Tuesday, January 20, 2015

Google, Elon Musk Collaborate on New 4,000 Bird Satellite Fleet for Internet Access; Will Compete with new WorldVu Venture

Elon Musk will be part of a new battle between global satellite fleets intended to bring Internet access to underserved people around the globe. SpaceX, Musk’s satellite firm, just got $1 billion from Google to help build a new satellite fleet.

Just days ago, Musk talked about  a new project aimed at putting up to 4,000 satellites into low Earth orbit to provide low-cost Internet access. The satellite system could start providing data services by 2020, though the full constellation could be in place by 2030, possibly. The cost of the venture could amount to $10 billion or more, Musk said.

Separately, WorldVu Satellites Ltd. has raised funding from Virgin Group and Qualcomm for a proposed global satellite internet company focusing on potential users in developing countries that cannot be reached by fixed or mobile networks, as well as to supply Internet access to flying aircraft.

The proposed network will cost between $1.5 billion and $2 billion, backers believe.

WorldVu Satellites founder Greg Wyler said. Wyler, formerly of satellite firm O3b, has been touting this idea for some time.

Virgin Group and Qualcomm are investors in the WorldVu “OneWeb Ltd.” service, which hopes to launch a constellation of 648 satellites. Investor Richard Branson thinks the total could eventually be higher than that. Branson also says voice service will be part of the core service.

Virgin is a sprawling conglomerate that now wants to build a new global satellite fleet to deliver Internet services to users who today do not have access by any other means.

Some might note that others have tried in the past, without much success, to create such networks, and few have tried to reach billions of people who today cannot afford to connect to the Internet.

But Virgin believes it has other assets that will help achieve OneWeb attain the goal of service at far lower costs.

Virgin Galactic’s “LauncherOne” program will be used to make frequent satellite launches at lower cost. Other launch partners. might be added, the press release announcing the venture hints.

Branson suggested that Virgin Galactic will be launching most of the OneWeb spacecraft, but not all of them.

“We have the biggest order ever for putting satellites into space,” Branson said. “By the time our second constellation is developed, the company will have launched more satellites than there currently are in the sky.”

The first launches are supposed to happen in early 2017. OneWeb controls a block of radio spectrum that it will use for the Internet service, but has to begin deploying the network to retain use of the frequencies, a typical requirement for spectrum grantees.

OneWeb’s satellites will weigh about 285 pounds and operate in a low-earth orbit about 750 miles above the planet’s surface. That has significant positive implications for potential bandwidth and latency performance, allowing much-lower latency than possible for geosynchronous satellites.

The deployment challenges will be significant for such a large fleet, but backers hope lower satellite and launch costs will help the venture provide consumer Internet access at far-lower prices than possible in the past.

Should both fleets be built and create sustainable business models, the task of getting billions of people Internet access for the first time will become a reality. That has implications for other existing satellite providers, as well as for mobile service providers providing Internet access.

How Big Will Healthcare M2M Be in 2020?

Internet of Things and machine-to-machine applications in the healthcare market are
“developing slowly, with regulatory constraints a frequent obstacle, especially in the US market,” said John Byrne, directing analyst for M2M and IoT at Infonetics Research.

Global M2M connected healthcare service revenue was $533 million in 2013, and is projected to reach $2.4 billion by 2018. Revenue grew 15 percent from 2012 to 2013.

Connections grew 23 percent in 2013 from 2012, to 44 million.

Infonetics predicts the connected health M2M segment will represent revenue of $2.4 billion by 2018, a 2013 to 2018 compound annual growth rate of 36 percent, but from a small base.

Some forecasts of mobile healthcare forecasts that might include M2M among other sensors, wearables and mobile health services might represent $59 billion in revenue by 2020.

A few think the market could reach $91 billion by about 2023. The point is that the numbers, depending on how one defines the market, can be almost arbitrarily large. In the early going the conservative forecasts are more likely to be correct.

Operational efficiency and lower operating costs are the primary adoption drivers for connected health M2M, Byrne says.

“In our view, an even more substantial issue is that healthcare providers and other participants in this market are reluctant to make significant investments in M2M solutions until they can clearly see the benefit, and this takes time,” said Byrne.

“Operators lack the personnel to deepen relationships with healthcare customers; they need to find partners that have strong ties in the healthcare community to accelerate growth,” Byrne said.

Though many would hope for faster progress, it is refreshing to see a realistic appraisal of market prospects, even if many are hopeful of faster development in the near term.

NHK Will Skip 4K; Go Straight to 8K

“Leapfrog” is a well-known business strategy. In many instances, a supplier might decide to skip an evolutionary upgrade (2G to 3G, for example) and skip ahead with a more-radical move (2G to 4G, for example), in an effort to gain advantage.

That is why executives at NHK have been thinking and now saying they will skip 4K and go straight to 8K. NHK said it would do so at the Pacific Telecommunications Council 2015 meeting.

How much impact that will have on consumer experience is unclear. To detect 8K image quality now requires that the viewer be sitting a distance of about 75 percent of screen height. In other words, for a screen height of three feet, the viewer has to sit about 2 feet 3 inches away from the screen.

Nobody is going to do that, routinely, in a home setting. At typical livingroom viewing distances, the 8K image quality will not appear any different than 4K. So it isn’t so clear the value of 8K actually will occur in the consumer display market, but rather in the medical or other imaging settings where such image quality really is useful, and users are very close to the screens.

T-Mobile US is Not Sustainable, Long Term, Its Owner Says

T-Mobile US is not viable long term, as an independent firm with its current position in the market, Timotheus Höttges, Deutsche Telekom CEO now says in public. For observers of the attempted effort to merge Sprint and T-Mobile US, that might be a predictable statement by the CEO of one of the two firms in favor of the merger.

Others, including T-Mobile US CEO John Legere, agree that additional scale is necessary, longer term, but that there are many ways to gain such scale. What many might assert is that gaining sustainable scale solely or primarily through organic growth is unlikely to work. Growth at the expense of margin can happen, for a time.

But that is not sustainable long term. And that means the issue is how long T-Mobile US can attain its current path. Some would argue the U.S. mobile market is fundamentally unstable.

Longer term, the current T-Mobile US positioning is not sustainable, especially given the need to invest between $4 billion and $5 billion each year just to keep up, Höttges said.

Some of that opinion argue that T-Mobile US does not, at present, earn enough revenue, or have a profit margin, that allows it to compete effectively with AT&T Mobility and Verizon Communications. If so, some future reduction of the number of leading players in the U.S. mobile market still remains inevitable.

Others argue that the recent strong subscriber growth provides evidence T-Mobile US does not need to bulk up by means of a merger.

That can take a while, though. Many of us argued in the 1990s that the ultimate fate of the two leading U.S. satellite TV providers was likely absorption by a telco. Whether that happens, and if it turns out to the ultimate case, is hard to say, yet. Regulatory and antitrust authorities have yet to approve or deny the AT&T purchase of DirecTV.

Still, the strategic logic was hard to ignore. Satellite is not a platform able to compete effectively in the triple-play services business, or support on-demand streaming delivery of video. Conversely, absorption of the satellite providers immediately would make the owners major providers of entertainment video, on a nationwide basis neither Verizon, nor AT&T, can reach, at present.

In other words, some of us always have seen the two leading satellite TV companies as strategic sellers, AT&T and Verizon as strategic buyers.

The same logic might apply in the U.S. mobile market. Long term, many would argue three leading contestants is desirable and sustainable, where a four-supplier market is not sustainable.

Regulators prefer to retain the four-provider market structure. Sooner or later, those preferences are likely to collide directly with sustainability questions.

Deutsche Telekom’s favored outcome would be an exit from the U.S. market, and a merger would allow DT to sell its majority stake in T-Mobile US to a new set of owners.

DT has an incentive to argue T-Mobile US is not viable, long term. It wants to convince regulators and antitrust authorities to allow some future merger that would reduce the number of leading U.S. mobile service providers.

But it still is unusual to hear the owner of a sizable business argue that business is not sustainable, long term.

Monday, January 19, 2015

Telecom Exec is Frustrated by "Unfair" Competition: Get Over It

“Building networks is what we know how to do best: we’ll leave making apps and creating services to others,” said Timotheus Höttges, Deutsche Telekom CEO. Some might say that statement accurately reflects the fundamental role access providers play in the Internet ecosystem.


But Höttges also argues Facebook is a communications service that is not investing in telco infrastructure: this is unfair,” Höttges said.


It’s an odd pairing of statements, in many ways, and likely requires a bit of context. What Höttges is saying likely reflects a logical position, namely that providers of like services should be treated in a like manner.


The Deutsche Telekom CEO might also be saying that if Facebook were to become an actual access provider, it should be bound by the same rules that Deutsche Telekom is (consistent with the differences that often apply to former monopoly providers).


But Höttges also seems to argue that Facebook--as an app--not an Internet service provider, is providing services that are functionally equivalent to the services Deutsche Telekom provides, and should be regulated in the same way that DT is regulated.

Observers will vigorously debate whether that line of thinking is reasonable, or makes sense. It’s a complicated matter because many apps now feature “communications” as a core feature of the app, even when they do not directly use any “communications” network features.

The friction won't end any time soon, if ever. At some level, the issue really is that "apps" are providing substitute solutions for traditional "communications" products, and for that reason the economic and financial value of app firms often vastly outstrips the value of access firms.

Telco executives will be frustrated by that state of affairs. It is not a death spiral, but arguably is a value spiral. Value within the ecosystem has shifted.

Sunday, January 18, 2015

Research that Only Confirms What You Already Know, or Want to Believe, is a Problem

Surveys are only as good as the assumptions that underlie them. If the samples are not truly representative of the population one claims to study (women, men, Millennials, retirees, electric vehicle enthusiasts, Facebook users), then one cannot extrapolate from a survey. 

In addition, the survey instruments, methods and questions must be constructed in ways that do not overtly bias the results. 

So without implying any shortcomings in methodology, or any overt attempt at influence the results on the part of any firm that hires a research firm to conduct a study, the results of one recent study of potential Internet of Things demand are so out of line with the likely state of current awareness one has to assume the survey sample was chosen from an atypical group of subjects.

In all likelihood--and without alleging any effort to skew results--a survey claiming extraordinarily high confidence in the value of IoT by business users produces those results because the survey sample is of people whose job responsibilities involve IoT in some way.

That doesn't mean the findings are in any way deceptive or inaccurate, or the result of survey methodologies that were faulty.

It likely does mean that the survey sample was not typical of all business or technology executives and managers of businesses in the United States as a whole. 

Some might argue the study only confirms that the survey population primarily was of information technology executives who believe IoT will be important. 





Saturday, January 17, 2015

Will U.S. Mobile Operators Backpedal on Mobile Payments?

AT&T, Verizon and T-Mobile USA had high hopes for their SoftCard mobile payments venture in 2011. So did Google. But many observers would say neither venture has gotten much traction.


Google Wallet, which launched in 2011, accounted for four percent of digital payment transaction volume in November 2014.

Apple Pay in November 2014  was responsible for one percent of digital payment transaction volume (measured by dollar amount), according to ITG Investment Research.


Still, so far, Starbucks is the transaction leader for retail payments.


“In 2013, payment for purchases by use of all mobile devices in the US totalled $1.3 billion, that was the entire market,” said Starbucks CEO Howard Schultz. “With over 90 percent of those purchases taking place in a Starbucks store, that means we had 90 percent share of mobile payments in 2013 while brick-and-mortar commerce in 2013 totalled more than $4.2 trillion.”


But there is a very long ways to go, so the outcome is not clear. Nor is mobile service provider involvement necessarily a settled matter, though at the moment it appears device providers, app providers or possible even some retailers have stronger momentum.


Some of us have argued that it could well take a decade or more before mobile payments become a routine part of the consumer experience when paying for merchandise at a retail location. And even then, “routine” use might be a reality for only about half of all consumers.


After 20 years, the percentage of U.S. households using automatic bill paying is still only about 50 percent. Likewise, after 20 years, use of debit cards by U.S. households is only about 50 percent.


It took about a decade for use of automated teller machines to reach usage by about half of U.S. households.


So history is the reason it is reasonable to predict that mobile payments will not be a mass market reality for some time.


Some might argue the problem is that big companies cannot innovate. Actually, that might be a problem, but is only a small part of the adoption process.


The bigger problem is that major changes in end user behavior have to happen, and before that can become a reality, it often is necessary to spend quite significant sums to create the infrastructure enabling the behavior change.


In the case of mobile payments, that involves creating a critical mass of devices, payment apps and processes, merchant terminals and retail brands. Beyond that, the developing market would have to come to a practical consensus about standards, interfaces and methods.


Also, with huge amounts of revenue at stake, it will take some time to sort through rival business interests and approaches that pit credit card issuers against retailers, for example.


All of that ensures a lengthy period of confusion before scale is possible. And until scale is possible, progress will be limited.


In consumer financial services, decades can pass before a significant percentage of consumers use an innovation. In fact, a decade to reach 10 percent or 20 percent adoption is not unusual, in the consumer financial services space.


So far, PayPal remains among the potential leaders. In September 2014, excluding Starbucks, PayPal had about 60 percent share of mobile wallet share, followed by Google Wallet at 43 percent.


But excluding Starbucks for retail payment volume is a big caveat


Still, PayPal was used by close to half of online consumers in 2012, so the trick is to leverage that position in the proximity payments business (retail store checkout).


Some believe Apple Pay could pose a major threat to market leader PayPal's current dominance of the general purpose mobile payment space, according to Steve Weinstein, ITG senior Internet analyst.


In the near term, it is Starbucks that Apple Pay might have to displace, even though Starbucks presently is a “captive” system, while Apple Pay aims to be a general purpose payment system.


And now there are rumors that Google might buy SoftCard, the mobile carrier initiative. That doesn’t necessarily mean the leading mobile service providers will abandon all efforts to find a role in the mobile payments or mobile wallet ecosystem.


But there are other potential new lines of business that seem to have more traction right now, including connected car, home monitoring and security, or any number of opportunities in the broader Internet of Things or machine-to-machine services markets.  


Innovation is always risky, and rarely happens precisely as its backers hope, and that has been the story for mobile payments so far.


Initially, both Google Wallet and Isis, the mobile service provider operation now rebranded “SoftCard” had explored a transaction business model. Both efforts quickly pivoted, though, disclaiming any effort to build a revenue stream based on transaction fees, which was the original revenue stream most mobile payment contestants had argued was the target.


Both turned to business models based on advertising and loyalty, the “wallet” part of the mobile commerce business, rather than the “payments” function itself.

That, in general, includes advertising, retention and rewards programs.


Those moves were a recognition that the payments ecosystem cannot easily afford to support many new “mouths to feed” in the revenue chain, if transaction fees are the revenue model for the new payments providers.


That stance meant incumbent participants had every incentive to use their considerable resources to thwart entry by a new category of participants.


One might also argue that the “commerce” angle, aiming to reinvent the shopping experience, almost automatically answers the question of “what’s in it for retailers” in a way that “payments” systems have not.

Merchants care about loyalty, customer retention and promoting customer traffic. The “wallet” approach addresses all three of those concerns, in addition to providing value for consumers, said  David W. Schropfer, a partner at Luciano Group.

Will Generative AI Follow Development Path of the Internet?

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