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Showing posts from October, 2014

Starbucks Claims 90% Share of Mobile Payments Market

With the caveat that the mobile payments market is very early in its development, Starbucks now is touting its early success.

“In 2013, payment for purchases by use of all mobile devices in the U.S. totaled $1.3 billion,” says Howard Schultz, Starbucks CEO. “Over 90 percent of those purchases taking place in a Starbucks store.”

“That means we had 90 percent share of (U.S.) mobile payments in 2013,” said Schultz, who noted that “close to seven million transactions” now happen each week, 16 percent of all transactions conducted in U.S. Starbucks stores, on a mobile device.
“No company and no retail store, domestically or internationally, even comes close,” he said.  
Of course, observers might rightly notice that the mobile payments business is nascent, with most of the growth yet to come.
But Schultz suggested “Starbucks Coffee Company has cracked the code at tying mobile payment to loyalty.” So the issue is whether Starbucks might now see a way forward to a bigger, more generic role in …

App Providers Should Beware Unintended Consequences of Title II

As much as arcane and esoteric as communications regulatory debates often can be, there is a good reason so much attention gets paid to it. Such rules create the framework that determines who can be in the business, how they can be in the business and to some extent how much money they can make in the business.
There are a few interesting angles to the possible new network neutrality framework the Federal Communications Commission is expected to propose, and a person might be forgiven a bit of uncertainty about whether the proposal will be deemed lawful, whether it is workable and whether the actual outcomes will be as its supporters hope.  
The plan now under consideration would separate broadband into two distinct services, with different rules.
The Internet access business, where ISPs sell connections to the Internet, would be less regulated, using the “information services” framework.
But the “back end” relationships between access ISPs and content providers would be regulated as a c…

Are Retail High Speed Access Prices Too High?

What is more important, nominal prices or prices expressed in terms of local purchasing power? That, in a nutshell, is why international comparisons of any goods or services have to be adjusted for purchasing power parity.
If that is not done, one can conclude U.S. Internet prices are too high. Adjusting for local prices, as when comparing the cost of an Internet access subscription to national income statistics, yields a different answer, namely that prices are quite low.
One might argue that consumer purchasing of products that are too expensive would be reflected in actual buying behavior.
In 2012, European Community adoption of fixed network access was about 27 percent of households, where U.S. adoption was in excess of 72 percent. So in which market are prices effectively too high, or value too low?
In the MENA region, fixed broadband costs about 3.6 percent of the average monthly income per capita, while mobile broadband costs around 7.7 percent of monthly income per capita.
The po…

What if There is No Way to Survive an OTT Attack?

Control of the value chain is a new concept for communications service providers. In the old world, where apps (voice) were vertically integrated with access, there was no question but that telcos controlled the value chain.
That is the fundamental difference between the past and the present. By definition, Internet Protocol separates apps from access. New business models at different layers are inherent in the protocol.
“Because connectivity costs are paid by the user, OTT players have great flexibility in their business models,” says Vision Mobile. “OTTs can monetize ads, downloads, analytics or acquisitions, and are thus able to price their services either free (Viber), close to free (Whatsapp), or even less-than-free (in the case of Google sharing app revenues with operators).”
The vertically integrated, “all-in-one” telco business model of bundling connectivity and service costs makes it impossible for telcos to compete with free or less-than-free OTT alternatives, Vision Mobile arg…

Uncertainty Threatens Investment in Gigabit Networks?

The reason service providers abhor “uncertainty” is the same reason any entrepreneur, investor or saver objects to uncertainty: making long-term decisions is a risky proposition when there is high uncertainty.
That is as true for Brazil as for the United States, the European Community or Mexico.
Many economists, in fact, would argue that much poverty around the world is caused because people are not assured that the fruits of their labor are safe from sudden confiscation.
It is not rational for a farmer to plant a crop if the farmer is not fairly certain he or she will be able to reap the harvest, in other words. The rule of law is a prerequisite for economic development, though not sufficient.
The problem at the Federal Communications Commission, argue Dr. George S. Ford, chief economist and Lawrence J. Spiwak, president, of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, is that, despite public assurances that “regulatory certainty” is an FCC objective, the a…

Starz to Create OTT Service?

Starz is the latest programming network to say it is looking at launching its own over the top service.

But Starz also is careful to say it will work with its linear video distributors, primarily focusing efforts on broadband-only homes and homes that do not buy any premium channels.
Separately, Verizon now is offering a free year of Netflix for new customers buying a $89.99 triple play service.
That offer includes symmetrical 75 Mbps high speed access service, a $150 Visa gift card and a full year of Netflix.  
BTIG analyst Walt Piecyk thinks the marketing message is noteworthy. Though a major supplier of linear video subscriptions, Verizon actually does not mention that fact as part of the promotion.
Instead, the new offer banks heavily on high speed access and over the top Netflix. What that means is that Verizon is dead serious in viewing linear video as a product with less relevance for future revenue than over the top video.
The recent decisions by HBO and CBS to launch their own br…

How Do You Replace $400 Billion in Revenue in 10 Years?

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We can disagree about how much new revenue some communications service providers will have to create over a decade’s time, to replace lost legacy revenues.
If global telecom revenue is about $1.6 trillion to $2 trillion, and assuming about half the revenue is earned in mature markets, then the revenue subject to disruption ranges from $800 billion to $1 trillion.
Half of that represents $400 billion to $500 billion. That, hypothetically, is the potential amount of global revenue that might be lost, and would have to be replaced.
What is more certain is that a huge amount of revenue from new services will be necessary, even if consumer purchases of Internet access continue to grow.
One fundamental rule of thumb is that, in mature markets,  service providers must plan for a loss of about half of current revenue every decade or so. That might seem shocking, but simply reflects historical developments.
Nor is that rate of change unusual. In the digital consumer electronics business, it mi…

What Drives "Cord Cutting" and "Cord Avoidance?" Will Lower Prices Make a Difference?

Some 14 percent of U.S. households do not buy a linear video subscription, according to a new study by The Diffusion Group, up from about nine percent in 2011.
That has many linear video service providers trying to create lower-cost packages, on the assumption that price is the issue (actually price for perceived value). But lower prices might not attract buyers who do not value the product.
At this point, most observers would expect that "declining subscriber" trend to continue, driven by customers who decide they can live without the product, and those who so far never have bought the product.
About 6.5 percent of U.S. households have cut the cord, meaning they used to buy a linear video service but no longer do so. On the other hand, those statistics do not include respondents who never have purchased a linear video service.
The differences between the two groups--those who used to buy, and those who never have bought--are so pronounced that any company targeting these con…