Apple IPhone 5 Will Cost U.S. carriers $10 Billion in Device Subsidies

Stifel Nicolaus analyst Christopher King estimates that U.S. mobile service providers will wind up incurring about $10 billion in device subsidies as they sell iPhone 5 devices.

If so, those sales would likely affect operating margins for both companies during the entire second half of 2012.

“Given our assumption of approximately $425 in carrier subsidies per handset, we believe the U.S. carrier market could be on the hook for more than $10 billion over the last three and a half months of the year alone, entirely due to the new iPhone launch,” he said.

If you wonder why service providers have a "love-hate" relationship with the iPhone, that's why.

HP Thinks it "Must" Offer its own Smart Phone

HP CEO Meg Whitman offers a simple explanation for HP's belief that the company "has to" sell its own smart phone.

"We have to ultimately offer a smartphone because in many countries of the world that is your first computing device," says Whitman. "You know, there will be countries around the world where people may never own a tablet, or a PC, or a desktop."

"They will do everything on the smartphone," Whitman says. "We’re a computing company; we have to take advantage of that form factor."

The logic is sound enough, but whether HP is simply too late is the issue. It's hard to imagine how HP comes up with a differentiated offer or a big enough application store on its own.

HP seems almost forced to try to leverage an existing mobile OS and developer community, such as Android operating system ecosystem, or possibly the Windows Phone platform, though the applications community for Windows now is much smaller than that of Android.

But going with Android means taking on the likes of Samsung. Having stumbled with its Palm acquisition, HP is unlikely to want to make the same mistake by buying Research in Motion.

Whitman makes a cogent argument for why HP has to be in smart phones. What remains to be seen is how HP can pull that off.

200,000 Time Warner Cable RGUs Exposed to Google Fiber Threat

Time Warner Cable's CTO Irene Esteves says Google's Kansas City 1-Gbps Internet access and TV service bundle doesn't pose a huge threat to the cable operator's overall business. Of course not. What Google Fiber does threaten is about 200,000 revenue generating units Time Warner Cable presently sells in the Kansas City market.

Of the 300,000 homes that Google Fiber is expected to pass in the area eventually, Esteves estimates that Time Warner Cable has 100,000 Internet and 100,000 video subs at risk.

If you assume that half the broadband customers in the Time Warner Cable service area buy high speed access from Time Warner, while half buy from AT&T, and if broadband penetration is 70 percent of homes, then you might assume Time Warner Cable's risk would be about 35 percent, or roughly 105,000 customers, which just about matches the Time Warner Cable figures.

If Google Fiber takes share equally from AT&T and Time Warner Cable, and if initial take rates are about 18 percent, one would expect losses of about nine percent for both incumbent service providers. That implies a potential Time Warner Cable loss of perhaps 9,000 high speed access customers.

If half the high speed access customers also buy the video service, then Time Warner Cable also potentially faces the loss of about 4,500 video accounts as well.

Among the other competitors in the Kansas cities market are DirecTV Group, Dish Network Corp., AT&T and SureWest Communications.

Apple's iPhone 5 Won't Work on 4G in Much of Europe

Apple's iPhone 5, launched to great fanfare in the United States on Wednesday, will not work on superfast mobile broadband networks in much of Europe, potentially confusing consumers and setting back the development of 4G services in the region.

Some carriers will benefit. Only Deutsche Telekom and Everything Everywhere in the UK will initially be able to offer the fastest internet access to iPhone 5 users in their markets, because they are the carriers holding the right frequencies.

The iPhone 5 is not compatible with 4G services on the 800MHz and 2.6GHz bands deployed across much of western Europe, including Spain, Italy and France.

Mobile Carriers Might Overcount Data Usage by 5% to 7%

U.S. mobile service providers might overcount end user data usage  by five to seven percent, a new study suggests. University of California Los Angeles computer science researcher Chunyi Peng probed the systems of two large U.S. mobile networks representing 50 percent of all U.S. mobile subscribers.

The researchers used a data-logging app on Android phones to check the data use that the carriers were recording. The carriers were found to usually count data correctly, but they tended to overcount—and hence potentially overcharge—when a person used applications that stream video or audio, and particularly when coverage was weak or unreliable.

1/3 of U.S. Survey Respondents Want an Apple iPhone 5

About a third of survey respondents to a recent Toluna QuickSurveys poll say they want an Apple iPhone 5. The survey also indicated that 56 percent of BlackBerry users are looking to replace their smart phones and 32 percent of Android users are also looking to switch devices. 

Must Telcos Embrace Over the Top Partners?

Virtually every telco in the world sooner or later will have to deal with over the top competition, even if the immediate threats are seen in some "developed" markets, the simple reason being that broadband Internet access makes such competition technologically possible for the first time. 

“Operators need to be more realistic and recognize that the OTT community is a meaningful threat to revenues,” says Nicole McCormick, Ovum senior analyst 

“The erosion of messaging revenues is already a reality in markets such as China and South Korea, and this is a harbinger of similar changes elsewhere," says McCormick. "Operators need to re-evaluate their business models, and decide on the degree to which they should compete or collaborate with content providers and OTT players.”

That also means virtually every service provider sooner or later has to have a strategy about dealing with over the top competition. One common strategy is to essentially fight OTT competition by adding more value to legacy services, using a combination of packaging, pricing and features. 

The less taken path, at least so far, is to actively embrace OTT services. That might not be so rare in the future, though it might be more common for service providers to craft ways of structuring access plans, rather than sponsoring OTT apps directly. 

Some service providers might craft access plans that exempt use of some specific OTT apps from a user usage allocation, for example. Apple FaceTime usage might be one example, but others will try to do similar things with messaging or entertainment video, perhaps offering unlimited usage or generous usage in exchange for payment of a specific app fee.