Security Concerns About Mobile Commerce Might be Quite Wrong

Though many have been cautious about prospects for mobile commerce and payment systems because of security issues, some think smart phones actually will prove to be far more secure than most password-protected operations.

That might not allay all concerns, but does suggest we are yet early in the process of figuring out how mobile commerce actually provides huge value, and supports huge ecosystems of value. 

As it is starting to appear, smart phones are becoming a more valuable part of any multifactor authentication process, as the smart phone is the device most people carry with them always, and is a logical device for biometric assessment. 

Leaders and Managers: Followers Create the Former, Power the Latter

For the typical person involved with any sort of work-oriented organization, the difference between managers and leaders will be a subtle thing, if most people even can describe the two types of roles precisely. 

Some might say the difference is between informal and formal forms of management. The president of the United States "leads" by formal mechanisms. He or she has power, the authority to command, by virtue of holding an office. 

CEOs, priests, legislators, judges or any other officials you can think of who have power by virtue of holding an office provide other examples of formal power. 

Anybody who has been in combat knows there is another type of authority, exercised informally, irrrespective of rank. That is a classic case of "leadership," which might be said to be an informal source of power, not granted by rank or office. 

Other examples often occur in voluntary organizations, where some people exercise leadership by personal traits or charisma that are unrelated to any formal title or official role. 

One can "manage" without charisma or personal authority, because of the "bureaucratic" grant of authority of office. 

One cannot "lead" without the ability to inspire informal assent to one's leadership. Paradoxically, leaders are those whom followers designate, and not those whom the formal structures of power designate. 

Managers and leaders are not identical concepts. 

In a formal sense, one must follow legitimate orders of a manager, executive, judge or other official because that person has the legal or institutional authority to issue an order to you.

Leaders get followed because people trust the leader's authority, expertise and personal and charismatic traits. In some cases, a leader has no formal grant of authority save that granted by the followers. 

And the two types of authority can be mixed, in most cases. Conceptually, one can lead without managing, in the specific sense of exercising genuine authority without formal designation (think of sergeants, petty officers or corporals in small group combat, especially when the lieutenant has been killed).

 It is possible to manage without leading (we do what you say because you have the power to order us to do those things). One can be a "poor" manager, but still be a manager, in terms of formal authority. 

In some cases, a manager might also be a leader (we follow because we believe in you, not just because you have the right to command). 

In other cases, followers designate their own leaders. That is why successful commissioned officers rely on their non-coms. 

You might argue the most successful authority figures are those who have both legal power and the informal assent of those they lead. "Office" confers power. It does not confer active assent or enthusiastic and creative support.

Volunteer organizations routinely rely on informal leadership; they have to. Large enterprises normally are managed. 

Market Disruption is a Game Verizon Can Play as Well

One often tends to think that big market disruptions are caused by small, upstart firms. History might suggest something quite different.

You might argue that it actually takes a large and dominant firm to truly disrupt a big market. Apple, for example, did not just revolutionize "mobile phones." It changed the relationships of power and value within the mobile industry, shifting power to handset providers and away from access providers.

Some would argue it will take a firm as big as Google, able to launch Google Fiber, and offer symmetrical 1-Gbps high speed Internet access, at $70 a month, to change the U.S. ISP business. 

In similar fashion, you might argue it took an industry as large as the mobile phone business to rapidly bring voice communications to billions of people who still do not have access to fixed network voice. 

And even though lots of firms are trying to disrupt the U.S. mobile business, one might argue it will take firms as big as Sprint and T-Mobile US (or Apple, Google, Amazon, Facebook) to really shake things up. 

So the notion that a big incumbent cannot disrupt a market is false. Consider what Verizon might do in Canada, where regulators want Verizon to enter the market, and the Canadian mobile carriers with 90 percent market share are vigoruously opposing the move. 

The point is simply that big markets get disrupted by other big firms, not start-ups. One is tempted to point to Skype as a countervailing example. But that analogy also is complicated. One might argue that landline voice has been disrupted most by mobile.

International calling has been affected by Skype, but there also are other pressures, such as rapidly declining international and national long distance rates, even before Skype launched. In fact, it was competition by big long distance companies such as MCI and Sprint that caused the drop in long distance prices, long before Skype was thought of. 

That is why it really matters when firms such as T-Mobile US, Google, Apple and Sprint get serious about challenging the prevailing market structure. That is typically what it takes to disrupt a market. But add Verizon to that list of names. 

How Strategic is Ownership or Operation of an Access Network?

For a very long time, one vital "core competence" for a fixed network telco might have been said to be its right to operate a monopoly access network. By definition, a legal barrier of entry to all other competitors is a rather notable advantage. 

But the value of that advantage is challenged under competitive conditions. When there are at least two ubiquitous fixed networks, or two or more broadband networks, plus mobile, fixed wireless and satellite access providers, one might argue the uniqueness of any access network is lessened, and presumably therefore the value of owning any single set of network facilities.

Few competitors would argue that network ownership is an insignificant source of advantage. But contestants might disagree about the extent of value, in a competitive market. And that also speaks to new questions about "core competence," which also relates to strategic business value.

What is a telco's core competence? It is a tougher question that sometimes seems to be the case. A core competence is not just "something we are good at," but a unique attribute that provides significant business advantage.

Some would say the three key attributes include: 

1. It is not easy for competitors to imitate.
2. It can be reused widely for many products and markets.
3. It must contribute to the end consumer's experienced benefits and the value of the product/service to its customers.

For that reason, the question now is asked with reference to network sharing agreements that have become more common in the mobile business. 

To be sure, one might argue such network sharing is and also somewhat involuntarily agreed to in the fixed network business, where mandatory wholesale policies and steep wholesale discounts are a feature of the regulatory landscape. 

But network sharing, where two or more competing mobile service providers agree to share towers or radios, for example, provides the more-challenging questions about the strategic value of networks. 

The Czech units of Telefonica and Vodafone could be on the verge of entering into a network-sharing agreement that is said to lower Telefonica's costs by more than CZK 4 billion (€155 million) over 15 years.

The natural question is the value of a mobile access network. Does it provide a unique advantage? Some service providers that have outsourced towers or even operations of the radio network seem to be saying that the network does not, in fact, provide unique value. 

One wouldn't want to stretch the argument too far. The use of the radio network also implies use of the spectrum, which might not be a completely unique asset, but certainly is not easy for competitors without spectrum to emulate, and is reused widely for all of a mobile service provider's products. 

One might argue that spectrum also contributes directly to an end user's experience. In those senses, spectrum, more than tower networks, might be said to provide a core competency. But that would be a rather "passive" source of advantage. 

Rights to use spectrum mean only that a service provider using licensed spectrum can afford to buy it. No particular operational or marketing skills are inherently involved. 

Scarcity remains a valuable attribute of spectrum-based and wire-based networks, in many or most cases. But just how valuable is a new question, as mobile operators start outsourcing or divesting assets related to spectrum, such as radio networks. 

Windstream Earnings Illustrate Rural Telco Problem

Windstream Corp. has a top line problem, namely that its growth product segments are not increasing fast enough to offset weakness in legacy product lines.

That isn’t unusual in the fixed network business. But there is one particular matter of note: the big part of the decline is shrinking intercarrier compensation, not direct end user revenues.

That illustrates a strategic problem for rural telcos, namely the smaller percentage of support service providers will earn from regulatory-driven sources. That, in turn, is a big issue because there are few other sources of end user income (consumers or businesses and organizations) in rural areas.

Without the historic levels of regulatory support, most telcos would not be viable, in their current form.

In the second quarter of 2013, Windstream business service revenues were $913 million, a two percent increase, year-over-year.

Consumer broadband service revenues were $120 million, a six percent increase year-over-year. Still, consumer revenues overall declined three percent.

Strategic revenue, which consists of total business and consumer broadband revenues, grew three percent year-over-year and represents 71 percent of the company’s total revenues.

Wholesale revenues in the second quarter were $151 million, a decline of 13 percent from the same period a year ago due to lower intrastate access rates as part of intercarrier compensation reform implemented in July 2012, Windstream says. Lower switched access revenues from declining consumer voice lines also was an area of weakness.

But with the exception of strength in business services and consumer broadband, total revenues and sales were $1.51 billion, a decline of two percent year-over-year.

Windstream, which began as rural wireline provider spun off from Alltel Corp. in 2006, has been remaking itself as a data services and broadband provider for business and consumers, as traditional landline revenue continues to dwindle.

There are wider implications here for rural carriers, namely that shrinking regulatory revenues are starting to pinch. The long term problem is that there really are not consumer-generated revenues available to had, in much mass, in rural service territories.

Video Cord Cutting Not Yet at the "Disruption" Phase

One rule I have consistently relied upon when assessing new technology adoption is to assume there is a quantum process at work.

In other words, only after a longish period of gestation, or an accumulation of small changes that leave markets largely intact, does there occur an “eruption” or inflection point after which the market rapidly changes.

Another way of putting matters is that forecast qualitative changes do not occur in some predictable linear fashion. In fact, big changes are non-linear. Observers watching for change tend to see small, incremental changes for a longish time. But big transformations normally look that way, right up to the point where the quantum change happens.

That is the “knee of the the inflection point,” where rates of change suddenly change in a non-linear fashion.

One practical implication for competitor strategy: a contestant has to be careful to structure operations to ride out a longish pre-change period. In other words, hitting the market too early is as dangerous as coming to market too late.

And the thing about quantum change is that, once the shift happens, it is too late for new competitors to get in, as the market reforms so quickly.

That will happen with the video entertainment market. Right now, it is just “drip, drip, drip,” with the observable small incremental changes happening at a low level. At those rates of change, it will take decades for anything meaningful to happen.

But that won’t be what happens. There will come a point in time, which we have not yet reached, when drastic change happens, very fast, with big shifts in consumer behavior and spending.

Right now, we are in a phase of gradual buildup of pressure in the video entertainment business that will, one day, lead to a quantum shift in the business.

AT&T and Verizon are adding video customers, to be sure. Those two telcos have added about 233,000 and 140,000 customers, respectively.

At the same time, the whole market has contracted by about 380,000 video customers. None of that is cataclysmic.

Those figures are perhaps statistically significant, but not yet evidence that the quantum shift has begun.

When the shift happens, scores of millions of accounts will shift in only a few years time.

Groupon Another "Netflix?"

Groupon is starting to remind me of Netflix, which has had to survive a few bouts of deep skepticism in the past about a business model that could not survive. Likewise, Groupon has been "left for dead" by many observers. Like Netflix, it defies skeptics. 

In its second quarter of 2013, Groupon "significantly exceeded our operating income expectations, and delivered our strongest quarter ever in North America, due in part to accelerated billings growth of 30 percent," said Eric Lefkofsky, CEO of Groupon.

In June 2013, nearly 50 percent of Groupon North American transactions were completed on mobile devices, compared with about 30 percent in June 2012, Groupon says. 

More than 50 million people have now downloaded Groupon mobile apps worldwide, with more than 7.5 million people downloading them in the second quarter alone.