T-Mobile US Breaks Trend

The one development that should jump out at you, looking at net subscriber counts for U.S. mobile service providers is the change of T-Mobile US customers between the first quarter and second quarter of 2013. 

Rates of change for the other service providers largely remained in line with past performance over the last several years.


 

Mobile Commerce 11% of E-Commerce in 1Q 2013

Mobile commerce is growing, to almost nobody's surprise, up to about 11 percent of all retail e-commerce transaction value in the first quarter of 2013, up from eight percent, year over year. 

Perhaps the more surprising argument is that offers and coupons play a role in that growth. 

Coupons and offers from firms such as Groupon had been derided as an unworkable business model over the past year or two. But some now would argue that successful coupon campaigns can help e-retailers acquire customers and drive online sales. 

By 2014 the number of mobile coupon users is expected to increase to 53.2 million a year. At roughly 10 percent, the redemption rate of mobile coupons vastly outperforms the redemption rate of print coupons, which typically is about one percent.

Mobile coupon efforts also Increase offline sales and foot traffic to physical stores.

Because they are received on phones but often redeemed offline, coupons are a perfect medium for retailers to acquire consumer data.

Coupons are essentially just another channel through which to communicate with consumers. It's useful to think of coupons less as a discounting vehicle, and more a piece of content with an offer appended.

As usual, most of those benefits flow to parts of the mobile ecosystem other than the access providers or handset suppliers. But those new values increase the value of the mobile ecosystem.

 

Telekom Austria Revenues Fall 2% in 2Q 2013

Telekom Austria's second-quarter revenues fell 1.9 percent year over year to EUR1.04 billion ($1.39 billion), as the operator saw sales fall across the majority of its European markets, including a 20 percent drop in Bulgaria.

That revenue decline is part of a wider problem for European service providers, fixed and mobile, namely a continuing slide in overall industry revenues. 

As has been the case for other service providers, Telekom Austria blamed competition and lower mandated roaming rates for the revenue woes. But as you might expect, lower retail prices forced by competition are causing Telekom Austria to spend more on marketing as well. 

At least so far, there appears little danger that every service provider in a particular country will go out of business as a result of the stresses. But one has to wonder about the outcome longer term. 

Many national regulators believe a minimum of four mobile service providers is necessary to preserve competition. But Austria only has three service providers, and at least with the current business model, one might argue there is "too much" competition to support all three on a sustainable basis. 

So something will have to give. Either the desire for four national operators is an unrealistic hope, and will lead to bankruptcy for most of the suppliers, or mergers must be allowed to happen, while service providers also must learn to adapt to a harsher business model in general, as well.

And though it has happened only on a minor scale historically, one must ask what happens if bankruptcy is the ultimate fate for all of the suppliers in a given country. The traditional thinking about such a problem is that telecommunications is so vital ("too big to fail") that the government would not allow it.

But what if the government cannot itself afford to take over and operate the national network? That would be a new question in most of Europe, since in the past one might have argued that nationalizing telecom again, so the government can subsidize losses, would be a viable option. 

Under today's circumstances, that is not possible, many of us would argue. 

Something very major would have to happen--serious restructuring of the retail service and operating cost model--to create a sustainable national network post-collapse. 

The point is that there would not be a government operator of last resort option, in many, if not most, instances. 

If no operator could create a viable business under competitive conditions, it is doubtful most governments could do so, either, except, some might argue, under a return to monopoly regulation. 

Perhaps some will argue that could work. In an Internet era, perhaps the purpose of a national network is simply high-quality broadband, not voice. 

Perhaps other service providers would adjust to a scenario where there is, in some countries, no such thing as universal interconnection for voice supplied over public networks. 

Maybe some countries will not have universal fixed network access, or even universal mobile access, even as a policy goal, as hard as that might be to envision. 

Maybe fixed networks will simply be abandoned, on a universal basis, in favor of some other access method, such as mobile-only or wirelss-only modes. 

The point is that telecommunications is a product like any other, supplied by contestants working in markets that are open to some amount of competition. But in other markets, failure of some contestants tends to lead to survival of a smaller number of providers. How far will regulators allow that process to proceed? 

And what if even that process fails? It is one thing to guarantee supply. There are fewer remedies for falling demand. 

Can FCC Lawfully Do Anything; Should it Do Anything, About Time Warner-CBS Feud?

"I am ready to consider appropriate action if this dispute continues," said U.S. Federal Communications Commission Acting Chairwoman Mignon Clyburn about the Time Warner-CBS contract dispute.

But it isn't clear what actual authority the FCC actually has about a contract dispute between two entities. Some might question whether the FCC should act, even if it had any actual authority. 

Some might see an analogy to binding arbitration for two parties to a major industry contract dispute, with a strike. But it isn't clear the analogy actually applies. 

As inconvenient as it might be for some consumers to miss CBS programming for a period, such contract disputes are just that: contract negotiations. 

Nor is it actually so clear that consumer welfare, if that were viewed as the grounds for intervention, and were lawful, is necessarily best served by such intervention.

As odd as it might seem, consumers already are starting to vote with their wallets that the current value-price relationship for video subscription services finally is moving past irritation to abandonment. 

And nobody disputes the notion that Internet delivery is coming, and appears to be what consumers might prefer. 

As a practical matter, a widespread shift to Internet delivery will only come when the current product is so broken there is massive resistance to buying video subscriptions.

In that sense, even an extended blackout would ultimately provide more value to consumers by perhaps allowing the current distribution method to become even more unpleasant. 

It is logical for content owners to want to maximize their revenues, and it is rational for a retailer to take action about price hikes it knows its customers eventually will refuse to pay. 

Maybe the best long term policy, in terms of consumer welfare, is to allow the ecosystem stresses to play out. Eventually, the business is going to change, in any case. The only issue is when, and how. 

Has U.S. Mobile Market Revenue Reached its Peak?

Virtually all products have a life cycle. That implies that even industries have life cycles. In the developed world, the fixed network voice business passed its peak revenue in 2000, even though revenues and users arguably continue to grow in the developing world.

Mobile has been the global growth driver, both in terms of revenue and subscribers, for more than a decade. But that pattern already seems to have cracked in Western Europe, where revenue is expected to decline between 2010 and 2020.

And though the U.S. mobile industry has done nothing but grow (in terms of subscribers and revenues), for decades, one might reasonably assume growth is not infinite.

Growth drivers already have shifted away from voice and text messaging to broadband services.

But competitive dynamics will play a huge role in shaping future industry results. Sprint and T-Mobile US plans to disrupt the U.S. market, one might reasonably conclude, will, as a logical corollary, halt revenue growth, and then lead to a first-ever decline, if French market and EU markets provide any useful guidance.

When a market is highly saturated, competition virtually always takes the form of price competition that tends to lead to lower average revenue per account, and therefore to a smaller market overall, measured in terms of revenue.

So even though the U.S. mobile market has grown steadily for decades, revenue likely will slow, then reverse, if T-Mobile US and a SoftBank-lead Sprint manage to take market share from Verizon Wireless and AT&T Mobility.

As much as executives at Verizon and AT&T will not want comparisons to the French mobile market after the launch of Illiad’s “Free” service, that is among the likely outcomes for the U.S. market.

To wit, the French mobile industry reached peak revenues in 2010, and has been declining since then. To be sure, the French mobile market has “grown,” as measured by subscribers, or at least accounts, as measured by subscriber identity modules.

By the end of March 2012, the mobile penetration rate had reached 106 percent of the population and the number of mobile subscribers had reached 66.8 million. But mobile revenue has declined.

In the third quarter of 2010, revenue was EUR 5 billion. By the fourth quarter of 2012, despite steady subscriber growth from 60.5 million to 66 million, revenue slipped.

In five Western European countries (Spain, Italy, France, Germany, United Kingdom), aggregate mobile revenue will decline will decline between 2010 and 2020.

Global telecom revenue growth has been slowing for some time, in most markets other than emerging countries, it is safe to say. It also is safe to say the worst-hit region globally is Europe, where service providers with significant exposure to Europe reported worse results in 2012 than they did in 2011, according to Ovum analyst Adaora Okeleke.

In fact, “the primary goal of Europe’s telcos is to stabilize their performance,” said Steven Hartley, Ovum telco strategy analyst. As is the case for other service providers facing maturing legacy revenue streams, European service providers face the challenge of growing new revenues in emerging markets faster than revenues decline in their core European markets.

And the problem there is that average revenue per user will be lower in the new markets. So European carriers are losing high gross revenue and higher margin customers while trying to gain lower gross revenue, lower margin customers.

Ovum forecasts that global telco revenue growth will slow to a compound annual growth rate of two percent between 2012 and 2018. Most of the actual growth will happen in emerging markets, while revenue is likely to stay stuck in a declining mode in Europe.

The reaction of Canadian mobile operators to a rumored entry by Verizon Wireless into the Canadian market likewise suggests mobile operators know precisely what would happen should a powerful new competitor try to shake up an existing market, namely significant market disruption.

The bottom line is the the U.S. mobile market, despite continuous overall revenue growth for decades, is likely to stall, then reverse, to the extent that T-Mobile US and Sprint are able to take market share from Verizon Wireless and AT&T.

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.