ISPs Drop Gigabit Service Pricing from $300 a Month to $70 a Month

EPB, the Chattanooga, Tenn. supplier of 1-Gbps service, has dropped its gigabit service rate from $300 a month to $70 a month, a reaction to the price umbrella Google Fiber apparently is creating.

EPB also converted all existing customers with 100 and 250 megabit-per-second services to the the gigabit speed.

Separately, Utopia, which operates a wholesale gigabit network in about 10 Utah cities, also says its retail ISP partners have dropped prices for gigabit access from about $300 a month to $65 a month to $85 a month.

To the extent that Google Fiber intended to influence investment in faster ISP networks, and create new price points, Google Fiber seems to be succeeding.

U.S. Mobile Market Disruption Will Not be Easy

Based on SoftBank's ability to shake up the Japanese mobile market, many observers expect a similar assault in the U.S. market, from a SoftBank-owned Sprint. SoftBank entered the market by buying Vodafone's Japan assets in 2006.

In just one year, Softbank managed to boost its subscriber base from 700,000 in fiscal 2006 to 2.7 million in fiscal 2007.

By the beginning of 2008, Softbank had grabbed 44 percent of Japan’s new mobile subscribers, well ahead of KDDI’s 35 percent and NTT-DoCoMo’s 11 percent.

Softbank’s “White Plan” was important, offering  offering free peak-time calls on SoftBank’s network.  

One key point was SoftBank’s willingness to sacrifice voice average revenue per user  to make market share gains. Back in 2006 to 2008, Softbank was willing to accept a stunning $13 overall ARPU decline.

SoftBank’s exclusive right to sell Apple’s iPhone, obtained in 2008, did not hurt, either.

It won't be as easy the second time, as voice prices are fairly reasonable in the U.S. market, on-network calling circles are common, and there will be no equivalent of the Apple iPhone exclusivity.

SoftBank strategists likely are hard at work trying to find some equivalent value, but the point is that it will not be easy to disrupt the U.S. market, especially when carriers are free to match key offers.

An example can be gleaned from the recent T-Mobile US effort to unbundle device purchases from recurring service charges. The “Jump” program--allowing faster device upgrades-- likewise was intended to differentiate T-Mobile US from its key competitors.

But the advantage is blunted when all the other carriers match the offer.  AT&T launched  its own program "Next," while Verizon launched  "Edge," substantially matching the T-Mobile US offer. Sprint now has followed with One Up, launching Sept. 20, 2013 and allowing Sprint customers to buy a new phone with no money down, paying for devices in installments over two years.

The move by Sprint means all four of the large national carriers offers such a program, and shows how hard it will be for T-Mobile US or  Sprint to truly disrupt the U.S. mobile market.

Some might argue the T-Mobile US campaign now will need to change yet again, allowing T-Mobile US to argue it is forcing the rest of the industry to change, and attempting further changes in retail packaging.

T-Mobile US might argue its competitors still have not truly matched its offers, given remaining price differences, especially between T-Mobile US and Sprint, on one hand, and AT&T and Verizon Wireless on the other hand, at least for single device accounts.

Just how much Sprint might be able to attack retail packaging or pricing levels, until the other carriers (or at least AT&T and Verizon Wireless) are unable to keep matching the offers, remains to be seen. But that is likely to be key to whether Sprint or T-Mobile US are able to significantly and permanently change market share in the U.S. mobile market.

Multi-Sided Markets are Complex, Therefore Slow to Emerge

Single-sided markets are relatively simple: there is just one type of buyer. Internet service providers, mobile service providers and fixed network service providers are examples.

There are other models, though, even in the network services business. Cable TV operators, for example, operate in two-sided markets, earning revenue both from end users and business partners.

Many of the newer markets service providers are entering, or have entered, are much more complicated. Those multi-sided markets require construction of more-complex value chains, and therefore take longer, and are tougher, to successfully create, according to Rajesh Kandaswamy, Gartner analyst.

Many of the hoped-for new businesses, such as any ways network services are exposed to third parties, are two-sided models, where revenue is earned from end users and business partners. That’s a more-complex business, creating multiple required ecosystem connections.

For a service provider hoping to earn revenue from advertising or content delivery network services, for example, service providers must maintain a critical mass of customers that advertisers want to reach, and then entice marketers to pay money to reach those prospects.

Some of the new revenue streams might be even more complicated. A connected car service, for example, could be a one-sided business (where a mobile service provider sells only to a automobile manufacturer), or a two-sided business, where a service provider sells direct to its existing customers, as well as to a partner auto manufacturer.

Mobile payments so far represent the most complicated, multi-sided ventures. The current system already has many participants. Card holders, card issuers (bank), card networks (Visa / MasterCard), merchants, and acquirers (banks and processors) are the primary stakeholders.

By definition, a payment network is multi-sided. Adding mobile payments inserts the mobile service provider into the value chain as well, and may or may not pose a threat of competing with other participants.

Multi-Sided Payment Ecosystem

In the simplest possible implementation of mobile payments, the mobile phone replaces the plastic card.

In a more-disruptive scenario, mobile services actually displace one or more of the existing participants.

But any multi-sided market is more complex to create or modify since it requires agreement of other participants in the value chain, some of which might resist the change, precisely because entry of the mobile payments participant can cannibalize revenue or threaten displacement of an existing provider from a role in the value chain.

That is one reason why mobile payments will take some time to develop as a mass market.

66% of All Mobile Phone Users Use Internet on Their Mobiles

Google Wallet Can be Used by Any Android Running Version 2.3 or Higher

It is not directly a commentary on the value of near field communications, but Google’s introduction of a new version of the Google Wallet app, rolling out the week of Sept. 15, 2013, is part of Google’s overall approach to apps, which is to make them available on all platforms.

The latest addition makes Google Wallet usable by all Android phones (version 2.3 and higher), in the United States. That means there is no need for NFC capabilities on the devices.

The updated app allows users to easily send money on the go, store loyalty cards, save money through offers, and view all your Google Wallet activity, Google says.

Using the Google Wallet app, users can easily and securely send money on the go to any friend in the United States with an email address (ages 18+). It’s free to send money directly from your bank account or Google Wallet balance, and low fees apply when using a linked credit or debit card.

With the new Google Wallet app, users add cards by scanning barcodes or inputting the card number into the app. The next time you’re at the store, you can earn points for your loyalty program by scanning the app at checkout, said Peter Hazlehurst, Google Wallet director of product management.

In addition to loyalty cards, all offers from the Google Maps app, Google Search, Google+ or Google Offers are visible and redeemable in the Wallet app at checkout.

Google Wallet also can be used to to pay on Google Play, select mobile websites or a growing set of Android apps.

The new version is available on the Google Play Store.

Does Broadband "Cause" Economic Growth and Higher Household Income?

Correlation is not causation. In other words, even when there is a relationship between two events, trends or occurrences, that does not mean one causes the other in a direct sense. Still, a study sponsored by Ericsson claims higher speeds "cause" higher household income.

With all due respect for Arthur D. Little and Chalmers University of Technology, which conducted the study, that’s a logical fallacy. No doubt, household income and use of broadband access are correlated.

But it is just as likely that higher income “causes” purchases of faster-speed broadband access, than that broadband access “causes” higher income. In truth, there is clear correlation, not “causation.”

Correlations are different from the classic method of making predictions: trying to find out "why" or "what caused something." That's known as "causation." But while correlation is not causation, correlation still is useful.

A correlation does not mean that one thing caused the other, but “big data” can yield important insights. For instance, after analyzing billions of records, MasterCard learned that when someone buys gas at around 4 p.m., the person will likely then spend $35 to $50 on groceries or at a restaurant. The gas purchase didn't cause the food purchase, but the two events are correlated.

That doesn’t invalidate the importance of the insight. In this instance, correlation is as important as causation, one might argue.

But it arguably is incorrect to see a causal relationship when there is clear correlation, but no clear evidence of causation. In fact, one might plausibly argue the inverse case, that is is higher income that causes purchasing of faster and more expensive broadband, not broadband causing higher income.

The study argues that, in OECD countries, the greatest measured increase in income was for households that upgrade from 0.5 Mbps to 4 Mbps, at around US$322 per household per month.

On average, upgrading from 4 Mbps to 8 Mbps yielded US$122 per household, per month. For Brazil, India and China, upgrading from 0.5 Mbps to 4 Mbps is projected to yield US$46 per month, per household, the report claims.

The Ericsson-sponsored study does attempt to control for factors known to influence income (age, sex/gender, education, household size, skills and type of occupation).

That there is a correlation between gross domestic product and Internet access speed does not seem out of place. Whether there is causation is the questionable assumption.

"Results are in line with our previous study that quantified the impact of broadband speed increases on the gross domestic product of 33 countries, as well as a slew of other studies we reviewed,” said Sebastian Tolstoy, VP Radio Business development and Strategy, Ericsson.

Few might disagree that “broadband access has a positive effect on the economy.” What is contestable is that broadband causes economic growth. Some would argue it is more likely economic growth causes faster-speed broadband to be deployed and purchased.

One might argue that mobile services likewise cause economic development. Others would argue mobile services are most plentiful and most advanced in densely populated urban areas where there are high concentrations of customers because economic growth is robust in those regions, compared to rural regions, for example.

That is why new mobile networks are built first in urban areas, not rural areas, and why most mobile service revenue is generated in urbanized areas. That is where the economic activity, higher incomes and wealth tend to be located. In other words, it makes as much sense to argue that economic growth “causes” mobile adoption as to argue that mobile “causes” economic growth. They are correlated, clearly, but not causal in a clear way.

The evidence is building for broadband speed as a driver of economic growth,” said Martin Glaumann, Partner at Arthur D. Little.

The study can show that increased broadband speed increases income,” said Erik Bohlin, professor at Chalmers University of Technology.

In Different Ways, Microsoft and Apple Both Bank on Having the Right Strategy

The best strategy in mobile device or computing device markets tends to change over time, some would argue. In a brand new market, it often makes sense to bundle the experience elements (integrate vertically) to reduce adoption barriers. 

You might point to AOL's success, early in the consumer Internet access market, or Apple's historic focus on integrating experience elements for personal computing. 

Later, when customers and users are well acquainted with a product, that approach can backfire, and a horizontal, unbundled, or "open" approach often can work better. 

And that is the issue both Apple and Microsoft are grappling with, at some level. Some would argue Microsoft is about to pursue a vertical approach in mobile, where it historically has taken a horizontal approach in PCs. 

And Apple continues to act consistently with its vertical approach, though many argue it should at least deviate somewhat from its "premium pricing" approach, as it did with the iPod product line. 

But some might argue that a horizontal approach is better in a mobile device market that increasingly is well understood and mature. When consumers are comfortable with a technology product, the importance of a unified, consistent experience (provided by a vertical approach) arguably is less important. 

Google, by way of contrast, has some "vertical" experiements (Nexus smart phone), but mostly operates horizontally, trying to be relevant on every platform. 

Google wants to offer an integrated experience, but doesn't worry so much about "absolute best" experience on every device or platform, all the time. Google wants useful experience on every platform, all the time, and "best" experience on some devices, some of the time. 

If Microsoft and Apple are wrong, time will tell. Cross-platform performance, some would argue, now is becoming strategic. Microsoft will pursue that some of the time, Apple some of the time, but neither has a cross-platform strategy all of the time. 

For that matter, Google does not have a horizontal approach all of the time, either. But most of what Google offers intentionally is cross platform and horizontal. The vertical efforts are mostly demonstration projects intended to illustrate best of breed use of the platform.