iPhone Prices Could Rise $60 to $80 for a "U.S. Made" Device

source: MIT Technology Review

Domestic production of iPhones with simple U.S. assembly could add $30 to $40 to the retail cost of devices built and sold in the United States, an analysis by MIT Technology Review suggests. If component parts also could be built domestically, retail prices could rise another $30 to $40.

Complete domestic sourcing is impossible, since the component rare earth elements are not found in the United States. The bottom line: if an iPhone were made of as much domestic components as possible, and fully assembled in the United States, an iPhone might cost $60 to $80 more than at present.

Smart Cities Proposal Shows How Hard it is To Envision, Much Less Create, Any Part of a Smart City

Denver’s proposal to the  U.S. Department of Transportation as part of its Smart City Challenge might show why smart city programs are such complicated undertakings, under the best of circumstances. The DoT program will award one U.S. city about $40 million for a smart city project, with an expected award of up to $10 million also provided by Vulcan.

In fact, it probably is a bit of a misnomer to talk of “smart cities.” Instead, there are lot of potential ways intelligence, big data and sensor networks can actually produce valuable outcomes.

But those real outcomes are going to be few and far between for some time, because the infrastructures do not yet exist.

What Denver wants to do first is “establish a robust data management and sharing platform that will connect disparate data sets from multiple agencies.”

That information will be made available in the form of mobile apps and at kiosks, integrating information about  the city’s five car sharing and three ride sharing companies with the bicycle program and the city bus and rail services.

Denver also proposes to electrify taxi and City vehicle fleets and introduce wireless charging (including for transit buses). Useful, but not necessarily “smart.”

The proposed project also will test autonomous vehicles, introducing autonomous elements to fleet and transit vehicles while testing autonomous vehicle business models. Also useful, but not something that will affect consumers.

Denver proposes an integrated data system that would draw real-time information from many sources, providing a detailed picture of travel through the city.

That, in turn, is supposed to support programs that give residents and commuters access to more transportation options, initially. Useful, but essentially an “uber app” (in the sense of amalgamating and integrating other exists information sources, not in the sense of the ride-sharing app).

Eventually, the information system is seen as supporting “smart vehicles” and autonomous vehicles.  to the street grid and to each other, helping to pave the way for self-driving cars. Again, useful, but not something that will be seen or touched by citizens and users.

Some elements focus squarely on making it easier for residents of low-income neighborhoods — especially those without credit cards or smartphones — to connect with ride-sharing services such as Lyft, check out B-cycle bikes or find other ways to fill in transit gaps.

There will be some visible changes: charging stations and information kiosks. Lots of sensors likely will be deployed to gather and update the information base. But most consumers will “see and use” a new transportation app.

The project would convert a significant percentage of the city’s fleet vehicles to electric power. That leads to a greener city, but is it necessarily a “smart city” development?

More electric vehicle charging stations would be added. An additional 15 miles of new bike lanes would be added per year. Both good things, one might argue. But hardly “smart.”

Many of the other outcomes are process related, such as creating a policy and regulatory environment inviting for automated vehicles, or create plans for an 80 percent reduction of greenhouse gas emissions by 2050, supporting efforts to increase bike and pedestrian commuter mode share to 15 percent by 2020, or reduce single-occupant vehicle mode share to 60 percent by 2020.

The project also implements a safety program to reduce and ultimately eliminate vehicle-related crashes, injuries and fatalities.

The point is that the “smart” part of the projects involve collecting and making information available.

Most of the other activities are not necessarily “smart,” but green. There is nothing wrong with that.  But it does suggest how hard it will be to create even one element of a smart city (in this case, smart transportation).

AT&T Will Likely Have to Boost FTTH Investments to Meet FCC Requirements

At some point soon, AT&T likely will have to hike spending on fiber to home passings if it is to satisfy a Federal Communications Commission condition that is part of the FCC's approval of AT&T’s purchase of DirecTV.

The approval includes a requirement for AT&T to add 12.5 million fiber to premise locations and 13 million fixed wireless connections.

The fiber to customer deployments are supposed to happen over a four-year period, including about one million by the end of 2016.

Some question whether that is going to happen, and how soon, given fixed network capital investment of about $2 billion a year at the moment.

In addition to boosting capital spending, AT&T might be banking on the ability to build more affordably than was the case when Verizon Communications installed most of its fiber to home networks.

Indeed, Verizon’s unexpected decision to deploy FiOS in at least some neighborhoods in Boston suggests something has changed in the perceived business model.

Perhaps one key element is the difference between cost to “pass a location” and “cost to connect a customer.” AT&T could pass many more homes than it “connects,” as perhaps half the total cost of activating a customer is related to installing drops and network interface units for each paying customer.

The amount of deployed capital therefore includes a fixed element (fiber pass a location) and a variable component (cost to activate a location).

Forced to predict, some of us would argue that many more passings will be covered than “connected,” as initial take rates for consumer optical fiber connections can be as low as 20 percent in the first year.

So, of 100 locations passed, about 20 will require additional capital to activate. Assuming new deployments are targeted neighborhood by neighborhood, where propensity to buy is the highest, the amount of stranded capital is reduced.

Back in 2008, it might have cost $3,800 just to pass a location. Now it might cost $600 or less per passing. But you can see the reason for skepticism in some quarters.

It might cost $600 million to pass a million homes, at $600 per passing. At $500 per passing, it still costs $500 million to pass a million homes.

Using the $500 per passing figure, AT&T would have to invest at least $1 billion in capital to pass two million homes. On an annual fixed network capital budget of $2 billion, that suggests AT&T might be able to add about two million passings a year.

That works out to a total of about eight million over four years, short of the total of 12.5 over four years.

So, yes, one might argue, capital investment would have to climb beyond $2 billion a year to satisfy the FCC requirements.

App Store, Google Play to Boost App Provider Revenue Share to 85%

source: Nielsen

Driven by marketing concerns, both App Store and Google Play are poised to raise the share of revenue going to their app store partners. Apple plans to boost app provider share of revenue from 70 percent to 85 percent, if an app can maintain a subscription from a customer for at least a year.

Google Play also is said to be planning an increase in app provider share up to 85 percent.

Apple’s move seems driven, in part, by a new focus on growing subscription revenues. Google likely is moving more to keep pace with the App Store. Both, in doing so, will strengthen their dominance of the app store markets.

source: Wall Street Journal

Growing competition from Amazon likely also is a factor. But the shift of app revenue to developers will likely increase developer commitment to both platforms.

The new revenue splits might be especially interesting for content providers, especially streaming video providers. Sales of streaming content subscriptions is becoming more important for content owners and distributors.

Value-Added Services--Free or For Fee--Boost Retention, Data Consumption, Perceived Value of Mobile Services

Value-added services--provided at no incremental cost as part of a mobile subscription--possibly can increase retention by about 11 percent, boost customer perception of network quality by about 55 percent, and boost data consumption by about a gigabyte each month.

In mature markets, offers are focused around video and music streaming services, primarily as a way of affecting customer perceptions of network quality or value.

That is one example of the way access providers partner with app providers to provide services that are seen to boost perceived value.

source: Nokia

Another important strategy involves creating and selling for-fee services, which might range from branded video or audio streaming to connected car services, home security and eventually, other Internet of Things or machine-to-machine (industrial Internet of Things) services.

40% of Mobile Operator Churn Driven by "Cost"

Not all customer churn is controllable by actions of the service provider. But about 40 percent of controllable churn still hinges on “cost and billing” issues, while 26 percent of churn is driven by network quality issues.

About 24 percent of churn is created by “customer care” issues, while “service and device portfolios” seem to drive about 10 percent of churn, a study sponsored by Nokia suggests.

In other words, prices deemed to be too high remain the biggest single driver of customer desertion, globally.

Perhaps also not surprisingly, prices are the top driver of customer decisions to choose a carrier. Asked why consumers chose a particular service provider, 45 percent indicated that “best prices” was the top reason.

Some 26 percent indicated that “network quality” was the chief reason for choosing a particular new service provider, while 25 percent said “geographical coverage” was the main reason for selecting a particular service provider.

source: Nokia

source: Nokia

IoT Eventual Winners Cannot Yet be Predicted

It always is hard to say which companies or industry segments will do best--or which will lead the disruptive attack--whenever an existing market starts to be disrupted by new technology and business models.

In the mobile payments business, various participants, from different segments of the value chain, and some intending to create space for themselves in the value chain, have made a run at mobile payments. Mobile service providers were the first to admit at least temporary defeat in the U.S. market, as the Softcard business was sold to Google.

Google, in turn, has struggled to make mass market inroads with its own Google Wallet and then Android Pay service. Apple Pay and Samsung Pay also are among the device or operating system providers trying to create a position within the ecosystem.

The retailer consortium, CurrentC, is the latest to fail. In some ways, Currentc had a potent argument: it represented major retailers who are the “buyers” of payments systems and services.

Banks and card processing services, plus PayPal and other app-based payment systems therefore remain in the race to win share in the new business.

Some believe the device or operating system suppliers will win.

At the moment, the same sort of uncertainty exists in every part of the Internet of Things ecosystem.

There is just no way, for example, to tell how the “access” or “connectivity” market ultimately will develop, or who the leaders will be. Similar uncertainty exists in terms of operating systems, chipset suppliers and most importantly, in terms of the applications and services to emerge first.

As with the mobile payments business, value must be proven before consumers or businesses will adopt any particular service or approach. And there is just no way to know for sure which services will prove to have the clearest business model, early on.

source: ABI Research