T-Mobile USA "No Contract" Plans are Deceptive, T-Mobile USA Agrees

T-Mobile USA’s “no contract” plans really aren’t, the Washington Attorney General's Office has found. As a result of an agreement between T-Mobile USA and the AG’s office, T-Mobile USA will modify its advertising nationwide.

T-Mobile USA recently launched new wireless service plans claiming to offer “no restrictions,” “no annual contract” and no requirement that the consumer “serve a two-year sentence.”  

The Attorney General argued, and T-Mobile USA agreed, that the claims are deceptive. Customers who purchase a phone using the 24-month payment plan must carry a wireless service agreement with T-Mobile USA for the entire 24 months or pay the full balance owed on phone if they cancel earlier.

So the plan really isn’t a “no contract” offer.

Logitech Revenue Dips 12%: Can You Say "Post PC?"

Logitech International fourth quarter results, for the period ending March 2013, fell 12 percent, year over year.

Sales for the latest quarter were $469 million, down 12 percent from $532 million for the same quarter of the prior year. "Turnaround" is the phrase the company now uses to describe its path forward. 

A "narrowed our strategic focus," job cuts and prioritized effort on products for tablets are examples of what Logitech is doing. 

It's just one more example of what is happening in the "post-PC" computing business. 

Time Warner Cable Offers its Customers "Free" Public WiFi

Google Fiber has gotten AT&T to say it will build a gigabit network in Austin. Time Warner Cable says it will give its Internet access customers "free" access to the Time Warner Cable public Wi-Fi network in Austin, Texas. 

"TWC WiFi" is a citywide WiFi Hotspot network free to Time Warner Cable customers with "standard Internet" plans or above, as well as "business class" subscribers. 

Prepaid access starting at $2.95 an hour will be available as well. 

So far, you'd have to deem Google Fiber a success, as far as spurring ISPs to upgrade Internet access. One would suspect the impact has only begun. 

OTT Messaging Represents 4% of Total Messaging Revenue

Over the top messaging apps are perhaps an apt metaphor for the ways the Internet has reshaped the communications business, most of us would likely agree. At various points in the recent past, there has been debate about whether the next generation telecom network would be the Internet.

That isn't true, precisely. There are private IP networks as there is a public Internet. There are Internet apps and carrier services. But to a degree that is discomforting, much of what people want to do these days can be done using the Internet, rather than any carrier-provided service.

Over the top messaging illustrates those changes as well as anything. But the OTT impact is not so much that it cannibalizes carrier messaging revenue. In fact, OTT probably represents something on the order of four percent of messaging revenues.

As often is the case, OTT does not so much replace existing revenue as destroy the business. Skype, for example, earns a modest amount of money in global telecom terms. But that is not what Skype represents. 

Instead of shifting revenue from one provider to another, Skype mostly kills the carrier voice business. Executives in the video entertainment business encapsulate that insight by talking by "trading analog dollars for digital dimes."

That pretty much gets it right. Internet alternatives only partly "take market share and revenue." Mostly, they destroy existing markets. T

Will AT&T Try to Buy Vodafone?

A recent rumor that Verizon Communications and AT&T were making a huge joint bid for Vodafone was denied. Some think that only means Vodafone rejected the offer out of hand, but the deal of as much as $245 billion might yet see the light of day, in a new form.

Assume Verizon Communications is serious about now pursuing a long-rumored effort to buy  from Vodafone  the portion of Verizon Wireless it does not already own. Assume the deal proceeds and is finalized.

Would that put Vodafone back into play, with AT&T making a new bid?

Vodafone is the second-largest global mobile communications company, with approximately 403 million customers in its controlled and jointly controlled markets.

Vodafone currently has equity interests in over 30 countries across five continents and more than 50 partner networks worldwide.

AT&T would stand to expand in a major way as a global carrier, and find a way to overcome sluggish growth of its U.S. business.  

Such a bid would be ironic in some ways. In 2004, Vodafone made a bid for the entirety of AT&T Wireless when that company was for sale.

Had that bid been successful, Vodafone presumably would have sold its stake in Verizon Wireless, and then rebranded the former AT&T Wireless business as Vodafone.

Cingular Wireless, at the time a joint venture of SBC Communications and BellSouth ultimately outbid Vodafone and took control of AT&T Wireless, which now is known as AT&T Mobility.  

So in an odd turn of events, Vodafone, which tried to buy AT&T Wireless, would then be acquired by its former target.

Make no mistake, the rumored or potential deals would offer the two U.S. mobile service providers a pathway to growth. For Verizon Communications, owning all of its mobile business would immediately boost earnings. For AT&T, the Vodafone deal would catapult AT&T into the global market in a new way.

Strategically, the AT&T interest in Vodafone’s global assets is a clear sign that AT&T sees future growth in the U.S. market as problematic. Verizon first has to consolidate its U.S. business before it can consider looking overseas for future growth.

Internet Video Eventually Will Create Network Winners and Losers

The switch to Internet delivery of video is going to have profound impact on the strategic fortunes of current and future providers of Internet access and video content.

If you want to know why Charlie Ergen, Dish Network CEO, is so intent on getting into the mobile business, that is the reason. At some point, as bandwidth requirements rise, and more of the traffic load becomes video entertainment content, network topology matters.

Point-to-multipoint networks are very good at delivering linear TV, where essentially one copy of a stream can be beamed to scores of millions to hundreds of millions of people.

But such networks fall apart when the traffic is point-to-point, as traditional telephone networks are, or must support unicast video, as the Internet must. The faster Internet access becomes, and the more people use the Internet to watch lots of video, the more difficult it becomes for a satellite provider, or any other unicast medium, to match.

Likewise, as bandwidth demands grow, spectrum-based networks will be at a disadvantage, compared to wired networks. As much as people enjoy the freedom of watching video content anywhere, anytime, volume sooner or later will naturally be pushed onto fixed networks.

We already can see glimmers of that trend in smart phone consumption patterns, where in many instances a majority of volume is shifted to the fixed network. That will only be more important in the future, as unicast, personalized consumption begins to rival linear consumption.

“Eventually, as linear TV is viewed less, the spectrum it now uses on cable and fiber will be

reallocated to expanding data transmission,” says Reed Hastings, Netflix CEO. “Satellite TV subscribers will be fewer, and mostly be in places where high-speed Internet (cable or fiber) is not available.”

Clearly, Netflix and other streaming video services now are driving bandwidth consumption in the U.S. ISP business. Since at least 2011, real time entertainment content has represented at least 49 percent of peak hour traffic  in North America.

By 2012, video had grown to represent as much as 75 percent of peak hour traffic. For some ISPs, that is an opportunity to sell bigger access packages. For others, video entertainment represents a danger, threatening to overwhelm either access bandwidth or capacity caps, or both.

During peak periods of internet use in the US, Netflix constitutes 33 percent of all downstream traffic, according to Sandvine. That’s more than Google’s YouTube (14.8 percent), BitTorrent (5.9 percent), Apple’s iTunes (3.9 percent), Amazon Video (1.8 percent), and Facebook (1.5 percent).

That has clear implications for all ISPs. The issue is just how big an impact all that consumption is having.

Netflix says its users consumed “more than four billion” hours of content  in the first quarter of 2013, so assume that means 4.150 billion hours, globally.

The vast majority of Netflix streaming subs are in the United States, so assume about 88 percent of the streaming happens in the U.S., market.

That implies monthly U.S. consumption of about 1.2 billion hours. So how many subscribers are streaming? Netflix has projected 28.1 million streaming users. That further implies consumption of 73 billion minutes a month.

That implies 2,599 minutes of Netflix viewing per subscriber per month, or roughly 87 minutes per subscriber per day, or 43 hours per subscriber per month.

But there’s a new wrinkle: Netflix is launching new plans that allow for up to four simultaneous streams on an account instead of two for $11.99 a month, $4 more than the current $7.99 single user plan.

Netflix estimates one percent of customers will opt for the new “family plans.” But for ISPs already grappling with Netflix bandwidth demand, the new plan will potentially double Netflix bandwidth consumption from some percentage of Netflix households.

ISPs with the ability to provision lots more bandwidth and price services to reflect higher consumption will have an advantage. ISPs that cannot so easily do so will face a challenge competing.

The Telecom Business is Getting More Like the "Internet"

One growing discontinuity in the communications business is the natural tendency to view the business through functional silos that are losing their meaning. These days, in many markets, people using smart phones are on the fixed networks for access, more than mobile access.

That discontinuity is going to grow, but should be familiar to anybody who works in the Internet ecosystem. Namely, devices and apps are agnostic to the underlying access medium. So even when a company “knows” its own revenue model is directly driven by a specific network (mobile, fixed, fixed wireless, satellite), the networks get used by people and firms with which the access provider has no direct relationship.

In other words, there is a growing disconnect between the concepts of “my customers” and “my users.” Virtually any provider of Internet access has more “users” than “customers.” To be sure, some will see that as a prod to think about ways of creating relationships with users who aren’t customers.

But the trend also explains why ISPs worry about becoming “dumb pipes.” But there is a crucial distinction: every ISP always and everywhere operates as a dumb pipe. What people want is access to the Internet.

One can argue that particular ISPs sell “smart pipe” services. There is some logic to that. But most of those smart features wrap around the dumb pipe function is some way. Traffic can be shaped to improve user experience. Content can be cached. Charging systems can be reconfigured.

And ISPs routinely also act as content or app providers (carrier voice and entertainment video are services, not “Internet” accessed apps).

It is not that the Internet access function itself is in danger of disintermediation. It is not. But the business context is morphing. Some might well argue that dumb pipe Internet access is in fact the foundation service of the future, with “carrier services” wrapped around that access.

Some telcos are trying to do what cable operators have done, namely vertically integrating (in a loosely coupled way) by becoming app or commerce providers. The trend will grow, especially for ISPs that find they cannot significantly reduce operating or capital costs to compete with lower-cost providers.

“Until three or four years ago, consumers primarily accessed the Internet through PCs and laptops but at the beginning of 2013, the picture is very different,” says Amanda Sabia, principal research analyst at Gartner.

“Consumers use multiple screens to perform various activities that require both fixed and mobile internet connectivity,” Sabia says. Consumers are screen-agnostic; they will use whichever screen is convenient, as long as it is ‘connected.’”

Gartner reckons that global mobile devices (other than smart phones with a mobile data plan) per household will increase by more than eight percent annually through 2016.