Additional Screens Get Used for Longer Form Video

It has been common for some years to refer to PCs, smart phones and now tablets as second or tertiary TV screens, in addition to the growing amount of online video consumed on standard TVs, but delivered using a game console or Internet-connected TV. 

And though most such Internet-delivered content remains "shorter form" fare, tablet owners spent 71 percent of their total tablet video viewing time watching videos 10 minutes or longer, a study by Ooyala finds. About 30 percent of total tablet viewing time was spent watching content over an hour long.

Desktop viewers tuned into live video for an average of 40 minutes.

Those statistics are important as they show growing willingness to watch the sort of longer form fare that in the past has been watched on TV screens. A shift of consumer behavior towards video viewing on screens of all sizes is one precondition for a future in which standard TV fare can be viewed conveniently on virtually any Internet-capable device. 

The other, and more important issue is a decision by programming networks to allow such viewing, and the development of what are to them interesting revenue models. 

Also, the amount of time users spent watching live video on gaming consoles more than doubled in the third quarter of 2012. 

Iliad Free Continues to Disrupt French Mobile Market

France's "Free Mobile" reached 4.4 million in the third quarter of 2012, ton reach market share of 6.4 percent, according to Reuters.

Perhaps more to the point, Free Mobile gained 60 percent of all net new mobile subscribers.

Iliad added 805,000 net subscribers. 

Orange gained 320,000 customers, SFR gained 40,000 and Bouygues Telecom gained 124,000. 

Price is Free Mobile's distinguishing trait, and the means by which it intends to disrupt the French mobile market. 

Fixed Network Broadband Market is Near Saturation

It almost seems impossible that fixed network broadband Internet access could have become a “legacy product” so soon, but that is what has happened. For the most part, nearly everyone who wants to use broadband already buys it. And for those who want access to the Internet, and don’t want to buy fixed network broadband, mobile broadband, using a smart phone, now is a growing trend.

Leichtman Research Group points out that  the 17 largest cable and telephone providers in the United States, representing about 93 percent of the total market, acquired about 580,000 net additional high-speed Internet subscribers in the third quarter of 2012.

Collectively, these service providers now account for over 80.7 million subscribers. Cable companies have 46.2 million broadband subscribers, and telephone companies have 34.5 million subscribers.

Keep in mind that not all households own or use computers, a primary indicator of potential demand for broadband. At about 80 percent broadband penetration, we already are very close to the percentage of households that own computers, use the Internet at home, and want to buy the product. .

Many studies show that income is directly correlated to PC ownership and broadband usage. Households with annual incomes of at least $75,000 buy broadband at at least an 87 percent rate. Homes with annual incomes of $30,000 to $49,999 buy broadband at a rate of about 64 percent.

That pattern roughly mirrors the TV market, where not all homes own TVs and not all households subscribe to video entertainment services, though most do. There are about 132 million U.S. homes. About 114 million have TVs. And there are about 96 million video subscriptions purchased by U.S. consumers.

Since many households own two or more PCs, it is difficult to determine precisely what percentage of U.S. homes actually are candidates for broadband services to support those devices.



The top cable companies added about 575,000 subscribers, while the top three telephone companies added about 5,000 subscribers, in large part because AT&T and Verizon actually lost customers.

AT&T and Verizon added 749,000 fiber subscribers (U-verse and FiOS) in the quarter, while having a net loss of 799,000 DSL subscribers.

The slow pace of net additions simply reflects a market that is nearly saturated. We will know when the market is completely saturated when net additions hit zero, or very close to it. .

European Mobile Providers Have a Tough 3rd Quarter 2012

SFR's third-quarter operating profit sagged nearly 17 percent, year over year in the third quarter of 2012,  Reuters reports. For the full year, SFRT now expects a decline of annual earnings of about 12 percent.

SFR added only 40,000 new mobile customers on long-term contracts and 24,000 broadband customers in the quarter, compared with larger rival France Telecom's 320,000 new mobile contract customers.

Vodafone Group reported service revenue that fell 1.4 percent in the second quarter ended Sept. 30, 2012.

Deutsche Telekom, the former German phone monopoly, last week reported a 0.1 percent decline  in third-quarter revenue. 

Telefonica, Spain’s biggest telecommunications company, said sales for the same period dropped 1.6 percent.

What Devices Will Tablets Cannibalize?

Tablets are among the fastest adopted consumer devices ever. The only other device that might rival tablets are smart phones. But one wonders: with global economic conditions difficult, are consumers shifting their spending from one device category to another? And are consumers shifting spending from non-technology categories to devices?

The evidence is probably ambiguous at this point. Perhaps the clearest evidence is that users are shifting spending from “high end” to lower-priced value PCs. But if that is true, one also wonders whether tablets might not start to cannibalize the “value PC” category in turn.

PC cannibalization has been the big issue so far. But it stands to reason that that opportunity costs exist in consumer electronics as in any other field of life. In other words, funds spent for one product necessarily cannot be spent for another product.

Gartner analysts have estimated that consumer spending on technology goods will increase to as much as $2.7 trillion by 2016, driving demand for everything from mobile devices to app store products.

In 2012, about $2.1 trillion€” will have been spent on mobile phones, tablets and smart devices to the services that enables these devices to connect to networks, €”a jump of $114 billion over what consumers spent in 2011.

Other changes might be happening, though. One might argue that a consumer structural shift is happening. A growing number of individuals, across all regions, may be placing more emphasis on purchasing, owning and enjoying technology than ever before.

At one time, the rite of passage for becoming an adult may have been buying a car and then a house. However, in 2012 the rising cost of running a car and buying a house may well cause priorities to be reset.

Renting may become more acceptable, and taking public transportation, taxis and renting cars may become preferable to owning them, particularly in cities with highly congested roads, Deloitte analysts argue. Spending less on housing and transportation enables more money to be spent on technology devices.


Consumers continue to favor lower-end desktop PCs and notebook computers over high-performance models, with the top-end systems accounting for only six percent of the market in 2012, according to an IHS iSuppli Compute Platforms Topical Report.

This year, for instance, the mainstream desktop PC category tied with the value PC category in the share of the global desktop PC market, with each segment projected to claim an evenly matched 46.9 percent by year-end. In comparison, performance PCs will be left far behind in third place, with a meager 6.2 percent.

Meanwhile in the notebook computer space, the value notebook segment will take 46.8 percent, compared to 44.0 for mainstream laptops and 9.2 percent for performance models, IHS argues.

The upshot is that it isn’t entirely clear whether demand for tablets is coming at the expense of some other category of PCs, some other category of devices, or whether some other part of consumer spending is being affected. 

But opportunity costs still apply, always. What people are spending on tablets and smart phones prevents spending on other goods and services.

Apple, Samsung Earn 99% of Smart Phone Profits

Samsung is making huge gains in the global smart phone market. But the story is more than a tale of growing market share. In the area of smart phone profits, Apple and Samsung earn about 99 percent of profits from sales of smart phones.

Apple, Samsung and HTC are now the only three profitable companies in the mobile industry. Not just that, Apple and Samsung together combined to grab 99 percent of all mobile profits, according to Asymco.

HTC got one percent of industry profits, according to analyst Horace Dediu of Asymco.

Why Tablets are Important for Fixed Network Service Providers

Tablets are important devices, for virtually all fixed network service providers. Though mobile service providers will do their best to convince users that tablets are more useful when they have their own mobile connections (Verizon Wireless “Share Everything” plans are an example), most people have learned to save money on their mobile data plans by using Wi-Fi for tablet, smart phone, iPod touch and other Internet-capable devices.

That’s a key business development for fixed network Internet service providers. It means the value of a fixed connection now is higher than it used to be, when just one or two PCs were connected. Now the single fixed connection supports multiple users and multiple devices.

Also, given the pricing of bundles, it often makes sense to buy video entertainment plus broadband, instead of only broadband access. Even when this is not the choice a consumer makes, it is easier to justify buying broadband because it enables use of PCs, tablets, smart phones, game consoles, TVs and other devices.

Depending on the number of users or devices that can be supported by a single fixed broadband connection, the justification for buying broadband never has been higher. Where once it only made sense to buy broadband access if a home used computers and the Internet, now it makes more sense to buy broadband because tablets, smart phones and other devices also can take advantage of the single connection.

In fact, the increase in number of devices using the home networks is one reason why “median monthly usage” (half of consumers use more, half use less) on North America’s fixed access networks has increased from 10.3  GB to 16.8 GB in the second half of 2012, some might argue.

Over the same period, “mean monthly usage” (arithmetic average)  grew by over 70 percent increasing  to 51.3 GB from 32.1 GB. Growing subscriber consumption is not limited to North America or fixed networks, either.

Relatively slow growth of mobile data consumption probably is a direct result of the shift to offloading of mobile data demand to the fixed network.

In North America, monthly usage on mobile networks has experienced only minor growth, Sandvine says.  In the second half of 2012, Sandvine has observed mean monthly usage increasing moderately from 312.8 MB to 317.2 MB.