You are currently browsing the category archive for the 'internet' category.
When Android was first unveiled, pundits ridiculed those who had thought a ‘Google phone’ would be something more. Android, of course, turned out to be an operating system developed for other companies’ handsets. But next year it could also be running on one designed by Google itself. Reports are circulating that the internet king is to take the hardware plunge, developing and marketing a smartphone that will compete against others using its software.
It would be a radical departure from Google’s current modus operandi, but it would give it a few things it doesn’t already have. First and foremost, a better product. Android has so many partners to please that it’s struggling to form a satisfactory relationship with just one. That problem is not shared by companies like Apple, which develop both the hardware and software for their phones.
But the move would appear a little panicky. While new manufacturers queue up to launch Android-powered smartphones, Google would seem to be saying it doesn’t trust any of them to get the product right. Yet Google has no experience in handset design whatsoever. Nor had Apple – one might argue – and look where it is now with its hugely successful iPhone. But Apple had at least designed and built computers and other handheld gadgets for years previously.
That’s also a problem because Google has no brand credibility as a manufacturer. In fact, consumers might even be turned off buying a handset they know was designed by Google – in the same way they wouldn’t buy a car made by a gas company.
The big risk would be that partners like Motorola take umbrage at Google’s entry into their market and boycott Android. If Google’s own phone was a runaway hit, that might not matter. But few would bet on it beating the iPhone. And by alienating its partners, Google might see Android lose its breadth of appeal.
All this comes while Google’s search-based advertising business continues to power the company along. But it’s the only thing that does. Numerous other ventures have yet to make a jot of difference to the company’s top line. The difference this time is that the repercussions of failure could be a lot more damaging.
An array of broadband providers, and some of the cheapest tariffs in the OECD, have helped foster the impression the UK is a hotbed of broadband rivalry. But the sad fact is that just one company – BT – is still responsible for most of the country’s telecoms infrastructure.
None of this matters too much when the regulator takes a reasonably tough line with BT. But some of Ofcom’s recent decisions look far too friendly towards the incumbent. Assuring the company it will have more control over its wholesale rates in a fibre-optic future might be necessary to get those networks built in the first place. But it raises big questions about what happens to alternative broadband providers that currently depend on a copper-line wholesale service from BT – none of which has been satisfactorily answered.
Ofcom’s latest move, according to a consultation document it published today, is to consider letting BT raise existing wholesale fees to plug the gaping hole in its pension deficit. The outcome could be a 4% rise in wholesale rates charged to the likes of Carphone Warehouse and BSkyB. Not surprisingly, neither of those companies is particularly impressed.
Most customers of those providers may only find out about all this if their retail charges rise. The alternative is that both companies decide (or are forced) to swallow the additional cost and accept that margins are going to shrink. Either way, parties that may have no connection to BT’s pension fund are being asked to prop it up.
Because BT’s retail division has to pay the same rates to its wholesale division as other companies, BT wouldn’t necessarily gain any obvious competitive advantage from Ofcom’s move. But it wouldn’t, of course, be under the same amount of pressure as its rivals, because money paid to BT Wholesale by BT Retail stays within the BT Group.
What’s for certain is that BT’s pension problems are a major worry. Its pension-fund deficit more than doubled between March and September of this year to some £9.4bn. And as our Retiring disgracefully article points out, BT’s longevity assumptions are rather optimistic, so the deficit could actually be much worse. Some kind of drastic action may be called for. But the solution Ofcom has proposed today is about as controversial as they come.
Operators in western Europe seem to have stopped worrying about getting customers on to 3G networks, and started wondering how they can make profits from 3G services. But in eastern Europe the issue is still about connecting customers in the first place. And the situation does not look good. According to new data from Wireless Intelligence, a market-research company, just two countries – Poland and Romania – accounted for roughly half of the 31m connections across the region in the third quarter of this year. 3G progress in Russia and Ukraine, the two biggest countries, appears to have stalled badly.
As our special report on eastern Europe points out, both Russia and Ukraine have run into difficulties partly because of politics. Ukraine’s recent postponement of a 3G auction was a clear example of unprincipled electioneering by Viktor Yushchenko, the incumbent president (see 3G politics). In Russia, meanwhile, the defence ministry has been clinging on to spectrum needed for 3G services in Moscow, where operators generate most of their revenues (see Missing in Moscow).
Wireless Intelligence reckons there are just 500,000 3G connections in Ukraine, all served by state-owned Utel – the only operator licensed to provide 3G services. And it says there are only 4m 3G customers in Russia – representing about 2% of total connections.
Poland and Romania appear to have avoided any of the political scuffles that can hold up 3G. But they are flying for other reasons, too. Both launched services well before this particular recession took hold. And in both markets the licensees include foreign direct investors with experience of operating 3G services elsewhere.
In Romania, the market could even get a lift in the short term. Romania’s regulator has recently given the nod to a takeover of Zapp, a tiny operator with a 3G licence, by Greece’s Cosmote, a much bigger company without one (see The power of three). That should give rise to a company that can better challenge the might of Vodafone and France Telecom, the country’s two biggest players.
Yesterday’s Financial Times article about News Corp’s talks with Microsoft made interesting reading. It’s always been a curious fact that newspapers have been happy to see their news content on Google offered for free while their print circulation continues to drop. Why hasn’t the media discussed a Google lock-out before this?
I don’t have an answer for that but I do have one for why its organising now. Rupert Murdoch’s print businesses - which own the esteemed Wall Street Journal and popular UK tabloid The Sun - reported a spectacular 81% drop in operating income from its newspaper operations in the three months to September.
And its not just Murdoch’s properties that are in deep trouble. According to the US Audit Bureau of Circulation, newspaper sales in the US in the six months to the end of September were down nearly 11% over the same period a year earlier. Similar declines have been registered in the UK.
Still, I can’t help feeling that the Murdoch/Microsoft talks look an awful lot like shutting the barn door well after the horse has bolted. Microsoft’s search engine – Bing? Bong? - has a 10% share of online searches in the US, compared to Google’s 65%. The loss of links to news (not all, but some) will not cause Google users to desert the site they’ve come to depend on for maps, searches, online photo albums, email, IM chat, etc, etc. Rupert, here’s a news flash: People use Google for a lot more than news.
And looked at from the other side, Google has its uses. According to Experian Hitwise, Google delivers around 25% of the Wall Street Journal’s online traffic. The fact that Murdoch is thinking about walking away from this must mean that his managers haven’t figured out how to make it’s online business pay. And that’s despite the company’s much-admired pay wall.
The problem, guys, isn’t Google. It’s the print business itself - a business that rather pompously ignored the impact of the web until it was too late.
Ofcom boss Ed Richards might look like he’s just graduated from high school, but he adopts a distinctly headmasterly tone when talking about the companies under his jurisdiction. “We’d be further on were it not for disagreements between operators motivated by clear self-interest,” he said at a London conference organised by the Financial Times this morning.
Mr Richards was talking about the intractable issue of spectrum. The US Federal Communications Commission has recently used the expression “looming spectrum crisis” when talking about it, and Mr Richards seems equally concerned there is a serious problem around the corner.
Evidently, he feels the disputes over the refarming of 900MHz spectrum, held by Telefónica O2 and Vodafone, have hindered progress. Currently used for 2G services, this spectrum could be repackaged and used for more efficient 3G services, according to Ofcom. But its current owners have been reluctant to part with it, arguing that Ofcom underestimates the cost of clearing 900MHz spectrum of 2G users.
Confusing matters further is the pending merger between Orange, owned by France Telecom, and T-Mobile, owned by Germany’s Deutsche Telekom. If it goes ahead, it will mean the UK’s biggest operator by customers controls a huge swathe of 1800MHz spectrum but none in the 900MHz band. Predictably enough, Hamid Akhavan, the chief operating officer of Deutsche Telekom, told conference delegates he saw no reason why competition authorities should oppose the merger, given that profitability has not risen (using measures such as EBITDA) in the UK since 2002. But Mr Richards is not so easily convinced, saying other factors need to be considered.
Spectrum, of course, is a finite resource. So if it’s not efficiently allocated and well managed, the market could suffer for years. Among other initiatives, Ofcom is calling for more R&D into devices that use spectrum more efficiently. But if its plan for using mobile broadband to serve isolated areas is to bear fruit, then more progress with the operators is paramount.
Is there no stopping Huawei? Fresh from winning the contract to build just about all of Telenor’s next-generation network in Norway, the Chinese manufacturer is this week reported to be signing off a deal with Vodafone. OK, it’s only for the establishment of a new R&D centre in Milan – not a lucrative network rollout – but it will have its western rivals smarting all the same.
According to analysts at the Royal Bank of Scotland, the UK operator and Chinese manufacturer are to collaborate on the development of various core network technologies, particularly something called Evolved Packet Core. Sounds dull, but just about every mobile-phone operator thinking about LTE – a so-called ‘4G’ access technology – will be looking to upgrade their core networks, too.
Of course, the chances are high that Vodafone eventually becomes a customer of Huawei for these core-network products. Although a commercial relationship didn’t result from their work together on software-upgradeable base stations, it was largely because Vodafone would have had to replace so much existing equipment. That’s not the case now. And the likes of Nokia Siemens Networks and Alcatel-Lucent will find matching Huawei’s prices in this particular business just as hard as in others.
A flood of announcements this week from the web 2.0 wunderkinds. YouTube is striking all sorts of pioneering content-sharing arrangements with film and recording studios (making it what – a repackager of professionally made content?); eBay is talking about putting Skype on the market (before it becomes so ubiquitous it makes no money); and Facebook, the ever-so popular but probably quite poor social-networking website, is apparently turning down funding offers that value it at about US$4bn (founder Mark Zuckerberg reportedly thinks it’s worth US$5bn).
Anyone would think it’s 2000 all over again – not the depths of the “worst recession since the 1930s”, as we’re so often reminded.
Don’t get me wrong – I admire the innovation behind all of these companies. But I find it hard to understand how anyone can see a bright future for them unless there is a fundamental shift in the way consumers interact with the internet – that is, unless people start paying for usage.
Perhaps counter intuitively, given it’s the only one that customers do pay to use, Skype is the most likely to burn out. It’s quite literally becoming a victim of its own success, as the saying goes. People only pay Skype when they use it to call friends on mobile phones or old-fashioned landlines. So every time one of those Luddites signs up to the service, Skype is losing a potential source of revenue. Seeing it out promoting its new application for the iPhone is a bit like watching a lemming in a long preparation for its cliff jump.
The others, however, are still entirely dependent on revenue from advertising – a market that is shrinking in the throes of the current economic turmoil. Now I know that internet advertising is holding up better than more traditional forms, but YouTube, according to various pundits, is still loss-making, and Facebook might be, too. Mr Zuckerberg insists its financial position is sound, and turning down a generous offer of funding would suggest he’s not desperate. He might, on the other hand, just be deluded. And before rumours of his investment rebuff began to circulate, he’d been sniffing around the money trail like a frustrated bloodhound tracking an elusive scent.
What’s certainly the case is that many advertisers don’t like what they see from either company. Big brands have taken one look at some of the weirdness that gets posted on YouTube and decided they don’t want to be in the same data centre, let alone feature their logo on the same web page. Facebook’s efforts to lure advertisers have been similarly in vain – principally because advertisers so far have been largely ignored by the Facebook crowd.
I think the deal between studios and YouTube just shows that both are getting pretty desperate (and locking up the Pirate Bay four isn’t going to dramatically improve the fortunes of the record industry). And I think Mr Zuckerberg is a greedy fool if he’s valuing FaceBook at 25% more than some generous (and perhaps naïve) investors.
The potential solution to both companies’ problems is to start charging customers. They’re reluctant to do so, of course, because their core teens-to-twenties audience doesn’t have much disposable income and has grown up using the internet for nothing (apart from the cost of access).
But that’s actually pretty cowardly. If people value something enough, they’ll stump up a small amount to use it. Let’s see Mr Zuckerberg figure out how much his 200m customers are willing to spend, and then we’ll have a fair idea of what Facebook – and its ilk – might be worth.
Pre-Christmas online shopping in the US and Europe has been a disappointment to those who hoped that the world’s consumers hadn’t stopped spending but were just sitting at home and buying online.
Last week’s Cyber Monday, according to HitWise Intelligence, showed a 1% decrease in the number of visitors to the top 500 retail web sites, year-on-year, the first reverse since shoppers started logging on. In the UK, ConScore reports that visit0rs to online retail sites were down 10% in November compared to the same month last year. France, Germany and Spain are reporting bigger drops.
Still, there are clear winners and losers in the cyberspace arena. Amazon.com’s traffic on Cyber Monday (December 1) was up a cool 21% this year over last and Walmart.com’s traffic was up 6%, according to HitWise. In fact, Amazon.com accounted for nearly 11% of visits among the top 500 US Retail Web sites. No prizes for guessing who was second. The world’s biggest cut-price emporium – Walmart.com – was in second place with 8.55% of visits followed by its rival Target.com with nearly 5%. In a downturn, online or off, consumers flock to discounters they know best.
A new report has given some insights into Kenya’s burgeoning mobile payments market. First launched by Vodafone and Safaricom in October 2005, the country’s M-Pesa scheme has grown rapidly ever since. But what is most striking is the potential for such a service to not just facilitate smoother transactions—but perhaps to replace banks altogether.
Users of the service can deposit and withdraw funds in much the same way they top up their mobile phones. Money can be instantly sent to any phone, which the recipient can then cash in—and it can also be used to buy goods and services. In short, it acts much like a virtual bank card, with Safaricom resellers acting as bank branches. Users don’t even need a bank account.
The need for this is great. In a country with some 36 million people, there are just 450 bank branches. The North Eastern part of Kenya, home to some 587,000 people, has just three branches. Being able to easily send and receive money from any part of the country, via one’s mobile phone, provides a major benefit to locals.
There are many examples of how it is being used: remote truck drivers being sent money for lorry repairs; travellers depositing money at home and withdrawing it at their destination, as a protection against theft; and even taxi drivers preferring M-Pesa for payment, rather than having to carry lots of cash.
Mobile payment systems may not have gained much currency in developed markets, where banking services are easily available and most transactions can be done easily online. But for developing markets, with poor infrastructure, few banks and bigger security risks, the potential seems very great indeed.
A recent GTF story caught our eye. It says that all the technology, advertising, and media hype in the world still doesn’t outdistance WOM – word of mouth. In a recent survey of business managers on what influences their business purchases, 53% gave word of mouth recommendations as their first choice.
How do WOM recommendations spread? Mobile, email? No, the story says it’s passed on by old-fashioned face-to-face communication. So, the moral is, if you want to promote your product or service, get out there and network.
