One Reason Why U.S. Vehicle Communications (Machine to Machine) Market HAS to Grow

The U.S.  Department of Transportation (specifically the U.S. NHTSA) is preparing regulatory proposals to make vehicle-to-vehicle communications (part of the broader "machine to machine" market) compulsory, to prevent crashes, reduce traffic congestion and to save fuel.

The U.S. Department of Transportation's (DOT) National Highway Traffic Safety Administration believes vehicle-to-vehicle communication technology for light vehicles, allowing cars to talk to each other, would  avoid many crashes altogether by exchanging basic safety data, such as speed and position, ten times per second.



That is one way to create a market: mandate it.  The major mobile service providers possibly stand to  benefit, even if the actual communications will use the 5.9GHz band and Wi-Fi air interface (802.11p), in part because any such systems will benefit from wide area communications as well. 

But most of the revenue likely will be earned by application providers, in a complicated ecosystem.

60% of All Internet Devices Exchange Traffic with Google Every Day

About 60 percent of all Internet end devices and end users exchange traffic with Google servers during the course of an average day, according to Deepfield.  In 2010, Google represented just six percent of Internet traffic.

In the summer of 2013, Google accounted for nearly 25 percent of Internet traffic on average. Perhaps as significantly, Google has deployed thousands of Google servers  (Google Global Cache) in Internet service provider operations around the world, accelerating performance and improving end user experience.

Aside from all the other things that presence could mean, one might argue that Google might be able to leverage all of that to better compete with Amazon Web Services, the clear market leader in the cloud infrastructure business.

Mid-2013 research by Synergy Research Group  indicated Amazon Web Services (AWS) had 27 percent market share of the infrastructure as a service and platform as a service segments of the cloud computing business.

At that point in time, North America accounted for well over half of the worldwide market, while Asia-Pacific region accounted for 21 percent of revenue and Europe, the Middle East and Africa accounted for 20 percent of revenue.

Ignoring Salesforce.com, which is in the applications as a service segment, Microsoft, IBM, Google and Fujitsu arguably were positioned in a clear second tier of providers, with market share between four percent and five percent.

AT&T and Verizon each had about two percent share. The question is what any of the other contenders can do to catch up to AWS. Some might argue Google is the firm best positioned to leverage other assets in that regard.

Some argue that Google is Amazon's only competition. Other cloud infrastructure providers might disagree, but few would doubt Google’s ability to challenge AWS, in ways other cloud infrastructure providers would find difficult and expensive.

By some estimates, since 2005, Google has spent $20.9 billion on its infrastructrure. Microsoft has invested about  $18 billion and Amazon about $12 billion.

TV is Turning Out to be Quite a Srtategic Asset for Telcos

There's a good reason why Vodafone bought Kabel Deutschland, and might be considering additional purchases of video subscription service assets in the United Kingdom: video services are among the areas where telco market share is growing.

And while profit margins at smaller providers will be slim to non-existent, larger telcos likely are seeing profit margins in the 20-percent range. 

Video also has emerged as a core application complementing a broadband access service. According to Bernstein Research, where U.S. cable TV and satellite TV providers are losing customers, U.S. telcos are gaining them.

Would You Rather Be HBO or Netflix?

HBO generated $1.8 billion in operating profit in 2013, propelled by revenue growth of four percent (to reach $4.9 billion). 



Netflix's revenue rose 21 percent in 2013 to $4.37 billion and $228 million in operating income. 



Netflix is growing faster, and already generates more gross revenue than HBO, though HBO has much higher profit margins. 



You might argue Netflix is more exposed to a slowdown in growth, as it will have to increase spending on original content. 

Verizon to offer $100 for New Lines in February

One big question observers have had about the escalating mobile marketing wars in the U.S. market is whether Verizon Wireless would have to respond. It appears that is happening, on at least a limited basis. 



Verizon will offer $100 for new lines from Feb. 7, 2014 to Feb. 28, 2014, on a two-year contract plan. 



What remains to be seen is how the offers and counter-offers develop over time, with or without any merger between Sprint and T-Mobile US. 

50% LTE Coverage in Africa by 2018

Though 2G and 3G likely will continue to represent the mobile networks most consumers connect to, by end-2018, half the African population will be covered by Long Term Evolution networks, according to ABI Research.

African LTE mobile subscriptions will grow at a 128 percent compound annual growth rate to surpass 50 million subscribers at the end of 2018, ABI Research forecasts.

“LTE handset shipments will increase by 75 percent annually on average in the next five years,” said Jake Saunders, ABI Research VP and practice director. “Given the poor fixed-line infrastructure, people will depend on the wireless network for Internet access.”

LTE base stations will grow at a compound annual growth rate of 40 percent over the next five years, ABI Research forecasts.

However, LTE network population coverage will be far from homogenous across the region, with a few countries such as Angola and Namibia nearing the halfway point already while wealthier nations like Botswana and Gabon have yet to deploy the advanced technology.

“Part of the underlying reason for this digital divide is the different types of initiatives driving LTE roll-out,” said Ying Kang Tan, ABI Research research associate. “We expect wholesale or shared networks such as the joint venture between the Rwandan government and Korea Telecom and the public-private partnership proposed by the Kenyan government to spur LTE deployment.

 Projected 2018 Network Subscriptions by Type of Network

source: Ericsson

We Should Know in a Few Weeks if Sprint Really is Going to Launch a Takeover Bid for T-Mobile US

SoftBank and Sprint reportedly will have to decide over the next few weeks whether to launch a bid to acquire T-Mobile US.

The argument essentially has to be that the U.S. market is becoming a duopoly, a condition that historically has resulted in high prices and low innovation in the U.S. mobile market, and that only a stronger number three provider (Sprint fortified by T-Mobile US) can check the growing market power of Verizon Wireless and AT&T Mobility.

U.S. regulators and antitrust officials likely already have signaled to Sprint a continuing belief that the U.S. mobile market already is too concentrated. Indeed, Sprint itself argued against the AT&T acquisition of T-Mobile US, on the grounds that competition would be harmed if the number of national providers dropped from four to three, the step it now might propose.

“Removing T-Mobile from the market would substantially reduce the likelihood of market disruption by a maverick,” Sprint said in a 2011 filing asking the FCC to block AT&T’s proposed purchase of T-Mobile. “T-Mobile, as one of only four national carriers, provides a critical constraint on AT&T’s consumer retail prices.”

Son and Hesse argued a combined entity will be a “super maverick” in the mold of T-Mobile US. On the other hand, regulators also might view a resurgent T-Mobile US as evidence that competition is increasing.

T-Mobile US has reversed a nearly decade-long slide in subscribers, and in 2013 had the second-highest net subscriber gains in the U.S industry, adding 2.1 net new customers over the last three quarters, compared to net additions of 4.1 million at Verizon Wireless and 1.8 million at AT&T Mobility, Bloomberg notes.

Arguments can be made, either way, that competition will be most effectively promoted if four carriers remain in the market, or if Sprint and T-Mobile US combine. The former argument will rely on empirical evidence of what T-Mobile US is doing; the latter on economies of scale that might be needed if a larger Sprint plus T-Mobile US wants to disrupt industry prices and packaging more than at present.