U.S. Fixed Network Broadband Adoption is 90%

New consumer research from Leichtman Research Group suggests that nearly 90 percent of U.S. households that use a laptop or desktop computer at home currently subscribe to a broadband Internet service.

Five years ago, 65 percent of households with a computer subscribed to a broadband service. That is a functionally reasonable indication that the fixed network broadband access business is saturated.

Some 91 percent of all households with annual incomes over $50,000 subscribe to a broadband service at home, compared to 68 percent of households with incomes of $30,000-$50,000, and 47 percent of households with incomes under $30,000.

The obvious implication for many will be that lower-income households want, but cannot afford, fixed network broadband. That is only partially true.

Keep in mind that 41 percent of households with annual incomes under $30,000 do not have use computer at home, compared to just three percent of households with incomes over $50,000. In other words, many lower income households simply do not use computers, so naturally demand for fixed network broadband is lower than it is for higher-income households. 

Annual Household Income	Use a Computer at Home	Internet at Home	Broadband at Home
Under $30,000	59%	52%	47%
$30,000-$50,000	84%	78%	68%
Over $50,000	97%	97%	91%

Is Mobile Payment Window of Opportunity Closing? If so, Where?

Some might argue that mobile service providers in emerging markets could relatively easily capture much of the the $120 billion to $130 billion mobile payments opportunity.

There is legitimate reason to believe the potential is there. In many emerging markets, where the banking infrastructure is undeveloped, the ability to use a mobile device as a virtual “branch bank” location is a winning and obvious proposition.

According to Gartner, the total value of mobile payments transactions will reach $600 billion by 2016, up from $170 billion in 2012.

Delta Partners argues that the market potential is about $12 trillion. Total fee revenue, some believe, could reach $250 billion, but banks and payment networks will capture most of it, Delta Partners argues.

“We estimate the global revenue that all mobile payments service providers can achieve is approximately $120-130 billion,” Delta Partners argues.

But 90 percent of this revenue will be generated in sophisticated and developed markets. That implies a developing market opportunity for mobile operatorsof about $40 billion to 50 billion, which is equivalent to four percent to five percent of total mobile operators’ revenues.

The point is that the window of opportunity for most mobile service providers is either closed or closing fast. Banks, Visa and MasterCard now are driving electronic payments growth across the world, Delta Partners argues.

While emerging markets operators may consider bypassing the banks, the developed and sophisticated markets operators need to build partnerships with financial-sector players in order to offer the full value proposition and to comply with commercial banking regulatory requirements.

“Sophisticated markets”  account for close to one billion people, Delta Partners says. The key value in such markets is replacing the traditional wallet.

“Developed markets” have a population of around four billion. Cash is still the main means of payment although payment card penetration is increasing. There the opportunity to drive electronic payments becomes a key objective for M-Payments providers. This cluster is represented by sizeable nations such as Brazil, Russia, India, China, South Africa, South Korea, Turkey, Poland, Malaysia, Indonesia, Thailand, Kazakhstan, Colombia and Saudi Arabia. These countries have 1.4 billion adults with bank accounts, 0.25 billion credit card owners and more than 1 billion Internet users.

“Emerging markets” have a population of around two billion. In these markets, less than 40 percent of adults have bank accounts. There are 0.4 billion people with bank accounts, less than 0.1 billion with credit cards and 0.4 billion Internet users.

Actual cash transfers are the big oportunity is markets such as Mozambique, Tanzania, Kenya, Uganda, Ghana, Nigeria, Angola, DRC, Pakistan, Ethiopia, Sudan, Syria, Iraq, Iran, Bangladesh, Mexico and Philippines.

Small, Medium Business Remains a Fragmented Opportunity

Telcos are not the top choice of small and medium businesses for information technology solutions in Western Europe, but as always, no single supplier segment dominates. That means the SMB market will continue to be contested, with any number of logical suppliers. 

Granted, communications service suppliers are viewed as more logical suppliers for "communications" services, but with the shift to cloud, mobile and managed services, it is logical to argue that the potential for access providers is growing, not decreasing. 

 

AT&T Still Has to Do Something About its Rural Fixed Line Assets

AT&T senior executive VP and CFO John Stephens says AT&T could have a solution for what to do with its rural wireline assets by the end of the year.

The T-Mobile USA acquisition presumably would have helped AT&T "fix" its rural broadband problem by allowing greater use of wireless broadband access to augment fixed network access. 

Fundamentally, the two options are to upgrade the rural lines, probably using new digital subscriber line technology, or divest the lines. Some might argue AT&T would rather divest, but the issue is what entity could be a willing buyer, with the desire and the cash to do so. 

Some might argue that AT&T would be better off simply divesting, if that can be done. 

Google and Apple Might Have 98% Market Share This Year

Equity analyst Trip Chowdhry of Global  Equities Research predicts that Google and Apple will capture 98 percent of the worldwide mobile market by the end of 2012. As for who is in third place, Chowdhry is blunt: "There will not be any third spot left."

The forecast is not a "wild" prediction, by any means. IDC's  figures for worldwide smart phone unit sales and market share in the second quarter of 2012 show that Android had 68.1 percent share, while iOS (Apple Inc.’s iPhone) had 16.9 percent share, for a total of 85 percent share between the two firms.

BlackBerry (Research in Motion Ltd.) had 4.8 percent share. Symbian (mostly used by Nokia Corp.) had 4.4 percent share. 

Windows had 3.5 percent share while Linux had 2.3 percent share.

Big New Markets, Such as Mobile Advertising, are Tough to Crack

Big new markets do not automatically translate into big profits for ecosystem participants in those new markets. That’s just one of the problems application and service providers face in new businesses such as mobile advertising, which just about any observer would say represents a huge growth opportunity.

Publishers have seen what happened to display advertising on the web: As more and more ad space was controlled by auction-based marketplaces, the excess supply drove down prices. So it has become hard for publishers to make profits selling web ads.

It might be reasonable to suggest that large publishers likewise will not want to subject their inventory to auction mechanisms, and will try to sell direct, a method that can maintain higher profit margins.

One might argue that will leave the mobile advertising networks with only the cheapest, least-demanded inventory available. At least so far, there is some evidence that mobile ad networks are not having an especially easy time.

In the first quarter of 2012, Velti had revenues of $51.8 million bur a loss of $8.8 million.
Millennial Media had revenue of $32.9 million and a loss of $5.3 million.

Augme had revenue of $5 million and a loss of $7.5 million.  Hipcricket, now owned by Augme, had revenue of $3.4 million and had a loss of $5 million.

Only Opera, which makes most of its money from browser-related ads, had revenue of $47 million and a profit of $11.4 million. Keep in mind, though, that Opera makes $7 million in mobile advertising.

Similarly, you might argue that telcos have had very mixed success with their efforts to create mobile app stores and important, widely-used over the top apps, as big as “apps” have become.
Most really successful apps generally are created by third parties these days. But that doesn’t mean all telcos will stop trying to move up the value chain.

Telefónica Digital is perhaps the best example of a tier-one global telco trying very hard to create important new apps, something Telefónica hinted at when it acquired Jajah.

Telefónica Digital  already has launched a VoIP platform called “TuMe,” constructed out of the JahJah acquisition, which provides free calls and messaging between members. Tu Me has no direct revenue model, at the moment, but is envisioned as a possibly important out of market growth platform.

“TuGo” is coming next. ,TuGo users will be able to move their mobile number into the cloud, using a service that routes incoming calls to whatever device they happen to be using as well as supporting outgoing calls from that device to any phone, but billed to the customer’s own account.

TuGo redefines the customer: they are no longer subscribing to a mobile telephone service, they're subscribing to a phone number which will drift between mobile and fixed networks as best suits them. In coming iterations of the service, Telefónica envisions the abilty to create entirely new 
personalities and functions for any smart phone using HTML5 capabilities.




No matter, the search for new business models and revenue streams will continue as an urgent priority, as voice revenues are declining.

Square Raises $200 Million in New Funding

Square has raised $200 million in new funding from Citi Ventures, Rizvi Traverse Management, and Starbucks Coffee Company.

One year ago, Square had approximately 150 employees and processed over $1 billion in payments on an annualized basis. Today, Square has over 400 employees and is processing over $8 billion in payments on an annualized basis.

The funding round values Square at $3.25 billion. In an indirect way, the valuation and Square's success shows why mobile service providers believe "payments" could be a large and substantial business.


The issue is whether it can become a large and substantial business for service providers.