Google Wallet is Failing

Google Wallet, it is probably fair to say, has failed to get traction. The Starbucks app, in contrast, or PayPal's payment platform, continue to stand out as successful mobile payment platforms.

Starbucks has about 10 million users of its mobile payment app. 

In fact, some would say Starbucks dominates mobile payments. 

PayPal expects to process $20 billion worth of transaction value in 2013. 

The fact that some big initiatives, sponsored by big companies, do not get traction is to be expected. We remain at a very-early stage of the evolving mobile payments business. 

In all cases, the solution has to solve a significant problem, in a way that provides more value to users. In the U.S. market, that is a challenge, as few consumers probably would claim the "payment process is broken." 

In the absence of a clearly broken process, any new way of doing things has to create and deliver high amounts of new value, to overcome adoption hurdles. 

Can Anybody Catch Verizon Wireless and AT&T Mobility?

Attackers in the U.S. mobile market have to be optimistic when facing AT&T Mobility and Verizon Wireless, because a rational observer might have a hard time figuring out precisely how any of the smaller providers realistically can overtake the leaders.

AT&T expects postpaid wireless net adds of approximately 500,000 when second quarter 2013 data are reported. AT&T also says  Inc. it has seen “strong” customer additions in the second quarter for U-verse broadband and TV subscribers, year over year.

AT&T also expects second-quarter mobile EBITDA margins to be comparable to the first-quarter. AT&T continues to expect revenue growth of about two percent for the quarter, but profit margins are expected to be down, year over year.

In its first quarter of 2013, Verizon Wireless saw an 8.6 percent year-over-year increase in both service revenues and retail service revenues, with 32.9 percent operating income margin and 50.4 percent segment EBITDA margin on service revenues (non-GAAP), both record highs.

Verizon Wireless added 677,000 retail postpaid net additions, up 35 percent year over year.

Those sorts of figures also point to reasons why it will remain difficult for T-Mobile USA, Sprint or Dish Network to reshape market shares in the U.S. mobile market. The two largest service providers simply continue to take more market share from the smaller providers.

Market share matters. As a rule, market share and profit margin  are related. So as AT&T and Verizon Wireless take more share, their profit margins should grow. In fact, theory would suggest that AT&T and Verizon Wireless, based on their current market shares, should earn profits at twice the rate of the smaller carriers.

T-Mobile USA operating margin was about 25 percent in the fourth quarter of 2012. Verizon Wireless reported first quarter 2013 EBITDA, equivalent to  “operating margin,” of 50 percent on service revenues.

Conversely, it will become harder for Sprint and T-Mobile USA to maintain their own margins if AT&T and Verizon Wireless continue to take more market share.

And new entrants such as Dish Network will start from zero, with no chance of profits for some time.

You might say that is the reason some attackers do not aim to overtake the leaders in an existing market. They want to remake the market, as Skype has done in international long distance. Instead of leading the existing market, the strategy is to essentially destroy the existing market, creating a new market with vastly different revenue and operating cost requirements.

Security Agencies Collecting Credit Card, Internet App and Phone Data from AT&T, Sprint, Verizon, Google, Apple, Microsoft, Yahoo, Facebook, AOL, Skype and YouTube

The U.S. National Security Agency has been collecting millions of customer records from Verizon, AT&T and Sprint, as part of a effort ostensibly for protection from terrorists.

But civil libertarians might now see a dramatic danger that collateral information also is being collected, and could be used in other ways by a growing “administrative state” than now has become a “spying state.” 

Federal agencies also have been collecting emails and Web search data from nine Internet app providers as well. 

Under the Foreign Intelligence Surveillance Act (FISA), the U.S. intelligence community has add access to the servers of nine Internet companies, including Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple.


Data about credit-card transactions also has been collected, and the current extent of continuing operations is unknown, the Wall Street Journal now reports.

Officials claim the program is “targeted” at terrorism suspects. 

But that isn’t the problem. The problem is that data on all sorts of U.S. citizens and residents also is collected, and apparently is retained. 

That means we have to “trust” agencies not to misuse that information. 

"Everyone should just calm down and understand this isn't anything that is brand new,'' said Senate Majority Leader (D., Nev.)


Maybe it isn't citizens who should "calm down."

Security Agencies Collecting Credit Card, Internet App and Phone Data from AT&T, Sprint, Verizon, Google, Apple, Microsoft, Yahoo, Facebook, AOL, Skype and YouTube

The U.S. National Security Agency has been collecting millions of customer records from Verizon, AT&T and Sprint, as part of a data mining effort ostensibly for protection from terrorists.

But civil libertarians might now see a dramatic danger that collateral information also is being collected, and could be used in other ways by a growing “administrative state” than now has become a “spying state.”

Federal agencies also have been collecting emails and Web search data from nine Internet app providers as well.

Under the Foreign Intelligence Surveillance Act (FISA), the U.S. intelligence community has add access to the servers of nine Internet companies, including Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple.

Data about credit-card transactions also has been collected, and the current extent of continuing operations is unknown, WSJ.com now reports.

Officials claim the program is “targeted” at terrorism suspects. But that isn’t the problem. The problem is that data on all sorts of U.S. citizens and residents also is collected, and apparently is retained.

That means we have to “trust” agencies not to misuse that information.

"Everyone should just calm down and understand this isn't anything that is brand new,'' said Senate Majority Leader Harry Reid (D., Nev.)


Maybe it isn't citizens who should "calm down."

Over 5 Months, 10% to 20% of Major ISP Customers Upgraded to a Faster Tier of Service

Based on the latest study of major U.S. ISPs studied by the Federal Communications, one might say that about 10 percent to 20 percent of major ISP customers upgraded their connections to a faster speed tier over the five months since the last study.

That is likely a combination of ISPs upgrading speeds and moving customers to the higher tiers, as well as some consumers choosing to buy a faster grade of service.

U.S. Access Market Faces a Qualitative Change

Quantitative changes sometimes lead to qualitative changes, as when higher Internet access speeds allow viable video streaming services or other cloud services to exist, or when computing costs drop multiple orders of magnitude, while performance increases by orders of magnitude.

The latest Federal Communications Commission report on U.S. Internet access performance also suggests the impact much higher bandwidths will have on the access market. 

One might argue that when speeds grow from 1 Mbps to 5 Mbps, or 5 Mbps to 10 Mbps, or 10 Mbps to 15 Mbps, the possibilities for business models get better in a sort of linear fashion. That might not be true as speeds grow to hundreds of megabits per second up to 1 Gbps.

At least in terms of market structure, some contestants, including satellite and fixed broadband providers, will be rendered mostly irrelevant, most places, when the market expectation is that hundreds of megabits per second, up to 1 Gbps, is the norm, or at least the marketplace reference.

In short, structural changes, not simply quantitative changes in typical access speeds, are going to reshape the fortunes of various market contestants over the next decade or so.

Consider only what already is the case for data consumption by users on different networks. Fiber to home network and cable network consumption levels over a month’s time are nearly identical, with the 50th percentile of users consuming about 40 Gb per account.

Consumers on digital subscriber line networks consume just half that amount at the 50th percentile: 20 Gb.

But notice the outlyer: satellite customers consume about a gigabyte, on a level with data consumption of smart phone owners.

So here’s the clear implication: as networks get faster, users consume more data. One should expect, over time, that users on networks featuring 100 Mbps to 1 Gbps are going to consume even more data than fiber to home and cable network customers already do.

There is no comparable technological fix for satellite networks, even though higher-capacity satellites are being launched.

"Interactive TV" Turns Out to be "the Internet"

Television interests have been trying to create “interactive TV” for decades, in the belief that such interactive features and personalization would create huge new advertising and marketing revenue streams.

But the future often unfolds in ways not anticipated. As it turns out, for interactive TV as for many other businesses, the Internet is creating precisely the business value once envisioned for another way of doing things.

These days, most consumers watch television while also using a smart phone or tablet. There is “interaction” all right, but not directly with the TV, as once was envisioned for “interactive” TV.

People are interacting with friends and augmenting TV experiences, but using the Internet and Web apps, not applications embedded into the content.

According to Business Intelligence, 85 percent of smart phone users do something related to TV they are watching, at least once a month.

More than 60 percent report doing so on a weekly basis and 39 percent say they do so daily.

But we often are surprised in the technology and communications business. Virtually nobody expected that people throughout the developing world would so rapidly adopt voice and text communications using mobile networks and devices.

The rapid acceptance of touch-based tablets came only after more than a decade of failed attempts to create a tablet device market. And most probably are surprised at how fast tablets are displacing PCs in everyday use, in many regions.

Few might have expected so rapid a change in broadband access markets since the advent of Google Fiber, even though 1-Gbps access networks were in operation before Google Fiber launched.

The point is that unexpected, destabilizing change is not unusual in the communications or computing businesses, nor does the future unfold in the linear way we sometimes expect or prefer.