SoftBank Talks to Deutsche Telekom about T-Mobile USA

It would be logical for Dish Network to turn to a deal with T-Mobile USA if its attempt to invest in Sprint were to fail.                                                                                Net Subscriber Additions                                                                                                                                                         


Now it seems a game of musical chairs could start, as SoftBank talks to Deutsche Telekom and a deal to buy T-Mobile USA, in case the SoftBank deal to buy Sprint were to fail.

Either way, it would seem, both Sprint and T-Mobile USA are likely to find themselves poised for potentially new strategies for attacking the U.S. mobile market. 

Whichever asset winds up affiliated with Dish Network will likely, over time, become a relatively specialized "mobile video" service, in terms of market positioning.

That doesn't mean its devices will fail to operate as phones, text messaging platforms or Internet access devices. But the positioning likely will be video entertainment centric. 

Whichever asset winds up affiliated with SoftBank likely will be "mobile Internet centric." Precisly what that might mean is not yet clear, but if SoftBank attacks the way it did in Japan, among the issues is how much average revenue per user the SoftBank-lead firm is willing to lose. 

In the meantime, while the instability continues, no matter what Sprint or T-Mobile USA says about its service, strategy and priorities, those all could change dramatically, and relatively soon. 

Google Denies "Back Door" Access to its Servers

Google CEO Larry Page and Chief Legal Officer David Drummond insist that Google has not "joined any program that would give the U.S. government—or any other government—direct access to our servers."

The U.S. government does not have direct access or a “back door” to the information stored in our data centers, Google says. Page also claims Google "had not heard of a program called PRISM until yesterday."

Google does say it provides user data to governments "only in accordance with the law." Some might say that is likely accurate, but also not completely "true," either. 

Michael Arrington suggests a way Google could be parsing words carefully, but also not completely denying that intelligence agencies can get the access reports claim. For one thing, entities supplying such data are compelled by law to deny they are doing so. 

Nor would NSA or other agencies need access to Google's servers. Backup copies would do. 

Internet Access in Very-Rural Areas is a Problem; High-Speed Access is a Big Problem

Lower-speed Internet access is a problem, but not as big a problem as higher speed service in the United States, a study suggests. 

Any experienced network engineer or architect would agree. At any higher speed, providing service in very-rural areas will be a big challenge.

But as access speeds climb, the gap between urban and suburban areas, and very-rural areas, grows fast.

At the moment, about 66 percent of U.S. residents living in very-rural areas have access to Internet access at speeds of at least 3 Mbps, compared to 99 percent of residents of residents of bigger cities and the suburbs of those cities.

About 53 percent of residents living in very-rural areas can buy access of at least 10 Mbps, compared to 98 percent of residents of bigger cities, and 98 percent of suburban residents living around those cities.

About 14 percent of residents in very-rural areas can buy service at 50 Mbps. About 67 percent of residents of suburban areas surrounding larger cities can buy 50 Mbps service, while 63 percent of residents in central areas of bigger cities can buy 50 Mbps service.

The gap is wider at 100 Mbps, where 38 Mbps of residents of suburban areas can buy such service, while 28 percent of residents in central city cores can buy 100 Mbps service. In very-rural areas, just about three percent of residents can buy 100 Mbps service.

About 23 percent of rural residents are able to buy Internet access at speeds of 50 Mbps or greater, while 63 percent of urban residents can do so, study by the National Telecommunications and Information Administration.

If adoption of 50 Mbps is not at 23 percent in rural areas, and 63 percent in urban areas, it probably means consumers have concluded the existing price-value relationships for slower-speed services are adequate.

One might therefore argue that producing inducements for further upgrades will require some tweaking of the price-value relationship. Since most expect there will be a continuing logic to “higher prices for higher speeds,” absolute price will be the biggest potential game changer, though price per megabit might indirectly be a driver of upgrades.

Likewise, some 38 percent of households in suburbs, 28 percent in the central areas of bigger cities and 31 percent of households in “exurbs” already can buy service at 100 Mbps.

What seems indisputable is that average purchased speeds will continue to increase, as speeds have tended to grow 10 times every five years.

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."