Will Google Fiber Economics Work?

“There’s no sense selling a product at a loss,” says Google CFO Patrick Pichette. “But it’s not only about profits, it’s about changing the access costs,” Pichette also has said. 


Assuming you believe that Google is serious about "making money" selling symmetrical 1-Gbps connections at $70 a month, and video service starting at $50 a month, the issue is what Google can do that cable operators or telcos have not been able to do to get capital investment and construction and other costs down to a point where retail prices at such levels still turn a profit.


Sonic.net might agree that it is possible, under some circumstances, to offer very high speed broadband access at shocking prices. Sonic.net already offers consumers 1-Gbps service for $70 a month. But Sonic.net also notes that its construction cost is about $500 for each home passed. And since Sonic.net gets about 33 percent take rates, the effective network cost for each customers is about $1500.


If Google gets similar economics for the network, and few observers are likely to think Google has found some magical way to avoid the actual costs of installing cabling, and also gets about 33 percent penetration, it should be possible to make money at $70 a month for a 1-Gbps service. 


Of course, operating costs will have to be kept in check as well, and that is an area of potential friction for Google, which arguably will not have the infrastructure a service provider might normally be expected to support. 


On the other hand, significant portion of the cost of delivering service is not the actual backbone network, but the drop network and then customer premises equipment. Google's "$300 connection fee" suggests the cost of activating a drop is that amount.


Then there is the cost of the customer premises equipment. Some might argue Google has a cost advantage in that area. To be sure, building custom boxes, in low volume, is not generally the key to low costs. 


But perhaps Google has built a really simple box, using its new Motorola expertise, that dramatically lowers CPE investment. On the other hand, some observers will note that Google actually supplies three separate boxes, plus a Nexus 7 tablet, for a customer buying the 1-Gbps plus video entertainment service.


Some will argue it is hard to see significant cost savings when using a discrete approach such as Google is employing, but perhaps that saves significant money. 


Others might argue that Google will save on marketing costs or other overhead, and that might be a more-reasonable argument. Sonic.net probably does not spend as much money on marketing as Comcast, Time Warner Cable or Verizon does. Google might be able to do as well as Sonic.net

Mobile Device Sales Hit by Economy, Globally

As much as people love their mobile devices, economic stringency is having an effect.But some would say tougher service provider policies, such as ending device subsidies or making upgrades at affordable prices more difficult, also are having an effect,  


Oddly enough, some service providers have concluded that they do better, financially, by slowing the rate of smart phone adoptions. Others have concluded they simply need to shift demand to smart phone brands that provide more favorable operator economics. 


The global figures also suggest that current demand now is driven by smart phones, rather than feature phones that traditionally have represented the sales volume. 


Global mobile phone shipments grew a modest one percent annually to reach 362 million units in the second quarter of 2012, Strategy Analytics reports. 

Samsung was the top performer, shipping 93.0 million handsets worldwide and capturing a record 26 percent marketshare to solidify its first-place lead.

Nokia’s global handset shipments continued to decline, at a negative five percent annually, reaching 83.7 million units in Q2 2012. 

Apple shipped 26 million handsets worldwide in the second quarter of  2012. 


Samsung was the star performer during the quarter, capturing a record 26 percent marketshare. 

Other findings from the research include:

• ZTE captured 5 percent of global handset shipments as shipments slipped minus 16 percent annually, partly because of weakened demand in major markets of Western Europe and China;
• LG’s shipments nearly halved year-over-year to 13.1 million units, as its feature phone volumes continued to slip. However, its global smartphone shipments encouragingly improved on a sequential basis.

Global Handset Vendor Shipments and Market Share in Q2 2012

Global Handset Shipments (Millions of Units)	Q2 ’11	Q2 '12
Samsung	74.0	93.0
Nokia	88.5	83.7
Apple	20.3	26.0
ZTE	19.6	16.5
LG	24.8	13.1
Others	130.8	129.7
Total	358.0	362.0
Global Handset Vendor Marketshare %	Q2 ’11	Q2 '12
Samsung	20.7%	25.7%
Nokia	24.7%	23.1%
Apple	5.7%	7.2%
ZTE	5.5%	4.6%
LG	6.9%	3.6%
Others	36.5%	35.8%
Total	100.0%	100.0%
Global Handset Shipments Growth Year-over-Year %	11.9%	1.1%

Apple Still Leads in Enterprise

While Android smartphone usage within the enterprise nearly doubled during the second quarter of 2012,  iOS continues to be the dominant smartphone platform, led primarily by the iPhone 4S, a Good Technology study suggests. 

On average, the two most recently released iPhones and iPads drove the majority of activations between April 1 and June 30, 2012. The iPhone 4S was the top device, driving nearly twice as many activations as any other smartphone, with 30.8 percent of activations for the quarter.

Apple iOS device activations still account for more than twice the number of Android activations in the enterprise when it comes to overall platform activations. iOS accounted for 70.8 percent, Android was 28.3 percent and Windows Phone 7 was 0.9 percent.

Corporate use of Android smart phones nearly doubled quarter over quarter, capturing 36.9 percent of total activations, led by the popular Samsung Galaxy SII, which ranked fifth in “Top 10” devices this quarter at 4.6 percent. 

Other “Top 10” Android devices include Samsung’s Galaxy SII and the Motorola Droid Razr which claimed the fifth and sixth spots. Both of these Android smartphones outpaced the original iPad and iPhone 3S, which ranked seventh and eighth, down slightly from their respective fifth and sixth place spots last quarter.

Additionally, while tablet adoption by the enterprise continued to grow—dominated by the iPad, which accounted for 94.5 percent overall tablet activations— smart phone usage still outnumbered tablet usage by three to one, accounting for 73 percent of total mobile device activations. 

Android saw another increase in this category for the quarter, as Android tablets captured 5.5 percent of total tablet activations, up from 2.7 percent last quarter.

U.S., Korea, Japan Represent 90% of LTE Subs

Operators in the United States, South Korea and Japan have established themselves as the early leaders in Long Term Evolution, jointly accounting for almost 90 percent  of the world’s LTE connections in the second quarter of  2012, according to Wireless Intelligence.


It is estimated that global LTE connections topped 27 million at the end of the second quarter, up from around 10 million at the end of 2011.


U.S. operators accounted for 47 percent of the total, followed by South Korea (27 percent) and Japan (13 percent). 


Wireless Intelligence estimates that the number of global markets with live LTE networks has grown from 30 at the end of 2011 to over 40 six months later, with LTE launching for the first time in 2012 in major markets such as India and Russia. 


The world’s largest LTE operator is currently the US market leader, Verizon Wireless. The U.S. number-one first launched its next-generation network at the end of 2010 and it is now live in 337 regional markets, covering nearly 75 percent of the US population (233 million POPs). 


Last week, Verizon announced that it had sold 3.2 million LTE devices in Q2, bringing its cumulative total past 10 million, and representing over 12 percent of retail postpaid connections. Its major rivals are playing catch-up. 


AT&T launched LTE in September last year and is currently live in 47 markets, with plans to complete rollout by the end of next year. It claims its 4G-branded network (HSPA+/LTE) covers 260 million of the population; it had a third of its postpaid smartphone subscribers (2.5 million) using its '4G' devices by Q2. 


Number-three US operator Sprint switched on its first LTE networks in 15 markets earlier this month, while several US regional operators have also launched, including the two largest, MetroPCS and Leap Wireless. 


Meanwhile, the South Korean market leader SK Telecom announced this week that it had surpassed 4 million LTE subscribers, adding the last million in just 44 days (it hit the 3 million mark on 6 June), with an average of 41,000 LTE users signing up per day in July. 


It is targeting 7 million in total by year-end. The operator also claims to be the first in the world to launch multi-carrier LTE, planning to roll-out the technology across Seoul and six other metropolitan cities this year. 


Japan’s largest operator, NTT Docomo, launched LTE in December 2010 and also this week announced it had hit the 4 million milestone. The Xi-branded network passed the 4 million subscriber mark on 22 July, around one and a half months after reaching 3 million. 

Google Fiber Offers "Free" 5 Mbps Broadband Access in Kansas City

Google Fiber, which is launching service in Kansas City, Kan. and Kansas City, Mo., will offer consumers a "free" broadband access services, offering downstream speeds up to 5 Mbps, with a 1Mbps upload speed, with free service guaranteed for at least seven years.


 Users have to pay a one-time $300 "construction fee," optionally payable in 12 monthly payments of $25), plus applicable taxes and fees. 


The "standard" symmetrical 1 Gbps upload and download service, with no data caps, requires a one-year contract and costs $70 a month, plus taxes and fees. 


The "entertainment television and 1-Gbps service costs $120 a month, and includes a number of standard video channels. The nominal pricing of the video service is $50 a month. A number of the leading networks, including ESPN, Disney and Fox channels are unavailable at that price. 


But Google Fiber at launch will be a "beta" in some ways, so programming line-ups might change, over time. 


The standard package also includes a free Nexus 7 tablet, though, at least in part because the tablet provides remote control features, as well as the ability to eamlessly watch on your tablet in other rooms of  a customer's house.


Of course, users who want broadband access and television will have three different boxes, one for broadband, one for TV decoding, and a third to provide digital video recorder functions. 

There are some ways in which the Google video service offers advantages. There is no separate box or fee for HDTV viewing, for example. Many service providers charge extra for DVR functionality as well. Google video service does not have those add-on fees.

• 3Net
 
• A&;E
 
• Action Weather
• Animal Planet
 
• Antenna TV
 
• Bandamax
• BET
 
• BET Gospel
 
• Biography Channel
• BlueHighways TV
 
• Bounce TV
 
• Bravo
• C-SPAN
 
• C-SPAN 2
 
• C-SPAN 3
• CBS Sports Network
 
• Centric
 
• Chiller
• cloo
 
• CMT
 
• CMT Pure Country
• CNBC
 
• CNBC World
 
• Comedy Central
• Cooking Channel
 
• Create
 
• Crime & Investigation Network
• Current TV
 
• De Pelicula
 
• De Pelicula Clasico
• Destination America
 
• Discovery
 
• Discovery en Espanol
• Discovery Familia
 
• Discovery Fit & Health
 
• DIY
• E! Entertainment
 
• Encore
 
• Encore Action
• Encore Drama
 
• Encore Espanol
 
• Encore Family
• Encore Love
 
• Encore Suspense
 
• Encore Westerns
• Flix
 
• Food Network
 
• FOROTv
• G4
 
• GAC
 
• Galavision
• Game Show Network
 
• Golf Channel
 
• H2
• Hallmark Channel
 
• Hallmark Movie Channel
 
• Halogen
• HGTV
 
• History
 
• IndiePlex
• INSP
 
• Investigation Discovery
 
• ION Life
• KCPT (PBS)
 
• KCTV 5 (CBS)
 
• KCWE 29 (CW)
• KMBC 9 (ABC)
 
• KMCI 38
 
• KPXE 50 (ION)
• KSHB 41 (NBC)
 
• KSMO 62
 
• KUKC 48 (Univision)
• La Familia Cosmovision
 
• Lifetime
 
• Lifetime Move Network
• Lifetime Real Women
 
• Live Well
 
• LOGO
• MeTV
 
• MGM
 
• Military Channel
• Military History
 
• MLB Network
 
• MoviePlex
• MSNBC
 
• MTV
 
• MTV Hits
• MTV Jams
 
• MTV tr3s
 
• MTV2
• MTVU
 
• mun2
 
• NASA
• NBC Sports Network
 
• NFL
 
• NFL Redzone
• NHL
 
• Nick 2
 
• Nick Jr.
• Nickelodeon
 
• Nicktoons
 
• Olympics Channel 1
• Olympics Channel 2
 
• Outdoor Channel
 
• OWN
• Oxygen
 
• Palladia
 
• PBS Encore
• PBS Kids Sprout
 
• qubo
 
• QVC
• REELZChannel
 
• RetroPlex
 
• Ritmoson Latino
• Science channel
 
• Sho2
 
• Showtime
• Showtime Beyond
 
• Showtime Extreme
 
• Showtime Family Zone
• Showtime Next
 
• Showtime Showcase
 
• Showtime Women
• Smithsonian
 
• Spike TV
 
• Sportsman Channel
• Starz
 
• Starz Cinema
 
• Starz Comedy
• Starz Edge
 
• Starz in Black
 
• Starz Kids and Family
• Style!
 
• SyFy
 
• TBN Enlace
• Teen Nick
 
• Telefutura
 
• Telehit
• Telemundo
 
• Tennis Channel
 
• The History en Espanol
• The Hub
 
• This TV
 
• TLC
• TMC Extra
 
• TMC: The Movie Channel
 
• Travel Channel
• TV Land
 
• TVG
 
• Universal
• Univision Deportes
 
• Univision tlnovelas
 
• USA Network
• VH1
 
• VH1 Classic
 
• VH1 Soul
• WDAF 4 (FOX)
 
• WealthTV
 
• Weather channel
• WGN
 
• Youtoo TV

Mobile Tops Consumer Spending for Technology

Consumer spending on mobile products tops all consumer categories in 2012, according to analysts at Gartner, who point out that "the three largest segments of the consumer technology market are, and will continue to be, mobile services, mobile phones and entertainment services," according to Amanda Sabia, principal research analyst at Gartner.

Mobile services are expected to generate 37 percent of total worldwide consumer technology spending in 2012, $0.8 trillion, rising to almost $1 trillion by 2016.

Mobile phones will account for 10 percent of total spending in 2012, about $222 billion, rising to almost $300 billion by 2016.

Similarly, entertainment services including cable, satellite, IPTV and online gaming, will account for 10 percent of total consumer spending on technology products and services in 2012, at $210 billion, rising to almost $290 billion in 2016.

Gartner predicts that consumer spending on mobile apps stores and content will rise from $18 billion in 2012 to $61 billion by 2016, and that spending on e-text content (e-books, online news, magazines and information services) will rise from $5 billion in 2012 to $16 billion by 2016.

Consumers will spend $2.1 trillion worldwide on digital information and entertainment products and services in 2012, according to Gartner, Inc. This amounts to a $114 billion global increase compared with 2011, and spending will continue to grow at a faster rate than in the past, at around $130 billion a year, to reach $2.7 trillion by the end of 2016.

The $2.1 trillion consists of what the consumers will spend on mobile phones, computing and entertainment, media and other smart devices, the services that are required to make these devices connected to the appropriate network, and software and media content that are consumed via these devices.

Telefonica Suspends Dividend, Share Buybacks

Telefónica will cancel the payment of all remaining dividends and share buybacks for 2012, an action that shows the stresses now experienced by businesses of all sorts in Spain, as a result of the economic and financial crises roiling Spain.


Telefonica's suspension of dividend payments is a risky step, as it would be for any public firm viewed as a "value" stock paying hefty dividends. The problem is partly a debt overhang that has to be rectified, plus a complete lack of revenue growth for the remainder of the year. 


The company said it now anticipates no significant revenue growth this year, compared with a previous expectation of revenue growth of at least one percent.  Telefónica said it will resume its dividend payments in 2013, with a dividend of 75 European cents a share to be delivered in two tranches, in the fourth quarter of 2013 and second quarter of 2014.


That of course assumes Telefónica can fix its immediate problems, namely controlling operating costs and getting debt to below 2.35 times operating profit in 2012. 


Telefónica's Spain operations, in the second quarter of 2012, saw revenue drop 13 percent year over year, compared with a six-percnet decrease for the European unit overall.


Perhaps most shockingingly, mobile phone usage revenue dropped 18 percent. You might conclude either that people indeed are not as attached to their mobile phones as once was thought, or that the Spanish economic crisis is so bad people have no choice, or that substitutes are being used, such as lower-cost services using "SIM-only" approaches.