Mobile Commerce Looks to be Bigger than Mobile Advertising

Though some might disagree, it appears that mobile commerce is poised to offer bigger financial returns for suppliers than mobile advertising, despite the headstart mobile advertising has had. To be sure, mobile advertising already represents $2.6 billion in U.S. market revenue  in 2012. 


Mobile payments transaction value on a global level will total $171.5 billion in 2012, Gartner estimates. If you assume payments revenue is two percent of the transaction value, that represents perhaps $3.43 billion in payment transaction revenue. 


By some estimates, U.S. mobile payments transactions represent about $81 billion in 2012. If so, at two percent of gross transaction value, the mobile payment processing portion of the business is about $1.6 billion. 


Of course, "mobile payments" represent multiple discrete lines of business, including remote purchases ("online" purchases), mobile purchases of content goods, retail point of sale payments and money transfers. 


Gartner also projects annual rates of growth ranging from 40 percent to 70 percent in various countries,  with U.S. rates closer to 70 percent annually. 

U.K. House of Lords Proposes "Radical" Change in Broadband Policy

With the caveat that government reports are not policy, and that many such efforts have no ability to affect changes in policy, a report by the Select Committee on Communications of the U.K. House of Lords does suggest some potential new ways to structure the upgrade of the U.K. fixed network. Whether it is feasible or not remains to be seen.

Indeed, critics might say it is financially unworkable. It might arguably be politically unworkable. But it is different. Basically, the study suggests focusing fiber upgrades on the middle mile of the network, deploying new wholesale fiber to “open access hubs” within reach of every community, says the study by the U.K. House of Lords.

The idea is to encourage multiple providers to connect to the “hubs” to provide local access. That is not architecturally so different from what planners originally have proposed. There has been general agreement on extending fiber to cabinets, where it is not feasible to run fiber all the way to each premises.


What is different is the degree of wholesale network access points, and the way the access network is owned and paid for. Among the provisions with the greatest cost implications is the notion that perhaps end users should build and own more of the access plant.


Engineers immediately will grasp the cost implications. Service providers will immediately grasp the competitive implications.

The open access fiber optic hub “refers to a physical object—in all likelihood a box—situated in the vicinity of a community,” the report says. “Its job is to act as a way station between that community and the broadband infrastructure that spreads out across the rest of the country,” the report says.

Engineers immediately will wonder whether the hubs are equivalent to “central office” locations, or are positioned deeper in the distribution network. The report does not make that distinction unmistakably clear, though one assumes the hubs generally will be deeper in the access network than a central office.

Running into the hub from the wider network would be an ample number of “dark” fiberoptic cables, available on an “open access” basis. Retailers would then build local access networks of their own, between customer locations and the hubs.

Engineers will see some pitfalls. As a rule of thumb, it is precisely the local access portion of the network that drives half of the total cost of a fixed line network. That generally includes all plant between a central office and the actual customer.

The House of Lords report might include fiber pulled much closer to the customer, in which case the access portion of the plant that any competitor might have to supply could represent less investment than generally has been required.

One analogy might be the “fiber to node” designs used by cable operators, which position the termination of the fiber network at a point where 500 to 1,000 homes are served. Perhaps an open access hub is comparable to a fiber node, in a cable TV sense.

What is unclear is whether the report envisions the hubs to be the equivalent of passive optical network locations, which feed perhaps 30 to 100 homes or locations. There are serious cost implications to using either of those wholesale termination points.

Most potential competitors will find the costs of building their own local access all the way from any customer back to the central office. Many more would find the prospect of building only to a hub serving 30 to 100 locations much more palatable.

There are some physical issues, either way. Availability of underground duct facilities or space on aerial poles will put limits on the number of competitors that actually could build new facilities to reach a hub, much less a central office location.

The study also suggests a potentially different way of looking at connection costs, though. “Currently, most people’s conception of broadband infrastructure  derives from their conception of the telephone network  or other utilities whose termination point is at the curtilage of the household, after which ownership of the network is taken over by the owner of  the premises.”

In other words, the provider’s network stops at the side of the house. The study says a different approach would entail the customer owning more of the drop and access network.

“An alternative way of thinking about the network might be that broadband rollout has more in common with the railways: the traveller has to get him/herself to the station and once there the train takes the train,” the report says.

The open access fibre-optic hub model would make it possible for individual property owners to build out the access network themselves, or at least have it built for them.

Marketers immediately will object that most users will be quite unwilling to undertake such investments themselves.

One alternative way of thinking of ownership structure is if the network is “a home with a tail,” where the household owns the last bit of fiber.”

Instead of having competition among suppliers to serve those homes,  a reverse model would have a household auctioning the ability to connect with the backhaul and to the network.

That likely would be a harder sale than many suspect, as it could entail customers spending $500 or more to reach a neighborhood cabinet.

While providing an eventual upgrade path to fiber to home, the study also recommends placement of optical splitters at a central office location, presumably thereby allowing competitors to lease an entire access network, rather than building their own.

In any event, the study argues that “a reorientation is required in government policy away from the absolute edges of the network and towards that part of it which brings optical network closer into communities.” For some, that might mean funding the “middle mile,” but that arguably is less accurate than saying the report recommends funding open access facilities deeper into the access network, with unbundling at a level where any retail competitor has to supply a link from any location back to an optical hub serving 30 to 100 locations.

Whether the report will have an impact is perhaps highly questionable. Aside from some potential BT objections, and possibly some BT support, there are highly uncertain cost implications for retail competitors, as well as revenue implications if wholesale network access locations make it easier for competitors to enter markets on a facilities-based basis.

How Big an Opportunity is "Mobile Banking?"

Is "mobile banking" a key revenue opportunity, or not? The answer is that "it depends" on what you mean by "mobile banking" and where those operations are conducted.


According to recently conducted survey by ACI Worldwide, 76 percent of Indian mobile respondents used their mobiles for mobile banking in last six months.

Comparatively, only 38 percent of  respondents from the United States, and 31 percent from the United Kingdom said they had used mobile banking in last six months. 


China, came in after India with 70 percent of users using mobile banking followed by South Africa (61 percent). The global average for Mobile Banking adoption rate stands at 35 percent of mobile users.


But there are key differences. Where both online banking using PCs, and branch bank infrastructure are highly developed, people tend to use mobile banking to check balances or move money between accounts. 


In regions where the banking infrastructure is undeveloped, and availability of PCs and Internet access is limited, people more often use mobile banking as a way to move money from one person to another, or from person to organization (to pay a utility or school bill, for example). 


As you would guess, the revenue opportunity for a "mobile banking" services supplier is greater, and more direct, in scenarios where peer to peer payments are involved. As people pay fees to Western Union to move money, so mobile banking in a P2P context represents per-transaction fees that are easy to measure.


That is not the case for "softer" mobile banking transactions conducted in regions where the banking infrastructure is highly developed. In Western Europe or North America, for example, mobile banking more often is used in place of an online session to check balances, rather than as a way to move money from person to person, or person to organization. 


That means "mobile banking" is a clearer revenue generating activity and business in developing region, than in developed regions.
In India, 64 percent  of ACI Worldwide survey respondents used their mobile phones to make payment at least once in last six months, while in China 66 percent said they had done so.

Only 30 percent of U.S. respondents and 23 percent of U.K. respondents reported they had made payments on mobile in last six months. Keep in mind that all the data includes content and virtual goods purchases (remote payments), as well as peer to peer money transfers or other mobile payments such as in-store purchases.


So it is likely that mobile banking activity in developed regions is "checking my balance," while mobile payments activity is "remote payments" (buying a game or app).

Some 25 per cent of U.K. mobile internet users now use mobile banking services, according to Antenna Technologies.  

Likewise, the mobile commerce market is expected to account for 24.4 percent of overall e-commerce revenues by the end of 2017. 


This represents the result of some spectacular growth in 2011, when the mobile online commerce market doubled in size to $65.6 billion, according to to ABI Research. If you assume that transaction fees amounted to 1.75 percent of the value of the transactions, then mobile payments provider revenue amounted to something like $1.1 billion in 2011.


The potential revenue is bigger if you assume an average of 2.75 percent transaction fees. In that case, the transaction fee revenue was about $1.8 billion in 2011.


But there are many other segments of the mobile commerce business, including hardware and software to support commerce, advertising, loyalty, marketing. In that sense, the mobile commerce opportunity is bigger, and affects more suppliers, than the mobile payments business.




According to the ACI Worldwide survey, the countries with highest levels of mobile payment adoption also display highest importance on mobile payments and money movement. Roughly two-thirds of Indian consumers consider making payments and moving money using their mobile phone in the next three years to be “very important” to them —in contrast only one in 10 French and Canadian consumers think mobile payment is “Very Important”.

In Brazil, for example, although 39 percent  of consumers consider mobile payment and money movement to be “very important,” 75 percent  would use their mobile phone to replace cards. That points up a key difference between “developed” and “developing” regions.

The ability to use a mobile phone as a payment channel is of clear value in settings where the banking structure is undeveloped. That function offers less value in markets where both online banking by PC and the branch banking infrastructure are highly developed.





The point is that "mobile banking" represents different opportunities in developed and developing regions. In the former markets, it is broader mobile commerce, including point of sale payments, where the revenue gains lie. In developing regions, it is peer to peer money transfers, for the most part. 

Smart Phone Adoption Correlates with Household Income, Except in China

Generally speaking, smart phone adoption is directly related to household income. But there are exceptions, such as the Chinese market, which "over indexes" for smart phone penetration. 


One suspects that subsequent generations of lower-cost smart phones and new retail plans are going to allow smart phone penetration rates to over index more like the Chinese market already does. 


In fact, you might argue that, despite lower per-capita monthly income, users in some "developing" markets already over index for smart phone penetration. 


Source data: International Labor Organization, MobiThinking



_{Source data: Telefonica January to June 2012 Results}

AT&T to Shut Down 2G network by 2017

In a Securities and Exchange Commission "10Q" filing, AT&T said that it will it will shutting down its second generation network so that it can concentrate on upgrading infrastructure to better technologies for the future.

The network shutdown will occur by January 1, 2017, and the spectrum used by 2G services will be reallocated for 3G and 4G use. Currently, about 12 percent of its customers under contract are still using handsets that do not support 3G.

When 95% Fiber Connections are Not a Good Thing

T-Mobile USA has "enhanced backhaul" covering 100 percent of its 4G (HSPA+) network, 95 percent of which is fiber backhaul, says T-Mobile USA. 


For T-Mobile USA and its customers, that is a good thing. For suppliers of those fiber backhaul connections, that is a good thing. 


The only ecosystem provider for whom that is not a good thing are the other suppliers of fiber backhaul services to mobile service providers who are not currently supplying the connections. 


And T-Mobile USA is going to need that bandwidth as it introduces the Samsung Galaxy S,  It is said to be one of T-Mobile’s fastest devices.

The Samsung Galaxy Note also offers the T-Mobile 4G Pro App Pack, a collection of apps and services including Dropbox, Evernote, Square, TripIt, CamScanner and LinkedIn.

The Galaxy Note also offers a variety of entertainment experiences, such as T-Mobile TV in mobile HD for watching live TV programming, Samsung Media Hub for renting and buying the latest movies and TV shows, and Google Play Music. 

The Galaxy Note also features an 8-megapixel rear camera and a 2-megapixel front-facing camera, to capture pictures and HD videos to share with friends, family and social networks.

Many of those applications will require lots of bandwidth. 

MetroPCS Launches "Dyle" TV Service on Samsung Galaxy S Lightray 4G

MetroPCS Communications has enabled the Dyle broadcast TV service on the Samsung Galaxy S Lightray 4G handset, the first smart phone in the U.S. market to offer live, local broadcast television using the Dyle mobile TV service.


Dyle offers content from broadcasters NBC, Fox, ABC, CBS Television, LIN Media, Telemundo, Univision, Ion, Belo, Cox Media, E.W. Scripps, Gannett Broadcasting, Hearst, Media General, Meredith, Post-Newsweek Stations and Raycom Media. In total, 92 stations have agreed to work with MCV.

The Mobile Content Venture that owns the Dyle service hopes people will want to watch linear TV on their smart phones, but some are skeptical, though Dyle says its research shows people will watch. 

Dyle research suggests that up to 61 percent of respondents to a survey would be very likely to switch service providers, or somewhat likely to switch service providers, to use such a service. 

One advantage of Dyle is that it does not use Internet bandwidth, simply adding direct ability to display a standard TV broadcast signal on a mobile device. 

Access to the Dyle mobile TV service will be offered in select markets and at no additional charge to customers on a MetroPCS 4G LTE service plan. In some other cases, Dyle has talked about charging a fee to use the service.