Smart Phones Will Close Digital Divide Globally

The “digital divide” has antecedents in the communications business. For many decades, policy makers struggled to figure out how to provide basic telephone service to billions of human beings who “had never made a phone call.”

And though household income and use of the Internet, mobile phones or fixed network telephones are correlated and causal, in any market, it still would be reasonable to expect that smart phone technologies will rapidly allow hundreds of millions of people to use the Internet for the first time, in the same way that mobile networks solved the problem of getting phone service to the “next billion” users.

Over 6.6 billion mobile phones will be in use by the end of 2017, according to CCS Insight's new market forecast. About 66 percent  of them will be smart phones, up from less than 25 percent in 2012.

In the first three months of 2013, smart phone shipments exceeded those of non-smartphones for the first time ever. Sales of smartphones have been helped by new, cheaper devices, especially, but not only, in emerging markets. The mobile and media analyst firm expects 1.86 billion mobile phones to be shipped in 2013, of which 53 percent will be smart phones

That means smart phone markets in Western Europe and North America will see penetration levels approaching saturation point in these markets within three years.

More than 50 percent of the mobile phones in use in these regions are already smart phones. CCS Insight predicts this figure will grow to more than 80 percent in 2015. Beyond 2015, much of the growth will come from emerging markets.

At the same time, sales of tablets are rising at a staggering rate. Altogether, global shipments of smart mobile devices (smartphones and tablets) will increase 2.5 times between 2012 and 2017, to reach 2.1 billion units. CCS Insight predicts that by 2017 the combined number of mobile phones and tablets in use will exceed the world's population.

Nor shouild we  underestimate the role of smart phone access in narrowing “gaps” between regions, states and population segments in use of the Internet, either in developing or developed regions.

It now is clear that the ways people choose to use the Internet is becoming more segmented, and that many users prefer to use smart phones rather than fixed Internet connections.

According to a 2013 analysis conducted by the Pew Internet and American Life Project, the digital divide between Latinos and whites is smaller than what it had been just a few years ago.

To be sure, there are sure to be gaps between first world and third world access speeds. As more gigabit networks are deployed in developed areas, the gap might even increase. But it also will be the case that “some Internet access” will be available to most people in emerging markets faster than many now predict.

At that point, ITU had estimated that the “number of people without access to telephony service has decreased to less than one-fifth of world population.”

The big breakthrough was mobile phone service. It took around 125 years to reach the first billion fixed lines across the world (1876-2001).

Mobile telephony has reached the first billion in 21 years (1981-2002) and the second billion users within just three years (2002-2005).

While the installed base of smart phones accounted for just over 20 percent in emerging markets at the end of 2012, Ovum estimates that it will reach nearly 50 percent by 2017, which translates to over two billion devices.

As the fastest-growing segment within overall devices, smart phones will be a critical driver of increased mobile Internet use across emerging markets, Ovum says.

Video Business Loses Customers, Again

The 13 largest subscription video providers in the United States, representing about 94 percent of the market, lost about 345,000 net video subscribers in the second quarter of  2013.

In the second quarter of  2012 and in the second quarter of  2011, the industry lost about 325,000 subscribers, according to Leichtman Research Group.

Those 13 cable TV, satellite TV and telco TV  companies represent 94.6 million subscribers.

Cable TV companies having about 50.5 million video subscribers, satellite TV companies have 34 million subscribers, and the telephone companies have more than 10 million subscribers. That implies the cable TV industry has 53 percent market share, satellite TV firms have 36 percent share, while telcos have 11 percent market share.

Some will note those trends and conclude that disruption of the TV business is coming soon.

The predictable changes we now expect to see are small market share gains by telcos, every quarter, at the expense of cable TV providers, with satellite provider share roughly stable. But the changes represent fractions of a percent of the installed base.

That was the story in the second quarter of 2013, according to IHS. AT&T U-verse and Verizon FiOS (with some small additions by independent telcos) added a net 398,000 video accounts during the second quarter, up from 304,000 net adds in the second quarter of 2012.

The U.S. video subscription business as  while lost a net 352,000 subscribers in the second quarter, according to IHS.

In a market with nearly 95 million to 104 million subscribers, that really isn’t such a big deal. That’s a market shrinkage of about one-tenth of a percent, to three-tenths of one percent.

Some might point to apparent disinterest in video services on the part of younger consumers forming households.

So far, thought, the changes indicate we are past the peak of the product life cycle, but are not yet in a “disruptive” phase where the decline becomes significant.

Multi-channel Video Provider	Subscribers at End of 2Q 2013	Net Adds in 2Q 2013	Net Adds in 2Q 2012
Cable Companies
Comcast	21,776,000	(159,000)	(176,000)
Time Warner	11,911,000	(189,000)	(169,000)
Charter	4,073,000	(51,000)	(72,000)
Cablevision*	3,171,000	(20,000)	0
Suddenlink	1,189,900	(22,900)	(19,900)
Mediacom	983,000	(16,000)	(22,000)
Cable ONE	575,762	(12,418)	(9,610)
Other Major Private Cable Companies**	6,810,000	(85,000)	(70,000)
Total Top Cable	50,488,762	(555,318)	(538,510)
Satellite TV Companies (DBS)
DirecTV	20,021,000	(84,000)	(52,000)
DISH	14,014,000	(78,000)	(10,000)
Total Top DBS	34,035,000	(162,000)	(62,000)
Telephone Companies
Verizon FiOS	5,035,000	140,000	120,000
AT&T U-verse	5,001,000	233,000	155,000
Total Top Telephone Companies	10,036,000	373,000	275,000
Total Multi-channel Video	94,559,762	(344,318)	(325,510)

Sources: The Companies and Leichtman Research Group, Inc.

Skype Now Available from Inside Outlook.com

Skype for Outlook.com is now fully available in the United Kingdom, Germany, Brazil, France, Canada and the United States. 

Outlook.com, which already allows Outlook users to connect with Facebook, Skype, and Google friends, now allows users to make Skype video calls directly from inside Outlook.com.

With Microsoft also making Skype part of the Windows operating system, we now have reached a point where users might just expect to be able to communicate using voice, video and text, from inside their mail apps and when using Windows PC devices. 

That trend has been developing for years, with communications becoming part of other apps, and over the top messaging apps proliferating. 

But such capabilities also illustrate why communications service providers are so intent on creating new revenue streams. They have to. 

10 Firms Win Parts of $10 Billion U.S. Interior Dept. Cloud Computing Contract

Verizon is among 10 firms supplying portions of a $10 billion 10-year contract for cloud services to be used by the U.S. Department of the Interior.

Cloud-based storage, secure file transfer, virtual machine, and database, web, and development and test services projects are among the functions and services the Department of Interior purchased.

AT&T, IBM, Lockheed Martin, Unisys, CGI Group, Aquilent, Smartronix, Autonomic Resources and Global Technology Resources got parts of the contract as well.

IBM says it won $1 billion, the largest contract it ever has gotten from the federal government for cloud-related services.

As always, the contracts might best be described as representing a “maximum of $1 billion” for IBM, since the actual value will hinge on how fast the projects can be implemented.

Amazon earlier in 2013 won a $400 million, four year deal to provider services to the Central Intelligence Agency.

The bids do not settle the issue of who the dominant suppliers ultimately will prove to be in the U.S. market, since the market is just beginning in earnest.

Nor do the bids definitively answer the question of how much success major U.S. telcos will ultimately have in the cloud services market, and how far their success could extend beyond transport services.

How Big a Phone Will You Carry All the Time?

How big a device will you carry with you, all the time, like you carry a mobile phone? Samsung Mega is going to provide some real-world testing, as AT&T, Sprint and US Cellular introduce the phablet this fall.

The 6.3-inch display on the Mega creeps closer to the crossover point between the smallest tablets and the biggest phone, and might be a test of whether a single device can replace the phone and the tablet.

Lots of people might not want to make such a choice, just as many people use PCs, tablets and smart phones, with each device used in distinct ways.

On the other hand, it still isn’t clear what percentage of on the go users might actually prefer a phone that has a screen large enough to replicate many of the functions a tablet might, under other circumstances, provide.

If you have used a Samsung Note, with a 5.5-inch screen, the move to a 6.3-inch device is somewhat incremental.

Where a Galaxy 3 or Galaxy 4 will fit in some cargo pockets, a Note really does not. Some of us have not found that a barrier to using a Note as a full-time phone.

The issue is how a pants pocket-sized 6.3-inch device will be received. The answer probably will be that for some users the Mega is a fine choice, giving many of the advantages of a small tablet without the need to carry one.

Others will probably find that is useful when fully mobile, but that a tablet gets used when a person is at home or other places where mobile support is not needed.

Perhaps the story here might turn out to be that “one size does not fit all,” giving Samsung a chance to create a new market segment (on the assumption that a phablet does not displace the tablet market, but represents a segment for mobile devices).

China Aims for 50 Mbps in Cities by 2020

The Chinese government now has a target of nationwide broadband coverage by 2020, and plans to rely heavily on mobile networks to achieve that goal in rural areas, while urban areas could see gigabit networks, even if the nearer-term bandwidth targets could likely focus on Wi-Fi coverage in key public urban areas by 2013 and fixed broadband coverage for 50 percent of all households by 2015.

50 Mbps is a stated objective for urban areas.

Cloud Computing Nears "Trough of Disillusionment"

Cloud computing is nearing a point where many observers or users are destined to become more disillusioned. And that will be a good thing. The reason cloud computing disillusionment will be a good thing is that such disillusionment, the end of overly-inflated expectations, is a normal part of the adoption cycle for most important technologies.

Only after the hype has worn off, and expectations are aligned with a better understanding of how value is generated, do major new innovations actually reach a stage where they routinely are used, and routinely generate value. 

Cloud computing has moved well past the peak of the hype cycle and is positioned near the bottom of the “trough,” a position Gartner might say shows cloud computing is largely past the stage of inflated expectations.

Cloud computing is not yet a standard technology delivering well-understood value. That still lies ahead.

By way of comparison, “big data” is almost at the peak of inflated expectations while the Internet of Things hype still is building.

Near field communications, a technology mobile service providers are hoping will prove vital for mobile-enabled commerce, the Isis and other mobile wallet services, still is on the back side of the hype curve, indicating it will yet be some time before the inflated expectations are wrung out.

The good news for supporters of cloud computing and NFC is that although there should be a further period where disillusionment is significant with both technologies, the period of useful adoption will follow next, with clear-eyed understanding of where value lies.

But that still will be a process of years, not months. Its supporters, while desiring faster progress, probably also recognize cloud computing is part of a larger transition of computing architecture that also includes embedded and highly distributed computing modes. 

Something that complex will displace existing ways of doing things, but it will take a while.

The “evolving relationship between humans and machines” is the way Gartner has chosen to organize the latest version of its “Hype Cycle for Emerging Technologies.”

That shows the generally heightened hype around smart machines, cognitive computing and the Internet of Things, or machine-to-machine communications. In the telecommunications business, that hype is seen in the attention now paid to connected car systems, home security and sensor networks of all sorts in the energy business.

Gartner's hype cycle reports are intended to  provide strategists and planners with an assessment of the maturity, business benefit and future direction of more than 2,000 technologies.

New hype cycles this year include content and social analytics, embedded software and systems, consumer market research, open banking, banking operations innovation, and information and communication technology (ICT) in Africa.

"In making the overriding theme of this year's hype cycle the evolving relationship between humans and machines, we encourage enterprises to look beyond the narrow perspective that only sees a future in which machines and computers replace humans,” said Jackie Fenn, Gartner VP and fellow.

Three trends are at work, Fenn notes. Technology such as wearable computing devices augment humans. In other cases, machines replacing humans.

A virtual assistant acting as an automated customer representative provides one example of that second trend.

The third trend is humans and machines working alongside each other, said Fenn.

Hype Cycle for Emerging Technologies, 2013