Will Apple Drive Inflection Point for Proximity Payments Business?

The rebranding of the AT&T, Verizon and T-Mobile US mobile payments app to SoftCard pretty much tells you what market SoftCard is chasing: retail payments made by mobile phones that displace payment by a credit card or debit card at a retail terminal.

That occurs just as the Apple iPhone 6 launch, among other things, means Apple also is getting into the mobile payment business for the first time.

Some of us have argued that Apple was the one company that could really make a breakthrough in mobile payments in developed markets.

The emerging issue now is whether, in fact, Apple’s presence can transform a market that has been slow to develop, even if there have been some successes, including the branded Starbucks app and credit card readers such as Square.

Among the long-standing issues is the matter of value--whether ability to swipe a phone is sufficiently more valuable than swiping a credit or debit card at a retail terminal.

There is an argument to be made that, in fact, the incremental value is relatively small. Some might point to the high use of the Starbucks card from mobiles as an example of how much value might be added.

Others might simply counter that the value is not the swipe, it is the free coffee one earns by swiping the Starbucks app from a phone, instead of paying by cash or card.

In that sense, the value for end users is not so much the “pay by phone” capability as the upside of free coffee. For Starbucks, the value is the data about its customers, as well as enhanced loyalty. And in 2012, Starbucks mobile wallet purchases accounted for perhaps half of all U.S. mobile wallet payments.  

There arguably also is some incremental lift in spending per customer, as often has been noted for credit card or debit card purchases, compared to cash payments.

Proximity payments, where a smartphone replaces a physical credit card, remains the big immediate opportunity in developed markets, many expect, even if money transfers have been the bigger development in developing markets.

That will likely be the case for Apple, SoftCard and others in the U.S. market as well.

Longer term, the bigger opportunity in developed markets might be banking or commerce in a broader sense. Still, the immediate measure will be the growth of merchandise sales in retail outlets where payment is made by a phone, linked to one or more credit or debit accounts.

U.S. mobile proximity payments are about to explode. Mobile proximity payments are payments for goods and services transacted via mobile device in bricks-and-mortar stores.

BI Intelligence, for example, estimates that mobile proximity payment volume will grow at a compound annual growth rate of 153 percent from $1.8 billion in 2013 to $190 billion in 2018, with an inflection point in 2016.

Mobile payments doubled in 2013 and will continue to grow at 43 percent annually through 2018, Forrester Research predicts.

All that noted, it remains unclear whether Apple will be able to make a breakthrough with its mobile wallet. At least so far, nothing about its approach is structurally different from what others have tried to achieve.

At its heart, Apple’s mobile wallet appears to be one more way to link credit and debit cards to phones, allowing them to act as the payment mechanism at a store.

Granted, Apple is Apple. Its market presence might be the tipping point, causing a critical mass of merchants to adopt new terminals and systems to support taking mobile payments.

But we likely are still a few years away from knowing. The iPhone ecosystem will need some time to replace older devices with devices capable of using the mobile wallet, and retailers still will have to make investments to support such payments.

The point is that Apple’s entry might help. But just how much, remains to be seen.

Internet was a Communications Network; Now it Mostly is a Distribution Network

Is the Internet a communications or content distribution network?



That's a rhetorical question, but an important question, nevertheless, since governments often regulate "communications" networks differently than they do "content delivery networks" (the generic function, not the business of CDNs). 



Even traditional language "any to any" speaks more to the original communications function than the ways most of the Internet actually is used as a content acquisition medium these days. 



The Named Data Networking project hopes to evolve the Internet's fundamental protocols in ways that acknowledge the key change by adding more security. But there is an equally-important change: the shift in Internet purposes from communication to content delivery.



"Recent growth in e-commerce, digital media, social networking, and smartphone applications has resulted in the Internet primarily being used as a distribution network for content," the NDN project says. 



Aside from the matter of security and protocols, that shift to content delivery could have important business and regulatory implications. 



One often hears it said that regulators should not allow the "Internet to become cable TV," That typically occurs in the context of discussions about network neutrality.



The notion is that the Internet should not become a media business.



The problem is that the Internet has become the enabler for precisely those developments. 



Many current and future battles will occur, around that change. The Internet originally was a narrowband communications network. Now it is a broadband media consumption network. 

By 2018, 1/2 of All Internet Users Will Live in Asia

By 2018, according to eMarketer, nearly half of the planet's Internet users will live in the Asia-Pacific region. At present, about 45 percent of Internet users live in Asia, according to Internet World Stats.

But China and India represent the majority of those users. For example, of perhaps about a billion Internet users in Asia, China represents 591 million, while India represents 213 million, about 80 percent of the total, according to Statista.

Japan represents about 10 percent, Indonesia about seven percent, South Korea about four percent, as does the Philippines. Bangladesh and Vietnam are closing on about four percent. 

Must ISPs "Upgrade or Die?"

"You upgrade or you die" is the catchy sub-title to a new report by GigU on the state of gigabit Internet access in the United States.

“We have made enormous progress,” the report suggests. “Scores of American communities” are building such networks. Moreover, “in a radical change ove rthe past 12 months, multiple service providers are initiating their own efforts.”

The “upgrade or you die” sub-title explains GigU’s view of competitive dynamics, where Google Fiber and municipal or other public-private testbeds have changed the competitive context.

The report also notes that progress towards gigabit access is not at a point where progress is “inevitable or irreversible.”

“We admit we’re not really sure that it is a case of upgrade or die for every telco or cable company,” the authors say. That likely is correct. In many markets, customers might not wish to buy gigabit services, at current or projected future price levels, compared to offers of 100 Mbps or 300 Mbps at lower price points.

Indeed, that is a current bet many cable companies are making, essentially gambling that, in the near term, the practical difference in end user experience between 100 Mbps or 300 Mbps and 1 Gbps is relatively slight.

But some extrapolation of Internet access speed trends since the days of dial-up access would suggest gigabit access will indeed be quite typical at some point. The issue is “when?”

By some reasonable extrapolation, it has been possible to suggest that 100 Mbps would be a typical access speed in the U.S. market by 2020, as crazy as that might have seemed 10 years ago, or even five years ago.

In 2002, it is hard to remember, only about 10 percent of U.S. households were buying broadband service. A decade later, virtually all Internet-using households were buying broadband access service.

Researchers at Technology Futures continue to suggest that 100 Mbps will be a common access speed for U.S. households by 2020, for example.

The new issue is how common gigabit access will be.

A reasonable forecast would have about half of U.S. broadband access users buying 100 Mbps connections--or faster--by about 2020.

About 10 percent will be buying 50 Mbps connections.

Nearly 24 percent will still be buying 24 Mbps service.

In 2009, Technology Futures predicted that, in 2015, about 20 percent of U.S. households would be buying access at 100 Mbps, about 20 percent at 50 Mbps, and something more than 20 percent will be buying service at about 24 Mbps.

That might have seemed a bold forecast back in 2009, but Technology Futures uses a rather common method of technology forecasting that has proven useful. In fact, Technology Futures has been relatively accurate about access speeds for a couple of decades, at least.

The 2009 forecast by Technology Futures furthermore seems to be a reasonable approximation of reality. Technology Futures had expected that roughly 20 percent of U.S. households would be buying 1.5 Mbps service by about 2010, another 20 percent would be buying 24 Mbps service, while 40 percent of U.S. households would be buying 6 Mbps service.

The Technology Futures estimates of 2009 seem to match other data reasonably well. An Akamai study suggested that typical U.S. access speeds. were about 4 Mbps, on average, in 2010,

Moore's Law, in fact, fairly well describes the growth of Internet access speeds in the U.S. market, since the time of dial-up access.

The point is simple enough: if Internet access bandwidth doubles every year, it is only a matter of time before 1 Gbps is a standard access offering. There will be a lag between the leading edge adopters and mainstream adopters.

But the more important point might be that mainstream users will, over time, have access to hundreds of megabits per second, where they now buy scores of megabits per second.  

Connected Car: Built in Versus Docking

According to the AutoTECHCAST findings, nearly two-thirds of car owners (65%) say they want built-in connectivity, compared to slightly more than one third (35%) who prefer brought-in connectivity using their smart phone.

That reminds me of the days of dedicated "car phones." Maybe it will be different this time around. But why isn't it simpler to dock a smartphone?

More than half of car owners say they are less likely to buy a vehicle that uses a data plan/carrier different from their own, and 31 percent say they are "much less likely" to purchase the vehicle.

That's crazy. Just make it easy to dock a smartphone or other. On nectar device.

Boost Mobile (Sprint) Counters T-Mobile US Prepaid Promotion

Sprint is offering new and existing Boost Mobile customers prepaid plans with unlimited calling, text messaging and one gigabyte of data for $35 a month, an offer evidently meant to be a response to T-Mobile US promotions for prepaid users offering a gigabyte of data for $40 a month, as well as a $40 a month, 500-MB plan offered by AT&T.

The Bloomberg report also notes that Sprint also is cutting the cost and doubling the data for its more expensive prepaid plans, which were priced at $50 a month and $60 a month.

As is typical for mobile marketing wars, each offer touted by a key competitor is quickly matched, and that seems to be the case here.

As part of an Amazon Fire promotion, AT&T Mobility reportedly is offering customers a “nothing down” plan for buyers of the Amazon Fire phone, at present offered exclusively through AT&T.

The limited time offer requires that customers  sign up for a two-year service plan or buy the device using the “Next”  installment plan, paying $32.50 a month.

Observers might disagree about whether the move reflects the mobile marketing war currently underway in the U.S. mobile market or just an oversupply of devices that AT&T wishes to reduce.

Separately, T-Mobile US doubled the number of music streaming services customers can use under the “Music Freedom ” plan that does not count music streaming against the user mobile data usage cap.

The original plan included  iHeartRadio, iTunesRadio, Pandora, Rhapsody, Samsung Milk, Slacker and Spotify. The latest move adds AccuRadio, Black Planet, Grooveshark, Radio Paradise, Rdio and Songza.

Promotions are not unusual even in “normal” times. But the present mobile marketing war means an unusually high number of promotions, some large, some small, will be launched.

Most recently, T-Mobile US quadrupled the amount of customers can get on its Simple Starter  plan, for an additional fee of $5 a month. The basic plan, costing $40 a month, provides 500 MB of Long Tern Evolution network data. For $45 a month, users get 2 GB.

T-Mobile US also now allows Simple Choice family plans including as many as 10 lines, and separately launched a promotion that matches smartphone data allowances when a tablet is added to a plan.

Sprint earlier had expanded its shared data plans to as many as 10 lines, doubled the amount of data included as part of such plans and set pricing that undercuts similar AT&T and Verizon plans.

Sprint also adjusted the single-line plan, setting $60 a month pricing for he tunlimited data plan.

Unlike family share plans offered by AT&T and Verizon Wireless, in which members draw from the same pool of data, each plan T-Mobile line has its own dedicated pool of data.

Under conditions where retail plans are changing so fast, a simple “no down payment” feature might not be viewed as that big a deal. Even under “normal” competitive conditions, that might not be so big a change.

Against the backdrop of a fierce mobile marketing war, every “little” promotion might have more significance.

Much of the recent activity has focused on the prepaid, or value segment of the market, in part because the major national service providers have been taking share from the independent prepaid brands.

Also, T-Mobile’s MetroPCS acquisition was an effort to bolster T-Mobile’s position in the faster-growing prepaid segment of the business.

source: Arstechnica

In fact, the prepaid customer segments are a the center of marketing campaigns launched by T-Mobile US and Sprint.

T-Mobile US arguably has been picking up tablet accounts and single-line phone accounts, weighted towards the value end of the market.

In the second quarter, T -Mobile US booked virtually all net new prepaid account growth in the U.S. market, for example.

T-Mobile US now also has increased by 2 GB Long Term Evolution usage buckets for customers of its “Simple Starter” plans.

T-Mobile US now provides “Simple Starter” plan customers to quadruple their data to a full 2 GB of LTE data, for just $5 per month. That plan was launched in May 2014 as an entry-level solution with unlimited talk and text, and 500 MB of LTE data for just $40, starting in September 3, 2014.

The move allows T-Mobile US to improve the value of its entry-level offer.

Sprint, likewise, has launched new plans aimed at single-line customers, as well as a shared data plan that features double the usage bucket as comparable plans from AT&T and Verizon, for example.

Other carriers also are attacking at the value end of the market.

Cricket Wireless (owned by AT&T) is offering former T-Mobile and Metro PCS customers who switch to Cricket Wireless a $100 bill credit, available from Aug. 24 to Oct. 19, 2014, at Cricket stores nationwide and online.  

There is no limit on the number of lines a customer can switch to Cricket, receiving a $100 bill credit for each line transferred.

Cricket’s new offer is one more way AT&T can fight back against attacks on the value end of the market from T-Mobile US or Sprint.

Promotions will be launched for the higher value shared data plans that represent multi-line accounts as well.

Still, at the moment, it is tablet additions and phone accounts in the value segment that have been the focus of marketing attacks initiated by T-Mobile US.

Sprint arguably is the carrier with the broadest attack on shared data plan accounts that are, by definition, multi-line accounts.

Thailand Incumbent Telcos Face Revenue Shortfall

New Thailand Information and Telecommunications Minister Pornchai Rujiprapa said his priority will be finding new revenue for his two state telcos, CAT Telecom and TOT Corporation, which are facing a cash crunch.

Nearly everywhere,  it seems, Telco revenue models are threatened.