"Getting" Social Media Takes Work and Time

We might generally agree at this point that social media tends to work better for consumer brands than for business-to-business brands, though at some point that is likely to change.

What is harder to contest is the issue of what it takes, not to understand, but to use, social media such as Facebook. A new study by A.T. Kearney illustrates some of the issues. The study found that 89 percent of consumer replies on company’s Facebook pages remained unanswered. To be sure, not every post requires a reply. But A.T. Kearney points out that Gucci didn’t reply to a single thread in the last three months.

That appears to be a common problem that mostly is "budget" related. Though it doesn't necessarily "cost" much to use Facebook, replies imply monitoring, and that takes people and time. And if the volume of replies and comments is large, then the labor to monitor and reply is going to be significant. Few large firms seem prepared to create entirely new staffs to handle this function, and perhaps few small firms can do so.

Even when marketers responded, only 15 percent of their posts “invited further conversation” and 17 percent actually “addressed the consumer by name. That is arguably tougher in a business-to-business setting, because many, if not most posts in such settings are "anonymous," suggesting that a poster needs or wants to keep an identity hidden. That's not so useful.

Firms that were a bit more friendly and responsive on Facebook averaged a consumer-to-company post/response ratio of 3:1. Most, however, had a 1:4 ratio. If you think about it, that's probably reasonable, since not every post does require a substantive reply.

Read the full study here: http://www.atkearney.com/index.php/Publications/socially-awkward-media-volume-xiii-number-2-2010.html

Read an analysis here: Why Some Of The World’s Biggest Brands Still Don’t Get Facebook - Elaine Wong - Media Geek - Forbes

Users Appear to Prefer "Do Not Track" Rules

Most people do not seem to like the idea of advertiser tracking of their online behavior, and with the Federal Trade Commission looking at tracking, it seems likely some new "do not track" program is coming.

The ironic facet of the issue is that refined tracking, conducted with permission, would mean a much-higher chance that most of the ads a user sees over the course of a day might actually be relevant, interesting and valuable.

Some forms of tracking, such as "remember me" functions, also are highly useful, and represent one way of maintaining "permission" status for any tracking programs.

Newspapers Stream More Video than Broadcasters

With the caveat that usage and bandwidth are not direct proxies for "revenue," Brightcove and TubeMogel report that newspapers surpassed broadcasters in total minutes streamed for the first time in the third quarter of 2010.

Brightcove suggests that newspapers are rapidly adopting and producing video content for what was once a print business. Of course, broadcasters probably figure they are "streaming" (broadcasting) all day, so online might not be so important to them.

Online media properties (which includes pure-play Web properties and blogs) also had a strong growth quarter in player loads (127 percent growth) and titles uploaded (23 percent growth), suggesting that video adoption and production activity is on the rise across the growing media category, Brightcover says.

Perhaps significantly, game consoles such as the Wii and PlayStation lead in viewing time with an average
of 2:45 minutes watched per view, compared with online video averaging out to just under 2:27 minutes per view.

read more here

Are People Watching TV?

Because consumers are using their PC for activities that require more attention than watching TV, which is mostly a passive activity, some might say TV viewing statistics are questionable.

Almost a third of consumers are playing games on their computers while watching television, and one-quarter are doing schoolwork, for example.

The Data Digest: What Are People Using Their PC For While Watching TV? | Forrester Blogs

SMBs Still Prefer Premises-Based IP Telephony

The growth potential of the hosted market over the next five to six years is still low when compared to premises-based IP telephony solutions, Frost & Sullivan says. Most smaller businesses still appear to want local control and prefer the one-time cost of a premises-based system, since the monthly charges associated with hosted services.

This is particularly true in the 50-to-100 extensions segment. While hosted telephony services have improved considerably in terms of voice quality and uptime, an on-site system is often less costly to maintain over a longer period of time and can exceed hosted services' uptime rates.

No Jitter | blog | Threats to the SMB Premises-Based IP Telephony Market

Amazon Kindle, Apple iPad Lead Reader Race

The e-Reader market has essentially become a two horse race between the Amazon Kindle and the Apple iPad, according to ChangeWave’s latest survey of more than 2,800 consumers.

The Amazon Kindle (47%; down 15-pts) is hanging on to a rapidly diminishing lead over the Apple iPad (32%; up 16-pts) among current e-Reader owners. However, the iPad’s share of the overall market has doubled since the last time ChangeWave surveyed e-Reader owners in August.

ChangeWave Survey - Amazon Kindle vs. Apple iPad

Travel Purchases Lead Mobile Commerce

U.S. mobile online shopping, excluding travel, grew from $396.3 million in 2008 to $1.4 billion in 2009. ABI Research believes that in 2010, mobile online shopping excluding travel in the US had more than doubled again, to total more than $3.4 billion by year’s end. Travel-related purchases (airline tickets, hotels, etc.) will add another $1.5 billion.

In 2010, U.S. mobile commerce sales were lead by travel, at 31 percent of value, followed by electronics at 20 percent. That would not be surprising given the relative higher cost of travel expenses compared to most other categories. Among other product types, the volume of expenditure in 2010 is estimated at :

Apparel: 13%
Books/Music/DVDs: 9%
Office Supplies: 7%
Housewares/Home Furnishings: 6%
Entertainment Tickets: 3%
All Other: 12%

Mobile Commerce Sales Explode in United States: Will Top $3.4 Billion in 2010

When Will Mobile Providers Move Big into Location-Based Advertising?

Location-based mobile apps are shaping up to be a major channel for local advertising, for some obvious reasons. Mobile devices are sensors that can alert advertisers to a potential customer's proximity.

That means proximity (maybe a better way of describing the value than "location") creates a new channel for local advertising revenues around which a proximity marketing business can be built.

Local advertising is a $133 billion revenue stream in the United States. You would expect Yellow Page companies, Facebook and Google to pitch mobile "proximity advertising" services.

But, at some point, mobile service providers are going to make a play as well. By definition, mobile providers know where their users are. All 293 million of them, or about 93 percent of the U.S. population. Though there are significant challenges to scale at the level of designing rich media campaigns using specific smartphone features, virtually all 293 million mobiles can receive text messages.

So it would make sense for carriers to create and sell proximity advertising with reach of 293 million potential customers. That sort of thing requires new levels of cooperation between the major carriers, though. Some believe they won't be able to work together. But the carrot of a universal ad platform built on proximity, available to 93 percent of all U.S. residents, has to be appealing. Isis, the mobile payments venture launched by AT&T, Verizon Wireless and T-Mobile USA, is one example.

5 Location And Mobile Tech Predictions For 2011

ROI: Why iPads Make Lousy Christmas Gifts - WSJ.com

In an entertaining commentary providing 10 serious and some not-so-serious reasons to avoid buying an iPad right now, or possibly an iPad at all, Brent Arends makes an interesting point about Apple, as a company.

"This isn't a technology company. It's a luxury brand, like Hermes or Tiffany."

Which, to the extent the observation is correct, makes Apple one of those rare firms that have achieved marketing differentiation in a big way, not selling the physical attributes of the product, but the subjective value of the product.

Not the steak, the sizzle, in other words. Not product features but the image and brand. That makes for nice profit margins.

In a broader sense, he notes that the scarcest resource for most adults is time. At some level, every application or "experience" provider is competing with limited time, not another app providing similar value. At some point, even with multitasking, a busy adult can only do so much.

At some level, the big constraint for Internet-mediated experiences and past-times of all sorts is the shortage of disposable time. Beyond a certain point, disposable income is not a barrier, time is.

Among the reasons for delaying an iPad purchase are the practical reasons. It will be better and cheaper by about April 2011. Alternatives are coming, and prices will drop. If you can live with access to Flash-authored video, use an iPad. If not, you might want to wait for a device that supports both HTML5 and Flash.

He also argues that a 3G-equipped version actually enables many of the best features, and that gets expensive, not to mention allowing people to waste even more time playing games or hanging out on social networks.

ROI: Why iPads Make Lousy Christmas Gifts - WSJ.com (subscription required)

Teen E-Mail Use Drops

In the last year, time spent using e-mail sites like Yahoo and Hotmail has fallen 48 percent among 12- to 17-year-olds, according to comScore, at least time spent with e-mail on computers. That might not come as a surprise. Virtually all studies have shown similar results.

ComScore also found a decline of 10 percent in time spent on Web-based email among 18- to 24-year-olds, about the same as it found for people up to the age of 54.

E-Mail's Big Demographic Split - NYTimes

Communications Taxes Going up in 2011

Get ready for new taxes on your mobile services in 2011.

When you buy a Kindle e-book in 2011, a buyer living in New Jersey who purchases a $10 e-book housed on a server in Texas might pay $1.52 in taxes (7 percent sales tax in N.J.; 8.25 percent in Texas). Mobile phone service generally saw tax increases of about two percent a month in 2010, compared to 2009. But 2011 could be far worse.

Some observers say tax hikes could amount to as much as 75 percent in some localities next year, as governments shift more of the communications tax burden to mobile services, where those levies used to primarily be carried by wired services.

On average, 15 percent of a monthly mobile phone service bill is already made up of taxes and fees, compared to 7% for most other goods and services, according to CTIA.

But in 23 states, taxes run even higher, including Washington at 23.64 percent, Nebraska 23.44 percent, Florida 21.31 percent and New York at 21.1 percent.

Municipalities can tack on a tax, as well. Maryland's Montgomery County, for example, raised its telecommunications tax by 75 percent to $3.50 per month for next year. Oregon's Keizer City Council has voted in favor of a similar tax hike of three percent.

Taxes on e-book downloads to an e-reader could add up to 21 percent of the total price, assuming multiple states apply taxes to the same transaction, according to MyWireless.org , a nonprofit consumer advocacy group.

Taxes on cable TV bills are likely to get hiked as well.

 read more here

UN Gives Governments a Monopoly on Internet Governance

The United Nations Committee on Science and Technology has decided that governments alone would be able to sit on a working group set up to examine improvements to the Internet Governance Forum.

This move has been condemned by the Internet Governance Caucus, the Internet Society, the International Chamber of Commerce and numerous other organizations, who have published a joint letter and launched an online petition to mobilize opposition. Read the letter here: http://isoc.org/wp/newsletter/files/2010/12/IGF-Working-Group-Decision1.pdf

The petition is here: http://isoc.org/wp/newsletter/?p=2710

Official Google Blog: Governments shouldn’t have a monopoly on Internet governance

A Bit More Clarity on FCC's Net Neutrality Order

Following are key excerpts from the Report and Order adopted by the Commission to preserve the open Internet, released by the Federal Communications Commission. Though the language will be fleshed out when the formal order is issued, the language hints at the amount of work yet to be done to flesh out what it all means.

Rule 1: Transparency

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

Rule 2: No Blocking

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management.

A person engaged in the provision of mobile broadband Internet access service, insofar as such person is so engaged, shall not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network

Rule 3: No Unreasonable Discrimination

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service.  Reasonable network management shall not constitute unreasonable discrimination.

Select Definitions

Broadband Internet access service:  A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service.  This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.

Reasonable network management.  A network management practice is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service. Legitimate network management purposes include: ensuring network security and integrity, including by addressing traffic that is harmful to the network; addressing traffic that is unwanted by users (including by premise operators), such as by providing services or capabilities consistent with a user’s choices regarding parental controls or security capabilities; and by reducing or mitigating the effects of congestion on the network. 

Pay for Priority Unlikely to Satisfy “No Unreasonable Discrimination” Rule

A commercial arrangement between a broadband provider and a third party to directly or indirectly favor some traffic over other traffic in the connection to a subscriber of the broadband provider (i.e., “pay for priority”) would raise significant cause for concern.  First, pay for priority would represent a significant departure from historical and current practice.  Since the beginning of the Internet, Internet access providers have typically not charged particular content or application providers fees to reach the providers’ consumer retail service subscribers or struck pay-for-priority deals, and the record does not contain evidence that U.S. broadband providers currently engage in such arrangements.  Second this departure from longstanding norms could cause great harm to innovation and investment in and on the Internet.  As discussed above, pay-for-priority arrangements could raise barriers to entry on the Internet by requiring fees from edge providers, as well as transaction costs arising from the need to reach agreements with one or more broadband providers to access a critical mass of potential users.  Fees imposed on edge providers may be excessive because few edge providers have the ability to bargain for lesser fees, and because no broadband provider internalizes the full costs of reduced innovation and the exit of edge providers from the market.  Third, pay-for-priority arrangements may particularly harm non-commercial end users, including individual bloggers, libraries, schools, advocacy organizations, and other speakers, especially those who communicate through video or other content sensitive to network congestion.  Even open Internet skeptics acknowledge that pay for priority may disadvantage non-commercial uses of the network, which are typically less able to pay for priority, and for which the Internet is a uniquely important platform.  Fourth, broadband providers that sought to offer pay-for-priority services would have an incentive to limit the quality of service provided to non-prioritized traffic.  In light of each of these concerns, as a general matter, it is unlikely that pay for priority would satisfy the “no unreasonable discrimination” standard.  The practice of a broadband Internet access service provider prioritizing its own content, applications, or services, or those of its affiliates, would raise the same significant concerns and would be subject to the same standards and considerations in evaluating reasonableness as third-party pay-for-priority arrangements.

Measured Steps for Mobile Broadband

Mobile broadband presents special considerations that suggest differences in how and when open Internet protections should apply.  Mobile broadband is an earlier-stage platform than fixed broadband, and it is rapidly evolving.  For most of the history of the Internet, access has been predominantly through fixed platforms -- first dial-up, then cable modem and DSL services.  As of a few years ago, most consumers used their mobile phones primarily to make phone calls and send text messages, and most mobile providers offered Internet access only via “walled gardens” or stripped down websites.   Today, however, mobile broadband is an important Internet access platform that is helping drive broadband adoption, and data usage is growing rapidly.   The mobile ecosystem is experiencing very rapid innovation and change, including an expanding array of smartphones, aircard modems, and other devices that allow mobile broadband providers to enable Internet access; the emergence and rapid growth of dedicated-purpose mobile devices like e-readers; the development of mobile application (“app”) stores and hundreds of thousands of mobile apps; and the evolution of new business models for mobile broadband providers, including usage-based pricing.

Moreover, most consumers have more choices for mobile broadband than for fixed broadband.   Mobile broadband speeds, capacity, and penetration are typically much lower than for fixed broadband,  though some providers have begun offering 4G service that will enable offerings with higher speeds and capacity and lower latency than previous generations of mobile service.   In addition, existing mobile networks present operational constraints that fixed broadband networks do not typically encounter.   This puts greater pressure on the concept of “reasonable network management” for mobile providers, and creates additional challenges in applying a broader set of rules to mobile at this time.   Further, we recognize that there have been meaningful recent moves toward openness, including the introduction of open operating systems like Android.  In addition, we anticipate soon seeing the effects on the market of the openness conditions we imposed on mobile providers that operate on upper 700 MHz C-Block spectrum, which includes Verizon Wireless, one of the largest mobile wireless carriers in the U.S.  

In light of these considerations, we conclude it is appropriate to take measured steps at this time to protect the openness of the Internet when accessed through mobile broadband

Specialized Services

In the Open Internet NPRM, the Commission recognized that broadband providers offer services that share capacity with broadband Internet access service over providers’ last-mile facilities, and may develop and offer other such services in the future.  These “specialized services,” such as some broadband providers’ existing facilities-based VoIP and Internet Protocol-video offerings, differ from broadband Internet access service and may drive additional private investment in broadband networks and provide consumers valued services, supplementing the benefits of the open Internet.  At the same time, specialized services may raise concerns regarding bypassing open Internet protections, supplanting the open Internet, and enabling anticompetitive conduct.  We note also that our rules define broadband Internet access service to encompass “any service that the Commission finds to be providing a functional equivalent of [broadband Internet access service], or that is used to evade the protections set forth in these rules.”

We will closely monitor the robustness and affordability of broadband Internet access services, with a particular focus on any signs that specialized services are in any way retarding the growth of or constricting capacity available for broadband Internet access service.  We fully expect that broadband providers will increase capacity offered for broadband Internet access service if they expand network capacity to accommodate specialized services.  We would be concerned if capacity for broadband Internet access service did not keep pace.  We also expect broadband providers to disclose information about specialized services’ impact, if any, on last-mile capacity available for, and the performance of, broadband Internet access service.  We may consider additional disclosure requirements in this area in our related proceeding regarding consumer transparency and disclosure.  We would also be concerned by any marketing, advertising, or other messaging by broadband providers suggesting that one or more specialized services, taken alone or together, and not provided in accordance with our open Internet rules, is “Internet” service or a substitute for broadband Internet access service.  Finally, we will monitor the potential for anticompetitive or otherwise harmful effects from specialized services, including from any arrangements a broadband provider may seek to enter into with third parties to offer such services.   The Open Internet Advisory Committee will aid us in monitoring these issues.

Australia National Broadband Network Pricing Clues

Australia's planned National Broadband Network (NBN) expects, over a decade, to build a fiber-based broadband access network providing 93 percent of Australian homes and small businesses with 100 Mbps service. Some locations will be served by wireless or satellite services that will operate at 12 Mbps. Fixed wireless will be used to supply service to about four percent of locations, while satellite is used to deliver service to about three percent of locations.

In total, about 13 million connections will be supplied.

"Retail pricing structure for fiber products is based around bundled (cheap or free) voice, fast broadband access and multi-channel TV," the NBN plan suggests. That little tidbit largely reflects the prevailing view that voice communications, though still a huge part of the overall value proposition, will not be the revenue driver for the network. Some might wonder about the relative contribution of multi-channel TV, over the medium or longer term, as well.

Of course, since the NBN will only supply wholesale access and transport, the specific retail plans will be determined by the retail providers themselves. Some may elect not to provide any one of the potential constituent services. Also, the NBN and its retail partners will continue to compete in a market with existing cable competition and expected growing competition from mobile networks as well.

One might guess, based on prior instances of robust wholesale regimes, that Telstra's current 70-percent-plus share of voice, and nearly-70-percent share of fixed broadband, could drop to about 40 percent, as already is the case in the wireless services domain. Market share of about 40 percent for fixed services would be consistent with other markets where robust wholesale competition is possible.

Some idea of the "retail pricing floor" can be gleaned from planned NBN pricing. Wholesale prices for a single 12 Mbps circuit are set at $24. A retail service provider will add operating, sales and capital costs to derive retail pricing. Other prices include wholesale charges of $27 for a 25 Mbps service with 10 Mbps return; $30 for a 25/20 service and  $34 for a 50/20 access; $38 for 100/40 service.

Wholesale pricing for a 250/100 plan will cost $70; $100 a month will buy a 500/200 service and $150 is the wholesale price per month for a 1 Gbps/400 Mbps service. The charges intentionally are designed to encourage wholesale partners to buy and retail services running at 100 Mbps.

The NBN also will sell symmetrical services with guaranteed quality of service (committed information rates).

NBN Co will "provide a layer two bitstream service only, using a GPON (gigabit passive optical etwork) architecture. The company is not preparing for the provision of layer one services, layer one unbundling, functional or structural separation. Retail partners will not be able to buy "dark fiber," in other words.

Wholesale products will be sold supporting downstream bandwidths of 12 Mbps, 25 Mbps, 50 Mbps, 100 Mbps, 250 Mbps, 500 Mbps and 1 Gbps, with upstream bandwidths ranging from 1 Mbps up to 400 Mbps. The NBN also will offer wholesale voice capabilities.

The NBN will add video streaming delivery, but will not supply the rest of the video infrastructure. Also planned are features to support multi-location enterprises and 1 Gbps virtual LAN services, as well as protected diverse-routing services.

The entire fiber network will take 9.5 years to build, assuming no materials or labor delays, and is projected to cost $36 billion. Revenues to 2020 are expected to be about $21 billion and operating costs are expected to run about $22 billion through 2020. The Australian government is contributing R27.5 billion, with debt financing of about $13 billion. The internal rate of return is expected to be seven percent.

For Telstra, the stakes are high, as Telstra will essentially be out of the infrastructure business, and purchase access and transport services from the NBN. Telstra also will divest its cable network customers as well.

You can read the full report here

FCC Net Neutrality "Rules" are More Like "Principles"

To me, this reads more like a statement of principles and direction than "rules." That likely is by design. That also means if the court challenges do not invalidate the entire order, we are in for a long period of gradual testing of what each of the principles actually means.

It appears we don't really know much, yet, especially since the actual language hasn't been released.

http://www.scribd.com/doc/45749183/Net-neutrality-statement-by-Julius-Genachowski-the-FCC-chair-on-Dec-21-2010

Netflix CEO Reed Hastings Disagrees with Investor "Shorts"

You would not expect any CEO of a public company to do anything but defend the company's valuation. Reed Hastings, Netflix CEO, facing what might be termed significant concern in some quarters that the firm is over-valued, does so in this post, a response to investor Whitney Tilson's stated reasons for shorting Netflix.

You can read the original here: http://seekingalpha.com/article/242320-whitney-tilson-why-we-re-short-netflix

Both sets of arguments are cogent. The one point where the Hastings response seems to me to miss the mark is Tilson's argument about higher broadband costs, incurred by consumers, not by Netflix, to consume Netflix or any other provider's streaming content.

Hastings rightly points out that on a cost-per-megabyte, backbone transport costs are declining. He's right about that. But Tilson seems to be pointing to the money end users have to pay, for their broadband access subscriptions, to consume streaming content.

As users begin to watch more online video, it is highly likely they will need to spend more money on their broadband access plans, and that will play some role in any consumer's evaluation of their costs to watch streaming video. It does not appear that Tilson was commenting on Netflix costs to move video across the Internet backbone, but about potential higher costs borne by end users to watch online video.

Netflix CEO Reed Hastings Responds to Whitney Tilson

FTC Wants Do-Not-Track for Online Ads

Any industry can run into consumer issues that are troublesome from a business perspective, and can lead to problems from a legal or regulatory perspective. It isn't yet clear whether the online advertising industry has done enough, or can do enough, to self police itself before outside intervention occurs.

It might now be too late for online advertising to escape outside intervention. The Federal Trade Commission wants a "Do-Not-Track" program for online advertising, saying the industry has moved too slow.

FTC Wants Do-Not-Track for Online Ads

Google’s Click-to-Call Boosts Response Rates

Google click-to-call over the last three months, on mobiles, has grown by an average of 28 percent month-over-month globally.

Surojit Chatterjee, senior product manager of mobile ads for Google, said campaigns with the click-to-call feature report sic percent to eight percent higher click-through rates than ads that don’t have it.

Google’s Click-to-Call Boosts Mobile Revenues: Tech News

FCC Passes Net Neutrality Order, Unclear What it Means

The Federal Communications Communication has voted to approve new net neutrality regulations on a three-to-two vote. As nearly as we can tell, the new rules, which will face court challenge and possible contrary instructions from the U.S. Congress, mandates network management transparency, and simply codifies existing rules protecting a consumer's right to use lawful applications.

The actual language of the order is not available yet, and much remains to be understood. Some would characterize the general thrust of the rules as forbidding some forms of "priority access" to sites and applications.

The rules appear to apply to both fixed and mobile networks, though only "unreasonable discrimination" is prohibited.

The rules appear to be less affected than fixed networks are, though the language used is broad enough that the actual details will have to be filled in by actual enforcement actions later, taken on a case-by-case basis. It appears we will have to wait not only for the actual written order, but for the legal challenges, case-by-case complaints to the FCC and then possible Congressional direction, one way or the other.

In short, it isn't entirely clear what has changed, here, and how big the impact might be.

Read more: http://www.electronista.com/articles/10/12/21/fcc.approves.net.neturality.rules.despite.gop/#ixzz18ltQVSRl

As expected, many who had argued for more-rigorous rules are disappointed. See http://www.freepress.net/press-release/2010/12/21/free-press-fcc-net-neutrality-order-%E2%80%98squandered-opportunity%E2%80%99 for example.

Orange Makes Big Bet on NFC, Mobile Payments

Orange, the key France Telecom brand, has announced that it will roll out near field communications-enabled handsets across its whole European Union footprint starting in the second half of 2011.

Orange Makes Big Bet on NFC, Mobile Payments | Mobile Marketing and Technology

Mobile Can Help or Hurt Retailers

In the absence of measures taken to use mobile shopping to their advantage, broadly-defined mobile retailing will hurt, rather than help, most retailers. The reason is simple. Web-equipped mobile users easily can check prices, availability, product reviews and other information on products while they are in stores. And people are doing that.

About 30 percent of respondents surveyed by the GfK Roper Poll say that, while at a store looking at a product, they tried to find a better deal elsewhere, using their phone. About 33 percent say that while out shopping, they emailed or texted someone to tell them about an experience at a store, such as finding a great deal or a great gift.

The study, sponsored by Sapient, also found that 30 percent of respondents own a smartphone capable of supporting such activities.

About 19 percent of respondents used their phone to post something on Facebook, MySpace, Twitter, or other social networking sites about their holiday shopping experience.

Mobile Marketing and Technology

Mogreet Launches MMS Ad Network

Mogreet has launched a Multimedia Messaging (MMS) ad serving network giving brands the ability to deliver video and picture content to virtually any mobile phone and any wireless carrier, says James Citron, Mogreet CEO.

Mogreet’s interactive Multimedia Messaging (MMS) provides marketers with the largest MMS reach in the mobile world, allowing access to nearly any mobile phone in North America, Europe and Asia, including both smartphones and feature phones.

Among its first customers is Cha Cha, the online question and answer service that handles about a billion queries a year. It would be hard to argue that video and rich media have more impact than simple text, nor the proposition that reach for any visual campaign is wider for MMS than for any other channel.

Mobile Marketing and Technology

20% Will Buy a Table in Next 3 Years

More than 20 percent of Americans currently surveyed by Harris Interactive say they plan to own or buy a tablet device within the next three years, according to a new online survey conducted in November by Harris Interactive and sponsored by Fuze Box. Harris Interactive also estimates there are nine million people who already own a tablet device.

Adults who own or plan to buy a tablet computer in the next three years plan to use their tablet for a variety of applications. Browsing the Internet (78 percent); email (75 percent); reading e-books/newspapers (53 percent) and social networking (50 percent) are expected lead applications.

Some 43 percent expect to watching TV or movies, while 37 percent expect to use their devices for work.

Mobile Marketing and Technology

FCC Net Neutrality Order: No Transparency

Does the public have the right to see the FCC's net neutrality proposal? Net Neutrality probably ranks as the most controversial issue in the communications sector right now, but nobody will be able to see the order in advance. In fact, nobody will be able to read the order until after it is passed.

The lag between passage and publishing is normal for the FCC. What is different is the secrecy in advance of a vote.

Why is FCC's 'net neutrality' order still a secret? - CNN.com

AT&T Says it Has the Fastest Network

AT&T cites a study by Global Wireless Solutions to back up its claim that the AT&T network is 20 percent faster than its closest competitor.

Mobile Broadband Out Performs Competitors | AT&T

Google Still Hunting for a Social Coupon Network

Google, whose $6 billion buyout offer was spurned by Groupon, is in talks with much-smaller rivals, the New York Post reports.

The news is not unexpected. Having determined that social couponing capability is key to local advertising, Google has to get into position, one way or the other.

Google shopping for Groupon wannabe - NYPOST.com

Facebook: The Case for Commerce Is Emerging | ClickZ

There is a growing expectation that Facebook will emerge as a key platform for commerce-based business models.

To the extent that sales originate through traffic, then Facebook already has achieved critical mass. Referral traffic began to clim when the 'Like' button was launched, some would argue.

Referral traffic to retailers and brands from Facebook began to climb. In August 2010, a few commerce brands even had more referral traffic from Facebook than Google.

Facebook as a meaningful source of referral traffic for e-commerce is a trend, and a case for commerce is emerging.

Facebook: The Case for Commerce Is Emerging | ClickZ

Digital Divide is Not Based on Access

In the District of Columbia and other urban areas, unlike rural areas of the United States, "lack of adoption of digital resources (computers and broadband) generally is not due to lack of availability of broadband," says a new strategy paper by the District of Columbina CTO.

"The District currently has three large wireline broadband providers and many smaller ones, as well at least six major wireless broadband providers (both 3G and 4G); together, these providers furnish service in all areas of the city," the report notes.

"Rather, individuals and households in areas where broadband service is available typically choose not to subscribe for one or more of three leading reasons²usability, affordability, and perceived value/relevance."

That's a different problem than the "there is no access" argument some have insisted is the issue, and will be tougher to remedy.

Digital Divide Strategy

3 Metrics to Prove Social Media Marketing is Working

Ultimately, all marketing channels must prove their worth. Right now, social media are in their infancy, and so are being widely nurtured despite clear evidence of return, simply because some investments initially are strategic, and only later are tactically justifiable.

At some point, though, social media will have to demonstrate return on investment in the somewhat imprecise way all other channels must: on lead generation and customer acquisition, even though those metrics are hard to attribute to any specific channel when multiple channels are used.

In the near term, people can use proxy measures, such as traffic growth, but that ultimately is a just a proxy for the other measurable outcomes any business has to rely on. 

read more here

Market Power and Markets: Comcast and Level 3 Communications

"If it is left to the market entirely, then there shouldn't be any one player with significant market power," says financial analyst Tim Poulus, writing about the peering dispute between Level 3 Communications and Comcast. " And if so, regulation must be put in place."

"Hence, there is a reason for regulators to look at the Internet on a global level," he argues.

With all due respect, almost nothing could be further from the truth: perfect competition or imperfect competition or even regulated competition will always lead to market power, especially in highly capital-intensive industries.

That isn't to say regulation based strictly on market power isn't necessary at some point. Sometimes a virtual monopoly has to be broken up or limited to restore competition to a market once more.

But there always will be market power, so long as consumers are free to choose products they prefer, and so long as the ability to switch providers is there. The reason is about as simple as it could be. People will buy the better products.

Over time, that leads to highly-unequal market power. Look at the market share for just about any product or industry that has matured and you will always find an unequal distribution of revenue, customers or profit margin. Some of us would expect the market share of provider one to be roughly twice that of provider two, as a rule.

The market share of provider two would be twice that of provider three. And as you can imagine, when you are dealing with "doubling," it doesn't take very long to reach the "long tail," in terms of market share.

Apple might well achieve market power with the iPad the way it dominates both music distribution and iPods. That's the way markets are supposed to work: better products, offering higher value, drive out products with lesser value.

At some point, antitrust concerns will be raised of course, and then decisions to cap share growth can happen. Comcast already is subject to such caps. Level 3 has no significant market power. Furthermore, there are other issues than assessments of market power, such as contract law. Just because a firm might be deemed to have market power does not mean its lawful contracts can be voided.

What if Netflix Switched From Pigeons to Postage? - Seeking Alpha:

"Net Neutrality" Might Happen Tomorrow...We Still Can't Agree On What it Is

The Federal Communications Commission is supposed to introduce and possibly vote on new "network neutrality" rules on Dec. 21, 2010, and whether one is in favor or not, we still cannot agree on what it is.

For some, it is a freedom of speech issue; for others a simple matter of network management, with many views in between. One can argue that the FCC already has addressed the "freedom of speech" issue, that Internet service providers already agree, and that there is in fact no need for new rules. The FCC's "Internet Freedom" principles are widely accepted, and one might argue that if anything needs to be done, it is a simple matter of enforcing infractions, as the FCC already has done, twice.

There is, in short, widespread agreement that users have the right to use all lawful applications.

Of course, even with recognized "freedom of speech" rights, there are permissible "time, place and manner" restrictions. Among the issues for network service providers is that all networks will, under extraordinary load, have to "block access to the network." Though some will disagree, such blocking is a network resource fact of life. When a server gets taxed, what does that server do? It blocks additional requests for access until it can clear the existing load.

Back in the old days, when telephone networks got overloaded, what happened? New callers were blocked from access. "All circuits are busy, please try your call again later." All servers work the same way.

But this is complicated. All networks get congested, some times. Outright access blocking is one way to deal with the load. Shaping the traffic and prioritizing traffic are other ways to deal with the overload problem.

Some net neutrality advocates believe such shaping and priorities should never be allowed. Some opponents say such blunt force rules will foreclose creation of new services that users might actually want to have access to. Some might want first priority for any active voice, video or conferencing session, with other classes of traffic, such as bulk software downloads, email or web surfing traffic given lower priority.

We might see, soon, what new rules the FCC wants to implement, and then we will see what is likely years of litigation about whether those rules can be enforced.

But no matter what form any new rules might take, they will not dispense with the need to allocate resources under conditions of congestion. One hopes any such rules will not reduce the amount of innovation. Ironically, one of the stated reasons in favor of strong net neutrality provisions is the preservation of an innovative climate. The problem with such rules is that they preserve freedom for some by taking it away from others in the ecosystem.

Four takes on why net neutrality matters

Best Buy bundling free Verizon, Sprint, and AT&T MiFis with iPads

Best Buy is now offering an iPad bundle which includes a choice of an AT&T, Verizon, or Sprint MiFi, when purchased with a two-year data subscription. The bundle deal is good until Jan. 2, 2011.

This sort of bundle illustrates the upside for mobile service providers for sales of mobile-connected iPads and tablets, and also allows people to use their tablets on several networks, not just AT&T, in the case of the iPad.

Best Buy bundling free Verizon, Sprint, and AT&T MiFis with iPads, contract required | 9 to 5 Mac Best Buy bundling free Verizon, Sprint, and AT&T MiFis with iPads, contract required | Apple Intelligence

AdMob and Coca Cola Launch Campaign

The AdMob team at Google recently worked with the Coca-Cola Company to produce a live wallpaper celebrating the holiday season based on their annual holiday commercial. Live wallpapers are animated homescreen backgrounds that respond to both touch and phone movement, and can also react to the time of day and a device’s geographic location.

This is the first time the AdMob team has worked with an advertiser on creating this type of mobile experience.

AdMob and Coca Cola bring the holidays to your mobile phone - Google Mobile Ads Blog

Facebook and Twitter are Big

Facebook and Twitter both are big. Here's a look at how big the two firms are. You can click on the image for a larger view.

The most reliable blogging services on the Web

Google’s Blogger platform is the most-reliable of several tested by Pingdom. The Blogger blogs didn’t have any downtime whatsoever during the two months we monitored them, followed by WordPress.com which had very little downtime.

Typepad performed about as well as WordPress. Posterous had somewhat mixed results, but overall performance was close to tht of WordPress and Typepad. Tumblr was the only service in the test that truly failed.

The most reliable (and unreliable) blogging services on the Web

AT&T Acquires 700-MHz spectrum from Qualcomm

AT&T is buying spectrum licenses in the 700 MHz frequency band from Qualcomm for $1.925 billion. The spectrum will be used as part of AT&T's Long Term Evolution 4G mobile broadband network.

Qualcomm had been using the spectrum to support its FLO TV business, but Qualcomm is shutting the service in March 2011.

The spectrum covers more than 300 million people total nationwide and includes 12 MHz of 700 MHz D and E block spectrum covers more than 70 million people in five of the top 15 U.S. metropolitan areas, including New York, Boston, Philadelphia, Los Angeles and San Francisco.

The network also includes 6 MHz of 700 MHz "D block" spectrum covers more than 230 million people across the rest of the United States.

Frequencies in the 700 MHz and 800 MHz bands are highly favored for mobile services because the signals feature both more range and greater ability to penetrate buildings. As indoor coverage is a continual issue for mobile services, the new frequencies will help AT&T deal with indoor coverage for its LTE network.

read more here

Zong for Content Purchases

Zong, a provider of content purchases, might ultimately have a wider role in the transaction space.

ITU Says Some 3G Networks are 4G, Pre-4G is 4G, and 4G is 4G

The International Telecommunications Union recently defined  “LTE-Advanced” and “WirelessMAN-Advanced” as the only "official definitiions of "fourth generation" networks, automatically making networks operated by Sprint, Clearwire, Verizon, MetroPCS and all other operators of WiMAX and Long Term Evolution networks something other than standards-based "4G" networks.

Now the ITU has muddied the waters even more, saying that some "3G" networks are "4G," while the formal "pre-4G" networks in existence, or about to be built, also are "4G."

"As the most advanced technologies currently defined for global wireless mobile broadband communications, IMT-Advanced is considered as “4G”, although it is recognized that this term, while undefined, may also be applied to the forerunners of these technologies, LTE and WiMax, and to other evolved 3G technologies providing a substantial level of improvement in performance and capabilities with respect to the initial third generation systems now deployed," the ITU says in a new statement.

Huh? Some of us have had no issue with T-Mobile USA saying its new HSPA+ network offers "speeds equivalent to 4G," because the WiMAX and HSPA+ networks do offer comparable access speeds. But it does create a definitional muddle. It's one thing for marketplace contestants to position their networks in one way or another.

It might be quite another for a "standards" body to argue that 3G is 4G, existing 4G is 4G, and other possible networks might also be 4G.

What's the point of a standard when it isn't a standard any longer? In this case, it might mean that the "non-standard" standards will grow organically to the point that the newly-minted "4G" standard simply ceases to be relevant, much as adherence to the supposedly-"legacy" TCP/IP completely killed the shift to new protocols for layers one through four of the data communications protocols.

One might say the ITU flip flop is merely embarassing, and yet another example of standards bodies attempting to define "next generation" networks. It might result in something far more substantial than that. One might suggest that the whole effort now is questionable, in terms of helping shape the development of 4G.

Once critical mass developments around the real-world 4G and advanced 3G networks, services, revenue elements and devices, evolution will happen based on those factors. That doesn't mean operators will abandon the effort to keep developing more-capable networks. But as we have seen with TCP/IP and other data "standards," the market often decides what a standard is.

So far, the markets, and end users, have decided the path for next-generation networks, in large part. That could well happen here as well. No matter what the ITU thinks, if voluntary groups such as the GSM decide to evolve LTE in some other direction, the existence of a formal standard will not deter them.

That is not to fault the well-intentioned hard work of the technologists working on the standard. The point is simply that the global telecommunications industry has yet to prove it can devise a "next-generation" network standard that real-world operators actually embrace obviously, and with great commercial success. Instead, the pattern so far has been that network operators and end users sort of grope towards better solutions as best they can.

But it is equally true that, up to this point, real-world commercial success has not been driven so much by the standards as by solutions that users believe are workable and useful.

For a discussion f the ITU standards, read this: http://www.itu.int/itunews/manager/display.asp?lang=en&year=2008&issue=10&ipage=39&ext=html and this http://www.networkworld.com/news/2010/121710-itu-softens-on-the-definition.html.

For a discussion of the change, arguing that the ITU now has erred twice on the same subject, see http://www.abiresearch.com/research_blog/1520.

Social Adoption by Enterprises

What social technologies and tools do enterprises view as most important, and what kind of investments do organizations plan to make in Web 2.0 in the future? This McKinsey presentation tries to answer the questions.  The survey examines business use of 12 technologies and tools: blogs, mash-ups (a Web application that combines multiple sources of data into a single tool), microblogging, peer to peer, podcasts, prediction markets, rating, RSS (Really Simple Syndication), social networking, tagging, video sharing, and wikis.


http://www.mckinseyquarterly.com/Business_and_Web_20_An_interactive_feature_2431?pagenum=1#interactive

Is 2011 the Year for Social Commerce?

Facebook has 600 million users worldwide, and about 140 million of those users in the United States. Facebook reports that about 50 percent of those users check the site every day.

Time on Facebook represents about 25 percent of time spent on line (11 hours a week for the average user), now cannibalizing time spent on line doing things like reading news and other online media, instant messaging and emailing, thanks in part, to entrepreneurs who have developed applications that keep users on the site more of the time.

Brands already use Facebook for branding and customer interactions. Can mobile and online commerce be too far away?

Is 2011 the Year for Social Commerce?

One Wonders Whether Many Charging Methods Will be "Legal," after Dec. 21

Packet priorities obviously raises hackles in some quarters, but there also is no question service providers are anxious to add value to their broadband access services, or services provided by their partners. One wonders how many of the possible techniques will be permissible after Dec. 21, 2010, at least temporarily, while the legal challenges are sorted out.

This webinar highlights the benefits of deep packet inspection, policy management and new differentiated charging solutions, especially in the wireless domain. In principle, some of the techniques are borrowed from the ways service providers have created incentives for users to shift some voice usage to non-peak hours.

Managing the unmanageable: monetizing and controlling OTT applications - FierceWireless

Orange leads NFC charge in Europe - Rethink Wireless

Orange, the key France Telecom brand, has announced that it will roll out near field communications-enabled handsets across its whole European Union footprint starting in the second half of 2011.

These phones can be used to pay for goods by wanding the devices near special retail terminals. Orange will kick off its initiative in its home base of France, and among its postpaid user base. It expects to have 500,000 French customers equipped with NFC by the end of 2011.

Orange told handset vendors at a meeting that it aimed to see NFC included in over half the new smartphone models it buys next year. Orange is the first European operator to make such a clear commitment to the development of mobile contactless services.

Orange leads NFC charge in Europe - Rethink Wireless

One Reason Online Privacy Rules Are Coming

An examination of 101 popular smartphone apps by the Wall Street Journal show that that 56 transmitted the phone's unique device ID to other companies without users' awareness or consent. Not everybody would think that especially intrusive.

Some 47 apps transmitted the phone's location in some way. Five sent age, gender and other personal details to outsiders.

Apple says that iPhone apps can’t transmit user data without approval, but the WSJ’s findings reveal many apps that don’t follow that rule. Google leaves it up to app makers to make users aware of the data their apps reveal. Android also gives users specific notes about the phone resources (including hardware and data) apps will use before they’re downloaded.

Unfortunately, there’s little users can do to protect themselves from data-sharing apps, aside from avoiding many popular apps entirely, the report suggests. Many mobile ad companies let users opt-out of their website tracking, but those opt-out lists don’t apply to apps, according to the WSJ. The ad company Jumptap says iPhone users can opt out of app data sharing by emailing their phone’s user ID to them. Apple says its iAd opt-out also applies to apps (but doesn’t prevent iTunes data from being collected).

The findings reveal the intrusive effort by online-tracking companies to gather personal data about people in order to flesh out detailed dossiers on them, and suggest why there will be growing political pressure to toughen online privacy, and mobile privacy by extension, if not formal and specific rules relating to mobile data.

read more here if you aren't a Wall Street Journal subscriber.

IPhone and Android Apps Breach Privacy - WSJ.com (subscription required)

Anonymous Anything Is a Problem

Washington Post readers constantly complain about the excessive use of anonymous sources in the newspaper. But the problem is even worse online, according to the newspaper's ombudsman.

"Staff-written news blogs are replete with violations of The Post's long-established and laudable standards governing confidential sources," Andrew Alexander, Washignton Post ombudsman says. "These unnamed sources often are cited without providing readers with even a hint of their reliability or why they were granted anonymity."

In the first two weeks of December alone, Post news blogs included more than 20 unnamed sources without any explanation of their quality or why they warranted confidentiality, says Alexnder. Many blogs referred only to 'sources' or 'those close to' a subject or situation.

In some ways, use of such sources is an occupational hazard. Some sources will say things only if they are not quoted or identified, and the technique remains an important way some news gets out. But such leaks typically always have an agenda.

Some might say the problem is even worse for anonymous comments and posts online, which tend to encourage rude behavior. Some will argue anonymous comments, posts or statements, though sometimes useful, are overused.

Andrew Alexander - Post's problems with anonymous-source rules get worse online

Visa Talks About Mobile Payments

Verizon Trademarks Reveal LTE "Video Messaging" Handsets?

Verizon apparently has applied for trademarks relating to"'video messaging" devices. That tends to suggest some new handsets will be brought to market for the LTE network that have video messaging as a lead application.

Though all smartphones are, by definition, multi-purpose devices, it has been clear for some time that devices can be differentiated by highlighting and optimizing a particular lead app. BlackBerry arguable was an "email" optimized device. Other devices have been optimized for Facebook, social network updates or Skype use.

It now appears video messaging could be another of the lead apps.

Verizon Trademarks Reveal LTE "Video Messaging" Handsets?:

It's a Good Thing App Developers Aren't at the Mercy of the ITU

If you want an excellent example of why it is a very good thing that software development now is viewed as occurring in "layers," where underlying communications protocols are abstracted, consider the situation facing mobile software developers.

"If you’re realistic you’ll admit that mobile “strategy” is a 12 month window into the future at best, where very few decisions are robust," argues Nick Jones, Gartner distinguished analyst.

Devices, tools, vendors, network contracts, business requirements, customer attitudes and competitors will change rapidly, probably invalidating some aspect of a strategy every couple of months.

For that reason, it is a very good thing that among the complications an application developer does not have to worry about is uncertainty about communications protocols in layers one through four of the "stack."

If there were tight linkage between layer-seven apps and layers one to four, developers would be in a pickle, now that the International Telecommunications Union has first created WiMAX and Long Term Evolution standards no real-world network uses, and further has complicated matters by saying that existing advanced 3G and pre-standard 4G networks are, in fact, 4G networks.

See this  and this this  for more details.

It's one thing to create standards that allow global networks to communicate. It's a good thing to have an evolution plan for networks that support greater functionality. It isn't so clear how useful it is to create a well-intentioned standard that first defines all existing networks of that type out of existence, before backtracking and declaring all of them to be "standards-compliant," and then to stretch the definition to include some advanced 3G networks as well.

App developers would face much greater uncertainty were they forced to create tools and products that had to track those sorts of changes.

Mobile developers can learn from the oil industry

A Look at Teen Texting Behavior

What is Netflix's Long-Term Position in Online Video Business?

Netflix has confounded naysayers for years. The basic argument has been that the DVD rental business would be replaced by online video, and that Netflix would not make the adjustment.

So far, Netflix has proved doubters spectacularly wrong. By all accounts, it is making a steady transition to online delivery, and its customers seem to be adapting as well. So perhaps a new consensus has developed: that Netflix is among the firms that will survive the transition from physical media delivery to online delivery.

If you have been in most Best Buy outlets recently, you get a sense that Best Buy is serous about ultimately phasing out sales of physical media content, to the extent that floor space is an indication of what a retailer expects to sell.

Perhaps oddly, then, one might ask the question of whether online delivery is an unalloyed good thing for Netflix. Some might argue it will pose new, and different questions, for Netflix.

Up to this point, most seem to agree that switching to online delivery saves Netflix money because the company avoids paying postal fees for delivery. That's true.

But content owners are becoming more aggressive about protecting their online rights, and it is a reasonable prediction that Netflix will have to pay much more, in the future, for access to content it can stream. That obviously could pose issues for the revenue model, given the low costs Netflix now imposes on users of its library.

If its content acquisition costs rise, Netflix will face margin pressure, with the obvious choice of raising prices or watching its margins tumble. Higher prices might limit growth, but higher prices seem almost inevitable, at some point.

In the chart, for example, note the blue bar, representing streaming content costs, compared to the white bar, which represents  DVD content acquisition costs.

At the same time, a switch to streaming, rather than DVD rentals, will cost Netflix more, over time. Now, Netflix can buy a DVD, pay once, and rent the disc until it is worn out. When streaming, the typical deal is that the content owner gets 60 percent of the gross rental fee. So there is more financial leverage when sourcing content by buying DVDs.

Other distributors pay similar amounts, of course, but generally price each viewing at higher rates, ranging from $1.99 to $4.99 per movie (or more) on Apple's iTunes, Amazon On Demand, Vudu, and cable, satellite or telco video on demand services, for example. TV show rentals might cost the end user $1 per episode.

Netflix now offers a $7.99 per month unlimited streaming service, and you can guess that the economics can invert, given reasonable volume. You might wonder how Netflix can even offer the unlimited $7.99 streaming plan, and the answer is that it has agreements that were very generous. But it takes no insight to argue that future agreements will not offer such advantages.

The Netflix deal for Starz contnet, signed in October 2008, gave Netflix access to approximately 2,500 Disney and Sony movies for less than $0.15 per subscriber per month for its content, compared to the $2 to $4 per subscriber per month that TV operators typically pay Starz.

Netflix signed a deal to stream content from Epix, which is owned by three studios, Paramount Pictures, Lions Gate and Metro-Goldwyn-Mayer. The exact terms of the deal haven't been disclosed, but numerous reports say it's for up to $1 billion over five years.

Importantly, Netflix won't be able to stream Epix's movies until 90 days after they have reached Epix's distribution window, which is typically 6-12 months after a movie is first available on premium movie channels, so this deal won't address Netflix's problem that it offers no current releases.

On the operating cost side, one might argue that more streaming means less mailing of DVDs, and hence less cost. That's correct. But one might quickly conclude that Netflix will have to pay more for streaming rights than it can possibly save in postage and fulfillment costs.

Perhaps the impact already is being felt. In the third quarter of 2010, Netflix's operating margin was 12.6 percent and net margin was 6.9 percent, down from 14.9 percent and 8.4 percent, respectively, in the second quarter. Some would say that is the result of higher content payments not balanced by an equal reduction in distribution cost.

There are other issues as well. At some point, if consumers start paying for bandwidth consumed that accounts for higher video consumption, the implied cost of streaming delivery will grow, increasing the "price" part of the "value versus price" equation. That could make other alternatives, especially a multichannel video subscription plus digital video recorder, a much more attractive "value."

That will especially be true for wireless providers, as people are getting used to watching video on their mobiles, and viewing on an iPad or wireless-connected PC also can be a satisfactory experience. Sanford C. Bernstein analyst Craig Moffett, for example, expects the revenue per megabit for wireless providers to fall from 43 cents today to just 2 cents in 2014.

Down the road are other potential risks to the business model as well. In September, the U.S. Court of Appeals for the Ninth Circuit issued adecision that calls into question the First Sale Doctrine. Though it was a case related to re-selling software, the court observed that the policy implications might affect movies as well.

To get early access to fresh content, Netflix will have to pay more. If it chooses not to do so, the value of its library might weaken, from a customer's perspective. If it pays more to acquire more, and fresher content, its costs go up. So Netflix might have to raise prices. That could change its place in the market.

Netflix could accept lower margins, up to a point. Amazon certainly seems willing to do so. But assuming Netflix can manage those challenges, it does seem that a strategic choice has to be made. Netflix can offer a wider array of current content at higher prices, or a more-limited range of library or catalog content at lower prices. Some would argue it will do both, offering "enough" content at "good enough" prices to establish its position within the overall online video market.

Even in the more-established "premium" channel space, there is content differentiation between HBO, Starz and Showtime because none of the networks can afford to buy rights to all "new release" movie content, for example.

The trick will be to build on the library while adding just enough fresh and recent content to remain competitive. It's a tall order, but Netflix has confounded its critics in the past.

Whitney Tilson: Why We’re Short Netflix - Seeking Alpha:

TV Viewing Fragmenting Across Devices

Fully 87 percent of users age 13 or older say they have played video games of some kind for Xbox 360 and Wii, with 80 percent saying they have done so for PlayStation 3. Much of this is the result of traditional offline play, but nearly half of Xbox 360 and PlayStation 3 users say they play games online.

read more here

But that might not be the most-important development in the gaming console space. The second-most popular use of consoles is for watching DVDs/Blu-Rays, most noticeably for PlayStation 3 but also for Xbox 360 (DVD playback is not a standard feature on the Wii.

PlayStation 3 users indicate that DVD/Blu-Ray viewing occupies 27 percent of their time with the console, about the same amount of time as users spend with offline gaming. DVD viewing occupies 11 percent of time on an Xbox 360

Video-on-demand and streaming services such as Netflix, MLB Network and ESPN3, account for 20 percent of Wii users’ time, 10 percent of Xbox 360 users’ time and 9 percent of PlayStation 3 users’ time.

In the second quarter of 2010, the average person watched more than 143 hours of television per month. What is perhaps new is the growing amount of time spent using gaming consoles for some of that viewing.

read more here