Justifying Mobile Payments

Observers of using Near Field Communications (NFC) in mobile phones are still confused about why it anybody would want to use the technology to make in-person payments at stores.

I'm Confused About Why Mobile Payments are a Good Idea. Many Other People Are, too.
When you look at the market, it makes little sense. Some of the arguments are:

• Using a phone is slower, not faster, than using a traditional credit/debit card.
• The costs associated with using a phone are higher.
• There is insufficient infrastructure available at merchants.
• Adding infrastructure (NFC-equipped point of sale terminals) would be expensive and adds too much cost for the merchant.
• There is an existing card presentation and clearance mechanism that's extremely well developed, entrenched and profitable. Barriers to entry are very high.
• Players are squabbling about who "owns" the customer and the secure element in the phone.

In short, the idea of adding an NFC payment mechanism to mobile phones makes little sense. And there's a lot of head-scratching going on among people in the industry as to why (and how) it could possibly happen.

A New Way to Think About It

I've said it before and I'm sure it'll be said again. NFC-based mobile payments are NOT a great idea at this point, at least not for the U.S. There isn't sufficient business case to drive key players to adopt it.

But there are a number of NFC applications that DO make a great deal of sense. And they're gradually finding their way into smartphones and stores and movie theaters and other places.

Mobile Coupons. Illustration from ViVOTech

People are justifiably now asking "How do NFC payments make business sense?" But when the market is ready, and there are enough NFC phones and infrastructure and interest -- driven by non-payment applications -- and people will be asking, "Why not NFC payments?"

 It's significant that we're still asking, "Why?" Instead, we need to make sure everything's ready when when people start saying, "Why not?"

"Inevitable:" New way to describe Mobile DTV in the US. 40% of population to have MDTV before 2012

I've been party to discussions on several public forums and in person regarding mobile digital TV (MDTV).  Many of them seem to pit people from the cellular world against the broadcast world.  The arguments from the cellular side, if I could be so bold to summarize are: "you will fail if you don't make the end user pay for every bit that goes through your network." 

The broadcast-based proponents are saying, "the free-to-air/advertiser supported business model has been pretty successful for nearly a century. MDTV is just a little more of the same."

Who knows? The cellular guys could be absolutely right. But that doesn't seem to actually make a difference to the broadcasters, who seem to be pressing on, regardless.  The latest news is from the Mobile Content Venture (MCV) is a commitment to turn on 40 MDTV stations in 20 markets by the end of 2011. The announcement promised:

"...a commitment to upgrade TV stations in 20 DMAs in order to deliver live video to portable devices.  By late 2011, the venture will deliver mobile video service in markets representing more than 40% of the US population.  The service will initially consist of at least two ad-supported free-to-consumer [emphasis added] channels in each market. Additional channels and markets are expected to be added over time.

In 2011, MCV expects to offer the mobile video service in the following markets: New York, Los Angeles, Chicago, Philadelphia, San Francisco, Dallas, Washington D.C., Atlanta, Houston, Detroit, Tampa, Phoenix, Minneapolis, Orlando, Portland, Cincinnati, Greenville, West Palm Beach, Birmingham, and Knoxville.

MCV looks like some heavy hitters to me.  It's a joint venture of  12 major broadcasters and network owned-and-operated (O&O) stations that includes Fox, ION Television, NBC and Pearl Mobile DTV, LLC. The Pearl member companies include: Belo Corp., Cox Media Group, E.W. Scripps Co., Gannett Broadcasting, Hearst Television Inc., Media General Inc., Meredith Corp., Post-Newsweek Stations Inc. and Raycom Media.

In an article in TVNewsCheck.com, author Harry A. Jessel quotes Salil Dalvi, co-general manager of MCV:

"A free service would speed consumer acceptance and encourage the manufacture of devices able to receive the service, Dalvi said. “We recognize that this is a product that is going to have zero subscribers, zero users on day one.

“One of the key elements of the ecosystem is to get going with devices,” said Dalvi. “The best catalyst for doing that was to make content available at no direct cost to the consumer other than the device itself… so that [they] have that opportunity…to sample the product and get accustomed to consuming the content on the platform.”

What does this mean? Exactly what I've been saying here: Consumers are ready for the ad-supported free-to-air business model and broadcasters (and advertisers and program producers) all understand how it works. All the same people who've been working together for years continue working together in exactly the same way they're accustomed to.

Just as important as consumers getting a taste of the service is the clear signal to semiconductor and consumer products vendors to start making a variety of equipment. And with players like FOX and NBC, those vendors will start noticing.

RIP MediaFLO? One Man's Experience

Having been a part of the mobile research and advisory industry for more than 10 years, I was lucky enough to get some cellphones to test when they were announced by the mobile operators.  AT&T was the most generous and I had the chance to use both a LG VU and a Samsung Eternity, both of which were equipped with MediaFLO receivers. These were both great phones (the Eternity is still in loving use) and the mobile TV function was something I needed to try out so I could have a clear understanding of how it worked from the consumer's perspective.

The relatively low frequencies used by the MediaFLO TV signal (UHF 52-54) gave it pretty good range and building penetration, so I could watch good TV even inside the house.

But the real test came when I was taking a train to my old family home in Michigan. Snow on the tracks had delayed the Amtrak Wolverine Express for several hours (Snow? In Michigan? In December? How could Amtrak have anticipated that?!) So I whipped out my LG VU to start watching TV programming.

And I watched.... er... well. Nothing that I really wanted to. I'm bored out of my mind, I have THE best technology to chase my boredom away and there's nothing. Deep inside Chicago's Union Station, the signal was weak. Once we started clickety-clacking through the Chicago suburbs, though, the signal was strong.

The programming, however, was weak. A movie that was halfway over. Spongebob Squarepants. Something about football. I kept flipping the channels, thinking "15 channels and nothing to watch." I finally settled on a news documentary about some woman who had killed her child (not my customary viewing).

Luckily, or not, once we got outside Chicago and neared Gary, Indiana, the signal sputtered and vanished. No more FLOTV for me for the rest of the trip.

I was deeply unsatisfied and, not only that, I was getting the signals for free! Because I was an industry analyst with a test unit, I wasn't even paying the $15/month charge.

I felt let down. And I remembered my visit to the huge, elaborate network operations center QUALCOMM had built in San Diego. They said proudly that they had the most advanced NOC anywhere... even the major networks didn't have operations like this.

15 channels and nothing to watch.

It was pretty clear MediaFLO was about to die a slow death.  There's no doubt that the technology worked, and worked really well. But the programming and the cost doomed US operations of MediaFLO from the start. Good try, great proof-of-technology. Business case? Not so much...