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.

Most Additional Mobile Spectrum Has to Come from Existing Licensees

Though better air interfaces, offloading, small cells and possibly retail pricing policies will help mobile service providers cope with growing mobile data demand, there actually is very little unused spectrum to allocate for additional mobile use.

That means reallocating existing spectrum is what has to happen, according to the Phoenix Center for Advanced Legal and Economic Policy Studies.

The U.S. federal government itself controls about half (1,687 MHz) of the spectrum

between 225 MHz and 3.7 GHz most useful for mobile or fixed communications.

And one problem is that government agencies do not have incentives to use spectrum efficiently.

“The PCAST Report, for example, states plainly, ‘Federal users currently have no incentives to improve the efficiency with which they use their own spectrum allocation.’”

The European Commission’s WIK-Consult Report notes that “public sector agencies may

not face sufficient incentives to make maximally economically efficient use of

their spectrum assignments (e.g. through sharing with other compatible uses), or

to give spectrum back to the spectrum management authority if they no longer need it.”

As we see it, it is the inefficiency of spectrum management, not spectrum use, which is most problematic, the Phoenix Center says. The fact that the Pentagon pays $750 for a hammer does not mean a consumer can’t purchase one for $10 at the local hardware store.

In contrast, if the government is an inefficient manager of spectrum, then the consequences of the inefficiency are realized across the entire spectrum ecosystem.

The issue then is one of creating a licensing regime that maximizes efficiency. The analysis suggests it is preferable for the Government to sell spectrum rather than lease it.

Where spectrum is shared, it likewise would be better for the management process to be conducted by the private market rather than a government entity.

Up to This Point, "New Services Revenue" Has Come from Legacy Sources

Despite the emphasis on creation of “new services” to drive the next waves of revenue growth in the local access business, the actual revenue gains so far have been driven mostly by market share shifts among mobile, fixed network telco, cable TV and satellite TV firms.

That is not to discount share shifts to independent providers of all sorts, including competitive local exchange carriers, independent ISPs and resellers. But most of the measurable volume of U.S. market share change occurs in just two segments: fixed network telco and cable TV.

You know the story: telcos are taking video market share, and ceding voice market share to cable TV. Cable TV companies are losing video share, but have gained voice services share.

Most would say cable companies retain an edge in high-speed Internet access.

In the business customer segment, fixed network telcos have been slowly losing share to cable TV operators, but also blunting inroads of the independent and competitive providers. The exception is a few independent fixed network telcos that have moved agressively into the small business services segment (Windstream and Frontier Communications being the salient examples).

Insight Research Corporation predicts U.S. cable companies in 2013 will reach $8.8 billion in annual revenues providing telecommunications services to small and medium-size businesses.

U.S. fixed network telcos probably have about $6 billion iin video subscription revenues, based on an attribution of video at $50 a month, on a base of about 10.4 million subscribers.

Next to mobility, business services are the second largest segment in the $500 billion U.S. telecommunications business.

According to Insight Research, cable companies already have about 10 percent of the business market for voice and data services. At $8.8 billion, the addressable market is $89 billion annually.

There is huge logic to the cable push. Most tier-one telcos consider small businessto be part of the “mass markets” operation. Given the historic consumer orientation of cable TV companies, selling voice and Internet to small businesses is not a huge shift.

Of course, cable operators also sell to enterprises, especially for high-capacity private networks and mobile backhaul connections.

In the future, cable operators probably also will get a share of the backhaul market for small cells.

The point is that, so far, the "new" revenue streams for cable TV operators and fixed network telcos have come from legacy services, albeit legacy revenues taken from existing providers.

At some point, that trend will run its course and "truly new" services (sensor connections for machine-to-machine or Internet of Things applications), automobile communications, home automation and other revenue sources will have to be created.

For some time to come, market share shifts will continue to drive the significant portion of service provider "new services" growth.