Are Apple and Nokia Mirror Images?

The Apple strategy for emerging markets is in some ways the mirror image of what Nokia did. 

Where Nokia had enormous strength in the "affordable phone" segments of emerging markets, 
Apple seems to eschew that segment, sticking with its "premium, high margin" positioning even as it tries to expand to some demographic segments (wealthier customers) of the Chinese and other markets.

Some argue Apple is going the same way with smart phones that it chose to go with PCs, allowing Android to capture market share, with Apple eventually being relegated to a niche role. 

Others believe Apple will succeed. But that is the point, some might say. We are talking about a pricing strategy. 

Those arguments essentially avoid the question that is at the heart of all debates about whether Apple can keep its magic without Steve Jobs. Here we are, talking about pricing strategy. We aren't talking about reinvention of whole markets. 

That might come, some would say. Others might say it might not even come, but Apple will find its way forward, anyhow. Some of us cannot avoid the sense that Apple will revert to the mean. 

Most of us would agree with a general rule that nobody is "irreplaceable." But some of us might agree there are exceptions to every rule. Steve Jobs was that exception. 

Expected Europe Consolidation Wave Causes EE to Rethink Sales

In anticipation of an expected major consolidation wave in Europe, carriers have to make decisions about whether they are buyers or sellers. In some cases, planned asset sales have been put on hold.

That is true for U.K.'s EE, which faces likely entry by AT&T into the $313 billion market, plus a Liberty Global-owned Virgin Media and a Vodafone with lots of new capital to deploy.

Deutsche Telekom and Orange of France apparently have slowed an effort to sell their 50-50 U.K. wireless venture known as EE.

In part, that is because of an expectation that the competitive situation could change in a major way, and soon, causing firms to rethink their strategies. Keeping EE intact might be useful for Orange and Deutsche Telekom in case they need to go on a buying spree of their own.

There are clear signs of change. America Movil wants to buy KPN.  Vodafone is said to be eyeing Fastweb in Italy. There is speculation that AT&T might try to buy all of Vodafone when the Verizon transaction is completed.

Vodafone is said to be weighing a purchase of Liberty Global, which only recently swallowed Virgin Media.

Telefonica is buying E-Plus in Germany.

The point is that major carriers might soon find themselves in an "eat” or “be eaten” situation.

AT&T could pay about 80 billion pounds ($124 billion) for what’s left of Vodafone, according to Robin Bienenstock, an analyst at Sanford C. Bernstein, basing her estimate on a valuation of six times earnings before interest, tax, depreciation and amortization.

AT&T has examined takeover candidates including Vodafone, U.K. mobile carrier EE (a joint venture between Deutsche Telekom and Orange), as well as parts of Spain’s Telefonica.

That might strike some as odd, given the declining amount of revenue being earned by European mobile service providers. But AT&T seems to be thinking, as does SoftBank’s Sprint, about ways to boost revenue by emphasizing fourth generation Long Term Evolution services.

Whether Vodafone is a buyer or seller, a huge rearrangement of assets now is conceivable, essentially forcing all the major players to weigh moves of their own.

The upshot could be an accelerated transformation of Europe's troubled telecom industry.

Across the European Union, there are far more than 100 mobile and fixed-line operators, owned by a jumble of more than 40 groups, according to consulting firm IDATE. That compares with just four big mobile operators in the U.S., where the cable-television and broadband business is consolidating, too. As a result, revenue and profit at many European telecoms has been falling in a stagnant economy.

The biggest turning point in the European landscape has been Telefónica SA's agreement this summer to buy the German mobile unit of Dutch telecom Royal KPN NV in a €8.55 billion ($11.4 billion) deal.

"This is the starting gun ," said Robin Bienenstock, an analyst for Bernstein Research. "The chessboard is going to reform really, really rapidly." The potential mergers could make mobile service provider operations bigger, wed fixed line networks and mobile networks and reduce the number of leading contestants in many markets.

There have been $99 billion in deals targeting European telecom companies this year, the highest figure for the same period since 2000, according to Dealogic. Nearly three-quarters of this year's deals have been for fixed-line or cable companies, the highest percentage since 2003, according to Dealogic.

Is Apple Making the Same Mistake, Again?

Apple surprised some observers, it is safe to say, by not releasing a low-cost device aimed at China and other similar markets.  

To be sure, Apple has been saying it would not do so, but many expected Apple would change its views, as it is changing its views about screen sizes for tablets (smaller) and smart phones (larger), when it earlier had insisted there was no need to change.

Right or wrong, that move suggests to some that Apple is committing a "colossal" error, choosing to maintain a "premium" niche instead of dominating the mass market.

The essence of the argument for trouble is that Apple is clinging to charging ultra-premium prices for products that are no longer ultra-premium, as well as maintaining prices that are so high Apple is priced out of the world's largest and fastest growing markets.

Some of you with long memories remember that Apple made the same decision in the 1980s, when it allowed Microsoft, with a vastly-different strategy based on ubiquity, relegated Apple to a small and niche role from which the firm never really emerged (in the PC market).

Some argue that Apple is in danger of making that same mistake again, by essentially adopting the same strategy again--a premium and small smart phone niche--rather than going for dominance globally. 

Others think Apple still has a strategy that will work. 

Apple Study: 8 easy steps to beat Microsoft (and Google) from Ouriel Ohayon

Auction Policies Should Work, Not Just "Sound Good"

There is a clear difference between policies that work, and policies that don't work, but make people feel as though "something was done."

A colloquial way of putting this is that it is important to be good, not simply to feel good, when "feeling good" does not actually fix a problem, or makes a problem worse.

Spectrum auction and other policies designed to increase competition and innovation sometimes can include clauses that apparently boost competition, but actually have no ultimate positive effect. In at least some cases, those policies to "increase competition" actually can delay the arrival of more effective competition. It's a paradox, but no less true for being so.

Auction policies sometimes contain preferential treatment clauses designed to increase competition. T-Mobile US and Sprint, for example, have argued that the larger Verizon Wireless and AT&T Wireless should not be allowed to bid on reallocated analog TV spectrum, or at least that the two smaller carriers should have some preferences in that auction, to “level the playing field” between the two smaller carriers and the two bigger carriers.

That is not an uncommon regulator approach. It often is believed that “set asides” for specific types of bidders (small businesses, disadvantaged classes of people) is good public policy.

It doesn't work, one study suggests. Restrictive or preferential bidding rules distorts prices and misallocates spectrum in ways that ultimately harm consumer welfare.

Larger carriers often have access to more capital and can build networks faster, for example. In other cases, they are able to operate any particular block of spectrum with greater efficiency, because of other spectrum holdings.

On the other hand, competition and consumer welfare tend to be boosted by reassignment of existing spectrum and the existence of a dynamic secondary market for spectrum.

For example, restrictive and preferential participation rules in place for the 1994 U.S. PCS spectrum auctions resulted in lost consumer welfare of as much as $70 billion, analysts argue.

Underfunded and unfunded business plans developed by new entrants acquiring set-aside licenses resulted in substantial amounts of spectrum sitting idle for many years.

The role of secondary markets also is instructive. Following the PCS auctions in the mid-1990s, all significant new entry into the US wireless market has been through spectrum re-purposing or the secondary market.

In the German 3G auctions in 2000, policies intended to encourage market entry were unsuccessful and resulted in a 10-year delay in the assignment of one-third of the 3G spectrum, delaying its development and the benefits consumers would have otherwise enjoyed.

In Canada and several European countries, restrictive and preferential policies intended to encourage market entry distorted the auction process and were unsuccessful in expanding the number of sustainable competitors in the marketplace.

Initial changes in the competitive landscape, attributable to restrictive auction rules, proved fleeting as market forces pushed the industry structure back to a pre-auction market structure with the same number of, or fewer, national competitors.

U.S. to Auction 10 MHz of Mobile Spectrum Now, 55 MHz More in Feb. 2014

The Federal Communications auction of 10 MHz of spectrum in the 1900 MHz band (1915-1920 MHz and 1995-2000). The move has been a bit controversial, as spectrum auctions frequently can be.

Dish and T-Mobile US had urged the FCC to delay the H Block auction, which is adjacent to spectrum Sprint already has in service.

The logic for a delay is that another planned auction of spectrum (AWS-3 M-Block) in February 2015 could be paired with the auction of the H Block spectrum (about 55 MHz worth of spectrum).

But the FCC has decided to move ahead, despite arguments that a delay might be preferable, and potentially more valuable, for T-Mobile US, Dish Network or other competing carriers.

As an old aphorism suggests, “for every public purposes there is a corresponding private interest.”

T-Mobile's LTE network now covers 180 million people in 154 markets

The T-Mobile US LTE network now covers 180 million people in 154 markets, which is perhaps notably impressive because T-Mobile US only began construction six months ago. 

The carrier first launched its LTE  in just seven markets back in March 2013. As network construction projects go, that's fast. 

On the other hand, it arguably is deceptive to show coverage maps such as this, which is "not (my emphasis) representative of LTE coverage," according to T-Mobile US itself. True the disclaimer is at the bottom of the map, so the image is not legally deceptive. It just is an effort to persuade that unfortunately is untruthful. 

Verizon Wants to Sell FiOS TV Nationwide

Verizon is having conversations with major programmers about how to bring its FiOS programming service to a national audience, delivered "over the top" of any broadband connection. 

Aside from the obvious implications for the future of online video entertainment, such a move would further decouple service providers from some traditional geographical limitations. In the past, mobile or fixed service providers could operate only in geographies where they owned spectrum, networks or franchises or licenses. 

The advent of the era of Internet Protocol and Internet-based communications breaks the link between network infrastructure and applications. So far, that mostly has manifested itself in over the top app growth.

But, in principle, streaming video can be sold over the top as well, as Netflix has so amply demonstrated. 

Such a move "out of territory" would allow Verizon to sell video entertainment to potential customers across the United States, and not only to the five million or so video accounts
Verizon presently services on its landline network.

Going over the top and out of territory would allow Verizon to sell to perhaps 130 million households.