband access market broadly, about nine percent of India's 1.2 billion people now have Internet access. Virtually everyone expects mobile to be the way most people in India get Internet access.


But what is unknown is whether 4G can leapfrog over 3G, at a time when even 3G is a very new service in the market, and such a small number of users (three percent, by some estimates) have smart phones. 


In May 2012, 3G adoption in India had reached perhaps 10 million to 12 million users. 





But some might argue the proper framework is not "3G" users but "Internet users." 

India has added 69 million Internet users between 2008 and 2011 and now has 121 million Internet users with a population penetration rate of 10 percent.

According to Mary Meeker, Kleiner Perkins  Caufield & Byers partner, India has 39 million 3G subscriptions as of the fourth quarter of  2011, with four percent penetration rate and 841 percent year over year growth. 

Reliance Communications has 3.2 million 3G subscribers(Q4 FY12), Idea has 2.6 million and Airtel has about 9 million 3G subscribers. Vodafone has 35 million data subscriptions including both 2G and 3G subscribers, including perhaps eight million or nine million 3G subscribers, Meeker estimates. 

She doubts that BSNL, MTNL, Aircel and Tata Tele have 15 million 3G subscribers between them.

But mobile Internet usage surpassed desktop Internet usage in India during the April 2012 May 2012 period. So it might not be unthinkable to argue that 4G could indeed leapfrog 3G, especially if the market is Internet access, not "mobile" Internet access. 

Netflix Sees Cable as Bioggest Competitor

Netflix believes its biggest competition comes from video entertainment subscription providers, namely cable, satellite and telco video providers. Lots of people would say Hulu Plus or Amazon Prime as Netflix's biggest immediate competitors, and that would be logical. 



Netflix notes that it competes for consumers’ viewing time with a variety of video services, including linear TV, DVRs, over-the-top (OTT) pure plays, and authenticated streaming offerings of the video entertainment providers and cable networks (cable operators, satellite TV and telco TV providers, and "TV Everywhere" offerings associated with those providers).


"We have yet to see HuluPlus or Amazon Prime Instant Video gain meaningful traction relative to our viewing hours, but as we continue to build a domestic profit stream they are likely to increase their efforts to gain viewing share," Netflix says. 


Netflix also believes "Redbox Instant" by Verizon will have a tough time breaking into the ranks of the top three providers. 


Still, Netflix believes its "biggest long-term competition for viewing hours will come from MVPDs and cable networks, both directly and through their TV Everywhere offerings."


The operant word is probably "long term."

300 Mbps Access is Great, But not a Consumer Offer

Comcast is readying a 305 Mbps high-speed access service to counter Verizon's 300 Mbps FiOS offer of 300 Mbps, costing $205 a month. Though some consumers might actually be willing to pay that much, most will not. 


U..S. access speeds are about 5 Mbps, some studies have suggested. At some level, it might be useful to calculate "cost per megabit per second," though no consumer buys access using that metric, opting instead for an assessment of actual monthly recurring cost, and headline speed. 


At the moment, U.S. offerings, overall, cost about $3.33 per megabit per second, with huge differences between urban FiOS access and rural digital subscriber line price-per-megabit-per-second, for example. 


Over time, we should anticipate that users will spend more money, per month, on broadband, simply because speeds and caps are correlated. And as more entertainment video gets watched, users will need larger caps. 


Mobile access makes a difference, though, especially as more consumers might opt to use mobile broadband, either in place of fixed access, or as a complementary form of access. 


But one problem is that "nominal prices" are not "effective prices" when most consumers buy a triple play bundle including broadband access, voice and entertainment video.


In  2010, for example, Comcast reported a monthly total revenue per video customer of $129 a month. By correlating the number of revenue generating units (RGUs) Comcast had at the time, one might suggest that the video portion of the bundle cost about $71 a month; the broadband access about $42 a month and voice service about $36 a month.

• Video (22.8 million customers at $71.37/mo)
• High-speed internet (17.0 million customers at $42.07/mo)
• digital phone (8.6 million customers at approx $36.15/mo)

That rather suggests to some of us that most consumers are not likely to spend much more than $40 to $50 a month for high speed Internet access, with a tendency over time for higher prices. 

Content Consumption is Now the Top "Purpose" of a PC

"Games" now are the number two most popular tablet activity, surpassed only by accessing the Internet, a study by Frank N. Magid Associates has found.


In fact, the list of top activities conducted on tablets shows the evolution of the personal computer, one might argue. In the 1980s, when PCs first were adopted in significant value, it was the spreadsheet and financial analysis that created the driver for adoption by businesses.


A variety of other business uses then developed, including desktop publishing. PCs became useful for consumers for other reasons, but included the ability to work and communicate "at home."But the new consumer killer application seems to be content consumption.

Significantly, the top apps on smart phones aren't all that different from what is done on tablets, the study also found. 


Of course, mobile devices are multiple-function appliances to a greater extent than tablets or PCs. Even so, calling is only a percentage of total activities smart phone owners now conduct on their devices. 


The big change is that content consumption activities apparently had grown to represent about half of all the time spend interacting with, and using, a mobile device, in 2011, according to comScore. 


The point is that the "purpose" of using a computing appliance has changed. For the most part, people rely on "computers" for media consumption. 

European "Network Neutrality" Issues Different than U.S. Issues

Last year the European Commission concluded an initial study on the issue of network neutrality, with findings that suggest issues are different in the European market, than in the United States.


A subsequent Body of European Regulators of European Communications (BEREC) investigation of Internet traffic management practices found that the most frequently reported restrictions on EC networks were the blocking or throttling of peer-to-peer traffic on both fixed and mobile networks and the blocking of Internet telephony traffic on mobile networks.


The report estimated that between 20 percent and 50 percent of European Internet users have contracts that allow providers to restrict services.


That points up a key difference between U.S. and EC service provider practices. In the U.S. market, blocking of lawful Internet applications is prohibited by the Federal Communications Commission's "Internet Freedoms" principles. In other words, no service provider can block a user's access to a legal application such as VoIP or peer-to-peer apps.


That appears not to be the case in EC countries, where at least some service providers block mobile VoIP, for example. 


But network neutrality really is a complicated issue, including distinct issues such as blocking of legal apps, ability to manage traffic to preserve quality of service and whether managed services can be created. 


In the U.S. market, no outright blocking of lawful appllications, including VoIP or peer to peer services, is permitted. 


At the moment, different frameworks exist for U.S. fixed network broadband access and mobile access where it comes to traffic management. On fixed networks, no traffic grooming, even for purposes of alleviating congestion, is permitted. Mobile operators may do so.


On fixed networks, no managed services providing quality of service benefits are permitted, though such practices are lawful on mobile networks. 


But network neutrality rules often bump up against business model issues. There is not dispute about whether a TV or radio broadcaster, or a cable TV or satellite network, can optimize its content for delivery to end users. 


The new area of uncertainty is whether application and content providers should be able to do more, in the area of content delivery, for example, to optimize applications on behalf of consumers or application providers. 


As content delivery networks actually favor some content over others, so it is conceivable that either end users or app providers might want to pay for quality of service mechanisms. Though you might argue that is no different than app providers paying for content delivery services, such quality of service mechanisms pose competitive issues, some argue. 


Obviously, optimized content will have an advantage over non-optimized, "best effort" content. That isn't so much an issue for non-real-time services. But real time services suffer when there is network congestion. Any over the top voice or interactive video application, for example, is quite sensitive to congestion. 


At issue is whether any end user or application provider ought to be able to buy an over the top Internet application or service that uses optimization techniques to improve experience, just as app providers buy content delivery network services. 

Transparency is a contested part of thinking about network neutrality, the notion being that users are entitled to know what terms and conditions might affect their use of Internet access services. 


The other real complication is that virtually all networks now use Internet Protocol, and not just for "Internet" apps. Users and regulators accept that a managed service has to be "managed" for quality reasons. 


But such managed services might use IP mechanisms on either private or public networks. Precisely what a "managed service" is, or ought to be, is a growing area of contention. Users, suppliers and regulators might agree that a service provider ought to be able to use quality of service mechanisms when providing carrier voice, video or messaging services, for example.


What is more contested is whether over the top suppliers of such services should also have the ability to create quality of service mechanisms as well.