Does Microsoft Make More Money from Android than Google Does?

How does Android help Google? In many ways, it is hard to demonstrate clearly. Google doesn’t charge device makers for using Android, so there is no direct licensing revenue stream.

Ironically, Microsoft gets a royalty on each copy of Android used, and can quantify what it earns from each sale of an Android device.

In fact, Microsoft makes more money, directly, from Android than Google does.

Royalties are the reason. Some estimate Microsoft earns $1 per Android device, from those manufacturers who have decided to pay Microsoft to avoid patent lawsuits. Others peg the costs higher.

If Microsoft earns an average of $8 per Android device, Microsoft would earn $3.4 billion in 2013 from Android device sales, assuming Microsoft gets royalties on half of Android devices sold globally.

By 2017, Microsoft could earn almost $5.9 billion from Android royalties. If Microsoft collected royalties on 75 percent of Android devices sold, by 2017 that could be worth over $8.8 billion.

Device makers don’t have to pay Google to use Android, but the majority are paying Microsoft, which holds patents over multiple technologies used by Android.

Microsoft has licensing deals with almost two dozen Android device makers, including Samsung, HTC, LG, and Amazon, as well as Hon Hai, the parent company of Foxconn and China’s ZTE.

Microsoft has said that 80 percent of Android devices sold in the United States and more than half of Android devices sold worldwide are covered by Microsoft licensing agreements.

But others would argue that Google never has intended to make money directly from the spread of Android.

A more reasonable answer is that Google expects to make money when people buy apps from Google Play, or use Google search or other apps.

But even that argument is true only some of the time. A good case in point is Amazon's version of Android, where Google Play Store is not available, even though Amazon uses a modified (“forked”) version of Android.

So some make the argument that Android’s share will not, in the end, help Google very much.

So why does Google support Android, if it gets no direct benefit? You might say the obvious answer is “advertising,” since Google's primary business is selling advertising.

To the extent that web services are distribution channels for ads, then Android is a distribution channel. Google's primary motivation for incurring the cost of creating and subsidizing Android is to ensure their services always have access to market.

Skeptics might argue that Apple wins, in the end, because Apple’s revenue model aligns application provider and Apple interests, while Android might, or might not, do so.

Some might point to data suggesting Apple users spend more money buying apps, or spend more time using the web and apps.

Flurry data shows that Apple users spend more time interacting with apps than do Android users, for example.

Some would note that Apple's App Store is generating $5.4 million a day in app sales for the top 200 grossing iPhone and iPad apps.

Google Play revenue, on the other hand, has been estimated at $679,000 for the 200 top-grossing apps.

On the other hand, the indirect value of Android for Google’s revenue prospects arguably is large, if hard to calculate directly.

Some argue that Android is important because Android users tend to make more extensive use of Google apps. In part, that is because each of the major operating systems tries to drive usage to ad networks and apps affiliated with the ecosystem.

So Google might be said to rely on the ndroid ecosystem to drive a certain portion of an expected 2016 $12 billion in ad revenue.

"Wireless" Has Changed Since 1990

Spectrum is the necessary foundation for wireless services of all kinds, and over the last several decades, the number of services, and types of services, have multiplied. 

Though some industry professionals will rightly point to scenarios where waveguides (optical fiber, coaxial cable, twisted pair) are better choices, wireless has assumed a dominant role for communications. In 1990, broadcast radio and broadcast TV were arguably the top wireless apps most consumers used.

By the turn of the century, mobile phones had clearly become the major new service consumers were familiar with, and used.

By 2010, Wi-Fi had become a highly-popular and familiar application used by consumers.

What might have changed by 2020 is not yet so clear, but at least expect that new ways of sharing spectrum could emerge by that point, with Internet access likely the main application.

By 2030, it is conceivable that new lead uses or apps might have emerged as well. 

All of that will begin with regulators in many countries making decisions to enable innovative new uses of spectrum. 

EU Roaming Costs Drop Again

As planned, the European Union’s plan to lower the cost of mobile roaming within the EU has set a new stage on July 1, 2013, with additional limits on prices for use of roaming data by about 36 percent.

Data roaming now is as much as 91 percent cheaper in 2013, compared to 2007, the EU says.

The EU also has mandated price caps on voice roaming and text messaging as well. As a result of the wholesale price caps retail price reductions of over 80 percent have happened since 2007.

The new price caps set maximum service provider wholesale rates at new lower levels.

Roaming data charges now are set at 45 cents per megabyte, down 36 percent from 2012 levels.

Placed roaming calls are capped at the wholesale level of 24 cents a minute, a 17 percent reduction from 2012 levels.

Charges for receiving a roaming call call dropped to seven cents a minute, down 12.5 percent compared to 2012.

The cost of sending a roaming text message declines to eight cents, an 11 percent reduction compared to 2012 levels.

Operators are free to offer cheaper rates, and some have already begun to remove roaming premiums altogether for voice and text messaging, or offer a roaming-free area region across one section of Europe or another.

On July 1, 2014, another planned price reduction will happen, dropping roaming data charges to 20 cents per megabyte, while initiated voice calls will decline to 19 cents a minute.

The cost of receiving a roaming call will dip to five cents a minute. The cost of sending a text message will drop to six cents.

Connected Car Market Will Happen; How is the Issue

By 2022 there will be 1.8 billion automotive machine-to-machine Internet connections, including 700 million connected cars and 1.1 billion aftermarket devices for services such as navigation, usage-based insurance, stolen vehicle recovery (SVR) and infotainment, a new study conducted by Machina Research, and sponsored by Telefónica Digital, suggests. 

What people now do is multitask, using their smart phones, tablets or other devices as the “interaction platform,” is that is what they want to do. The connected car market might face similar challenges. 

People might decide all they want is for the autos to allow connection of smart phones to in-car peripherals such as screens. 

Think of “car phones” and you will see the problem. People like being able to communicate easily from wherever they are. 

But a dedicated car phone no longer makes sense. People just use their mobile phones. 

Machina Research predicts that by 2020, 90 percent of new cars will feature connectivity, growing from less than 10 percent today. 

In part, that is because connectivity will be necessitated by regulatory mandates such as the European Commission’s initiative eCall, which calls for a system to be fitted to all new vehicles by 2015, meaning emergency services will automatically be contacted and given the vehicle location in the event of a serious accident. 

But there are lots of issues if the communications are hard-wired into the auto itself. 

 Among the issues for automobile suppliers are ways to keep auto communication systems up to date, as new air interface standards are introduced, and as autos are built for global markets where air interfaces and networks are disparate. 

In other words, technology life cycles are different in the mobile and auto industries. Mobile networks tend to change every 10 years or so. Autos will be used for 15 to 20 years. 

Some requirements are obvious. Auto communications must be multi-mode, since autos might have to use 3G in some markets and can use 4G in other markets, with various flavors of 4G also an issue. 

So the car communications systems will have to roam. Largely unresolved are the business model issues, such as who pays for the connections. 

That’s another reason why allowing people to connect their own smart phones makes sense. 

Connected car sounds like a good idea. But so did “interactive TV.” People now “interact” while watching TV. They just don’t necessarily want to interact with the content directly, using some dedicated feature of the TV or the content.

In similar fashion, a connected car market likely will develop. Precisely how remains a very open question. Car phones seemed like a good idea at the time, as well.

Mobile Operating System Disruption is Possible, but How Often Can it Occur?

Apple and Samsung had 62 share of the 141 million U.S.-owned smart phones in the March to May 2013 period, comScore reports.

Apple had 39 percent of the installed base, while Samsung had 23 percent. HTC had nearly nine percent while Motorola had nearly eight percent and LG had nearly seven percent.

Though some will question how much benefit Google yet has reaped as a result of its Android initiative, Android ranked as the top smart phone platform in May 2012 with 52 percent market share.

Apple ranked second with 39 percent market share, followed by BlackBerry with nearly five percent, Microsoft with three percent.

And we sometimes forget how rapidly operating system preferences have changed. Until 2010, Symbian lead globally. At the beginning of 2008, Android wasn’t a commercial platform.

By 2010, Android had become the clear market share leader (sales, not installed base) globally.

For new challengers, including Tizen, Firefox and even Windows Mobile, such sudden changes offer hope that, under the right circumstances, a new operating system can disrupt the existing market.

On the other hand, challengers also must confront the size of the content and application ecosystems that the leaders have managed to build.

Mobile operating system disruption can happen, as we already have seen. The issue is how often, and under what conditions, such disruption is possible.

How Fast Will Asia Reach First World Levels of Broadband Access?

How long will it take for Asia to Reach "First World" levels of broadband access adoption and speed? The answer, of course, depends on where we look. Some would say a few nations in Asia already have surpassed most nations in North America and Europe.

But that's the point: Asia is too varied a place to describe in "average" terms, as it arguably includes both the nations with the fastest access as well as some nations with very low access speeds or adoption. 

 Hong Kong has average access speeds of 54.1 Mbps, while South Korea has average speeds of 48.8 Mbps. 

Malaysia, with an average peak connection speed at 18.2 Mbps, represents the average country. 

But Asia is a continent of wide dynamic range, where it comes to access speed. Africa, Europe, South America, and the Pacific (which includes Australia and New Zealand) all have a rather even distribution; consequently they have a median and an average that are both located near the middle. 

 In Asia, median (half of country speeds are higher, half are lower) and mean (arithmetical average) are not closely correlated. 

That tends to happen when a sample includes widely-disparate numerical values. 

 "Average" data consumption is that sort of distribution, as it is typical for a small number of users to consume very large amounts of data, while most users consumer relatively little.

So it is difficult to predict when "Asia" will reach "First World" levels of adoption or speed. Some nations in Asia already have surpassed most developed nations. Some are comparable, and some lag. 

But many predict huge adoption of Internet services in Asia over the next decade, as Asian Internet adoption rates already are the highest in the world. 

DirecTV wins LTE Spectrum in Columbia, Brazil

DirecTV Group has spent $45 million to acquire fourth generation spectrum in Brazil. DirecTV plans to use the spectrum to expand its Long Term Evolution business in Brazil.

And although the idea might meet with some skepticism elsewhere, DirectTV plans to use LTE to create a dual-play dual-play offer of entertainment video and broadband Internet access, using LTE as a rival to either digital subscriber line or cable modem services.

DirecTV's Sky Brasil subsidiary acquired 12 regional blocks of 2.5 GHz spectrum in Rio de Janeiro and Sao Paulo, as well as in Amapa, Bahia, Goias and Parana, Rio Grande do Sul, and Santa Catarina. DirecTV already had been selling wireless broadband in Brasilia.

DirecTV has four million video customers in Brazil.

Nor is the Brazil expansion the only wireless broadband effort DirecTV has launched in Latin America. DirecTV also has won LTE spectrum in Columbia.

In some ways, DirecTV’s business model is reminiscent of the way early LTE networks were launched, with “modem only” service initially, before LTE phones actually were available.

In DirecTV’s case, though, the focus on Internet access only is deliberate. LTE’s value is that it enables Internet access, not that it is a “mobile phone” network.

As with most to all observations about service provider strategy, the question of whether LTE can be a competitor to DSL or cable modem or satellite Internet access has to be answered in context.

In some markets, LTE will indeed prove to be a primary way for some service providers to provide Internet access. In other cases the business case will be less strong. But DirecTV's moves also illustrate that LTE is not "just" a fourth generation "mobile" technology.

It also can be a primary Internet access platform.