Going over the top

There’s a lot of furious activity going on in the telco services space right now. Feeling the heat from our Over The Top friends, carriers are feverishly investing in similar services and applications to maintain their place as a gatekeeper of the communications experience.

October 26, 2012

9 Min Read
Going over the top

By The Informer

There’s a lot of furious activity going on in the telco services space right now. Feeling the heat from our Over The Top friends, carriers are feverishly investing in similar services and applications to maintain their place as a gatekeeper of the communications experience. Something like Sylvester Stallone switching his cap backwards as he squares up to another arm wrestling rival.

But perhaps they are being more anxious than Lance Armstrong at a drugs test. After all, insight released by Informa Telecoms & Media this week suggests that revenues from those particular streams will be small in the short term and the medium term, too. With such services accounting for just 0.7 per cent of global carrier revenues, about $7.7bn, in 2012.

Telefónica Digital is a prime example. The one year old company is pretty exciting, responsible as it is, for innovating on behalf of one of the planet’s biggest carriers. The Telefónica Digital services unit will contribute eight to ten per cent group revenue by 2015, up from four per cent in 2011, and is admirably trying to create a shared network API platform, offering operator partners and developers an opportunity to build and market apps to their collective customer bases.

It’s made some headway Norwegian operator Telenor has already jumped on board. And earlier this year, US software developer Apigee, which specialises in the development and management of network APIs, was tapped by Telefónica to lay the technical foundations for the carrier’s mobile initiatives. It has busily been going about making acquisitions to further this aim.

The most recent acquisition, this week in fact, was US-based video communications platform TokBox, which started life as a video conferencing company, but changed its direction to create a free API, OpenTok, enabling developers to add group video chat features to apps and websites both on and off mobile. Telefónica plans to incorporate TokBox’s video capabilities to create a unified video, voice and text API service with global reach.

The Informer finds the applications and potential of these cross-platform hooks fascinating, and another company that has been smart in its packaging of APIs, and very successful in integrating social gaming and driving brand awareness through applications is Facebook.

It was Italian carrier Wind, that rather cleverly this week introduced a Facebook application that enables its prepay customers to top up their credit directly through the social networking platform. Users of the application, including non-Wind customers, can also send a top-up gift to a Wind prepaid number. Alternatively, users who find themselves running low on credit can send a begging request to friends to top-up their account.

It’s more the anti-socialisation of casual lending though isn’t it? No longer will you have to look your mate dead in the eye as you sit in the pub one week before payday and ask them to lend you twenty quid. Now you can just poke them.

The Informer learned another interesting tidbit of information about the behaviour of consumers in developing markets when it comes to money. Research from Visa in six emerging markets, found that consumers do not save and do not have an appetite for saving money. But when you go into detail, it seems that consumers do actually have sophisticated behaviour when it comes to savings, they just don’t call them ‘savings’.

Conversely, consumers in emerging markets perceive the idea of saving money as being for the wealthy, rather than for the unbanked. However, they do still store money for a purpose, such as for their children’s education, healthcare or simply for a rainy day, but rather than a bank, the money is often stuffed in the mattress or a cookie jar. Naturally, this means there is scope here for mobile banking services to offer products based on security, convenience and assurance rather than on the same interest levels consumers in developed markets might expect.

To come back to Facebook, you need to be developing apps that offer an improved service from operators by allowing them to engage with customers where they spend most of their time online. But while there’s a good argument to say that with close to one billion users, that place is Facebook, the social network really isn’t feeling the love right now.

Zuckerberg’s firm posted a $59m net loss for 3Q12, which it blamed on high taxation, despite revenue increasing by 32 per cent year on year.

Breaking down the figures reveals some interesting elements however. Around 86 per cent of the firm’s revenue came from advertising during the quarter, and 14 per cent of that revenue came from mobile. Yet out of a total of one billion users, the number of active mobile users stands at 604 million, so clearly, mobile is not nearly as engaging as an advertising platform.

Perhaps the Facebook money machine is running down. Social gaming firm Zynga, which has created some of Facebook’s most popular apps, like Farmville, announced that it was cutting five per cent of its 3,200-strong workforce.

Zynga relies heavily on Facebook for its success and even has a profit-sharing arrangement set to end in 2015 where Facebook receives 30 per cent of everything Zynga makes through the social media site. Last year the company filed for an IPO and said its future was in mobile, but at the same time concerns were raised that while the company relies heavily on sales of virtual goods to users, such users constitute a tiny proportion of the overall numbers who play hugely successful games.

Moving on, there could be layoffs on the cards for optical fibre specialist and Gorilla Glass manufacturer Corning, which blamed “economic headwinds” for net income dropping 36 per cent year on year in 3Q12. Still, they do have a CFO called James Flaws.

When the Informer thinks of Gorilla Glass, the first thing that pops into his head is the Cadbury’s gorilla, shredding the skins furiously to Phil Collins’s ‘In the air tonight’, and anyone who claims they don’t do the same thing on the air drums whenever they hear that song is lying.

The second thing the Informer thinks of in relation to Gorilla Glass is Apple, one of Corning’s biggest customers. But Wall Street was down on the Californian style shop this week as financials fell short, with profits in the last three months only climbing to $8.2bn from $6.6bn last year, and revenues of $36bn, up 27 per cent.

Shocking isn’t it? But ever the victim of its own success the company struggled to shift more than 14 million iPads in the quarter because people were holding out to see what would be unveiled on November 23.

Still, Apple can probably feel smug at getting one over on Google, by acquiring Particle, a HTML5 design and creative consultancy firm that was previously a key supplier to Google and Motorola.

“Google leans on Particle as a leader in HTML5 and open web standards, involving us in a variety of Google Chrome initiatives and experiments, and often inviting us to speak at Google sponsored events,” the firm had written on its site, before it was replaced by a more generic holding page this week.

Still Gartner believes that Google’s got plenty going for it and that within four years the Android operating system will be used on more computing devices than Microsoft’s Windows.

At the end of 2016, there will be 2.3 billion computers, tablets and smartphones using Android, just nipping past the 2.28 billion Windows devices, Gartner said. This compares to around 1.5 billion Windows devices in 2012, and 608 million using Android.

But Microsoft is probably contributing to its own demise if the reviews of Windows 8 are anything to go by. Many are saying that the Metro tile touch UI, which has spawned many adoring fans, does not mesh well with the updated version of Windows 7 that sits underneath.

It sounds at worst horribly confused as to what it is, and at best a Jack-of-all-trades-master-of-none. But not everyone’s a detractor. In fact, Malik Saadi, principal analyst at Informa believes it could have a “halo effect” on Microsoft’s efforts in the mobile space.

The system is designed to bring a touchscreen experience to PCs and laptops, which will also continue to support keyboard and mouse input methods.

“With the addition of touchscreen to the Windows 8 OS, users will become familiarised with how to interact with the platform, and it could have a halo effect as users find it easier and more intuitive to interact with Windows Phone devices.”

He added that touchscreen and, increasingly, gesture and voice recognition, have helped make smartphones and tablets very popular. By introducing those interaction methods to the desktop environment, developers will be able to target a wider audience of users using the application development framework and the same set of APIs.

“This will enable Microsoft to grab new opportunities in markets that it was not able to tap into before, including tablets, smartphones, set-top boxes and other consumer electronics devices,” Saadi said.

On the subject of new opportunities and markets, several people have pointed out this week the week that UK carrier EE announced its LTE pricing that there is no such thing as an LTE-specific application. What you get with LTE is the same stuff you had on 3G but faster. Ok, maybe there’s VoLTE, but that’s still years away.

The UK service will go live on October 30 and it’s pretty pricey. The cheapest 4G tariff including the full price of a handset is £41 per month with a 1GB data limit on a 24-month contract.

An LTE capable device with a 500MB data limit will set customers back £36 per month, 3GB will cost £46 per month, 5GB is £51 and 8GB will be priced at £56 per month. Huawei’s Ascend P1 4G LTE handset is the only device available for free on a 4G contract, on 1GB price plans and higher. An iPhone 5 64GB device will cost as much as £379.99 on a 500MB contract. SIM-only deals will begin at £21 per month for 500MB, and a 5GB plan will cost £36 per month. Each tariff includes unlimited voice and SMS.

According to Steven Hartley, principal strategy analyst at Ovum: “This suggests that aggressive targeting of its rivals’ most valuable customers awaits. When considered against other unlimited minute and text plans on high-end devices, like the iPhone 5 or Samsung Galaxy SIII, plan, prices are similar. However, EE customers would also have to pay £49 for a 16GB device, whereas it would be free on other networks, such as O2. Nonetheless, compared to the high premiums charged for LTE at launch across Europe, this is refreshing, even if it will not appeal to everyone’s budget.”

On the flip side, EE’s rivals are busily investing in their HSPA networks in the short term, to improve the performance of more affordable connections. But that didn’t stop Vodafone jumping on the bandwagon on Friday, coming out with a “4G phone promise,” which is designed to give customers the confidence that they will be among the first to benefit from “ultra-fast 4G” when it launches next year.

Provided a Pay monthly customer has been with Voda for at least three months, the operator will take back their old phone, knock 70 per cent off their remaining contract charges and give them a new 4G phone and contract.

Until next time, take care

The Informer

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