Sprint Drops Bombshell

Sprint has decided to outsource all of its network operations to Ericsson as part of a seven-year deal that indicates Sprint no longer considers network operations a core function, or something that allows it to create customer-facing value.

Network operators have been outsourcing some operations and functions for years. But no tier-one carrier has gone this far. Sprint will continue to own its network and make investment and equipment purchase decisions.

Sprint personnel will maintain first-line, customer-facing operations. But Sprint no longer considers the day-to-day management of its network a core source of market differentiation.

The move does not indicate any change in the perceived value of network ownership. But the devaluation of routine network management is shocking for an industry where most employees once worked in network operations.

Apple iPhone Proves Disruptive

Apple and Nokia are on radically different trajectories, at least where it comes to smart phone market share, say analysts at Generator Research. The firm believes Nokia will tumble from about 40 percent share today to just 20 percent in 2013.

Apple's share, meanwhile, should accelerate and hit 33 percent of the market at the same point.

Apple would match Nokia's share sometime in 2011 and ship as many as 77 million phones that year.

Observers rightly point out that the mobile handset is a complicated business with lots of subtle angles. It also appears to be a business where new attackers can dislodge global incumbents.

Will New Unlimited Plans Tap New Market for Bill "Predictability"?

Ready Wireless, a provider of prepaid wireless services. Based in Hiawatha, Iowa, has launched two unlimited usage prepaid plans. The first provides three days of calling and a bundle of text messages for $10. The other plan provides seven days worth of calling for $15.

The plans are aimed at casual users who prefer unlimited calling, but have only sporadic use, or want to manage cash outlays closely. That's one potential new market segment for prepaid or postpaid.

The other market is any consumer that simply wants payment predictability.

Recently there have been new offers launched in the industry by prepaid wireless providers offering monthly plans costing $45 to $50. And amidst a bit of a shift from postpaid to prepaid plans, some speculate that another shift from traditional prepaid products to "unlimited" plans could occur.

John Hodulik, UBS analyst says 12 million of 50 million total U.S. prepaid subscribers are on an unlimited plan. But those numbers could grow very fast if a price war breaks out, and resets pric ing expectations.

Unlimited plans might be creating a new value proposition: "pay to avoid limits and overage charges" that might challenge the "pay only for what you use" value proposition.

In principle, those value propositions should hold either for prepay or postpaid plans.

Most customers still remain in the middle, paying for a bucket of minutes on a "use it or lose it" basis. But there always is an element of bill unpredictability with such plans.

You might think heavy talkers are the prime candidates for an unlimited plan, but I'd be willing to bet that the bigger market, ultimately, will be the typical consumer that simply values predictability.

As the prices of unlimited plans fall, they reach a level that appeals not only to heavy callers, but virtually any consumer that simply wants payment predictability, with no surprises. That's going to be the bigger market.

Shift to Online, Mobile, Social Marketing Will Slam Traditional Media

Forrester Research predicts that interactive marketing in the United States will near $55 billion and represent 21 percent of all marketing spend by 2014 (click on image for larger view).

Search marketing, display advertising, email marketing, social media, and mobile marketing are the categories that will benefit.

More significantly however, overall advertising in traditional media will continue to decline in favor of less expensive, more effective interactive tools and services. With dollars moving out of traditional media toward less expensive and more efficient interactive tools, marketers will actually need less money to accomplish their current advertising goals.

The majority of current online budgets appear to be earmarked for search marketing, even though the search landscape is rapidly evolving to include real-time updates and also social, community and micro networks.

Mobile marketing spending will grow at a 27 percent rate over the next five years, reaching $1,274 million in 2014.

Social media marketing will increase to $3,113 million in 2014 from $716 million in 2009, with a 34 percent growth rate.

Owned social media assets (like internal blogs, community sites) are really the only emerging media getting traction in today's economic climate, Forrester says.

If You Had to Cut a Communications or Entertianment Service, Which Would it Be?

It appears most users would reduce spending elsewhere to hang on to their broadband connection, while most would consider cutting back on a mobile broadband connection, if forced to make a cut in the monthly service budget, a recent survey by Strategy Analytics suggests.

TV service seems the next most resilient service.

Some of us might be surprised that propensity to keep either a fixed or mobile voice service is similar.

71% of Marketing Budgets Have Been Cut

About 71 percent of chief marketing officers say they have seen marketing budgets reduced,

and 51 percent have seen cuts of at least 20 percent, say respondents to a recent Forrester

Research survey.

TV, print, radio and magazine spending has taken the biggest hit, with budget decreases of 67

percent. Branding and advertising budgets have been cut 64 percent, respondents say.

About 52 percent have reduced spending on direct mail. In fact, virtually every category studied by Forrester Research has declined this year.

But a significant percentage of respondents also report they plan to increase nspending in a few

categories. About 47 percent of marketers say they will increase spending on social media,

Web site development, online advertising, and email marketing.

That marketing budgets have been cut should come as no surprise. That happens whenever there is an economic or industry downturn. Nor should the shift of spending towards online, mobile or social media provide much of a surprise. That simply is where users are spending more of their time.

Over the long term, marketing effort always follows audiences.

Sprint Sells 99-Cent Netbook

Sprint is offering new customers Compaq’s 1040DX netbook for 99 cents when bought at Best Buy with a two-year mobile broadband contract costing $60 a month.

The same netbook with service bought from Verizon Wireless or AT&T is $199.99, while a non-contract price is $389.99.

In principle, the tactic is the same used by mobile providers to bundle handsets with service. .

Sprint is fully subsidizing the hardware price in order to gain a two-year service agreement. At $60 a month, the 3G service costs the consumer $1,440, for a gross revenue for Sprint of around $1,050 over two years. So the netbook represents marketing cost.

But some consumer advocates want an end to such bundling practices, arguing that the practice ties customers to a carrier. Up to this point, most consumers might conclude that the significant discounts on handsets are worth the trade off.

In fact, some economists argue that subsidized handsets actually lead to more innovation, as users have incentives to upgrade to new devices frequently. If the general rule is that consumers buy less of products that are more expensive, severing the tie between service and subsidized handsets should reduce the frequency with which most consumers buy new devices.

To the extent that new devices drive new applications, application-based innovation could suffer.

That said, sales of unlocked devices would allow some greater degree of switching behavior. Users of CDMA handsets would have a choice of Verizon and Sprint, while GSM users would have a choice between AT&T and T-Mobile USA.

A new regime of unlocked phones should in principle also spur development of phones operating on both GSM and CDMA, though at the price of higher handset cost. To the extent that rapid mobile handset innovation and adoption lead to higher consumer welfare, regulators might want to weigh the costs and benefits of handset subsidies very carefully.