Apple Co-Founder Wozniak Thinks Cloud is a Huge Problem

"I really worry about everything going to the cloud," he said. "I think it's going to be horrendous. I think there are going to be a lot of horrible problems in the next five years," says Steve Wozniak, Apple co-founder. 

The reason is not that the cloud won't work. Instead, he worries about content ownership.  "With the cloud, you don't own anything," he says. "You already signed it away" through the legalistic terms of service with a cloud provider that computer users must agree to."

iOS and Android Tablets Capturing Different Consumer Segments

Clear customer segments emerged from a comScore analysis of tablet purchasing, and the findings might strike you as entirely believable. 

Apple iPad owners skewed male (52.9 percent), slightly younger (44.5 percent under the age of 35) and wealthier (46.3 percent residing in households with income of $100k or greater) compared to an average tablet user during the three-month average period ending June 2012. That over-indexing for younger and richer users has been a notable characteristic of iPad adopters since the product first launched. 

In comparison, Kindle Fire owners saw their audience skew female with 56.6 percent of its audience base represented by females. 

Both Android and Kindle Fire users saw household income below that of iPad owners, aligning more closely with household income reported by smart phone owners. 

Demographic Profile: Tablet* and Smartphone Audience 3 month avg. ending June 2012  Total U.S. Tablet Owners and Smartphone Subscribers, Age 13+ Source: comScore TabLens and comScore MobiLens
	Total Smartphone	Total Tablet	iPad	Android** Tablet	Kindle Fire
Gender
Male	51.9%	50.0%	52.9%	50.9%	43.4%
Female	48.1%	50.0%	47.1%	49.1%	56.6%
Age
13-17	6.0%	5.5%	4.7%	6.2%	5.5%
18-24	17.5%	13.0%	14.0%	12.9%	12.2%
25-34	24.6%	24.2%	25.8%	22.5%	24.7%
35-44	21.0%	20.6%	21.4%	20.1%	20.5%
45-54	16.7%	18.1%	16.8%	19.7%	16.9%
55-64	9.0%	11.0%	9.7%	10.8%	12.5%
65+	5.3%	7.6%	7.5%	7.8%	7.6%
Household Income
<$25k	12.0%	7.8%	5.5%	11.7%	7.0%
$25k to <$50k	19.6%	18.1%	14.4%	20.4%	20.9%
$50k to <$75k	19.3%	19.1%	17.2%	20.0%	21.3%
$75k to <$100k	15.6%	16.7%	16.6%	15.3%	17.5%
$100k+	33.5%	38.4%	46.3%	32.5%	33.3%

Does Mobile Commerce Make More Sense Than Mobile Advertising?

If you are a tier-one mobile service provider exploring large potential future opportunities, it matters greatly how big each potential new business might be. Though most such firms will place lots of bets, and wait to see what develops, tier one service providers cannot waste time on "small" opportunities. 

Typically, services such as mobile advertising, mobile payments or mobile commerce, machine to machine communications or enterprise-oriented services are on the list of such possibilities. So how big might "advertising" be, compared to "commerce?" 

It's a hard question to answer, in part because "mobile advertising" and "mobile commerce" clearly overlap, while mobile commerce overlaps with mobile payments and banking. 

Google Wallet or Isis, for example, both envision their mobile wallets becoming a hub or intermediary for all sorts of deals, offers, coupons and loyalty and reward programs, even though mobile wallets are seen as intimately related to mobile payments. 

In fact, it might be the case that the interest in "mobile advertising" now should better be described as an interest in mobile commerce, anchored initially by mobile wallet efforts. 

At least in part, mobile commerce also makes sense because research from Nielsen in 2011 already was showing that 29 percent of smart phone owners use their phone for shopping-related activities. 

But at least so far, few of the top activities conducted by mobile shoppers are extremely conducive to direct mobile service provider participation. Some 38 percent of respondents conduct in-store price comparisons (38 percent of mobile shoppers), about 38 percent browse products through their mobile Web or apps while 32 percent report reading online product reviews.

The opportunity for mobile service providers to create value and a role in those activities and ecosystems is largely unclear. Mobile wallets, on the other hand, could represent a much more logical role for a mobile service provider. 

Mobile advertising, for example, might represent $2.6 billion in 2012 revenue, and little of that flows to mobile service providers. Mobile commerce includes sales of mobile content, purchasing of services and products, mobile offers and deals, for example. That activity, even exclusive of sales of ring tone, mobile video or games, shows, already had reached 




   



 Apps, which account for the majority of mobile phone time in the U.S., may be the key to shifting consumers from browsing products on their phone to making purchases, some would argue.

There also is a relationship to mobile payments as well. Although only nine percent of mobile shoppers have used their phone to pay for a purchase at a retail point of service terminal, 71 percent of app downloaders would be interested in an app that allows them to use their phone as a credit card. 

Even those preliminary figures suggest the potential, from a mobile service provider perspective, of pursing mobile commerce, wallet and payment initiatives, compared to mobile "advertising," in a narrow sense.

Loyalty, offers and other revenue streams related directly to mobile wallets are feasible and logical, but might more logically be seen as mobile commerce rather than mobile advertising revenue streams. 

Where Providers Can Make Money In Cloud Services, Now

If you agree with the notion of product life cycles, then you might also agree that new technologies have adoption cycles, and "hype cycles," as well. 


The Gartner notion of how technologies develop incorporates the notion that a period of high expectations normally is followed by period where those initial hopes are dashed, eventually followed by a period where innovations are well understood and adopted.


You might argue that most of the money will be made once that occurs. If so, you might expect that email has been mainstream and throwing off substantial revenues for a while, and is maturing. 


Cloud-based advertising (think Google) and cloud-based sales force automation (think Salesforce.com) and other software as a service apps are in the full deployment stage. 


Infrastructure as a service is getting close to full deployment and acceptance. Public cloud storage has a ways to go before it will reach full deployment, though. 

Mars Rover Curiosity Beats Odds

Almost 70 percent of previous missions to Mars had ended in failure, which explains the significance of Mars Rover "Curiosity" making a safe landing on the red planet. 


A heat shield had to slow the spacecraft from 13,000 mph to about 800 mph. Then a giant supersonic parachute unfurled to slow the rover further to about 200 mph. 


Then onboard radar has to detect the surface, and rocket engines aboard a kind of jet pack have to fire, slowing Curiosity to a crawl. Finally, a bridle had to lower the rover from the jet pack to the surface. 




The landing sequence, dubbed “seven minutes of terror,” required the largest supersonic parachute ever deployed in space, and 76 pyrotechnic explosions. If any one of those explosions had not occurred, Curiosity would have crashed. 

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.