What Next for T-Mobile USA?

AT&T easily will survive any failure of its bid to buy T-Mobile USA. T-Mobile USA, on the other hand, will continue to face strategic problems. A distant fourth in the U.S. mobile market, with no spectrum available to launch a fourth-generation network, T-Mobile USA either has to spend lots more money to try and catch up to AT&T and Verizon Wireless, or must exit the U.S. market. Few think its parent, Deutsche Telekom, has the appetite for investing.


That suggests T-Mobile USA will still be looking to sell, in the event of a failure of the AT&T bid to buy T-Mobile USA. One issue is the pool of potential buyers. But a significant strategic issue is the value of the asset in a mobile market where being "in the middle" is difficult.


AT&T and Verizon Wireless clearly lead the higher end of the market. Many other larger-regional providers lead the lower end of the market, especially the prepaid segment. That leaves firms such as Sprint and T-Mobile USA in an arguably exposed position, vulnerable to lower-cost providers on the lower end and pressure from the market leaders at the top. 


At a practical level, competing with the larger national contestants means heavy advertising and marketing costs. In some cases, the regional providers can be more targeted about such spending. And that's part of the rub. The providers of lower-cost prepaid services succeed in part by controlling their overhead costs, allowing them to offer lower prices. 


The contrast is perhaps not so stark as the positioning of a mass market retailer between Tiffany and Wal-Mart, or between Tiffany and Amazon.com, but it is the same general problem. 

T-Mobile USA has lost 850,000 contract customers in 2011. In the third quarter, sales fell 2.3 percent to $5.23 billion, though earnings rose 3.8 percent to $332 million. One wonders if earnings rose because T-Mobile USA essentially stopped investing as it would have, if it thought it was going to be an on-going business.

T-Mobile gained 826,000 prepaid customers in this year's first nine months of 2011. The problem is that profit margins for such customers are lower than margins for prepaid customers. Also, T-Mobile USA is the only service provide of the top four without the ability to sell the Apple iPhone. Deutsche Telekom's unsolved problem

Spectrum assets are another issue. T-Mobile USA’s CEO, Philipp Humm, made the point at a May 2011 hearing on the merger before the Senate Judiciary Committee. “As data usage continues to explode, spectrum is becoming a constraint to our business, with T-Mobile facing spectrum exhaust over the next couple of years in a number of significant markets,” Humm said. “Moreover, our spectrum holdings will not allow us to launch [Long Term Evolution]. ” No independent future?

Mobile Wallet: Consumers Are Hesitant, For Good Reason

A new survey by Compete suggests most consumers are not yet inclined to use mobile wallet services, despite apparent awareness of around two thirds of respondents. 


About two thirds of people who use debit cards and credit cards say they aren’t planning to start anytime soon. Just seven percent of banking consumers indicated that they would be very or extremely likely to start using their phone or tablet to make a bill payment. 


About five percent of banking consumers said they would be likely to start using their mobile device to make a deposit. Most also say they aren’t likely to start using their mobile device to make a point-of-sale purchase.


None of that should be surprising. Consumers need a clear value proposition, and it still isn't clear that has been established. Mobile Wallet: Consumers Are Hesitant Few wallet services have been able to fully develop the features they believe will clearly add significant value for consumers, and few retailers are able to support those features, either. 


Beyond that, few consumers actually are able to use near field communications, for example, since their current devices are not equipped to do so. 

Although current use and intended adoption rates for mobile services are low, once consumers adopt mobile financial or money services and start using their phone as a mobile wallet, they use the services frequently, the survey also shows. Some 16 percent of consumers using "Mobile tap and pay" do so daily and another 36 percent use it weekly. A full 87 percent of consumers using mobile couponing do so at least once a month.


There is one important element to keep in mind for any brand-new service such as mobile wallets, namely that it usually is quite impossible for end users to understand or to quantify their possible use of a product they have not yet experienced. 


Apple, for example, has not had a history of conducting market research about any of its new products, on the theory that consumers cannot really describe their possible use of a product they never have seen.

40% Drop in SMS revenue by 2015

Industry executives surveyed by Telco 2.0 believe it is possible that over the top messaging services will displace about 40 percent of text messagin revenue by 2015, at least in Europe and the Middle East.

In part, that might be a function of generally higher costs in such markets. Costs for consumers in North America tend to be lower than in Europe, for example.

The main cause is competitive pressure from Facebook, Skype, Google and BBM. Mobile voice isn’t that far behind, with a 20 percent decline foreseen by surveyed executives. 40% drop in SMS revenue by 2015

Economic Eras are Rough During the Transition

Fundamental economic transitions always are times of social stress. The transition from agriculture to manufacturing was hugely disruptive. We might be in the midst of another great transformation from manufacturing to "information" as the basis of the economy. If history is any guide, the disruptions we are seeing are a byproduct.

The good news about information technology, according to Erik Brynjolfsson and Andrew McAfee, the authors of  Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy  is that it’s making America more innovative, productive and richer.

But the bad news, the two MIT professors add, is that this new wealth, innovation and productivity is being spread unequally, so that only a minority of Americans are reaping the benefits from it. The Internet Is Making Us Both Richer and More Unequal

Ofcom Describes Net Neutrality Policies

A new position paper by U.K. regulator Ofcom on network neutrality relies heavily on competition to maintain an open Internet access business, while at the same time generally allowing Internet service providers to use network management tools so long as they are transparent about such practices.

At the same time, Ofcom says it will watch for any signs that “best effort” Internet access, which does not allow any packet prioritization, does not coexist with any managed services ISPs may offer.

In fact, the Ofcom rules are less restrictive than current U.S. rules, which do not allow any packet prioritization on fixed networks, at all. What Ofcom does seem to warn against is forms of management that have the business result of favoring an ISP's own services, over competing services offered by other contestants.

Mobile and fixed network operators can meet new demand for high-speed Internet access either by investing in new capacity and partially by rationing existing capacity, in part by using traffic management tools,  Ofcom says in a new position paper explaining its thinking on network neutrality policy.

“The question is not whether traffic management is acceptable in principle, but whether
particular approaches to traffic management cause concern,” Ofcom says. The U.K. communications regulator rightly notes that just two broad forms of Internet traffic management exist, either a “best effort” approach that simply randomly slows down under load, or some form of “managed” access that could include priorities for delay-sensitive or higher value traffic.

Ofcom generally argues that access providers can do quite a lot where it comes to traffic management, so long as they are transparent about it and communicate those practices to end users. There is an expectation that users will have access to all lawful applications, of course.

While recognizing that best-effort and managed services will coexist, Ofcom says it would consider intervening if the amount of “managed” bandwidth jeopardized the amount of “best effort” access Ofcom considers key to continued innovation.

Likewise, Ofcom says it would be concerned if any particular management technique was applied in a way that harmed competitors to ISP-owned services. Ofcom network neutrality statement

AT&T Giving Up on T-Mobile USA Bid?

On November 23, 2011, AT&T and Deutsche Telekom withdrew their applications to combine spectrum owned by both companies, something that would be required if AT&T were to succeed in acquiring T-Mobile USA.

AT&T also says it will take a pretax accounting charge of $4 billion ($3 billion cash and $1 billion book value of spectrum) in the 4^th quarter of 2011 to reflect the potential break up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval.

AT&T says it still is pursuing the deal, but the taking of the charge and withdrawal of applications indicate, at the very least, that AT&T thinks prospects are dimming, if not a definitive recognition that the bid will fail.  AT&T Throwing in Towel on T-Mobile USA?


Given the fact that the accounting charge will be taken in advance of the time the Department of Justice antitrust hearing would occur, some will speculate that AT&T plans to withdraw its bid to buy T-Mobile USA before the hearing. 


It is starting to look as though AT&T is preparing to abandon its acquisition attempt. 

50% Of E-commerce Site Visitors Are Logged In To Facebook

A new study shows 50 percent of visitors to e-commerce sites are currently logged in to Facebook. 50% Of Ecommerce Site Visitors Are Logged In To Facebook

"On average in October (2011), 50.8 percent of traffic was logged into Facebook while visiting our customers’ ecommerce sites.  Across all customers, this rate ranged from approximately 40 percent to 60 percent, SocialLabs says. Facebook visitors on e-commerce sites.

"While users on our clients’ sites are logged in to Facebook slightly less during the workday and slightly more during the evening, the percentage of logged in users is still very high during the workday," SocialLabs says. "For example, during the work week of October 17 to 21st, on average 51 percent of users on our e-commerce deployments were logged in to Facebook from 9AM to 7PM."

Using Facebook social plugins and Connect integrations, sites can leverage Facebook data to show visitors what friends bought or shared, what products relate to their Likes, and which friends they might want to invite. The study was conducted by Sociable Labs, which helps websites implement social functionality, and looked at 456 million visits to over a dozen ecommerce sites catering to different demographics.