More Trouble for 4G LTE Investment Models

Will fourth generation Long Term Evolution profit margins be sacrificed to speed mobile operator growth? It already is, in some instances.

You know what that means: increased difficulty for the 4G LTE investment decision, in some instances.

French mobile service provider Free Mobile has added an LTE 4G high-speed broadband service to its Free Mobile package without raising the price, in a market where its chief rivals charge a premium for using the 4G network.

Iliad says its monthly Free Mobile subscription remains unchanged at 19.99 euros a month including 4G, without a long-term contract.

Pressure on LTE profit margins is evident elsewhere as well. EE in the United Kingdom is bundling unlimited calling and texting when roaming in some European countries on 4G. Without necessarily eliminating a cost premium for using the LTE network, the “no incremental cost roaming” is another way of merchandising the LTE network without directly eliminating a cost premium on recurring service.

Hutchison Whampoa’s “3” in the United Kingdom has added an additional four countries (United States, Indonesia, Sri Lanka, and Macau) to its U.K. “Feel at home” roaming plan which allows United Kingdom-based consumers access to their respective voice and data allowances abroad. These new territories make a total of 11 countries where free roaming is available.

The obvious implication is that 3 is deliberately sacrificing potential revenue to grow its global presence, since roaming fees are a high-margin service, as Free Mobile is using the “no incremental cost” approach to take market share from other mobile operators in France.

The use of free 4G LTE roaming is part of Hutchison Whampoa’s effort to create a bigger global network. Three operates in Indonesia and Sri Lanka, but the U.S. market is the first country offering free roaming where 3 does not have a facilities-based presence.

The “Feel At Home” program  now operates in 11 destinations around the world.

For mobile service providers investing in brand-new LTE networks, the fact that some competitors are willing to offer the new service at no premium over 3G will make the business case for 4G harder.

Half of all Smart Phones Bendable by 2019?

Some 40 percent of smart phones will be curved and bendable by the end of the decade, says Ramchan Woo,  head of the LTE Product Planning Division at the LG Electronics Mobile Communications Company.

Bendbles might not necessarily be thinner, though one suspects that is a requirement. At the very least, bendables should vastly reduce the number of cracked screens we seem to see these days. 

Why Word of Mouth is Essential for Really Big Companies

The converntional wisdom is that positive and enthusiastic word of mouth (people referring other people to a specific product) is helpful for any supplier of goods and services.

Some might argue world of mouth is the only a way a successful company becomes a huge company. The reason, as often is the case, is scale. 

When a company is small, marketing or advertising arguably can drive usage growth. But eventually, a firm gets so big that it simply can't spend enough money to have an impact.

At that point, only word of mouth recommendations make a difference in sales volume. 

True, the product has to be useful, priced right and of sufficient quality to make it "better" than other alternatives. Still, it is a useful insight: a very-large company is in the hands of its users, where it comes to marketing, even if a small company can affect sales by marketing.

Will Change to Communications Act of 1996 Create New Winners, Losers?

Fundamental changes in national communications law do not happen all that often. In the United States, the Communications Act of 1934 was not fundamentally revised until the Communications Act of 1996.

So it is noteworthy that there are rumblings of a possible effort to revamp the Communications Act of 1996.

Congressman Fred Upton (R-MI), head of the House Energy and Commerce Committee, and congressman Greg Walden (R-OR), chair of the Communications and Technology subcommittee, say they could possibly undertake changes to the Communications Act of 1996 as soon as 2015.

Among the likely areas of change are the rules that govern providers of the same services, across different industry silos. Many would argue that, under competitive conditions, it does not make sense to apply different rules to providers and technologies that compete in the same markets.

The big philosophical question is whether lawmakers move to apply less-restrictive rules across the boundaries, or apply more-restrictive rules across the industry lines. In other words, telco executives likely would prefer less-stringent cable TV style regulation over common carrier rules.

And that will remain the challenge. Each industry will naturally prefer rules that favor it, and are at least neutral, or perhaps inhibiting, to key competitors. So the issue is how to harmonize the rules in a mostly “neutral” way, to retain support across the board. It never is easy.

For the moment, they will hold a series of hearings in 2014.

The potential change highlights a key facet of the communications business: communications regulators and lawmakers are vital and foundational in every country.

Communications laws always pick winners and losers, since no firm can be in business without a decision by government to allow an industry to exist and allow firms to be in the business.

Communications policies also enable and set boundaries on use of specific technologies, revenue models and sometimes even profit margin.

In the United States, prior to 1996, for example, it was illegal for more than one firm to provide local telecom service in a local area. In Myanmar, until 2013, only two mobile service providers could be in business. In 2013, that number expanded to four.

Whether a firm can try and enter a business is fundamental, and is a matter of government policy. Governments can encourage competitors, or restrict existing providers from entering new markets.

Governments affect pricing policies for some products. And governments always have a say about whether a specific company can buy another company, or whether certain companies lawfully can attempt to buy another firm in the business. The former generally is a result of antitrust policy, the latter more often a matter of foreign investment rules.

So it is noteworthy that there is some movement to update the Communications Act of 1996, itself the first significant change in national communications policy since 1934.

As always, political support and “timing” are crucial. Lots of legislation gets introduced in Congress; little of it has a chance of passing.

It isn’t yet clear whether the requisite climate of “this is on the agenda now, and has to be dealt with,” can be built.

But current Federal Communications Commission Commissioner Ajit Pai supports the initiative.

Comcast, AT&T, the National Association of Broadcasters and the National Cable and Telecommunications Association already have said they support the effort.

At least initially, that is formidable. Any bit of legislation has less chance of getting support when industries collide. There is much greater chance when industries agree that a change is needed.

But this is about winners and losers, make no mistake.

It's not Easy to Run a Carrier-Owned Over the Top VoIP Service

Jajah, one of the early over the top VoIP services, is shutting down on January 31, 2014. Founded in 2005, jajah was acquired in 2009 by Telefonica for $207 million, as part of a strategy to create a telco-owned over the top service.

But Telefonica has been pursuing other ways of using VoIP to pick up more users, namely with mobile apps like Tu Go. In essense, Tu Go now will do what jajah once was seen as doing. 

BlackBerry Says It Isn't Dead

BlackBerry says it is "very much alive," and that "reports of our death are greatly exaggerated," in an open letter by BlackBerry to enterprise customers. 

It's an odd statement, in some ways, but seems to validate thinking in many quarters that BlackBerry will pin its future hopes on remaining an enterprise-oriented mobile communications services company, and not a consumer devices company.

Interim BlackBerry Ltd. chief executive John Chen issued the open letter in an apparent attempt to reassure enterprise customers about the firm's commitment to remain a viable provider of range of services for large organizations, including the managing and securing of multiple devices using the BlackBerry Enterprise Service.

In the letter, Mr. Chen says that some consumers are hearing from companies that sell MDM (mobile device management) software that BlackBerry’s BES (BlackBerry Enterprise Service) might not be supported, a typical competitive tactic in such cases.

Amazon Prime Air Will Need Approval from Federal Aviation Administration!

Still, the idea that Amazon might be able to use drones to deliver parcels (up to five pounds, at the moment) to locations within 10 miles of an Amazon warehouse would open up affordable, same-day delivery options for perhaps 80 percent of everything Amazon now sells.

IF the Federal Aviation Administration Administration approves, of course. Watch for a whale of opposition from place-based retailers.