Surprising Findings about Mobile Payments

You might not be too surprised if told that about a third of U.S. mobile phone users have used mobile payments of some sort over the last year or so. You might not be surprised if a significant percentage of those sales were of digital goods such as games, apps or music.

But a new study found surprising behavior. Despite the popularity of digital downloads, such as apps and music, more respondents reported buying physical goods with their phones than online services, digital goods, or virtual currency, IDC reports.

That would be a significant finding, indeed, at least for remote payments made from a mobile device.

The  IDC Financial Insights study  found that mobile payments have more than doubled in popularity, reaching over 33 percent of survey respondents. Of those that had made a mobile payment, more than half used PayPal Mobile (56 percent), with Amazon Payments and Apple's iTunes service statistically tied at about 40 percent.

The findings are important for mobile payments providers and merchants, as the behavior shows increasing adoption of the mobile payment habit for products not traditionally associated with mobile device content and application purchases.

O2 London Small Cell Network Will Offer Free Access After Olympics

U.K. mobile service provider has built a network of 100 free Wi-Fi hotspots in West London as part of the Olympics. As always is the case after an Olympic event is held, the purpose-built facilities are reused in new ways. That will be the case for O2's network as well. 


The Wi-Fi network, serving the West End, offers service at speeds up to 24Mbps.

Users will have to register, but unlike Virgin Media's network on the London Underground, O2's hotspots will remain free after the Olympics are finished. So you might well wonder what the revenue model will be.


O2 aims to support its investment by selling advertising to local businesses, probably adding location features to craft deals based on end user location. There is another difference.

O2 is using the 100 Wi-Fi hotspot deployments as the foundation for a future small cell network that will use O2's 3G network, reinforcing the macrocell network where it is most congested. 


As a matter of engineering, that has meant locating the Wi-Fi hotspots in locations where eventual conversion to a GSM small cell network will be compatible with the macrocell network. 

According to O2 Wi-Fi managing director Gavin Franks, the carrier is targeting the end of the year for the small cell conversion. 

Predictably, Dish Network alters AutoHop

Dish Network has made a series of software upgrades to its DVRs embedded with the "AutoHop" feature, that automatically removes all advertising from prime time broadcast TV network programming recorded using the DVR feature.


Subscribers now have the ability to choose which channels to record among the "Big Four" networks, where previously they were all automatically recorded.

Subscribers also can choose to delete programming off the hard drive at a time of their choosing, as opposed to accepting a default-delete date.

A third change switches the cursor default from "yes" to "no" when presented with the option to skip ads.

All those changes presumably are intended to bolster Dish Network's defense of its technology, as it faces major lawsuits from broadcasters who claim the AutoHop feature is a violation of their copyrights and also a breach of affiliate contracts Dish Network has signed with the broadcasters. 

The broadcaster challenges were entirely predictable. Whenever an upstart has challenged the over the air broadcast business model, there have been legal and regulatory challenges. In the mid-twentieth century, for example, broadcasters successfully convinced the Federal Communications Commission that some core cable TV industry values, such as offering out of market TV signals, were impermissible. 

Broadcasters and movie makers also challenged the legality of such devices as the video cassette recorder. So the challenge to the lawfulness of AutoHop was inevitable. 

That incumbent legal and regulatory resistance always is predictable when new technologies or business models pose a challenge to either communications or entertainment industry business models. 

Dish Network presumably hopes the changes will bolster the Dish Network argument that AutoHop only provides consumer choice and convenience, and does not constitute any sort of copyright infringement. 

Some Parts of the Telecom Business Are Shrinking

Virtually all experienced observers of the global telecom business are familiar with the notion that, over time, there always is consolidation. In large part, that is because there are scale effects in the business, meaning that the more volume a supplier has, the lower its costs typically are, per unit delivered.


But there is something more at work, as well. Generally speaking, global service provider revenues, overall, are flat. Some regions are growing, while some are shrinking. But if you assume any public company must continually grow its revenues, acquisitions simply are the only way to grow revenue, long term. That leads to supplier consolidation. 

There are changes beyond the tier-one service provider level, as well. Smaller or more specialized service providers likewise are consolidating. And so is the channel. 


"The channel is shrinking," argues channel expert Dave Michels.  "Enterprises are buying less, prices are dropping, models are changing."


"There will be fewer dealers tomorrow than there are today," he says. "There is still plenty of channel opportunity, in fact huge."


"Just not as huge as it once was," argues consultant Dave Michels.


Some of us might argue that the revenue opportunity might not be so much "huge," as it is "significant." The reason is that distribution by channel partners historically has made sense in the medium-sized business segment. 


Consumers and small businesses are best reached using mass media and now the Web. Enterprises can be sold direct. In the middle is where the channel has made financial sense. 


But some of us would argue that cloud-based application delivery will shift more of the mid-sized business opportunity away from channel partners and towards direct delivery as used in the mass markets. Not all mid-market applications can be delivered that way, to be sure. But a significant portion will shift. And that means suppliers will "go direct" rather than using channel partners. 


Veritical specialities also are likely to become more important, once cloud deliver makes it easier for enterprises, mid-market firms and small businesses to "buy direct" and provision from the Web. 

12.5% of Western Europe Smart Phone Users Buy from Phone

Of smart phone users in France, Germany, Italy, Spain and the United Kingdom, about 12.5 percent have made a purchase from their devices during the last year, according to the comScore MobiLens service. 


The study showed that the mobile retail audience in those countries nearly doubled over the past year, with 1 in 6 smartphone users accessing online retail sites and apps on their device, comScore reports.  

Mobile Retail Activity Among Smartphone Owners 3 Month Average Ending May 2012 Total EU5 (FR, DE, IT, ES and UK) Smartphone Audience: Age 13+ Source: comScore MobiLens
	Target Audience (000)	% of Smartphone Audience
Total Smartphone Audience: 13+ yrs old	117,609	100.0%
Purchased goods or services	14,552	12.4%
Type of goods or services purchased
Clothing or accessories	5,036	4.3%
Books (excluding e-books)	3,806	3.2%
Consumer electronics / household appliances	3,698	3.1%
Tickets	3,639	3.1%
Personal care / hygiene products	2,452	2.1%

Is "National Broadband Policy" Needed, or in Need of Adjustment?

U.S. broadband prices are not the lowest in the world, by any means, and some worry that neither speeds nor prices will improve much, in the future. That inevitably will lead to calls to “do something” about national broadband policy.

There are a couple issues there. The first is whether, under present fiscal circumstances, the federal government and U.S. States can do much of anything about direct investment of their own. Like it or not, the answer is that policy frameworks can be adjusted, but that there is precious little “investment” possible, from government quarters.

The more contentious issue is likely around what incentives properly can be provided for cable operators and telcos to voluntary boost their own investment, and how much those incentives matter, where it comes to investment decisions.

Some might say that almost no amount of incentives would convince a rational executive to invest “too much” in a business that cannot return a market rate of return, compared to all other alternatives that promise a higher return. It is not easy to balance end user welfare and industry incentives, under conditions of great uncertainty.

A new FCC study released in July 2012 does show that progress is being made. As always, the issue is whether the progress is fast enough.

Whether Google Fiber in Kansas City, Kan. and Kansas City, Mo. will have the intended effect of spurring more investment by telcos and cable operators remains to be seen. So some might say handwringing about the state of progress in the U.S. broadband market are overblown.

That is not to say issues exist. There clearly is an argument to be made that most telcos cannot outline a solid business rationale for aggressive fiber to the home upgrades, in many, if not most cases. In part the problem is that financial return is questionable. In other cases the argument is simply that alternative capital investments in mobile assets will drive a higher return.

Also, unlike the situation in many other markets, a powerful, facilities-based competitor with arguably better cost structure (both in terms of capital requirements for bandwidth upgrades, and workforce cost issues), competes head to head in virtually every market, with two powerful satellite contenders that reduce the potential gain from offering video entertainment services, a key element of the telco business case for deploying fiber to the home.

As far as the retail pricing, where the U.S. never ranks among the “best” providers, measured in terms of price per megabyte of access speed, one problem is simply that costs are higher in the U.S. market.

Population density might be the single most important factor determining the cost of any fiber to home network build. A related issue is average “loop length,” a metric that is roughly related to population density.

U.S. service providers have to supply service over much longer average loops than service providers in Europe, or in many “city states” that feature high-density housing. Basically, retail cost everywhere is related rather directly to network investment cost.

So Google Fiber’s $70 a month benchmark for symmetrical 1-Gbps access, along with a similar offering by Sonic.net, probably are best viewed as “stretch goals” for most U.S. telcos, arguably less a stretch for cable operators, and out of reach, for technical reasons, by satellite broadband providers.

Perhaps progress in the U.S. broadband market is not “the best of all possible worlds.” But options simply are not unlimited, or investment drivers very easy.

Notice What is Missing on Google Fiber

Virtually unmentioned in discussions about Google Fiber as it is being deployed in Kansas City, Kan. and Kansas City, Mo. is that voice is available as part of the service. That’s largely because the really unique aspect is the 1-Gbps broadband access.

Even the video service is a relatively basic offer lacking many channels many consumers will prefer.

But voice is less than an afterthought. it’s just something users can supply themselves, using over the top applications such as Google Talk.

That tells you much about potential future models for at least some access providers, if Google Fiber proves it can make an actual profit, offering 1-Gbps symmetrical Internet access and entertainment TV, on its own fiber to the home network.

Broadband access will be the foundation. Google Fiber believes video entertainment is a crucial service to drive higher average revenue per user. Sonic.net believes Internet access and voice is the more logical bundle for it to offer.

In either case, the real top draw is Internet access at 1 Gbps for $70 a month. Basically, voice or video are complementary services.

Cable operators and telcos, with higher operating costs, might always feel it necessary to offer the triple play as a way of creating enough gross revenue to support their services. But some service providers might try and optimize their offerings around broadband access, using either voice or video as a complement, but not both.