What Does Google See in Chromebooks?

Google’s Chromebook initiative initially was derided by many as “too little, too late,” coming at a time when the market was turning to tablets as the growth category in computing devices.

Google obviously did not agree then, and sales results now suggest Google was on to something. Though Chromebooks still represent a small portion of the total U.S. market for laptops and netbooks, Chromebook market share, and apparently growth rate, is increasing.

The devices had about four percent to five percent market share in the first quarter, though that was up from one percent to two percent in 2012, according to Mikako Kitagawa, Gartner analyst.

On the other hand, there is little question that tablets are leading consumer interest in computing devices at the moment. Global PC shipments dropped to 76 million units in the second quarter of 2013, a 10.9 percent decrease from the second quarter of 2012, according to preliminary results by Gartner.

This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market’s history, Gartner says.

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” said Mikako Kitagawa, Gartner principal analyst.

“In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC,” Kitagawa says.

What does Google see in the PC market that others might not? As with Android, Google’s revenue model benefits from increasing the ways Google can steer users to its own apps, devices and operating systems.

Though it might be hard to quantify directly, the more touchpoints Google has, the more places and times it can display ads that underpin its current revenue model. That is the same reason Google has been so proactive in pushing for faster broadband access, lower cost broadband access and ubiquitous access.

In addition to the “always connected” angle, future web apps might act much like launch “native apps” on devices, even when those devices momentarily are not connected.

Chromebook might seem like a distraction. But it is a piece with Google’s support of Android, maps, office suites, YouTube and other apps, devices and operating systems. All of that contributes to creating an ecosystem where the ability to sell ads based on detailed knowledge of people, their behaviors and activities is possible.

Internet Users, Everywhere, are Sophisticated Consumers of Access

People are sophisticated consumers of Internet access services, a global impact study suggests. 

Teenage users in South Africa, for example, use their mobiles and fixed network access in ways that minimize costs, maximize convenience and use the strengths of each method at different times and places.

Among low-income users, free use (such as that in a library) supports resource-intensive content creation or work operations where storage, time, bandwidth and bigger screens are key requirements or at least more conducive to achieving the Internet session goals.

But users avail themselves of their mobiles for Internet access for time-sensitive pursuits, interpersonal communication and low-bandwidth media consumption.

Shared access venues are seen as better for consumption of media and working with large-format documents, while mobile access supports everyday social connections and messaging.

In South Africa, of 8.5 million Internet users in South Africa, 7.9 million accessed the Internet on their phones in 2011, and that 2.48 million of these used only mobile phones for their Internet access.

Also, among a population of 49 million people, ITU estimates suggest there are 725,000 fixed broadband subscriptions, but over 50 million mobile subscriptions.

One possible conclusion is that Internet users, rich or poor, are sophisticated consumers of Internet access services. In developed nations, end users likewise mix use of mobile Internet and fixed network access (Wi-Fi, typically) during the course of a day, in ways that similarly provide value at lower cost.

But it appears cost is not the only dimension upon which consumers are sophisticated.

Internet access speed might be a major reason large number of developing market public access users use shared computing services, even when they also have computers and Internet connections at home, a study suggests.

In other words, people are smart. They use Internet access tools the way they might use other tools, each with a purpose.

In Brazil, home Internet penetration at home among shared venue users was 40 percent, compared with the 24 percent national average. In other words, a significant percentage of people with at-home connections still use shared Internet access centers.

In Chile, 33 percent of public access users had Internet connections at home, as

did about 25 percent of users in Ghana and the Philippines.

Users said “better equipment,” “faster connections,” and availability of “help” were key reasons for using a shared center.

In other words, the Global Impact Study of Public Access to Information & Communication Technologies study suggests users are aware of the benefits of using different access networks and services, in different ways, for different reasons that provide higher value.

Projections of Developing World Internet Adoption are Wrong, as Voice Projections were Wrong

Current projections about developing world use of the Internet generally feature a linear growth pattern. That is a rational way of think about it. 

But it also is likely to be wrong. Forecasters looking at use of voice communications in the developing world likewise were linear. 

But those forecasts were quite wrong. Why they were wrong is a story about deregulation, competition, using "capital-rational" networks and changing consumer perception of value. 

Voice communications, provided by mobile networks, became non-linear and exponential over a brief period of not even a decade.

Based on that precedent, one also would predict that Internet adoption in the developed world also will be non-linear. It is hard to predict, as the impact of mobile communications was hard to predict. 

But one clear implication is that the massive adoption wave happened only when service providers switched from expensive fixed networks to more-affordable wireless networks. In fact, from 1997 to 2007, world fixed lines were up relatively slightly. 

As with voice, mobility and wireless are likely to be the foundations for a similar upsurge of Internet access in developing nations. 

BT to Offer 300 Mbps by end of 2013

Sometimes slowly, fixed network access speeds are climbing towards a gigabit standard. 

BT now says it will launch a 300-Mbps service in about 50 exchanges by the end of 2013. Those exchanges already have fiber to home networks in place. 

Existing customers on the fiber to home network will also be able to upgrade to the faster speeds by switching to the £50 "Unlimited" package, which comes without any usage limits and is free from traffic management. 

Are Mobile Broadband and Smart Phone Internet Distinct Market Segments?

Strictly speaking, observers consider the use of dongles as "mobile broadband," while use of smart phones for Internet access is considered something else.

In the U.K. market, for example, about five percent of surveyed respondents say they use mobile networks for Internet access to their PCs. 

About 33 percent say they use their smart phones for Internet access. Of course, many smart phones feature personal hotspot features, making the distinction fuzzy, at best. 

But it always is possible to identify "market segments" that some might say are distinct, and others believe are parts of a single market. Are triple-play services a distinct market from the markets for constituent services?

Is business high-speed access a different market from consumer high-speed access? Is 3G data access a different market from 4G data access?

The answers are more difficult because there always are some customers who use their services as though the choices (mobile broadband or smart phone access versus fixed network access, for example) are in fact clear substitutes.

In other words, some consumers make their own decisions about what products are functional substitutes, and which are not, even when regulators and service providers consider the products separate markets. 

Ofcom, for example, does not consider fixed wireless access a functional substitute for fixed high speed access supplied by either cable companies or over BT's network, since Ofcom is largely concerned with wholesale offers. 

And fixed wireless networks are not especially well suited to wide scale wholesale operations, Ofcom believes. "Deployment of broadband services using fixed wireless access so far has been limited to specific geographic areas or specific circumstances," Ofcom says. 

"In the short term, given the costs involved in providing fixed wireless access and the lower quality of the service, it is unlikely that an increase in the price of wholesale broadband products will lead a substantial number of CPs (communications providers) to switch to fixed wireless access at the wholesale level," Ofcom says. 

The point is that although there are reasons to consider mobile broadband as a distinct product from smart phone Internet access, the boundaries are fuzzy, and likely will become more fuzzy, as personal hotspot capabilities obliterate the differences in capability. 

Mobile and Autos are Made for Each Other, But App Providers Will Make Most of the Money

Five years from now, there will be over 60 million connected cars on the road globally, according to estimates from the GSMA.

Car-focused telecom, hardware and software services will drive some 40 billion euros ($51 billion) in annual revenue by 2018, Business Intelligence estimates.

Pandora, for example, is now being used in 2.5 million cars and 100 car models through one of its 23 partnerships with auto brands and eight partnerships with stereo manufacturers.

But some things do not seem to change. As with other ecosystems, ranging from electricity to water to roads, most of the ecosystem revenue is earned by third parties that build their own businesses on top of the infrastructure.

App providers will earn most of the money, a story by now familiar to service providers of all types.

Voice over LTE Getting Traction?

Service providers often face business model issues when transitioning from an older network to a new network, especially when the new networks have to support legacy applications. Consider the case of a telco upgrading its digital subscriber line network to a fiber to home or fiber to neighborhood network.

The business problem often is that capital has to be invested to support applications that offer no incremental value, or little perceived incremental value, over the older network versions. Fiber to the home offers faster speeds than DSL, but many consumers often do not see the need for the higher speeds, initially. Stranded capital results, in other words.

Up to this point, Long Term Evolution support for voice has been a similar case in point. Service providers have been relying on workable 3G voice while using new LTE bandwidth for Internet-based services.

Though there arguably are new features supported by Voice over Long Term Evolution (VoLTE), there have been some technology issues to be overcome. But an equally important issue is that it has not been clear any incremental revenue can be earned by deploying VoLTE.

To be sure, it is simpler, and more elegant, to deliver voice using the same network used for Internet access.

Some also believe VoLTE will offer additional features, compared to legacy forms of mobile voice. What operators are hoping for is that a combination of VoLTE, high definition voice and Rich Communications Suite will create a differentiated voice value proposition.

Also, at some point, supporting voice on LTE networks will allow operators to decommission the 3G networks, freeing up spectrum.

But as a practical matter, lots of mobile service providers have opted to rely on 3G for voice, using 4G primarily for Internet access operations.

"Operators are using another solution called circuit-switched fallback CSFB, and my understanding is that has worked better than operators had dared hope for,” said Mark Newman, chief research officer at Informa Telecoms & Media.

Some argue VoLTE adoption has been slower than anticipated in part because 3G voice still works, and because shifting more data access operations to 4G has the effect of freeing up more bandwidth on the 3G networks as well.

Stéphane Téral, Infonetics Research principal analyst, argues that VoLTE adoption will accelerate now that SK Telecom has shown how well VoLTE works in a national deployment.

Infonetics Research now expects 12 commercial VoLTE networks and eight million VoLTE subscribers by the end of 2013, with about three-quarters of those in Asia Pacific region.

At the same time, any number of observers might say there remains the possibility that over the top mobile voice could have bigger impact.

“While Skype dominates the over-the-top mobile VoIP space, the market is seeing other applications such as Fring, KakaoTalk, Line, Nimbuzz, WeChat and Viber gain in strength,” said  Diane Myers, Infonetics Research principal analyst.

“But the fact remains that most over the top mobile VoIP providers are making very little money per user,” said Myers. “In 2012, the average revenue per user was a meager US$7.13 annually.” That is an unsustainable business model, if not augmented in other ways, she said.

The number of global OTT mobile VoIP subscribers shot up more than 550% in 2012, to over 640 million, and is expected to approach the 1 billion mark in 2013, Infonetics Research estimates.

But Infonetics Research also projects the number of VoLTE subscribers to grow at a 145 percent compound annual growth rate from 2012 to 2017.