We are in a New Phase of the Smart Phone Market

You know you are in a new phase of any market when older questions don't make as much sense. Remember the discussion and speculation several years ago about whether any other manufacturer could build a device to rival the iPhone?

Would that question still be salient today? No, some of us would say. Probably not, all of of us might say. 

That is the reality behind the numbers that show convergence of sales and profit between the Samsung Galaxy line of devices and the iPhone.

Canaccord Genuity is out with its quarterly look at the "value share" in the smartphone market. Samsung has dramatically narrowed the gap with Apple.

Vodafone Opts for Content, Value to Differentiate 4G

Whether there is a new “killer app” for Long Term Evolution remains an unknown possibility. Up to this point, it is fair to say, “faster access” has been the value proposition. Some with longer memories will recall that among the advantages of third generation networks was the creation of a platform for new services, though.

For the first half decade or so after widescale deployment, such new apps did not actually emerge. So the issue is whether, or when, such new apps might emerge for 4G.

Vodafone, it appears, wants to try a little harder to change the value proposition using content and retail pricing and packaging, rather than speed or better coverage, which might be said to be the more traditional value pitches for a mobile broadband or mobile data service.

“While the presumed emphasis on 4G has always been on coverage and network speeds, Vodafone has opted to focus on the content deals and tariff options behind its offer,” says Emeka Obiodu, Ovum principal telco strategy analyst.

There might be another way of looking at the LTE strategy as well. Most service providers, when it is possible to claim it, tout their better coverage or speed. That often comes with a “premium” positioning, as is characteristic of Verizon Wireless in the U.S. market.

To be sure, Vodafone would not concede that it does not have coverage advantages. But it does not seem to be “leading” its marketing with those advantages, and instead is emphasizing content and value.

Obiodu argues that Vodafone wants to avoid the mistakes of the initial 3G introduction, when it was too focused on building and marketing the best network, only to see other competitors emphasize the value proposition, the Ovum researcher says.

“So this time, Vodafone is focusing on getting the commercial proposition right,” he argues.

“We expect the deals with Spotify and Sky Sports to appeal to a lot of customers.”

The focus is on business model innovation. Doubling the data package, and content access are ways of changing the value proposition, convincing customers to spend an additional £5/month, instead of just selling a faster network.

That probably will be important over time, as virtually all the contestants are able to sell faster 5G service, eliminating the distinctiveness of “speed” and, if nothing else changes, drawing attention only to matters such as price.

Stickers Make LINE Money

Who'd have thought a business model could be built on "stickers!"

LINE Corporation’s revenue for the quarter was JPY 12.8 billion, up 348.9 percent over the same quarter of 2012 and 45.3 percent over the previous quarter. 

Revenue sources included in-game purchases (53 percent), sticker purchases (27 percent), official accounts, and sponsored stickers, LINE says. 

Telefónica Reportedly Will Shut Down Over the Top Voice App Tu Me

Telefónica reportedly will shut down Tu Me, its over the top free messaging app, on Sept. 8, 2013. Some had questioned the logic of competing against the likes of Skype and WhatsApp with a branded single-carrier app.

The shutdown of Tu Me might confirm the thinking that such an approach is difficult to impossible. T-Mobile’s Bobsled and Orange’s Libon remain active, so the matter is not completely resolved.

At least in part, the original thinking behind Tu Me was that availability of the app would allow users who were not Telefónica subscribers to communicate with Telefónica customers, eventually perhaps driving incremental calling revenue, as SkypeOut does.

At the time of its launch, some suggested Telefónica was a standout among service providers that “got it.” Such observations frequently have proven wrong.

Service provider executives are not dumb for refusing to embrace some business models that make sense for over the top app providers. As their experience with VoIP has shown amply enough, just because Skype or WhatsApp can build a business offering free voice or messaging, that does not mean a telco or cable company can do so.

As it turns out, Tu Me could not get traction, at least, not enough traction to create a huge user base that might have enabled a sustainable revenue model. As Tu Me might illustrate, service providers cannot always compete successfully against over the top apps with their own branded versions of such apps.

Do Apple iPhone Sales Mean Apple is the Same Company as it Was in PCs?

Apple, in its days as a supplier of personal computers, never had much market share, compared to machines of the Windows ecosystem. And while Apple still makes the argument that profit, not sales volume, is its top concern, Apple's recent smart phone sales are starting to remind some of us of Apple's past, when another ecosystem gobbled up the sales volume, installed base, and influence.

The Android ecosystem is approaching 80 percent market share. Apple's iOS still is significant, to be sure. But even Apple's profits seem to be dipping, as Samsung's profits climb almost to parity with Apple. 



Though it might have seemed far fetched not so long ago, Apple is facing a replay of its experience with PCs, where it lost leadership to Microsoft early on, and survived only a niche supplier. That isn't to say necessarily will repeat itself, but the numbers should provoke concern. 

Some would say Apple's iPhone business, as originally constructed, no longer works. The high-end is saturated, so Apple needs to introduce a low-cost iPhone, even if that risks further weakening of its average selling price and pressure on profit margins. 
 

 

Unlicensed Spectrum Can Dramatically Reduce ISP Breakeven Points

You'd undoubtedly be correct--or at least in very good company--if you predicted that mobile data access would be the primary way most people without Internet access will use it over the next 10 years. 

But some of us also would argue that other methods will play a significant role, including public-private partnerships, Wi-Fi hotspots, non-profit or fixed broadband access services as well. 

Some of us also would argue that the only way ubiquitous coverage for all potential users, including those with little ability to pay commercial rates, will hinge on creating lower cost alternatives ot mobile or fixed network service.

That is no slam on mobile or fixed ISPs. It simply is a recognition that the cost structures for telcos and mobile service providers might not allow for very low cost access, and reasonable usage buckets, for users with little disposal income. 

For that reason, some of us believe shared spectrum and unlicensed spectrum will be necessary parts of the overall Internet access ecosystem in many regions where consumers are underserved, or not served at all. 

By reducing government licensing and spectrum purchase requirements, at least some ISPs would be encouraged to create sustainable access services that would be absolutely unfeasible if those ISPs had to buy licensed spectrum or comply with the full set of regulations telcos and mobile service providers must obey.

Google Starbucks Wi-Fi Deal Will Represent a $50 Million or Greater Annual Investment by Google

Based on industry pricing, the Google deal to supply Wi-Fi services at 7,000 Starbucks locations could represent at least a $50 million a year investment by Google, based on what it is paying Level 3 Communications to supply and manage the access, according to estimates from D.A. Davidson telecom analyst Donna Jaegers.

That level of investment does not include money Google will spend to upgrade the Starbucks Digital Network experience, either. 

Consider that the sort of long-range investment Google previously has made in access capabilities, ranging from metro Wi-Fi to Google Fiber.