AT&T Stores to get an Apple Style Feel

AT&T is planning to drastically change the way its stores look starting in the year 2013, replacing fixed point of sale terminals with use of smart phones and tablets. 


In large part, AT&T wants to create a retail experience more akin to the Apple Stores, and one has to wonder how many other retailers will decide the more-informal, check out without standing in line experience is workable as well. 


That could lead to rather large changes in the design of retail locations, some would argue, showing one more unexpected change from the shift to mobile payments technology. 

Telstra, the Australian communications services provider, also is considering a similar change in retail store format. 


After a successful test project in a Washington supermarket, Qthru is officially launching its mobile platform allowing shoppers to scan items with their smart phone as they shop to facilitate a more efficient checkout using their phone. The Qthru approach retains the traditional POS terminal locations, but speeds checkout because the scanning of products already has been done. 

"Given recent advancements in technology, consumers are realizing there is a better way to check out of a retail store without standing in a long line," Aaron Roberts, founder and CEO of QThru, says. 

Google Wallet Makes Big Change of Mobile Payments Strategy

Google has changed iits digital wallet strategy in a significant way, one might argue. In the past, Google Wallet has stayed out of the “interchange fees” part of the revenue stream, in favor of an exclusive reliance on loyalty, advertising, offers and other marketing and advertising functions.

But with the decision to support virtually all the major branded cards inside Google Wallet, a shift of revenue strategy could occur. A new cloud storage strategy does a couple of things. First, all major card brands can be accomodated, even if the resident application on a Google Wallet device is the prepaid MasterCard account.

The new approach is closer to that of PayPal than was the case for Google Wallet’s initial positioning, says Zilvinas Bareisis, Celent consultant. And the change makes Google Wallet a venture that makes money from transactions, something the older Google Wallet did not attempt to do.

The cloud-based credentials still require use of the MasterCard PayPass terminals and software loaded on each Google Wallet device. But since the MasterCard prepaid account is linked (in the cloud) to MasterCard, Visa, Amex and Discover accounts, Google Wallet users can use the wallet in much the same way as PayPal.

That would be a fundamental shift of strategy. Before, Google Wallet was not a transaction processor in the same way as PayPal functions. Now, Google Wallet will, in effect, become a transaction processor, in an indirect way.

More accurately, it has become a merchant of record. Google sits in the middle of its Wallet transactions, rather than just passing through plastic credentials to an NFC enabled smartphone.

The new approach also bypasses the need to cooperate with mobile service providers, and allows Google Wallet to be provided “over the top,” without using the mobile service provider secure elements. Card issuers might like that angle, since it means they are relieved of the obligation of paying fees to any mobile service providers who want to get a slice of transaction processing revenues.

Google Wallet becomes as a “merchant of record” for transactions. True, they won’t have to incur the extra costs of provisioning their card credentials on to secure element, but that would also rule them out from participating in other NFC ventures, such as Isis.

Now, from the merchant point of view, they are accepting a prepaid MasterCard, while it might an Amex card that actually funds the transaction. PayPal deals with it by having direct acquiring relationships with its merchants and offering them a discount rate which represents an expected blend of funding transactions, says Bareisis.

Does it also mean that Google Wallet will have to establish relationships with the acquirers to re-coup from merchants any potential differences in transaction costs? Or will it have to charge the end user for “loading” their wallet, something that other prepaid card providers do for card-based re-load transactions?

In any emerging business, it is not unusual for start-ups, even those as big as Google Wallet, to change business models in dramatic ways. Isis, the mobile service provider service, initially envisioned being a “merchant of record.” Then Isis decided to take the former Google approach, and eschew any role in transaction fees.

Google now has taken the reverse path, essentially adopting the former Isis approach. In other words, both Isis and Google Wallet now have reversed their initial positions on revenue models in the wallet space.

Verizon Will Have to Abandon Cable Marketing Deals to Get Cable Spectrum

Verizon may have to abandon its agency deals with several U.S. cable operators as a condition of gaining Department of Justice approval of $3.9 billion worth of spectrum sales by the cable operators, Reuters reports.


Those agency agreements, which allow cable operators Comcast, Time Warner Cable, Cox Communications and Bright House Networks to sell Verizon services, while Verizon can sell cable operator services, apparently are viewed as anti-competitive by DoJ lawyers, and are not, strictly speaking, a part of the deal whereby Verizon would buy mobile spectrum from the cable operators.


Sources tell Reuters that DoJ will require a halt to the agency deals wherever Verizon has network assets, essentially. That apparently would satisfy DoJ officials that neither cable nor Verizon would use the marketing deals to essentially end facilities-based competition between Verizon and cable firms. 

Justice Department officials think the marketing deal would be  amounting to an agreement "not to compete" with each other. Barring of the agency deals would require some rethinking, by the cable operators, of their wireless strategy.


Where in the past the cable operators had worked with Sprint, they had recently been hoping to work with Verizon Wireless, as part of the agency deals, to add a wireless product to their triple-play offers. If the DoJ blocks those deals, cable will have to find some other way to create a wireless strategy.

DirecTV U.S. Subscriber Base Shrinks in Second Quarter 2012

DirecTV suffered a U.S. subscriber decline for what seems to be the first time many of us can recall, raising questions about whether that result is entirely a deliberate DirecTV policy related to bad debt, or perhaps an indication that the satellite TV business has reached a peak, in terms of market share.


Net subscribers declined in the quarter "principally due to lower gross subscriber additions, partially offset by a reduction in the average monthly churn rate," DirecTV says.


But DirecTV also says the "gross additions declined mainly due to a greater focus on higher quality subscribers and stricter credit policies, as well as lower gross additions from the telco sales channel."


In other words, some of the slower net additions were the result of DirecTV refusing to sell to some potential customers, while sales activity by telco partners is waning. 


The lower churn rate was mainly driven by a greater percentage of subscribers on contracts, auto-bill pay and customers that buy advanced equipment, DirecTV reports. 


Average revenue per user increased 4.2 percent to $94.40, due mostly to price increases on programming packages, higher advanced service fees, pay-per-view revenues and penetration of premium channels, partially offset by increased promotional offers to new and existing customers, DirecTV said. 


DirecTV's 19.91 million U.S. subscribers represented an increase of two percent, year over year, though. 

Smart Phone Owners Report More Problems with Call Quality, Spam, Internet Quality

As useful and valuable as consumers find smart phones, based on their buying of the devices and services, smart phones do seem to produce higher rates of call quality issues, unwanted text messages and, obviously, Internet access experience, a study by the Pew Research Center’s Internet & American Life Project suggests. 


The findings point out an apparent contradiction: though people find relatively high instances of product failure when using either feature phones or smart phones, the value so vastly outweighs the advantages and even the defects do not deter high rates of product acceptance. 


Some of us would note that, for decades, cable TV providers faced the same issues, and in some ways still do. Consumers frequently rank their "satisfaction" relatively low, compared to other products. But that has not historically lead to product abandonment. 


In recent years there has been significant loss of market share to other providers, but even the other providers receive substantially the same complaints as do cable TV providers. 


Some would argue that subscription products generally are less favored than other goods. Whether that is because such products often are intangible, or disliked for some other reason, is hard to determine. 


But it is somewhat striking that so many consumers of mobile service experience the reported problems. Some 88 percent of all American adults have mobile phones and 72 percent of respondents experience dropped calls at least occasionally. 


Some 32 percent of mobile device owners say they encounter this problem at least a few times a week or more frequently than that. About 68 percent of cell owners receive unwanted sales or marketing calls at one time or another. 


And 25 percent of mobile phone owners encounter this problem at least a few times a week or more frequently, the study suggests. 


Of users with mobile broadband service, 77 percent of respondents said they experience slow download speeds that prevent things from loading as quickly as they would like. Of those mobile Internet users, 46 percent report slow download speeds weekly or more frequently.




Smart phone owners reported higher incidence levels of these problems, compared with feature phone owners. 

IP Transit Price Disruption Heating Up?

Prices for wholesale IP transit service normally decline, on a price-per-bit basis, every year. So the mere fact of price-per-bit decreases should not normally constitute a reason for concern. 


The only thing that does raise concern is a rate of price decline that is higher than expected. So it is that TeleGeography says IP transit price declines in most locations accelerated over the last year.

The median monthly lease price for a full GigE port in London dropped 57 percent between the second quarter of  2011 and the second quarter of 2012 to $3.13 per Mbps. The issue is that prices had dropped at a 31 percent rate of decline between 2007 and 2012. 


In New York, the comparable price dropped 50 percent to $3.50 per Mbps over the past year, and 26 percent compounded annually over the five-year period. 


Just how significant that is cannot yet be determined. A dip during or immediately after the 2008 Great Recession would not have been surprising. A faster drop in prices, given the current recession, might not be unusual, either. And there seems no shortage of new competition in either London or New York markets. 


On the other hand, the trend of IP transit pricing on the highly-competitive routes to London and New York do not seem out of line with long-term trends, either. 


    Median GigE IP Transit Prices in Major Cities, Q2 2007-Q2 2012

Source: TeleGeography

Time Warner Cable Now Earns 43% of Revenue From "New" Sources

In its second quarter 2012 earnings report, Time Warner Cable earned about 57 percent of its revenue from legacy sources (video entertainment subscriptions and advertising). The problem, one might argue, is that the 42 percent of revenue earned from "new" sources includes two sources, namely high-speed access and consumer voice, that have, in turn, become "legacy" revenue sources.

The latest "new" source of revenue is voice and data services for business customers. At some point, that source also will become a "legacy" source.

That points up a larger strategic challenge, namely how Time Warner Cable can continue to grow, as all its "new" revenue sources become "legacy" sources that cannot drive significant growth.

Excluding the impact from acquisitions, residential services revenue growth was primarily driven by an increase in high-speed data revenues, partially offset by a decline in video revenues, Time Warner Cable says.

Time Warner Cable lost 169,000 video subscribers during the quarter.

The growth in residential high-speed data revenues was the result of growth in high-speed data subscribers and an increase in average revenues per subscriber (due to both price increases and a greater percentage of subscribers purchasing higher-priced tiers of service), Time Warner Cable says.

Residential video revenues decreased driven by declines in video subscribers and revenues from premium channels and transactional video-on-demand, partially offset by price increases, a greater percentage of subscribers purchasing higher-priced tiers of service and increased revenues from equipment rental charges, Time Warner Cable also reported.

Residential voice revenues remained essentially flat as growth in voice subscribers was offset by a decrease in average revenues per subscriber.

Consider Comcast, the largest U.S. cable TV company. Comcast now relies on its core legacy service, video entertainment revenues, for about 33 percent of total revenue. How Time Warner Cable could get to similar levels now becomes the issue.