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Why Internet of Things Matters

With the Internet of Things at the peak of its hype cycle, we will all be hearing predictions of non-linear growth. Many forecasts, for example, call for deployment of 20 billion or 30 billion IoT units by 2020.

The stakes for telecommunications service providers are huge. If one assumes that most tier one service providers will have to replace about half their current revenue over about a decade’s time, and if one assumes the broad IoT category represents the best candidate for driving as much as half of that new revenue, it matters greatly whether service providers actually can do so.
In other words, practitioners hope that the broad IoT category can drive new revenue growth, within a decade, representing about 25 percent of all current revenues. That is a big deal, especially if the industry proves unable to grow all other new revenue sources at a level representing about 25 percent of current proceeds.
The uncertainty is palpable, at the moment.
A recent survey of executives watching…

Telecom Ecosystem Tension Grows as Business Model is Stressed

A lawsuit filed by five banks for losses related to credit card hacking illustrates in a new way the business tensions within an ecosystem can erupt. In a lawsuit filed by five banks, the plaintiffs are seeking to recover their costs of coping with a massive data breach at Target, alleging that Target was negligent.

The cost of replacing credit and debit cards from a 2013 data breach has been estimated at $400 million.
In the telecommunications business, similar tensions exist between content owners and networks and video subscription distributors over the price, terms and conditions of content rights.
Networks want higher per-subscriber fees and carriage of many new channels. Distributors want lower costs and fewer requirements to carry many new channels with low viewership.
Device suppliers depend on service providers for distribution, but mobile service providers chafe at the notion the perceived value of mobile subscriptions is driven by the devices brands.
Operating system suppli…

ISPs, Social Media, Subscription TV Score Below Average for Consumer Satisfaction

It might be worth noting that consumer satisfaction is rarely directly related to customer spending, customer retention or churn, even if one assumes the relationship would be quite direct.

Sometimes people keep buying services, and show relatively low churn, even for products they claim to be somewhat unhappy with.

Of the five worst-performing industries routinely tracked by the American Customer Satisfaction Index are Internet social media, health insurance, airlines, subscription TV services and Internet access services.  
Few industries have offered less satisfaction to consumers over time than commercial airlines or several of the telecommunications services, but health insurers have fallen substantially since 2005.
While subscription TV and Internet service providers earn the very lowest ratings among 43 industries in the Index, health insurers share a berth close to both airlines and social media among ACSI’s bottom five industries for customer satisfaction.
Ranked on a 100 poin…

Airline Prices Really are Not "High," Neither are U.S. Telecom Prices

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Some might argue telecommunications and airline service are analogous sorts of industries. Both are extremely capital intensive, both originally were operated as monopolies or oligopolies, the assets often owned directly by the government. Both have been privatized and become competitive industries.
Both industries have been profoundly affected by new technology and have become suppliers of products widely used by consumers, where once they were largely used by wealthy users.
Where both industries might once have competed based on quality, now both industries must compete on price. Both industries routinely rank at or near the bottom of consumer satisfaction surveys.
Both often are criticized by consumer advocates for offering low quality and high prices. Both arguably are tough industries, however. Consumers want (consistent with safety and consistency) low prices. But low prices are an issue for suppliers, in terms of sustainability.
Over the last 60 years of commercial aviation, airlin…

Bhari Airtel Tries Higher Prices for OTT VoIP Bandwidth

Bharti Airtel prepaid customers, under a new pricing regime, will not be be able to use discounted mobile Internet access rates when using an over-the-top voice over Internet protocol app such as Skype, Viber and similar services.
The move is reminiscent of pricing policies some mobile service providers adopted when VoIP services first emerged as a threat to voice revenues.
To be sure, there is a nuance. The new policies mean usage of mobile Internet access for VoIP apps does not qualify for prepaid data discounted rates, effectively raising the cost of using an OTT VoIP app.
Bharti Airtel can continue to claim that formal prices for use of VoIP bandwidth have not been raised; VoIP usage simply uses a “standard” rate, not a discounted rate that applies to other Internet apps and usage.
Effectively, it is a price increase. Starting in January 2015, Airtel customers using a prepaid data pack will be charged a higher rate for VoIP calls.
Bharti Airtel says use of VoIP apps will be charged a…

U.S. Network Neutrality Rules Will Set Back Service Provider Hopes for 2-Sided Business Models

Sometime early in 2015, the U.S. Federal Communications Commission is going to issue its long-awaited network neutrality rules. Just as certainly, no matter what the FCC does, there will be lawsuits challenging the rules.
All of that, plus a possibility the Congress will eventually step in and provide direction, mean we still will have no resolution of network neutrality rules in 2015.
In the end, some compromise solution is likely, with consumer access remaining a “best effort only” service, and business users free to buy or create services featuring prioritized access.
If, as likely, consumer services remain based on  “best effort” access, at least one logical way for service providers to create a “two-sided” business model in the consumer Internet access business will fail.
Service providers continue to hope that other methods of selling services for third party business partners might yet emerge.
In fact, some hope 5G mobile networks will embed precisely such features into the fab…

5G is Likely to Fulfill Promises if the Business Architecture Succeeds

Many fifth generation network proponents are fond of saying 5G is not about faster speeds or network performance, but “heterogenous” network access or lead applications. In other words, the expectation is that 5G will represent not just a “faster network” but a network characterized by its application focus.
That said, proponents now say a minimum of 50 Mbps in the mobile environment, and up to 1 Gbps in fixed indoor environments, is a baseline. So “faster networks” might not define 5G, but speeds will grow.
Though 5G networks will feature “much greater throughput, much lower latency, ultra-high reliability, much higher connectivity density, and higher mobility range,” 5G networks also will feature the ability “to control a highly heterogeneous environment, and capability to, among others, ensure security and trust, identity, and privacy,” the Next Generation Mobile Network Alliances argues.
Many suggest that Internet of Things or machine-to-machine applications, for example, will be ke…

IoT Might Be Very Big, But Few Can Say What the Business Models Will Be

With the “Internet of Things” at the peak of its hype cycle, we will all be hearing predictions of non-linear growth. Many forecasts, for example, call for deployment of 20 billion or 30 billion IoT units by 2020.
Of course, a recent survey of executives watching the market admit they lack a clear perspective on the concrete business opportunities. That isn’t as flaky or fuzzy as it might seem. Few would have been able to predict the many revenue models and businesses created by the Internet, either.
On the other hand, any predictions of IoT installed base are close to pure conjecture, if the actual business models cannot yet be fully defined.
A few years ago, some analysts had predicted that, by 2020, the market for connected devices would be between 50 billion and 100 billion units.
None of that is at all unusual. If IoT does wind up becoming a major technology with wide application, the impact will be as profound as observers predict. But big new markets typically grow far more slow…

Global Mobile Revenue Growth Slows to 0.5%, Search for Industry Revenue Growth Intensifies

Though mobile services have been the clear growth driver for the global telecommunications industry over the past decade or two, and though mobile data has taken the growth leadership from voice and text messaging, mobile revenue growth rates are slowing, globally.
Global mobile service revenue in the first half of 2014 grew  just 0.5 percent, compared to the same quarter of 2013, to $385.5 billion, according to Infonetics Research.
At the same time, voice usage slightly slowed, caused by an increase in use of over-the-top communications alternatives.
Also, mobile Internet access overtook SMS as the largest revenue generator of mobile data, Infonetics Research reports. Mobile Internet access revenue rose 26 percent in the first half of 2014, compared to the first half of 2013, and mobile Internet access now drives mobile data services revenue growth.
Despite the growth of mobile data revenues, average revenue per user continues to fall, but at a much slower pace in every region, includi…

Does Apple Pay Have to Catch PayPal or Starbucks?

Apple Pay in November 2014  was responsible for one percent of digital payment transaction volume (measured by dollar amount), according to ITG Investment Research.

Google Wallet, which launched in 2011, accounted for four percent of digital payment transaction volume in November 2014.
Apple Pay could pose a major threat to market leader PayPal's current dominance of the mobile payment space, according to Steve Weinstein, ITG senior Internet analyst. PayPal was used by close to half of online consumers in 2012, so the trick is to leverage that position in the proximity payments business (retail store checkout).
In September 2014, excluding Starbucks, PayPal had about 60 percent share of mobile wallet share, followed by Google Wallet at 43 percent.  
In the near term, it is Starbucks that Apple Pay might have to displace, even though Starbucks presently is a “captive” system, while Apple Pay aims to be a general purpose payment system.
“In 2013, payment for purchases by use of all mo…