Early adopter, entrepreneur, leader interested in software, the Internet, mobile telephony and computing, and VoIP. Founder or senior management with The Personal Bee, Orb Networks, CallTrex, Borland (BORL), The Dr. Spock Company, Neta4, WhoWhere?, CMP Media, and IT Solutions.

Today's Buzz:

Thursday, May 27, 2004

How high can ARPU go?

ARPU or Average Revenue Per User is the way that mobile operators judge how well they are doing in mining expansion opportunities within their current customer base. This is especially important in western markets where mobile phone use is virtually ubiquitous so no new growth will come from expansion of the customer base. It looks as if the news is good for operators who have bet on next generation services, if you believe the results of a JD Power and Associates survey reported on the BBC. "It is quite amazing really that people are spending more on their mobile than on gas or electricity bills," Gunda Lapskim, a JD Power director, is quoted as having said. Much of this spending is on services beyond voice. But how much will people pay for communication services even if entertainment is included? How high can ARPU go?

According to the survey, the average monthly bill rose by 14% since 2003 -- an average of 534 British pounds per year. If the annual increase continued at 14% for the next 10 years, ARPU would grow to almost 2000 pounds per year. Even allowing for inflation, this still suggests that people would be willing to spend as much on their mobile bill as they would for a new desktop computer... every year.

Here is the full JD Power press release in which the rankings of UK operators are also disclosed -- Virgin is number one amongst pre-pay customers and Vodafone is number one amongst contract customers. "Image" competes closely with "Call Quality/Coverage" as the most important factor...

Tuesday, May 25, 2004

The issue is not about how cool the phone looks

Martin Geddes blogs Finland, Finland, Finland offering opposing views on whether Nokia can get its cool back (not to mention growth, profitability, etc). What I find interesting about this discussion is that here (and elsewhere - Techdirt and BusinessWeek) the debate is about industrial design -- do Nokia phones look and feel cool? But in my opinion this is not at all what the next evolution of the device is all about...

Nokia made a really smart move -- they jumped on the digital bandwagon early, when a lot of their competitors (and leader Motorola) stuck with analog. The question in my mind is whether or not Nokia will make the next jump from phone to computer.

The handset industry has approached the problem of increasing features in handsets from a consumer electronics perspective -- pack the electronics tighter, pre-wire the features, and focus the device on a particular demographic.

Two years ago I was at the Nokia Mobile Internet Conference and heard Jorma Ollila's keynote speech in which he said that in the future every phone would be unique. That is, you would have a phone that suited your needs, I would have one that suited mine, and 500 million other people would have their own idiosyncratic versions of the "perfect" phone.

The only path to this vision is by making the leap from thinking of the phone as a consumer device to thinking of it as a computing platform -- infinitely programmable to provide whatever feature set a given user wants -- even different feature sets at different times of the day (work vs evening).

Nokia's purchase of Symbian solidifies their intent to own this new phase, but will they understand enough about this alien world and will they understand it fast enough? Microsoft is moving quickly, and we could wake up one day with Windows ubiquitious in our pockets the way it already is on our desktops.

Wi-Fi -- just like Bathrooms and Napkins...

In the continuing saga of the Cometa Networks shutdown, eWeek reports that Cometa customers are scrambling to find alternatives. In the article, Peter Hoedemaker, vice president of retail at Tully's Coffee,is quoted as saying
"Everybody is still trying to figure out the economics of [Wi-Fi]."
Note to Peter -- the economics are in selling coffee.

Perhaps he should go check out this post at Wi-Fi Networking News, outlining Wayport's new pricing plan. Wayport is converting from the common Wi-Fi model of sharing variable revenue and cost with their location partners to a flat fixed fee, allowing the partner to decide how much (if anything) to charge.
In a clear swipe at T-Mobile’s arrangement with Starbucks, Borders, and Kinko’s, in which, according to many sources, the cell company bears the cost of the network and operations and shares revenue with its venues, Wayport’s CEO Dave Vucina said, that a retail partnership “shouldn’t be about how much they can get for free from the provider but should be more about their core business and driving enormous traffic for their core business.”

So Peter -- think about it this way -- you provide a bathroom in Tulley's and that costs you something every month, even though not all of your patrons use it. You provide napkins, even though not everyone takes one. Why not build Wi-Fi into the base cost of operating a Tully's outlet and offer patrons free access just as you do with bathrooms and napkins?

Monday, May 24, 2004

Will Telephony go to Zero (dollars)?

A reader of this blog anonymously posted a comment to one of my earlier posts, How Cheap Can It Get?, asking if the price to make a phone call might one day drop to zero. The answer is YES and that day is already here.

How can you make a free phone call? Download Skype, go to a coffeeshop with free Wi-Fi access, and dial anyone else who has a Skype phone.

While we are still a few years away from ubiquitous free calling (and free Internet access for that matter) this day is likely to come sooner than later

Jeff Jarvis has a report on an article by Eli Noam, a Columbia professor, in which he argues that:
the entire information sector - from music to newspapers to telecoms to internet to semiconductors and anything in-between - has become subject to a gigantic market failure in slow motion. A market failure exists when market prices cannot reach a self-sustaining equilibrium. The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes.

Eli seems to take this as a negative, while I tend to think in terms of Joseph Schumpeter's concept of Creative Destruction -- the deconstruction of these industries is enabling an entirely new generation of technologies an industries to evolve.

In the future we will pay for certain aspects of connectivity -- reliability, security, and performance. Like drinking water, in the western world basic access will be ubiquitous (it may just taste funny) and you will pay for the higher quality bottled stuff. Telephony will become just "...a voice application, completely indistinguishable from any other kind of application that can run on an IP network..." (Michael Powell, Chairman of the FCC)

Should I Stay or Should I Go?

The provocative title of a recent Crain's Chicago Business article is Should Moto sell its cell phone biz? Now may be best time to hit the exit though the article goes on to state what most analysts believe -- that Motorola needs an Asian partner to take over manufacturing while continuing to be a design center:
No Motorola business needs bold action as badly as its largest, the $11-billion cell phone manufacturing unit. Now a distant second in a business it once dominated, Motorola has operating profit margins less than half those of its biggest rivals. Cell phone manufacturing is migrating to low-cost Asian producers able to churn out cheap phones for the mass market. Cell phones themselves are morphing from a sophisticated technology into a household product subject to shifting consumer tastes and falling prices.
Decisive action on the cell phone business could take one of two forms: an outright sale of the business, or a deal with an Asian manufacturer to take over Motorola's handset production while Motorola continues to develop and license the technology and its brand name. A pair of big European cell phone makers have cut such deals in the past month.

But does this make sense? The interesting problem for all of the handset manufacturers is that virtually ALL of the growth in this market (60 million units) will be in China. According to China View (Xinhua online)Lucky Goldstar has already surpassed Motorola in the worldwide CDMA handset business and is also number one in the critical Chinese market. And they have there eyes set firmly on the GSM prize.

Motorola could hollow out their handset division, handing over manufacturing to China the way they have handed over software to Microsoft. But what is left? The Motorola brand name? Dell would have more success managing this kind of business. If Motorola truly can't figure out how to manufacture mobile phones cost effectively at an $11 billion annual run rate, maybe they should exit the business.

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