By 2017, 66% of Verizon Wireless Traffic Will be Video

Video already accounts for 50 percent of Verizon Wireless'network traffic today and by 2017 video will represent about 66 percent of all Verizon Wirelessll traffic, saysVerizon Communications CEO Lowell McAdam. 

Most ISP networks probably are in the same situation. 

Service Providers Must Expect to Lose 50% of Legacy Revenue in 10 Years

One fundamental rule of thumb I use when looking at revenue sources in the global communications business is that service providers must plan for a loss of about half of current revenue every decade or so, as markets continue to evolve. 

This graph illustrates the point. In 2001, about 65 percent of total consumer end user spending for all things related to communications and video services went to "voice." In 2011, voice represented only about 28 percent of total consumer end user spending. That is easily a reduction by half. 

To be sure, this graph only shows relative spending, not absolute amounts. But you get the point. 

Over that same period, mobile spending grew from about 25 percent to about 48 percent. Again, you see the pattern: growth of about 100 percent (losses of 50 percent require gains of 100 percent, to return to an original level,  as equity traders will tell you).

Video entertainment spending likewise doubled. 

In the U.S. market, one can note roughly the same pattern for long distance and mobile services revenue. Basically, mobile replaced long distance revenue over roughly a decade. 

It is worth noting that voice revenue trends have been through two fundamental cycles, with a third on the way. 

At one time, international long distance was the highest-margin product, followed by domestic long distance. 

That changed fundamentally between 1997 and 2007. 

Over that 10-year period, long distance, which represented nearly half of all revenue, was displaced by mobile voice services.

In the next displacement, broadband is going to displace voice. 

Will Regulators Allow ISPs to Build Where There is Demand?

Should AT&T get municipal authority to build its proposed 1-Gbps access network in Austin, Texas, new issues will be raised. Some providers, such as Sonic.net, have been extending 1-Gbps service first to the places Sonic.net believes there will be the highest demand. 

Sonic.net is "prioritizing our fiber build-out efforts on communities where we see very high uptake of our Fusion Broadband Phone service." Google has done the same in Kansas City, Mo. and Kansas City, Kan. 

And now AT&T says it wants the same terms and conditions as Google Fiber got, before starting its own 1-Gbps upgrade in Austin. 

That raises an issue. Traditionally, municipal franchise authorities have required universal coverage of all homes in a franchise area as a condition of getting a franchise. That can raise overall deployment costs high enough that many would-be providers are discouraged from trying to do so. 

So the broader issue is whether regulators will relent, allowing suppliers to build where there is demand, rather than stipulating that facilities be built where there is little demand, or requiring suppliers to build low-demand areas roughly as fast as they build high-demand areas.

Other proponents of gigablit service, including Gig.U and Ignite, as well as the Federal Communications Commission, recognize that gigabit service has to occur first in selected parts of communities. 

The issue is whether it is not realistic to recognize that similar priorities might be necessary if the fastest extension of gigabit service is desirable. The point is that gigabit networks are expensive. And it might be that the best way to encourage such upgrades is to foster "spot deployments" as widely as possible, without immediately worrying about "universal service."

That isn't the way regulated communications has been governed in the past. But new policies that do not require universal access might speed up investment. There are public policy issues, to be sure. But gigabit networks are a gamble. 

Perhaps we should encourage providers to make the gamble by loosening requirements for universal service, in preference for "build everywhere you can make money, as fast as possible." Oddly enough, if prices do not fall until there is competition and scale, which will lead to applications innovation and then more scale, one has to "prime the pump."

What Google is Up to In Travel

It isn't unusual when a firm buys an asset that will help build an important new business. It is rare for a firm to buy a key asset and then sell it again, in less than 12 months. And that's what Google did with Frommer's Travel, part of a broader effort to build a mobile commerce revenue stream to augment its advertising revenue streams.

In saying it wants to turn intention into action, Google is providing more of its own content to Web surfers by adding information on hotels and restaurants around the world, a bid to attract users and advertisers from sites such as Yelp.

Travel is an important category for Google as it allows Google sites to become a destination. That's why Google bought Zagat and travel information provider ITA Software. 

Google looks to become a one-stop-shop for not only product search but anything to do with the process of gathering information about travel and destinations. But 


Google has other travel related interests, ranging from mobile payments to "local deals." In some ways, airline schedules are another form of "search." But Google would seem to have ambitions across a broader swath of the shopping process. 

The Reason Why Broadcasters Want to Kill Aereo

In 2012, local TV stations earned about 6.5 percent of total revenue from fees paid by cable TV, satellite TV and telco TV video service providers to carry the local TV signals on their video subscription services.

By 2017, that could grow to 9.5 percent of total revenue, according to  BIA/Kelsey. Some might note that affiliate fees also are paid to the broadcasting network with which each local broadcaster has affiliated. 

Such retransmission fees are the reason broadcasters are trying to kill Aereo and Aereokiller. 

10% of U.K. Mobile Users Routinely Use a Shopping App

More than half of European online adults owning two or more connected devices, Forrester Research now says. As you would guess, that has indirect and direct implications for mobile commerce and e-commerce and other parts of the Internet ecosystem.

The United Kingdom has the highest percentage of consumers going online regularly, the most online shopping and the most mobile Internet usage. Some 10 percent  of U.K. consumers with a mobile phone have used a shopping app in the past month.

Germany has the largest online audience in Europe. Almost three in four German online adults have ordered products or services online in the past three months, spending an average of €225. But Germans do not use  newer e-commerce modes such as social or mobile commerce.

Compared with Spain and the United Kingdom, French online consumers are less likely to own multiple connected devices; they are also, overall, the least likely across the five countries to own a laptop, tablet, smartphone, or netbook.

About 58 percent of Italian adults and 69 percent of Spanish adults go online monthly.. However, those who are online are very active social media users. In both countries, 66 percent of the online population has a Facebook account, and they are more likely to be active content creators.

"Nobody Rides for Free: Issue in Mobile Payments and Telecom

MasterCard recently has instituted a new fee structure for “staged” digital wallet providers such as Google Wallet, PayPal and Square, In practical terms, it means the cost of doing business, for those digital wallets, is higher than it used to be, when using MasterCard bank-issued cards are invoked by wallet users.

The point is that although the mobile commerce ecosystem now is a battleground on many fronts, upstart disruption agents now have to confront incumbent resistance. 

The process is reminiscent of what happened when U.S. local telecommunications stopped being a monopoly after 1996. There was an explosion of new competition. Regulatory rules favored the attackers, up to a point. 

But incumbents counterattacked, with prices charged for use of their networks being one element of the resistance. 

Chris A. McWilton, MasterCard’s U.S. Markets president, said PayPal “rides for free"  on the back of other business models." Does that sound familiar? 

Back in 2006, then AT&T CEO, Ed Whitacre complained that “some people” want AT&T to act as a “dumb pipe that just keeps getting bigger and bigger.”

“If you build it, you have to make a return on that,” Whitacre said.  “Nobody gets a free ride , that’s all.”

It's the same language, and with similar justifications. Of course, there are differences. Business partners cannot use the MasterCard network or the public switched telephone network without paying the network owners. Both of those networks are "closed."

The actual problem AT&T was complaining about was use of the Internet access service. There's a key difference, or at least an important nuance. Use of the global voice network is a fee for service, as is use of MasterCard's clearing and settlements network.

Though users pay a fee to get access to the Internet from an ISP, they do not pay for use of the Internet.

Still, you get the point. Incumbents faced with disruptive challenges to their business model will eventually use all the powers of incumbency, when they can, to fight back. Veterans of the U.S. competitive local exchange carrier business will recall just how effective incumbents can be. 

Despite the familiar refrain that "the present year" is the year of mobile wallet or mobile commerce or mobile payments disruption, we are a long ways from knowing how the full story will play out.