Mobile Subscriber Growth Will be Lead by Asia, 2012-2018

If you want to know where the great volume of new mobile subscribers is coming from between now and 2018, look to Asia, says Ericsson. That especially will be true of China and the rest of Asia aside from India. Elsewhere, new subscribers will be hard to find in Western Europe, North America and Central and Eastern Europe. 

France Telecom Joins T-Mobile, Telefonica in Embracing Carrier-Owned OTT VoIP

Orange is betting on carrier-owned over the top VoIP as a strategy for competing with Skype, WhatsApp and Viber. "Libon" offers free calling between Libon users, but charges for calls to landline and mobile  numbers. 

At some level, the determination is simply that Orange needs to remain relevant as a supplier of communications services, whatever the danger of cannibalizing at least some of its own voice and messaging revenue. T-Mobile has taken a similar approach. 

In principle, supplying its own over the top voice app also means Orange can supply people with communications outside the areas of the world where Orange operates its own facilities. 

The main reason service providers do not like “over the top” services and applications is that they generally represent direct competition. In other words, over the top apps are substitutes for key products service providers sell.

But that is one key to how things will change in the future. If a major reason over the top apps and services are disliked is that they pose a threat to revenue, then a major reason for adopting an over the top approach is if doing so can create new revenue opportunities.

The business decisions are tricky. In some ways, over the top apps always will represent some danger of cannibalizing existing revenues. But service providers already understand and have embraced other ways of building new revenue streams by going “over the top.” They just haven’t used the term.

Instead, it has been more common for service providers to go “out of region,” as when acquisitions are made in areas where a given firm does not already provide service. European telcos buying assets in Africa provide examples. Cable companies buying other firms in different regions is another example.

The point is that buying assets out of region is similar in principle to some forms of over the top service. Incumbent local exchange carriers have created competitive local exchange carrier operations to sell services “out of region,” for example.

Over the top is trickier for the simple reason that customers and non-customers can use the apps or services, so there always is some risk of substitution for existing services a provider sells. But over the top also can represent an “out of territory” growth strategy.

Think of it as a shift of focus from “selling services to current customers, where we have network” to “selling services to non-customers who are out of territory.” That’s a big shift, as traditionally service providers have operated on a territorial basis, with licenses or franchises that specify where they can build networks and provide services.

Over the top changes all that. As Google apps can be used by any person with web browser and broadband access, so too can a telco-owned app be used by anybody with a web browser and broadband access, in territory or outside it.

Sooner or later, service providers will figure out how to do so on a broader scale. Telefonica, T-Mobile, Deutsche Telekom and others have invested in their own over the top apps. In part, that has been a defensive move in markets where use of over the top apps are a major part of consumer behavior.

But over the top also has been viewed as a way of creating new customers out of region or out of territory.

If you think about it, the Verizon and Coinstar joint venture to create a streaming version of Redbox is part of a pattern at Verizon and elsewhere, namely that over the top services increasingly are being viewed as a way to sell services to “non-customers.”

In essence, the new streaming service will reach beyond the footprint of Verizon fixed network customers and appeal to all 30 million Redbox customers who have been renting DVDs from the Redbox kiosks.

According to Verizon Communications CFO Fran Shammo, Verizon was looking to create a streaming service that would extend “outside of just the FiOS footprint, utilizing the content that FiOS has and bringing that into the rest of the United States.”

Some think something similar will happen as Verizon’s agency agreements with Comcast, Cox Communications, Time Warner Cable and Bright House Networks develop, as well. Those efforts so far have had each of the partners co-selling cable TV, fixed network broadband access and fixed network voice, plus wireless service, outside the Verizon fixed network footprint.

In essence, Verizon is using the agency agreements to sell services to “non customers” outside the Verizon fixed network footprint.

Likewise, T-Mobile USA has found much the same results with its “Bobsled” over the top VoIP service.

Since April 2011, more than 10 million calls have been made on the over the top Bobsled application made available by T-Mobile.

Of the millions of Bobsled calls made to phone numbers, 80 percent originate from outside the United States, though messaging seems to be a U.S. phenomenon. Although Bobsled Calling has seen significant international usage, Bobsled Messaging users are predominately U.S. based, with 90 percent of messages sent domestically.

Usage statistics also show one of the key present realities of over the top apps sponsored by communications service providers, namely that usage might often be by "non-customers."

Of the more than one million Bobsled Calling users, 95 percent are not T-Mobile wireless subscribers, T-Mobile says.

That should suggest one key strategic difference between a carrier-offered app or service, and an over the top app, namely that in some cases the OTT apps do not necessarily cannibalize current customer use of carrier services, but essentially are an "out of region" service that gets used by non-customers.

A La Carte Entertainment Video Might Not Work, Though People Want It

Most people these days would probably agree that the ability to buy video a la carte, show by show, series by series or channel by channel, using the Internet or any other distribution method, is a good idea. Some blame the distributors for failing to meet demand. But distributors would say their programming contracts forbid such sales. 

"We should be clear about something: cable companies are at the mercy of content companies on the issue of content rights and use," says Michael Powell, National Cable and Telecommunications Association president. 

The licensing rights dictate most of what distributors can, and cannot do, with that licensed programming. Most consumers probably think, intuitively, that shifting to an a la carte retail regime would lead to lower costs.

Powell points out the flaw: "The a la carte model is deceptively attractive until you do the math."

People generally assume that if ESPN were sold a la carte the price would fall. But if you assume a shift to a la carte could not happen unless such a development were revenue neutral, you have the crux of the problem. With fewer customers, there would be less revenue, but programming and other costs would remain the same. So prices would rise. 

Studies are inconclusive, though. Some show a sort of neutral or slightly positive outcome if a typical consumer purchased about 11 channels. 

A la carte would mean fewer subscribers and fewer advertising dollars. So prices actually would rise. For "ESPN to maintain its current revenue, it would have to cost hundreds of dollars," says Powell.

An economist might say the typical video bundle works because it allows distributors to apply scale and scope economics. The corollary is that most networks, which are advertising supported, want to be part of a "no choice" basic tier for business reasons of their own, namely the ability to better sell the advertising that underpins their business models. 

When multichannel video distributors say a bundled approach creates economics that favor smaller, niche networks to thrive, they are right. An end to bundling would likely decimate most smaller, more-lightly-viewed networks. To the extent that content and program diversity is a desired end user benefit, "choice" in all likelihood would decline in a full a la carte environment, because most people would not buy most channels. 

The possible advent of over-the-top TV viewing worries most in the current ecosystem for one compelling reason: "households view less than one quarter of the networks they are forced to buy in the bundle," the Consumers Union noted in an past analysis assuming a 50-channel offering. Even today, with hundreds of available channels, end user behavior does not seem to have changed much. 

Most people watch a dozen or so channels on a regular basis. 

Cable operators have argued that end-user costs might actually climb in an a la carte environment, for a number of reasons. Higher customer care costs, operating and marketing are likely, cable operators have argued. Part of the argument has been based on the need to supply new decoders to customers who did not previously need them. That is likely not much of an issue these days, as cable operators convert to largely-digital or all-digital services where customers already must be provided set-top boxes.

Operators also have argued that customer care costs would rise, and there is more substance to that argument, at least during the period where customers would be confused about the new way of buying service. The National Cable and Telecommunications Association has estimated that customer care costs increase by more than 75 percent in a pure a la carte scenario, the Consumer Union says. 

Others believe a typical household might wind up paying about the same amount each month. That is likely true more for ulti-person households and for households that watch more television.

Separate studies by the Federal Communications Commission seem to have concluded that unbundling could save money, or wouldn't save money. One of the studies suggested  “consumers that purchase at least nine networks would likely face an increase in their monthly bills" when buying a la carte. 

Likewise, one of the studies suggested bill increases ranging from 14 percent to 30 percent under a la carte, while the other suggests a consumer purchasing 11 cable channels would face a change of bill ranging from a 13 percent decrease to a four percent increase, with a decrease in three out of four cases.

ITU Internet Censorship?

Some 42 countries filter and censor content. In just the last two years, governments have enacted 19 new laws threatening online free expression, Google says.

Guardian Newspaper Says: Two Years from a Mobile Tipping Point

Many application providers have a "mobile first" business strategy. Some media and content companies are moving that way as well. 

Anthony Sullivan, group product manager for Guardian Core products at Guardian News & Media, says mobile devices, including tablets, now represent 35 percent of all "accesses" of Guardian products.

At some times of day, mobile visits overtake desktop for Guardian products, he notes. 

"If you look between 6 am and 7 am in the morning, we're now getting more visits coming from mobile devices," he said. "On Saturdays at 3 pm when the Premier League is in full flight, we also have more mobile devices than desktop."

"The way we've organised ourselves reflects that we put mobile really at the center of our planning," Sullivan notes. 

Spectrum Sharing Test?

It might be a bit of an experiment, but LightSquared is proposing a spectrum sharing plan as part of its effort to resurrect its business plan. 

To avoid interference, LightSquared proposes to share spectrum that is currently set aside for weather balloons used by the federal government. In exchange, LightSquared said it would permanently relinquish its 10 MHz of spectrum that is directly adjacent to the frequencies used by GPS receivers.

LightSquared wants to combine the 5 MHz it uses for satellite service at 1670-1675 MHz with frequencies in the 1675-1680 MHz band. 

FCC officials might want to approve the proposal just to see how it works, since there is some thinking wider sharing of spectrum might be possible in many other bands. 

Will the U.S. Cable Industry Someday Have a Broadband Monopoly?

 

Is the market for high-speed broadband Internet destined to become a "new monopoly?" The question might seem silly to many observers who compete in the market. 

Some simply point to the consistent strength of cable provided broadband in the net new customers area as evidence cable is winning the broadband access market share battle 

It is hard to refute that notion, as consistent declines for telco-provided digital subscriber line services, despite gains by fiber-reinforced services provided by telcos, are a clear trend. 

So U.S. cable operators are gaining share in the fixed network access market. Also, recent marketing agreements between Verizon and top U.S. cable operators give the impression that cable has abandoned any serious effort to build its own facilities-based mobile business, while Verizon likewise has decided that, where it cannot provider FiOS, it will rely on mobile broadband. 

But that's only part of the story. 

Mobile broadband is beginning to represent a bigger share of total broadband access, as well.  

The number of active mobile broadband subscriptions reached nearly 1.2 billion by mid-2011, representing a 45 percent increase annually since 2007, with total mobile subscriptions topping five billion By the end of 2010, there were over twice as many mobile broadband as wireline broadband subscriptions, for example. 

Over the longer term, fixed broadband access share might not matter as much, overall.