How Mobile Payments, Minimum Wage Demands are Correlated

McDonald's is testing Isis-based mobile payments, for logical reasons. “At this time we are testing mobile payment in Salt Lake City, Utah, and Austin, Texas,” said Ofelia Casillas, media relations manager at McDonald’s, Oak Brook, Ill.

Obviously, the point is to get McDonald’s consumers to get in and out of the stores as quickly as possible.

But there is another angle, sometimes missed. Mobile payments could well become part of an intensified automation strategy for McDonald's, if wage pressures become a big new issue. 

One basic principle of economics is that prices and quantity sold are inversely related. When prices for any product get raised, demand decreases. Labor is a product like any other. So one reaction to a major increase in wage bills will be employment of less labor. Mobile payments and ordering kiosks are parts of that future strategy. 

An Illustration of How Speed Transforms Internet Markets

Though there are other issues at work, a comparison of AOL dial-up customers and Netflix customers illustrates the way that Internet access speed can affect business models. Simply, broadband enables bandwidth-intensive apps, especially video. You can see that in the growth of Netflix.

To be sure, it is a complicated change. AOL's walled garden of content fell out of favor compared to the open Internet. Also, AOL had early success because most U.S. residents were new to using the Internet, and AOL offered a simple way for people to get online. 

These days, "always on" features of the broadband approach to access (typically with Wi-Fi available) mean people do not actually have to do much of anything to "get online."

Still, you get the point: as access speeds have climbed, new apps are conceivable. 

EC to Review Telefonica, E-Plus Merger: How Many Carriers are Needed in Germany?

European Union antitrust regulators will examine deals such as the proposal by Telefonica and Royal KPN to combine their German assets, based on their impact on national markets rather than the whole EU. That deal would create a new market leader, at least ranked by subscribers.

EU regulators are already examining Vodafone Group’s 7.7 billion-euro ($10.2 billion) bid for Kabel Deutschland Holding.

Somewhat ironically, in light of EC proposals to create a single EC telecom market, the deal is being scrutinized in the context of German market competition, not in the broader context of how competition would be affected at the EC-wide level.

One issue for the German mobile market is the minimum number of service providers deemed necessary to maintain adequate levels of competition and innovation.

The Telefonica merger with KPN’s E-Plus would reduce the number of providers from four to three, a situation that the European Commission obviously will consider, though so far EC regulators say there is no "magic number "of providers” that always will encounter opposition from regulators.

Eventually, EC regulators might be more concerned about market share across the EC, where today that is less a concern.

Tablet Sales to Eclipse PCs by 2015

International Data Corporation expects tablet shipments to surpass total PC shipments (desktop plus portable PCs) in the fourth quarter of 2013.

PCs shipments are still expected to be greater than tablet shipments for the full year, but IDC forecasts tablet shipments will surpass total PC shipments on an annual basis by the end of 2015.

Smart phones will continue to ship in high volumes, surpassing 1.4 billion units in 2015 and accounting for 69% of all smart connected device shipments worldwide.

"At a time when the smart phone and tablet markets are showing early signs of saturation, the emergence of lower-priced devices will be a game-changer," said Megha Saini, IDC research analyst. Presumably Saini is referring to some developed markets, as demand is far from reaching saturation in most of the world’s markets.

"Introducing new handsets and tablet devices at cheaper price points along with special initiatives like trade-in programs from Apple and Best Buy will accelerate the upgrade cycle and expand the total addressable market overnight."

As always, price plays a huge role in adoption. IDC expects the lower-cost devices to drive interest globally.

IDC also expects to see more product substitution as larger-screen smart phones with five-inch or larger screens (phablets) start to compete with the smaller-screen tablets with screens of seven to eight inch screens.

iCharts

Will "Connected Continent" Plan Spur Infrastructure Investment, or Not?

As always is the case, not all stakeholders will be happy with the new “Connected Continent” proposal. Some policy advocates will not be pleased with the approach to network neutrality (too lenient on the service providers).

Service providers might not like the provisions that will take revenue and profit out of international calling. Some national regulators might not prefer the shift of authority to a centralized approach.

And many will continue to wonder where and how the funds to invest in next generation infrastructure will be found.

The “Connected Continent” plan, created by Vice President for the European Commission Neelie Kroes, might actually depress European service provider investment in next generation infrastructure, according to Strand Consult.

The main problem, perhaps, is that the proposal continues to favor “competition” at the expense of “investment.”

The proposal “will create price wars between operators, which will deliver lower prices for consumers in the short term, but remove incentives for operators to invest long term,” argues John Strand, Strand Consult principal.

In the near term, service providers will spend scarce capital on acquiring other service providers, not investing in infrastructure, one might argue.

Strand argues that in a newly competitive market, service providers will be forced to spend more on marketing, diverting capital that might otherwise be invested in infrastructure.

Also, if price competition heats up, profit margins and revenues will fall further, reducing the ability to invest in infrastructure.

Contrarian investors might see an opportunity there, however. One reason AT&T might be interested in getting into the tough European mobile market now is precisely the inability of other competitors to invest heavily in fourth generation infrastructure.

European Commission Announces "Connected Continent" Proposals

The European Commission’s Connected Continent plan aims to create a unified telecommunications market within the 28 member states that reduces end user costs for cross border communications but also makes it easier for service providers to gain scale in their businesses.

In part, the new proposed rules would simplify telecom regulations across the EU, giving service providers access to all 28 markets with a single authorization. The proposal also aims to loosen regulations and streamline wholesale network access procedures for service providers wanting to use an incumbent network.

While not mandating specific new roaming rate reductions, the proposal bans incoming call charges starting on July 1, 2014. That will essentially encourage service providers to offer phone plans that apply everywhere in the European Union, with no distinctions between domestic and roaming prices.

The plan also will allow customers to “decouple” their domestic calling service from their roaming calling service, using a single subscriber information module.

The proposal also prohibits companies from charging more for a fixed network intra-EU call than they do for a long-distance domestic call within the EU region.

For mobile intra-EU calls, the price could not be more than €0.19 per minute (plus VAT), lowering costs for consumers.

The proposed network neutrality rules have several elements. Blocking and throttling of Internet content and apps would be banned, giving users access to the full and open internet regardless of the cost or speed of their internet subscription.

On the other hand, service providers will be able to create and sell “specialized services” with assured quality (such as IPTV, video on demand, apps including high-resolution medical imaging, virtual operating theaters, and business-critical data-intensive cloud applications) so long as this did not interfere with the Internet speeds promised to other customers using “best effort” Internet access services.

In doing so, the EC is trying to preserve best effort Internet access without prohibiting the development of new types of managed services that actually require quality of service guarantees or features.

The proposal also would coordinate spectrum assignment across the EC region, to make it easier to provide EC-wide 4G mobile access and Wi-Fi access.

European "Single Telecom Market" Proposals Coming Soon

We are likely to learn, on about Sept. 12, 2013, in some detail, how European Community regulators want to create a more unified and single communications market within the EC region.

It isn’t yet clear, for example, how regulatory authority will work. It is not expected there will be a call to replace 28 national regulatory bodies with a single EC regulator. If for no other reason, that decision dodges a certain to be controversial issue.

The proposal is expected to take steps to elminate the difference between local calls made in-country and long distance calls made to other EC member nations. Mandated significant reductions in roaming rates appear to have been dropped from the proposal, though the proposed rules still will have the effect of lower prices for out of country calls within the EC.

“We need to extend the same formula to other areas: mobility, communications, energy, finance and e-commerce, to name but a few,” said José Manuel Durão Barroso, European Commission president.

“We will formally adopt a proposal that gives a push towards a single market for telecoms,” Barroso said. “Isn't it a paradox that we have an internal market for goods but when it comes to digital market we have 28 national markets?”

For European service providers, perhaps the biggest issue, aside from the possibility of drastically lower roaming revenues, is whether the “single market” will extend to a single market for service providers, in terms of easier ability to merge and consolidate national entities.

Many would argue that European service providers are experiencing financial difficulties because their operations are too fragmented and lack scale. In principle, a single telecom regulatory framework could clear the way for relatively rapid consolidation that would improve operator finances.

The single market principles aim to reduce complexity by creating common frameworks everywhere within the European Community nations, and allow service providers to more flexibly operate outside home markets.

The proposal also would create a network neutrality framework that some might say is not draconian. The proposal combines two elements.

ISPs would be barred from blocking and throttling lawful content.

On the other hand, the proposal allows reasonable traffic management measures to minimize the effects of temporary or exceptional network congestion. Some would say those are sensible proposals.

Significantly, the proposal also would allow ISPs to create and offer services with a defined quality of service or dedicated capacity.

Many opponents of network neutrality might find that formulation worthy of support.