How Big Will Proximity Mobile Payments Be in 2016?

It always is difficult to predict the likely growth of the mobile payments business.

In part, that is because there are different mobile payment segments; mobile payment revenue for providers is distinct from transaction volume, the number of suppliers is quite fragmented and the actual revenue for payment system suppliers is quite variable.

Aside from all that, even successful innovations in the financial services business can take quite some time to get traction. In the case of mobile proximity payments, the issues range from the base of active devices able to support specific mobile payment systems to retailer adoption of the services and terminal deployments.

source: the financial brand

All of that adds up to a huge challenge for the various payment system contestants.

Nor is it clear what transactions will make most sense, for most people, based on which services are supported at the venues they frequent, and the types of purchases where using proximity payments makes the most sense.

According to the latest proximity mobile payments forecast from eMarketer, the total value of mobile payment transactions in the US will grow 210 percent  in 2016.

In 2015, mobile payments transactions will total $8.71 billion in the United States, with users spending an average of nearly $376 annually using their mobile phone as a payment method.

By way of comparison, other forms of mobile payment or mobile banking represent far larger transaction volumes. In 2015, for example, more than $53 billion in remote mobile payments will be made.

By 2016, total mobile payment transactions at retail locations are estimated by eMarketer to reach $27.05 billion, with users spending an average of $721.47 annually. By 2016, according to Forrester Research, about $63.4 billion in remote mobile payments will occur.

There will be 23.2 million people in the United States using proximity mobile payments in 2015, eMarketer expects. By 2016, that will grow to 37.5 million.

“Mobile wallets like Apple Pay, Android Pay and Samsung Pay will become a standard feature on new smartphones,” said eMarketer analyst Bryan Yeager. “Also, more merchants will adopt point-of-sale systems that can accept mobile payments, and incentives like promotions and loyalty programs will be integrated to attract new users.”

eMarketer defines proximity mobile payments as point-of-sale transactions that use mobile phones as a payment method, via tapping, waving and similar functionality.

OTT is Becoming a Bigger Issue Even in Physical Access, Backhaul and Transport

Neither Google nor Facebook are being anything but transparent about their own roles in new parts of the Internet ecosystem, whether that is moves into e-commerce as a foundational business model, pioneering use of new Internet access platforms or accepting new roles in app hosting, transport or backhaul.

Long past is the time when Google or Facebook solely sourced their global connectivity from capacity providers, their networking gear from traditional original equipment manufacturers or their data center requirements from third party data center operators.

Having achieved huge scale, both firms now can make different “make versus buy” decisions. And the increasing trend is to “make” rather than “buy.” That makes the large app providers clear examples of “frenemies.”

They both buy from, and compete with, traditional suppliers of transport, access, data center support, networking gear and software.

In many markets, that should lead to many new opportunities to work with the likes of Google and Facebook as backhaul and transport providers.

That is how Google, Facebook and most proposed low earth orbit satellite constellations are planning on coming to market with new Internet access platforms. Basically, all propose use of their new platforms for backhaul and transport.

That said, Google Fiber and Nexus also directly compete with existing suppliers. In India, both Google and Internet Basics (Facebook) are working with existing Internet service providers to build out public Wi-Fi networks.

And though the decisions will be no easier than in the past, affected contestants will have to decide how to work with, or compete with, the likes of Google and Facebook at many layers of the protocol stack, not just the physical and transport layers.

In most cases, access and transport providers will mostly avoid competing at the application layer. At some point, scale advantages held by the biggest app providers are too great to overcome.

That appears to be a growing reality in the cloud computing business, where public cloud increasingly is concentrated among the ranks of Amazon Web Services, Microsoft and Google, many would argue. Private and hybrid cloud computing continues to be the place where others have significant market share.  

source: Synergy Research

Private cloud continues to offer more opportunity for rival suppliers. By 2018, 31 percent of cloud workloads will be in public cloud data centers, up from 22 percent in 2013. That represents a compound annual growth rate (CAGR) of 33 percent from 2013 to 2018.

By 2018, 69 percent of the cloud workloads will be in private cloud data centers, down from 78 percent in 2013. That represents a CAGR of 21 percent from 2013 to 2018, according to Cisco.

The point is that there are few completely fixed roles in the Internet ecosystem. That means every contestant will compete with, and cooperate with, other participants at various times, in different places, for distinct reasons.

Perhaps there are other implications as well. Most observers of business strategy would note that, over the long haul, a bifurcated, or barbell structure tends to develop.

That is to say, there are a relatively few market leaders with most of the share (customers and revenue), but also many many small firms with some niche strategy, dependent for success on the very inability of large firms to compete in small markets.

If so, then there might be many new opportunities for specialists, even in the scale-driven consumer services business. Large providers will continue to dominate the “commodity” parts of the business.

Specialists will have greatest opportunities in niches of various types, geographic or functional. Only a large firm might be able to supply mobile services effectively and sustainably across a subcontinent.

But it also is likely there will be room for local specialists as well, even in the “commodity” Internet access business, simply because the large-firm business model will not work everywhere, always.

Why Do People Use Ad Blockers?

An upsurge in use of ad blocking software, enabled by third party apps and recently boosted by Apple’s decision to make installation of such ad blockers easier by Apple’s iOS, is partly attributable to perceptions that ad blockers improve end user experience.

Just how much the irritation is over “ads” as such, and how much is caused by perceived slower loading times, for example, is the issue.

What is not debatable is that many users seem to be aware that advertising now significantly boosts mobile data consumption.

For users with limited mobile data usage, that matters.

Ads in free apps make mobile devices run slower and use more data,” says University of Southern California professor William Halfond, co-author of a study with Stuart Mcilroy of Queens University, Jiaping Gui of USC, Meiyappan Nagappan of Rochester University and William G. J. Halfond of USC.

Apps with ads  use an average of 16 percent more energy, lowering the battery life of a smartphone from 2.5 to 2.1 hours on average, or down to 1.7 hours at the high end of energy usage.

Apps with ads also take up an average of 48 percent more central processor time and 22 percent more memory use.

Because the ads themselves are content that has to be downloaded, apps with ads also cause smartphones to use up to 100 percent more data.  

On average, these apps use around 79 percent more network data.

That is a problem the ecosystem should be able to address, if the degree of annoyance--and the amount of ad blocking-increases significantly. We might not yet be at the point where there is enough pain to cause various ecosystem participants  

"Evolution of Everything" Questions Effectiveness of Some Innovation Policies

Matt Ridley’s book The Evolution of Everything primarily discusses the issue of scientific research and its impact on innovation. More pointedly, perhaps, he looks at the role of basic science as a driver of technology innovation.

Innovation is something virtually everyone believes is important and worthy of support.

“Undoubtedly the capability to innovate and to bring innovation successfully to market will be a crucial determinant of the global competitiveness of nations over the coming decade,” the Organization for Economic Cooperation and Development has said.

What might be less clear are causal relationships between inputs and outputs. Another OECD study of public research and development funding found some positive impact from public spending programs on the volume of private firm research by smaller firms.  

Most of us likely assume that investments in basic science are important, in large part, because they contribute to a faster rate of innovation. Ridley argues that is not the case, or at least not much of an enabler.

If correct, we are wasting quite a lot of time, money and effort in a misguided effort to affect a process that is resistant to any such intervention. “Most technological breakthroughs come from technologies tinkering, not from researchers chasing hypotheses,” he argues.

In a broad sense, the book argues that major scientific achievements develop from the bottom up and cannot be much affected by top-down efforts. Other OECD research has looked at similar processes in education.  

“Governments cannot dictate either discovery or invention; they can only make sure that they don’t hinder it,” Ridley argues. “Innovation emerges unbidden from the way that human beings freely interact if allowed.”

None of that is going to prevent governments from acting as though investments in public research are necessary and helpful.

EU Internet Access Coverage Reaches 99 Percent

A study prepared for the European Commission Directorate-General of Communications Networks, Content and Technology by IHS Global Limited, Valdani Vicari Associati shows Internet access coverage no longer is  problem within the European Union.

While availability is not the same as purchase, a variety of access platforms are widely available across the European Union, with digital subscriber line, 3G mobile and satellite having the widest availability. Broadly speaking, there is no lack of high speed access infrastructure in the European Union, though rural areas are tougher to serve, as always.

The study results show that over 216 million EU households (99.4 percent) had access to at least one of the main fixed or mobile broadband access technologies at the end of 2014 (excluding satellite).

VDSL coverage  increased by over seven percentage points throughout 2014, reaching 37.6 percent of households by the end of the year.

The proportion of homes passed by fiber to the premises networks increased by 4.3 percentage points to reach 18.7 percent, while DOCSIS 3.0 coverage grew slowly, reaching 42.7 percent of households covered in 2014 compared to 41.6 percent the previous year. Some 98.2 percent of cable connections are now DOCSIS 3.0 capable across the EU.

LTE coverage has increased from 59.1 percent to 79.4 percent.

Spectrum Sharing that Does Not Displace Licensed Users is Coming

Spectrum sharing can take any number of forms, some methods being nearly indistinguishable from spectrum leasing, other forms using the model set by Wi-Fi (essentially uncoordinated sharing), and newer forms relying on various forms of spatial sharing (sharing allowed in some areas, not in others), time-based sharing (as some radio or TV broadcasters might do) and coordinated sharing (either using databases or cognitive radios).

One of the newer thinking about sharing involves sharing of existing licensed spectrum with new users, without relocating the existing users.

Licensed shared access ( LSA), for example, allows licensed services to share spectrum in a band with new users without disrupting existing users, while still increasing the amount of spectrum available for other users.

That is important for a number of reasons, the most important reason being that it is less disruptive than moving users from their current bands to give access to new users. Not only does this approach save the significant costs for relocating users and their access gear from one frequeny to another, it also creates new capacity much faster than any relocation approach requires.

Under the licensed shared access approach, additional users can use the spectrum (or part of the spectrum) in accordance with sharing rules that protect incumbents.

Such approaches almost always will require incentives for the incumbent users to permit sharing.

That might include direct payments from the new user or the regulator, payments to upgrade equipment or take other costly actions than would facilitate sharing or savings on fees paid to the regulator for underused spectrum.

In Europe, such sharing likely will emerge first in the 2.3 GHz band, to support mobile services.

LSA is being worked on in France, Finland, Italy and the Netherlands.

The United States is developing an approach to sharing in the 3.5 GHz band, as well.

A three-layer model is envisioned, with protected incumbent access, priority access (some interference protection) and general authorized access (opportunistic access without interference protection).

AT&T Dramatically Changes Revenue Source Profile

On an annualized basis, AT&T will earn about 46 percent of its revenue from business sources and about 54 percent from consumer services. That is a big change from the prior year, when AT&T earned about 54 percent of revenue from its business solutions category.

The perhaps-shocking change is that AT&T, on an annualized basis, will earn just 22 percent of revenue from consumer mobile services, making AT&T almost a mirror image of Verizon, which earns about 85 percent of total revenue from mobile services.

Altogether, about 41 percent of AT&T’s total revenue is earned from mobility services.

In the quarter, AT&T earned about 45 percent of total revenue from business solutions, 28 percent from entertainment and Internet services and 24 percent from consumer mobility. About 38 percent of business solutions revenue was generated by business customer mobile services.

Beyond that, AT&T reported double-digit revenue, adjusted operating margin, adjusted earnings per share and free cash flow growth in the third quarter of 2015.

Third-quarter consolidated revenues of $39.1 billion were up nearly 19 percent year over year,  primarily due to the acquisition of DirecTV.

Business Solutions revenues up 1.2 percent, year over year, with strategic business services revenues of $2.8 billion, up 12.6 percent and up 15.2 percent, when adjusted for foreign exchange

Operationally, AT&T gained 26,000 domestic DirecTV net adds, 192,000 IP broadband net adds

and 2.5 million AT&T Mobility domestic mobile account net adds.

Of those mobile net adds, 755,000 were branded phone accounts, including 289,000 postpaid and 466,000 prepaid net accounts.

AT&T also added 1.6 million connected device accounts, including one million connected cars.

Total churn was 1.33 percent, down year over year, while postpaid churn was 1.16 percent.

The company also is increasing its adjusted EPS and free cash flow outlook for the year. For the full year, AT&T now expects adjusted EPS in the $2.68 to $2.74 range and free cash flow in the $15 billion range or better.