AT&T and Verizon Have Diverging Business Strategies

With rather sudden speed, AT&T and Verizon--which like all former incumbent telcos once had similar business strategies and profiles--have become distinctly different. Put simply, Verizon emphasizes mobile revenue, while AT&T actually emphasizes business customer revenue, with a major contribution from video entertainment.

Of the $32.2 billion Verizon earned in the first quarter of 2016, $22 billion was earned from mobile services, or 68 percent of total. Verizon does not break out the portion that is consumer or business revenue.

In its first quarter of 2016, AT&T earned $40.5 billion. Mobile services contributed $18 billion, or 44 percent of total revenue, including both business and consumer accounts. So mobility is a significantly smaller percentage of AT&T total revenue.

The two firms also emphasize revenue in different ways. AT&T, in 2015, says it earned just 24 percent of total revenue from consumer mobility, and consolidates fixed network and mobile services for business customers.

In 2015, AT&T business solutions represented 49 percent of 2015 sales. In other words, in AT&T’s view, business services are more important than consumer mobile.

At the same time, in 2015, AT&T’s entertainment group drove 24 percent of revenue, as important as consumer mobility. In other words, AT&T says it earns 73 percent of revenue from business and entertainment services.

In other words, Verizon in the first quarter earned 32 percent of total revenue from fixed network operations, both consumer and business.

But Verizon says it earned just just $4 billion from consumer fixed network operations, or about 12 percent of total revenue.

If total fixed network revenue was $9.3 billion in the first quarter of 2016, then business revenue (including wholesale) from fixed network operations was about $5.3 billion, or about 16 percent of total revenue.

So the story is Verizon mobile, AT&T business and entertainment video. That’s a pretty big distinction.

In South America, Facebook and Google Drive 70% of Traffic

So far in 2016, in North America, real-time entertainment apps drive data demand on fixed networks, largely Netflix traffic, which represented about 35 percent of all bits transferred over North American fixed networks, according to Sandvine.

Amazon Video drove about 4.3 percent of peak downstream traffic.

On North American mobile networks, music services as a whole are increasing in traffic share, yet no single service is among the top 10 applications.

During peak period, real-time entertainment traffic continues to be by far the most dominant traffic category on mobile networks, accounting for almost 40 percent of the downstream bytes on the network.

In Latin American mobile networks, Facebook and Google drive 70 percent of total traffic in the region.

10% of Wearable Owners Have Stopped Using Them

You never can be too sure what the “next big thing” will be, in the connected devices business.

Tablets and smartwatches might be among the categories that have failed to achieve that status. People use them, to be sure. But neither device yet has yet to prove it is transformative in the same way that PCs earlier, and smartphones recently, have been.

Some 10 percent of wearable owners have stopped using their wearable, according to an Ericsson ConsumerLab poll of wearable device owners from Brazil, China, South Korea, the United Kingdom and United States.

Ericsson says about 33 percent of those who abandoned use of wearables did so within the first few weeks of ownership.

Limited functionality was the primary problem for 21 percent of respondents who stopped using their wearable device. Some 14 percent of of those who had stopped using their wearable device said it was because the devices were not a standalone product, and required use of a smartphone.

source: Ericsson

IT Shifting from "Cloud First" to "Cloud Only," Gartner Says

By 2019, more than 30 percent of the 100 largest vendors' new software investments will have shifted from cloud-first to cloud-only, Gartner analysts now predict.

"More leading-edge IT capabilities will be available only in the cloud, forcing reluctant organizations closer to cloud adoption,” said Yefim V. Natis, Gartner VP.

By 2020, more compute power will have been sold by IaaS (infrastructure as a service) and PaaS (platform as a service) cloud providers than sold and deployed into enterprise data centers.

The Infrastructure as a Service (IaaS) market has been growing more than 40 percent in revenue per year since 2011, and it is projected to continue to grow more than 25 percent per year through 2019.

By 2019, the majority of virtual machines (VMs) will be delivered by IaaS providers. By 2020, the revenue for compute IaaS andPlatform as a Service (PaaS) will exceed $55 billion — and likely pass the revenue for servers.

“Unless very small, most enterprises will continue to have an on-premises (or hosted) data center capability,” said Thomas Bittman, Gartner VP.

In Every Ecosystem, One Segment's Cost is Another Segment's Revenue

Ecosystems always are contentious, since one segment’s revenue is another segment’s cost.

We saw an obvious example of that when Verizon’s fixed network workers went on strike for higher wages and benefits.

We see the conflict often when various parties argue about rights to use spectrum; whether spectrum can be shared; whether spectrum should be available license exempt, or not; whether zero rating should be allowed.

We also will see that principle in action as the Indian government auctions a prodigious amount of mobile spectrum--as much as 2300 MHz-- later in 2016. Consider that the whole Indian mobile industry presently uses between 200 MHz and 300 MHz of spectrum. So the upcoming auction represents an order of magnitude (10 times) increase in spectrum.  

To put that into perspective, the potential spectrum rights could cost more than double the industry's gross revenue and more than 20 times the annual free cash flow of the entire mobile industry.

The expected spectrum payments also represent a sum four times higher than the last auction.

Shockingly, projected spectrum payments in this one auction could represent a sum as high as twice as much spending as in all prior mobile spectrum auctions put together.

So there you have a clear example of ecosystem tension because one segment’s revenue is another segment’s cost. The Indian government thinks it could raise a sum representing as much as 25 percent of the government’s total annual revenues.  

Some analysts would note that India already has some of the highest costs in the world, where it comes to spectrum rights.

In the end, all costs, everywhere in the full ecosystem, are paid by other parts of the ecosystem, with all ultimate costs borne by end users and consumers, or parties subsidizing use of ecosystem products (advertisers, for example).

Uber Requires Smartphones; Airbnb Arguably Does Not

It is probably not too early to speculate that smartphones now have been around long enough that people see new ways to leverage the technology. More accurately, people are coming to understand how apps, running on smartphones that people always have with them, are creating new possibilities.

Without smartphones, it is unlikely that Uber and other ridesharing services would be feasible. Airbnb likely would be conceivable, even without smartphones. But that obviously raises a question: in what other spheres of economic activity might smartphone-based apps be used to bring latent resources to market?

Let us be clear. People using smartphones to comparison shop, while they are out and about, and then ordering online, already is changing the face of retailing. But Uber is more profound than that.

What Uber did was revolutionize our thinking about the real-time use of assets that mostly lie fallow, even more than Airbnb did. Airbnb allows people to bring latent lodging assets to market, though not necessarily as a smartphone-essential function.

Uber really does require the ubiquity of smartphones to really demonstrate value. So the only question is what other areas of life have latent resources not brought to market because of friction, including the lack of a marketplace to monetize those assets.

Uber could not function without smartphones. Airbnb arguably can do so. So which potential spheres of economic life are smartphone-dependent, where it comes to commercializing latent assets that are underused?

"Impossible to Predict" How Consumers Will React to a Truly New Product, AWS Head Says

"What we've learned over time at Amazon, is that very often at the beginning of something really different and really new, it's impossible to predict how customers are going to react to the offering," says Andy Jassy, Amazon Web Services CEO.

That's why Amazon, as a company, doesn't focus on the first wave of feedback to any product,

Few firms have enough financial depth, or patience, to do so. But that approach resembles what Apple used to do, under Steve Jobs. Famously, Jobs believed consumers could not really judge whether they would like a new product they never had experienced, so market research was useless.