Mobile’s Future is Changing "Offline," Not "Online"

Some, including entrepreneur Edward Aten, think mobile will be disruptive to the extent it solves "offline" problems for people, not "online" issues. 

In other words, the big opportunities are not so much in making the smart phone a better screen and experience, but making it a tool to solve problems of friction, inefficiency, incomplete information, tedium and excess capacity in the offline world. 

So the real value is less in the way a smart phone functions as a smaller-screen version of a PC, and more in the way mobility gets applied to solve a wider range of real-world problems in real time. 

Unlike some who casually say the "smart phone era is ending," Aten and others believe it is just beginning. That would tend to match past experience with really transforming technology. The benefits frequently are not seen for quite some time. 

The perhaps classic example is the "productivity revolution" personal computers were supposed to bring. Lots of people have studies the matter and been puzzled as to why the expected gains were not seen, even after decades of heavy investment. 

Technology adoption only improves productivity if it is accompanied by concurrent changes in the way work is done, way work is organized.

For example, many would note that there was a substantial increase in productivity during the twenty-year stretch from 1980 to 2000, fueled by companies' investments in enterprise-wide information technology. 

But some research has found scant evidence of major change in the 1980s, and highly-concentrated changes in the 1990s. In other words, a decade passed with very modest apparent gains, and even in the 1990s, when some vertical markets saw big gains, many other sectors really did not benefit very much.

In fact, just six industry segments showed clear evidence of productivity impact: semiconductors, wholesale, securities, retail, computer manufacturing and telecom (specifically "mobile").

But McKinsey analysts point out that there were several driving forces in each industry, that those forces were not the same in each industry, and that information technology was but one of several apparent drivers of productivity growth. 

'However, McKinsey research on the returns generated by these investments found that productivity growth occurred only when the technology was accompanied by thoughtful business process innovations tailored to sector- and company-specific business processes. 

In fact, technology adoption alone, without the accompanying changes in work practices, had little or even a negative impact on productivity.

One might therefore argue that mobile technology's ability to significantly disrupt various industries will hinge on how much each of those industries can reorganize its processes to adapt to mobility. 

History suggests progress will be uneven. 

Are We Already in the “Post Smart Phone Era?”

Have we now entered the “post smart phone” era? So says Shawn DuBravac, chief economist at the Consumer Electronics Association. "I think we are entering a post-smartphone era," he said.

Basically what DuBravac appears to mean is simply that 65 percent of time spent on smartphones now is is "non communication activities." The appellation “post smart phone era” simply reflects the fact that communications functions such as calls and texting are no longer the main focus for smart phones.

“The smartphone has become the viewfinder of your digital life,” said DuBravac. Aside from adding one more catchy phrase, it isn’t so clear that the appellation has too much meaning, though.

To be sure, some have used that phrase to describe the next era of computing form factors. It is rather likely that such use of the term is premature, though.

It’s a bit like people talking about “Web 3.0” even before “Web 2.0,” whatever you think that entails, was firmly established.

CEA seems to base the nomenclature on an overall shift in the technology market’s focus away from hardware and toward apps. That’s reasonable. But no more reasonable or accurate than saying computing architecture is shifting to cloud mechanisms.

Nor can we discern much even by looking at device sales. To be sure, IHS iSuppli predicts global smart phone shipments will rise by 28 percent in 2013 to 836 million units, up from 654 million in 2012, at a time when smart phone penetration in most regions of the globe remains at 20 percent or less.

But an “era” of computing should be generally recognized by most people, not something we debate. Nor do the lead apps used by any class of computing devices over time necessarily define a computing era, though that is a more-logical way of defining a computing era.

By such standards, we cannot tell what the developing era “after the PC” will look like, much less be called. To be sure, the argument that we are entering a post-PC era makes more sense.

It surely is fun, but not actually so helpful, to declare even that the “smart phone era” is ending.

None of the Internet's 4 Leaders are at CES. Really

By nearly universal reckoning, there are now four technology companies that truly matter truly matter to people: Apple, Amazon, Facebook and Google. 

None of them are at the Consumer Electronics Show 2013. Some might make an argument for either Microsoft or Samsung as a potential fifth, but those are highly contestable assertions.

Mostly everybody agrees that the four horsemen of the Internet are Apple, Amazon, Facebook and Google. 

You can make your own assessments of what that might mean in the future for a meeting that historically has touted "consumer electronics." Over the years have featured TVs and video entertainment technology, then computers, then mobile phones and now might be adding tablets. 

But lots of the attention this year, to the extent there is a clear theme, seems to be reverting back to TVs and applications that run on TVs. And that might tell you something. Many of us cannot think of a better venue for TVs.

But lots of us would argue that in a world where so much of the value of anything people do with Internet-connected appliances rests with software, CES is losing a good deal of relevance. That none of the "four horsemen" feel they "must" be there tells you something. 

It used to be the case that only Apple was the major player without a presence. These days, the absences are more telling. 

Back closer to the turn of the century, any discussion of the "four horsemen of the Internet" would have featured names such as Cisco, EMC, Oracle and Sun Microsystems. 

Perhaps nine years later, all the names have changed. 

Mobile Industry is Shifting to Vertical, Rather than Horizontal Revenue Opportunities

It would be a reasonable assumption that many emerging revenue opportunities for mobile service providers are of the "vertical," rather than "horizontal" type. In other words, services for specific industry verticals (automobiles, home security, energy, transportation) will drive new revenue opportunities, not generic horizontal applications such as "broadband access" or voice or messaging. 

Some might consider Sirius XM a play on "radio," the analogy being that Sirius XM is to radio as cable TV is to broadcast TV. But Sirius XM also is a vertical play on the automobile vertical, as growth traditionally is driven by "car-deployed" receivers. 

Much activity at AT&T and Verizon, as well as other service providers, now is shifting to vertical, rather than horizontal apps. 

The three areas AT&T is emphasizing at its developer conference indicate the areas AT&T believes are fruitful new revenue sources for the company. "Digital Life" is for the moment highly focused on home automation applications that work with user mobile devices. 


"Mobile Payments" suggests another area AT&T considers fruitful, and obviously will include the Isis mobile wallet system, and probably future mobile commerce elements as well.

The "Connected Car" initiative illustrates the new role of the automotive vertical in thinking about new machine-to-machine initiatives.  


Verizon also thinks the "connected car" market is an important part of the broader machine-to-machine business. 

New AT&T U-verse "Screen Pack" Illustrates "Value-Based Pricing" Dilemma

AT&T is offering U-verse TV customers a new Screen Pack feature, costing $5 a month, and offering access to unlimited viewing of a library of about 1,000 movies. The content can be viewed on U-verse TV, U-verse.com and on the U-verse app for tablets and smartphones, AT&T says. 

In one sense, that is a simple business decision by one Internet service provider. There is no absolute reason why any particular service or application has to be sold at retail on any basis directly related to the cost of providing the service. 

In fact, there is no reason why a firm cannot sell a product at cost, or at a loss. Still, service such at Screen Pack, and streaming of Netflix movies, do raise questions. Ignoring marketing and fulfillment costs, what does bandwidth and content licensing really cost, for such services.

And what level of actual average usage is a "breakeven" business case? By some estimates, a standard two-hour high-definition movie might consume about 3.6 gigabytes. A standard definition movie of the same length might consume only about 700 Mbytes (much depends on coding, of course). 

One presumes there is some clear point where AT&T might start to "lose money" in terms of licensing fees, incur higher network usage that could affect peering deals, or incur consumer displeasure because monthly caps are breached. On the other hand, AT&T and other ISPs might someday create "video-specific" usage plans that accommodate the higher usage heavy video watching represents. 

Though it is not a real question at the moment, one wonders how to reconcile the cost of bandwidth for video, which currently might be said to "cost" as much as bandwidth used for voice, messaging, web surfing or other applications, but which has quite different quantitative dimensions, and a clear expected consumer price point. 

In other words, including costs of bandwidth, peering, marketing, delivery, licensing and other costs, people expect "unlimited streaming" for a small fixed cost. In that sense, the "cost" of any single video event is deemed to be relatively low, even if "value" might be moderate to high. 

Another way of putting matters is that a consumer would expect unlimited access to 1,000 movies for $5, while a bucket of voice minutes of use might cost an order of magnitude more, even while consuming a vastly-smaller amount of bandwidth. 

The way I used to describe this was that 24 hours of video delivery of an older analog TV system would easily represent the equivalent of scores of DS-3s worth of delivered "data."

Yet where a single local DS-3 might cost $10,000 a month, for a cable TV subscriber the cost of scores of DS-3s used for video would be $35 a month up to $80 a month. 

It used to take as much as 24 MHz of bandwidth to deliver a single, uncompressed full-motion video stream, or about half a DS-3. 

These days, using much better coding, we can squeeze multiple standard-definition TV signals into a couple of megabits per second, or less, and a single HDTV signal into 6 MHz of bandwidth. 

The point is that there is a vast difference between the "value" and the "price" of network resources and bandwidth used to deliver a single TV event, compared to two hours of talking or texting, or web surfing. 

On a revenue-per-bit basis, voice and texting are really high value, for the amount of bandwidth consumed. The revenue-per-bit for entertainment video is frightfully low. How to reconcile those extremes is going to be an issue, some day, if value-based pricing happens. 

Video has for some time been driving bandwith consumption, but without a good relationship between value and revenue, from an ISP perspective, or from a retail buyer perspective, based on prevailing tariffs. 

Is Amazon Web Services Worth $19 Billion?

Amazon Web Services is in many ways a proxy for the cloud services business, or at least the infrastructure portion of the cloud services market (infrastructure as a service or platform as a service).

Macquarie Capital estimates that the overall cloud market will hit $71 billion in revenue in 2015 and suggests AWS will have $38 billion, or 53 percent of the total market. Macquarie Capital analyst Ben Schachter therefore estimates AWS would be worth $19 billion, based on a 5X multiple of Macquarie’s 2013 AWS revenue estimate, or $30 billion using an 8X multiple.

OTT Video Will Remain 10X to 100X Smaller Than Subscription TV, Near Term

Technologists often think that because Internet-based tools can change the way people watch cable TV, such changes naturally will occur. Business issues, though are the issue, specifically the scores of billions content owners and video distributors make from the current business model. 

Consumers likely want to be able to buy only what they want, when they want it. But it is asking too much for a big industry to destroy itself. Over the top video revenues will grow, of course, but will remain a small fraction of the overall video subscription business, which might represent $170 billion just in subscription revenues (irrespective of advertising and commerce revenue) by 2016.