$15 a Month Discount for Unbundled Mobile Service Plans is the Right Number

You might wonder why AT&T gives customers who choose not to buy bundled phones a $15 a month discount on recurring costs of service. That amount fairly closely tracks the amount of the device subsidy for a customer on a bundled plan.

A report by the Organization for Economic Cooperation and Development suggests that, in those those countries where both bundled and “buy your own device” options exist, such as in France or the United States, the bundled option (including discounted smartphone) was, on average, between $10 and $20 a month more expensive than the “buy your device separately” option.

Looking at recurring costs, one can see the potential impact of device subsidies on recurring costs. A $600 device, sold at $200, implies a $400 subsidy. At $20 a month, that further implies 20 months to recoup the cost of what is in essence an installment plan.

Take that $20 out of the monthly cost and U.S. service plans cost the same as European plans. AT&T’s $15 a month discount for “access only” service tracks that figure closely.

The OECD report, however, concludes that, in broad terms, service pricing is only slightly affected by the presence of bundled discounts for popular smart phones.

Will U.S. Mobile Price War Survive a Sprint Acquisition of T-Mobile US?

Some observers now are worried about a "price war" in the U.S. mobile industry, with T-Mobile US launching cost of service attacks that AT&T, Verizon Wireless and Sprint have responded to in different ways. 

All the carriers have matched T-Mobile US no-contract plans to some extent, and all have embraced forms of "faster device upgrade" programs.

Given the generally robust revenue growth Verizon Wireless and AT&T Mobility have seen in recent years, some equity analysts naturally fear a protracted price war will harm earnings for Verizon and AT&T, even if T-Mobile US currently seems to be benefiting. 

What SoftBank will do at Sprint is the big unknown. Virtually all observers have expected that Sprint would launch its own attack on the U.S. market, presumably involving an assault on prevailing pricing.

But with T-Mobile US now doing the attacking, with success, the room for SoftBank to do so is made more difficult. Some might argue that is why there is talk about an acquisition bid by Sprint for T-Mobile US. 

Certainly, Deutsche Telekom wants to sell T-Mobile US entirely. So a willing seller is likely to attract motivated buyers. But regulation and antitrust concerns are likely to loom large. U.S. antitrust authorities have made clear a preference for four suppliers in the market, not just three. 

So some think a clever bid would structure the acquisition in a way that also enables Dish Network to enter the market as a new provider, keeping the market at four national providers. 

SoftBank and Sprint likely would have to take other steps to persuade regulators that the T-Mobile US assault also would continue. 

So in any outcome, even if analysts think the only way to stop a ruinous price war is for Sprint to acquire T-Mobile US, the price war is unlikely to abate. 

Comcast, Charter Probably Will Team to Buy Time Warner Cable

With Charter Communications maneuvering to buy Time Warner Cable, Time Warner itself has signaled a preference for an acquisition by Comcast.



But that would be risky, in regulatory terms, as Comcast already is the largest U.S. cable company, with market share just above 30 percent, and gobbling the number-two U.S. operators would likely trigger a negative antitrust response.



So Charter Communications hopes Comcast will join Charter in a joint bid, with a prior agreement on how Time Warner Cable assets would be divided. 



Cable operators have experience with joint bids, and have in the past done precisely that. 



For Comcast, such an approach has benefits. For starters, Comcast would not acquire all of Time Warner Cable, just the New York assets. So while Comcast would get bigger, it would not get substantially bigger. That might mollify regulators and antitrust authorities.



Also, the New York market would have strategic value for Comcast, which would then be able to expand its business customer operations in a market with high business customer potential. 



Owning the metro New York assets also would better position Comcast for an eventual bid to buy Cablevision Systems, which operates on Long Island. 

Will Apple Transform Mobile Payments?

I have in the past argued that the one technology company that could really shake up mobile payments was Apple. At least so far, though, Apple has not made a move, for sensible reasons. 



Apple's services approach has always been structured in ways that help Apple sell devices in the consumer market, and it hasn't been so clear how an industry-leading mobile payments capability necessarily would create a new device market. 



One might argue such a capability would help Apple sell more iPhones and iPads, but that is a different matter, something more incremental, and not the foundation for a whole new product category Apple can re-imagine and reinvent. 



But that might be changing, as there now are reports Apple is looking at creating a service handling payments for physical goods and services on its devices. Apple's iTunes and Apple Store already process remote payments, though indirectly, linking credit or debit cards to iTunes accounts. 



But Apple perhaps senses the growing role of commerce in providing both direct revenue and indirect business benefits is reaching a point where it could make a big difference. 



Consider the fact that, for the first time in history, major technology leaders have revenue models anchored on advertising (Google) and retailing (Amazon). Now "payments" creates the revenue model for firms such as Square. 



Now we might see whether Apple can transform retail payments and thereby create a major new revenue driver for a technology firm. 

One Good Reason Why Disruption of Any Media or Communications Business Still is Possible

Incomplete knowledge makes rational decision making quite difficult. In fact, some would say incomplete knowledge means it is not possible for people to behave completely rationally, even when they want to do so. 

But since it is a statement of fact that nobody can know everything, there always is the possibility that somebody, with a particular set of domain knowledge, can "see" something other practitioners--with different domain knowledge--cannot perceive. 

For that reason, disruption of any market in media or communications remains possible. 

Hola: Peer to Peer Virtual Private Network

Hola, a new peer-to-peer virtual private network service, is bound to be used by people who want to watch content they are not able to access because that content is not licensed in the nation where they reside.

On a larger level, though, Hola is a way to provide the benefits of a content delivery network without actually using a CDN. It makes the Internet more efficient as well. 

Perhaps intriguingly, Hola also makes it harder for government authorities to track your IP address. 

With the disclaimer that I am not advocating anybody violate copyright rules, the networking approach, and the ability to change an IP address, might in some cases be quite useful, particularly in countries where governments are heavy handed, and where dissent is considered a crime.

Hola is the latest practical implication of P2P techniques historically used by content sharing apps and services, but which have other important ramifications. 

Asia Regulators: Flexibility Now Key in Regulating Spectrum

Shin-Yi Peng

There might just be growing recognition among national communication regulators that spectrum policy requires much more flexibility than in the past.

“Old approaches are ill suited to quickly changing environments,” said Chinese Taipei National Communications Commission Commissioner Dr. Shin-yi Peng, who also is a professor of law at National Tsing Hua University.

As one example, Peng noted that when Taiwan finalized its 4G license rules, it chose a technologically neutral approach that does not specify what technologies must be used, allowing operators to move quickly.  

“Stakeholders asked us whether the licenses would be tradeable,” and Peng said that will be possible. “A secondary market will exist.”

And though large incumbents traditionally have dominated spectrum auctions, Thailand is looking at ways to help smaller and local Internet access providers, for whom free Wi-Fi is most important.

Jesada Sivaraks

But backhaul is an issue, said Jesada Sivaraks, National Broadcasting & Telecommunications Commission of Thailand Secretary. The reason is that many smaller ISPs try to use existing unlicensed frequencies for backhaul, which causes interference issues. So Thailand is looking at whether it can use the E band at 60 GHz, to help small and local providers with backhaul.

Another new line of thinking concerns ways to increase usable spectrum without using the traditional approach of clearing spectrum, relocating existing licensed users, and then auctioning or allocating the cleared spectrum.

“Moving licensees is viewed as difficult,” said Peng. So “spectrum sharing turns out to be an important policy tool.”

“Dynamic spectrum access is new, and we are looking at it,” said Pricilla Demition. National Telecommunications Commission of the Philippines Chief, Frequency Management Division.

Priscilla Demition

Even in the area of mobile backhaul, there is new thinking. The issue is how to get middle mile connections to serve remote areas.  It isn’t as though access spectrum scarce. But middle mile facilities often are lacking

“Licensed mobile operators know it will be years before they get out there,” says Robert Pepper, Cisco VP. “So they are partnering, using LTE for backhaul, then using Wi-Fi to distribute signals in the village.”

“Regulators are starting to see advantages to cooperation between licensed and unlicensed operators,” said Pepper.

Commissioner Peng noted that Taiwan allows use of 3G in 1.8 GHz for backhaul, but only in rural areas.

“LTE for backhaul might be only 1 Mbps to 10 Mbps, which will not be enough bandwidth for local use,” said Sevaraks. “Mesh Wi-Fi might work as well, as might C-band repurposing for mobile or terrestrial communications.”

“The crux of the matter is how to create more useful spectrum,” said Peng.