Tough Economy Affecting Cable, Mobile in Opposite Ways

Between 2007 and 2011, U.S. consumer spending generally shrank, as a response to the Great Recession and anemic recovery since 2008.

But though spending dropped overall, there was one area where spending actually rose: telecom services.

As you might guess, the growth was driven by mobile services, and most would attribute those gains to the attractions of smart phones such as the Apple iPhone. 

U.S. consumer spending on phone services rose more than four percent in 2011, the fastest rate since 2005, according to Department of Labor statistics. 

Families with more than one smart phone sometimes pay more for mobile service than they pay for cable TV and home Internet access. 


The tough economic conditions are not helping cable companies, though.

“The real important economic stats for us in terms of potential wind at our back really relate to improvements in occupied housing, improvements in the unemployment stats, increases in disposable income and increases in consumer confidence,” according to Time Warner President and Chief Operating Officer Robert Marcus. “To tell you the truth, we really haven’t seen a whole lot of meaningful improvement in those stats across our footprint.”

Of course, as happy as mobile service provider executives might be about the revenue growth, the cost of subsidizing those smart phones creates operating margin issues. Still, the numbers speak for themselves: consumers are making cuts elsewhere to fund mobile services.

Other purchasing categories, including cars, clothing, entertainment and food consumed away from home have suffered, in comparison.

The big issue is how long that growth trend in mobile spending can continue.

Kindle Fire HD Generates 11% of Kindle Fire Web Traffic After 1 Week

The new Amazon Kindle Fire HD was released Friday, September 14^th, 2012 and seems quickly to have made a mark on bandwidth consumption. 

After only five days, the Kindle Fire HD represented 11 percent of all Kindle Fire Web usage, according to Chitika

Service Providers to Challenge Game Console Market

AT&T, Verizon Communications, Time Warner Cable Inc., Comcast and Cox Communications are gearing up for a push to deliver video games directly to televisions, Bloomberg :reports, a strategy shift that poses a threat to traditional consoles such as the PlayStation, Wii and Xbox, and shows how ecosystem partners increasingly find themselves competitors as well.

With cloud gaming, consumers will be able to avoid buying Sony’s PlayStation 3, Microsoft’s Xbox 360 or Nintendo’s Wii, and play using generic controllers connected to their set-top box or TV. Some carriers are looking at software that turns smartphones into controllers.

There still are a few technical upgrades required to set-top boxes, such as more powerful graphics processors. But none of that is a show stopper.

Media CEOS Bullish on Tablets, Mobile

CEOs from global entertainment and media companies are bullish on mobile and tablets for future growth, a study by Ernst & Young suggests.

Some 79 percent of CEOs said tablets would have the greatest impact, while 62 percent said smart phones would also be influential. 



Mobile devices also are expected to be the biggest drivers of growth in content consumption over the next three years. 

How Long Can Separate Regulation of Broadcasting, Cable, Communications Continue?

It long has been a fixture of regulatory policy that different media have had distinct regulatory frameworks. In the U.S. market, the fundamental frameworks include unregulated “media,” partially regulated broadcasting and cable; and heavily-regulated common carrier services.

That “regulation by function” made sense at the time. As all networks become multi-purpose networks, the logic of regulating networks “by function or media type”  is subverted. That necessarily raises huge issues that affect the foundation of contestant business models.

In a simple way, the issue is whether stricter common carrier rules should be applied to "less regulated" media, or whether less regulation should be applied to common carrier services.

Also, some would argue, the growing instability of all legacy revenue models, across print, video, music, audio, television and communications industries means that regulation has to incorporate, as a primary objective, the fostering of innovation and investment in network facilities, as there is much less certainty than in the past. 

Greater risk, all other things being equal, means less investment.
A new International Telecommunications Union broadband report incorporates a healthy measure of those perspectives.

“Service providers have struggled with legacy inherited laws and regulations that award licenses per service, and many companies have taken the issue to court – for example, cable TV companies seeking to provide telephone service over their networks, and telephone companies wanting to upgrade their networks to offer video programming services and compete with the cable companies,” the ITU report says.

“More modern approaches to regulation may be needed – such as converged regulation, simplifications to the licensing regime or unified licensing, where one unified license can allow any telecommunication company to provide any service, as long as consumer rights are protected, and the competitiveness of markets is not threatened,” the International Telecommunications Union broadband report suggests.

The historic division between regulation of communications and separate regulation for broadcasting was acceptable in the past when spectrum and telecommunications were clearly divided, and regulation of content was a major focus of any broadcasting agency, the ITU says.  

With the shift of virtually all networks to Internet Protocol, virtually all networks can deliver any type of media. And that complicates any efforts to regulate media, broadcasting and communications separately.

The ITU study notes that policy-makers and regulators now must “stimulate”  demand for broadband and in promote investment in infrastructure. That also requires a “balance” of technologies and policy approaches appropriate to specific situations, including more wireless effort.

The growth rate in global mobile  data traffic is projected to grow 60 percent annually from 2011 to 2017, which will result in a 15-fold increase in traffic by 2017, mainly due to video traffic.

“Such an explosion in data traffic requires more spectrum,” the ITU says.  In this regard,
policy-makers and regulators can help to create a supportive environment and encourage
investment and ensure sufficient availability of quality spectrum, the ITU says.

Should all Internet Device User Interfaces be the Same?

Ask yourself whether it is especially helpful for all your digital devices to use a similar look and feel. How important is it that your PC, your tablet, your smart phone and possibly other devices have a similar user interface? Microsoft is about to find out, it appears, with the launch of Microsoft 8. 

Making radical changes to Windows poses a risk for Microsoft as enterprises and other large organizations prefer to reduce technology risk by deploying mature, stable, well-supported products, Gartner argues. 

Windows Vista, for example, never gained significant success in corporate environments, and its lack of success can be glimpsed in the market share statistics. Gartner estimates that just eight percent of PCs run by Gartner clients ran Vista at its peak. 

The bottom line is that IT leaders are questioning whether Windows 8 will suffer a similar fate, Gartner argues. 

"Microsoft's approach is very different from Apple's and Google's, where phones and tablets have much more commonality than PCs and tablets," Gartner says.  The new "Metro-style" user interface, which includes large buttons for touch and eliminates the ability to boot to the familiar Windows Desktop and have a traditional Windows start menu,  is probably the most controversial decision Microsoft has made in Windows 8, Gartner says. 

The result is an operating system that looks appropriate on new form factors of PC hardware including tablets, hybrids and convertibles, but has people questioning its appropriateness for traditional desktop and notebook machines, which comprise the majority of the existing PC market, Gartner notes. 

Telecom Italia Network Sale?

Telecom Italia SpA should sell its fixed-lined network, said Marco Fossati, whose family’s Findim Group SA owns about five percent of the company. 

“This opportunity should not be wasted as the right conditions may be now, in the next two or three months, or never.”

To be sure, the interests of major shareholders and end users or Telecom Italia do not always line up in the same way. Telecom Italia, like other European telcos, needs to reduce its debt load and make investments in newer lines of business. 

One can argue that what is good for Telecom Italia as an asset, and what is good for Italy, Italian consumers or Telecom Italia as a going concern, can be different. 

In a larger sense, there is a small but growing divergence of opinion among tier one service providers about the value of network asset ownership. 

In some cases, service providers have concluded that they can live with a future as non-facilities-based providers, or have traded their facilities ownership for other opportunities. That is the case in Australia, New Zealand, Singapore and Malaysia, for example. 

In a broader range of cases service providers have concluded they can do so out of region, while continuing to operate as facilities-based providers in region. Increasingly, there is understanding that specific elements of the network can safely be outsourced or shared. 

Telecom Italia might ultimately look for some way to bring in other investors, which would raise liquidity, while retaining management control of the network, though.