Square Offers Merchants a Flat Transaction Fees

Square is now turning the tables by offering a flat monthly transaction fee of $275 for merchants who do more volume. Basically, Square is going to offer small businesses who make less than $250,000 per year worth of transaction the option of either paying the set 2.75 percent per swipe or one fixed price per month, at $275 per month, with no charge per swipe.

With $250,000 in transactions, paying $275 per month works out to around 1.3 percent per transaction, which is significantly lower than the current rate of 2.75 percent.

If a business goes over $250,000 (and had opted into the monthly swipe fee) then the first dollar after will be charged the standard 2.75 percent rate. 

One way or the other, the trend in transaction fees will keep dropping as the mobile payment business gets traction. Every newly competitive business has that impact on prevailing prices. 

Over the Top Apps Pose Huge Risk for Some Mobile Service Providers

Over the top mobile voice and texting apps now affect traffic for almost 75 percent of mobile service providers operating in 68 countries surveyed by mobileSquared as part of a project sponsored by Tyntec. 

But the potential danger will vary from country to country. Service providers in smaller countries, where lots of cross-border calling or messaging occurs, with high tariffs for cross-border traffic, will experience more danger than large countries with larger internal populations that can call quite some distance without crossing a border. 

OTT apps and services also will cannibalize international calling revenues in any country with a large migrant population outside the home country. Think Filipinos working in the Middle East, or Indians living in the United States. 

On the other hand, retail packaging can alleviate some of the potential risk, as Verizon Wireless is doing with its "Share Everything" plans.
About 52.1 percent of respondents estimate over the top mobile apps have displaced about one percent to 20 percent of traffic in 2012. That’s a clear issue since traffic lost means lost revenue as well.

Almost 33 percent of respondents expect one percent to 10 percent of their customers will
be using OTT services by the end of 2012, with 57 percent of respondents believe 11 percent to 40 percent of their customers will be using OTT services in 2012.

But 10.5 percent of service providers anticipate more than 40 percent of the user base will be using OTT services by the end of 2012.

In 2016, 100 percent of respondents believe at least 11 percent of their customers will  be using OTT services. In fact, 42 percent of operators believe that over 40 percent of their customer base will be using OTT services in 2016.

The issue is what to do about the threat. In some countries, it might be legal for mobile operators to block use of OTT apps, as some carriers blocked use of VoIP. You can make your own judgment about whether that is a long-term possibility.

There are direct and indirect ways to respond, though. It is at least conceivable that some mobile service providers can legally create separate fees for consumer use of over the top voice and messaging apps. In other cases service providers will have to recapture some of the lost revenue by increasing mobile data charges in some way.

Verizon Wireless protects its voice and texting revenue streams by essentially changing voice and texting services into the equivalent of a connection fee to use the network. Verizon charges a flat monthly fee for unlimited domestic voice and texting.

The harder questions revolve around whether any service provider should create its own OTT voice and messaging apps, even if those apps compete with carrier services. Aside from potentially cannibalizing carrier voice and data services, this approach arguably does take some share from rival OTT providers.

On the other hand, it is a defensive approach that essentially concedes declining revenue, with some amount of ability to capture revenue in the “OTT voice and messaging” space.

Some larger service providers might find they are able to consider a partnering strategy with leading OTT players. To some extent, this also is a defensive move aimed at recouping some lost voice and messaging revenues. In other words, if a customer is determined to switch to OTT voice and data, the revenue from such usage ought to flow to the mobile service provider, if possible.

But there is a notable difference to the branded carrier OTT app approach. In principle, such OTT apps can be a way of extending a brand’s service footprint outside its historic licensed areas, into countries where it is not currently licensed.

Instead of functioning as a defensive tactic that recoups some share of OTT revenue in territory, OTT voice and messaging can be viewed as an offensive way of providing voice and messaging services out of region, says Thorsten Trapp, Tyntec CTO.

Over the longer term, it might also be possible for mobile service providers to replicate the network effect that makes today’s voice and messaging so appealing, namely the ability to contact anybody with a phone, anywhere, without having to worry about whether the contacted party is “on the network” or “in the community” or not. The RCS-e/Joyn effort is an example of that approach.

Likewise, mobile service providers might be able to create a mediating role that bridges a closed OTT community by enabling third party access to some other third party community using the mobile phone number.

A version of this story originally appeared at Metaswitch Networks Carrier Evolution.

Top U.K. Texting Moments of the London Olympics

The infographic shows the biggest jump in message volume in the U.K. market began with the parade of nations.

To Change TV, Change the Way People Pay

"If Apple really wanted to change the way people watched TV, it would change the way people paid for TV," argues Peter Kafka. That pretty much is the dilemma for anybody who really wants to disrupt the existing TV business.

To change TV, you have to change the way people pay, and the current arrangement is too lucrative for content owners and distributors to contemplate, unless Apple or some other company showed up with enough money to at least make a major change revenue neutral.

Of course, new formats, including "direct to YouTube," are in an experimental phase. That will continue to be an important venue for niche content.

So far, though, content creators tend to go where the money is, and that is traditional TV networks.

But Apple can’t do that. No single company can. The U.S. subscription TV business generates about $90 billion in annual subscription revenues. To offer a revenue neutral business model for the content owners, a disruptive provider would have to offer something on the order of $30 billion to $40 billion in revenues for the content owners, annually.

So far, nobody has been able to do so, at least in part because the assumption is consumers do not really want to pay for all that programming. They only want some of it. As in the music business, the equivalent of songs, not CDs, is the model. So any attacker would likely find that what it really could sell is less than $30 billion to $40 billion.

The business model would be upside down from the beginning.



There is another angle. Apple's talks with cable operators about a possible Apple set-top box will run into the same brick wall Microsoft did when it proposed a similar Microsoft decoder. The cable executives see the set-top as the gateway to their business, and were determined to keep Microsoft out. They aren't likely to view Apple as less of a threat.

NFC and Internet TV Cause "Disillusionment;" That's a Good Thing

Some technologies are moving fast along the "hype" curve, indicating for Gartner that they are closer to having a real marketplace effect. Among those technologies are near field communications, apparently. Here's the July 2012 positioning on the hype curve.



In July 2011, here's where near field communications was positioned on the hype cycle curve:



You'll notice that NFC payment was at a peak of hype in July 2011. In July 2012 NFC and NFC payment are sliding down the "disillusionment" part of the curve, a necessary part of becoming important in the market. Internet TV likewise has moved into the "trough."

Apple Bought AuthenTec: It Needed NFC Fingerprint Sensors, Quickly

Apple now owns AuthenTec, which has a fingerprint authentication technology.

One would suspect that means Apple wants to use the capability in some way related to its new Passbook mobile wallet.

Fingerprint sensors can be used in many ways of course, but linking purchase authorizations to fingerprints obviously would make sense to people making mobile purchases.

Some of us have argued that the one company that could really shake up the mobile payments or mobile wallet businesses would be Apple, simply because Apple tends to create markets, rather than share them.

The issue, if that is what one believes, is that Apple creates new device markets. So what new device market could Apple create?

The closest analogy so far would be Apple's reshaping of the existing mobile phone market. As Apple now gets the majority of its revenue from phone sales, perhaps the mobile wallet effort is simply a feature designed to maintain that dominance.

Or perhaps Apple has something else in mind.

$1.3 Trillion Worth of Mobile Payments by 2017, Mostly for Physical Goods, Local or Remote

It makes sense that most of the transaction value in the mobile payments business will be for purchases of physical goods, either bought locally or on a remote basis. One percent of a very big number--consumer spending--is always a big number. Four percent of a very big number, which is the percentage of total consumer purchases Juniper Research expects will be transacted on a mobile device, represents about $1.3 trillion in transaction volume.

That would be about a 400 percent growth to 2017, from current 2012 levels. Physical goods purchases   will account for 54 percent of the total value of mobile payments by 2017,  Juniper Research predicts.

Not all forecasts are so optimistic. The Aite Group projects $214 in U.S. mobile transactions by about 2015. Aite Group predicts each one of the multiple categories of mobile payments will experience double-digit growth, with a 68 percent compound annual growth rate between 2010 and 2015.