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?"

New and Interesting NFC Developments

After my little hiatus, I've been finding the pace of near field communication (NFC) deployments and trials is picking up its pace.  Here's a sampling of what's been happening.

This is the area I've long said has to get the focus of development in order to lay the groundwork for mobile payments (groundwork means enough phones having NFC capability). These are primarily small deployments, minor applications, but are the sort of thing that is going to be needed to get people thinking about NFC, using it, and, more important, developers finding ways to integrate NFC into useful, productive, profitable applications.

Blackberry Tag was announced by Research in Motion in early October. 

[Tag] will allow users to share contact information, documents, URLs, photos and other multimedia content by simply tapping their BlackBerry smartphones together. BlackBerry Tag will also enable friends to instantly add one another as contacts on BBM™ (BlackBerry® Messenger). 

RIM took the industry lead last year when it announced it would eventually include NFC in all its devices. RIM is also opening its NFC application programming interface to allow developers to start making their own NFC apps.

Media Junction deploys smart posters for Jamiroquoi's European concert tour. Despite the lack of NFC-equipped phones (only the Google Nexus S and Samsung Tocca). Neil Cartwright of Media Junction says the phones will "automatically sense the contact and take the user to a webpage on their mobile browser. Users will be able to share the page with other fans and friends once viewed and they know secret URL.  The exclusive content, a behind-the-scene video, was specially commissioned for the promotion to provide a strong incentive for fans to tap on the poster."

Vox Cinemas in Dubai started using NFC for in-theater promotions using smart posters. The system was introduced by Proxama.  Exit displays allow NFC phone users to tap a tag to access movie listings and a Nokia Facebook 'Like' page.

Art Lovers Rate Exhibits with NFC at the STRP Festival in Netherlands. According to NXP, the semiconductor company that provides NFC chipsets, "By simply tapping a work of art with an NFC enabled device, visitors can rate pieces... Enabling visitors to share their appreciation for the arts with their friends via social media, the Android app also gives visitors information about the art through a synthesized voice." I'm not completely certain what a "synthesized voice" is, but but at least uses NFC.

A Concept Medical Device called MiniME is a personal device that monitors "ECG, blood pressure, heart rate, pulse oximetry, body temperature, blood glucose, cholesterol, hemoglobin and prothrombin time. Data are communicated through a cloud or internet site and shared with healthcare professionals via mobile devices." Even though it's not expected to become a commercial device in its current form, the MiniME, designed by Sweden's Ergonomidesign is expected to bring together all the stakeholders in the remote monitoring ecosystem.

Google Making More Wallet Progress

OK, now things are getting even better.

Remember Google Checkout? That's a way you can consolidate your purchasing information into a single credential that you could use at a wide range of e-commerce web sites. I'm no expert and haven't used it before, but it seems like a good idea but nothing that's too earth-shaking.


Remember Google Wallet? It was a way you could consolidate your purchasing information into your cell phone.

Now Google is putting the two of them together and replacing Google Checkout with Google Wallet. Anybody who had agreed to accept Google Checkout is automatically transitioned to Google Wallet.

I mean, think about it... I wouldn't want to use a separate payment method online and in real life (oh, wait; I do that right now with PayPal feeding my debilitating addiction to art deco clocks from the 1930s. I don't use the PayPal account for anything else. Pity)

Understanding the Vision 
Google's move means that we're moving closer still to the mobile wallet replacing the leather wallet. Rather than having separate operations serving the online and in-person purchase, having a single entity handle both kinds of payments is more like the way we use the credit and debit cards in our own wallets.

What about Privacy?
Well, there is the privacy thing. You have to remember Google makes its money from advertising and its ads are successful because of targeting... targeting that comes from knowing so much about you. When you unify all your purchasing, you're also providing all your entire purchase history -- online and real life -- to Google. It's important to remember with companies like Google (and Facebook) that you are NOT the customer... you are the product. And the more information you willingly provide, the more valuable you are as an advertising target.

Google Wallet Looking More and More Like a Wallet

Ever since the first report I wrote about mobile wallets in 2006, I had identified as the key obstacle competition among the players, especially competition based on the technology.

In Japan, all the mobile operators unified under a single trade name (osaifu-keitai, or wallet phone), even thought it was originated by one of the major mobile operators, NTT DoCoMo. All three operators also adopted the same technology, the near-field communication variant called FeliCa. 

In the US, heavy competition and a hands-off approach by regulatory bodies had caused many delays or the death of some new, interesting technologies (remember AM Stereo? I didn't think so).

These will be getting thinner and thinner

However, an announcement last week shows that there's more cooperation than competition among the key players for mobile wallet (and ultimately, mobile payments): VISA and Google have agreed to put VISA's PayWave technology and brand name in Google Wallet phones. 

PayWave cards and dongles are already offered through a number of issuing banks including BarclayCard, BB&T, Chase, PNC, Wells Fargo and others. 

Hey, prospects for mobile wallet are getting better, aren't they?

You bet they are. The things I believe are going to be required to push the entire market forward are the open wallet concept, rather than the closed system initially proposed - and abandoned - by Isis. For the ultimate success, mobile wallet is going to have to replace everything you now keep in your leather wallet: ID, gym membership, loyalty cards, all your credit and debit cards, library card, pictures of the kids and all the other things. And only after ALL those things are possible will the mobile payments component of the mobile wallet be ready for its inevitable success. 

Isis making the right moves

It's with considerable hope that I watch some recent announcements from (and about) Isis, the joint venture of AT&T, T-Mobile and Verizon Wireless.

First, Isis CEO Michael Abbott has been saying the right things about the "competition" Isis would face from Google Wallet. Instead of putting Google down or dismissing it (as Square's Chief Operating Officer recently did about its NFC competitors), Isis is supportive of its huge competitor, recognizing that Google's success in the market will surely propel the entire segment forward.

Second, Isis is expanding the expected scope of its 2012 rollout from one city (Salt Lake City) to two (Austin, Texas). Reportedly there will be fewer than 1 million phones involved with the rollouts, which sounds extremely ambitious when you consider the two cities have a combined population of 2.8 million.

Third, Isis has been hinting at having three banks involved with their rollout, without naming the banks. However, there have been reports that JP Morgan Chase will be providing a credit account and CapitalOne offering a prepaid card. BarclayCard was part of the of Isis's initial closed-system business plan.

What does it all mean?
In my estimation, these three items point to some acceleration of the realization of NFC mobile payments in the U.S. I've said it before, though: we need to be considering ways to encourage non-payment NFC applications such this NFC building access application for BlackBerry. Just don't expect things to happen immediately. It's going to be a while before there is enough infrastructure to support a robust cellphone-payment ecosystem.

Interested in seeing the numbers?
By the way, I published a forecast for report at GigaOm concerning NFC handsets and a variety of NFC applications, which you can see here... you need to be a member of GigaOM Pro to read the whole thing

“Pay-by-Phone Dialed Back” is NOT bad news for mobile payments in the US

If you don’t read past the headlines, things look pretty gloomy for Isis, the AT&T/T-Mobile/Verizon Wireless joint venture for mobile commerce:

• Pay-by-Phone Dialed Back (Wall Street Journal) 
• Operators scale back Isis m-commerce network as NFC competition mounts (Fierce Wireless) 
• Wireless Carriers Losing Isis M-commerce network in favor of simpler mobile payments solutions (Mobile Marketing Watch).

Sounds pretty grim with all those negative words: "Dialing back… losing… mounting competition." It almost sounds like this is the end, doesn’t it?

Actually, no. In fact, it indicates that Isis (and presumably the companies behind it), are maturing and facing the realities of the mobile payment market. And, perhaps, they were also reading my blog. So what's happened so far?

Isis started out with a business plan that basically put the mobile operators in the middle of the transaction, collecting fees on transactions. Everything passed through their system – and ONLY their system – using their specifications and their business systems… the entire process from start to finish. If you’ve been in this business a while, you’d recognize it as a pretty typical heavy-handed first draft from the telcos.

The dissent showed up pretty quickly when Research in Motion announced that its NFC-equipped handsets would not be compatible with the Isis approach. The result was a public row over who “owns” the customer  (personally, I don’t care to be “owned” by anybody.)

The reaction was hardly predictable, though. Isis seems to have realized that their requirement that they own mobile financial transactions would delay or even kill the prospects of the technology.  (http://alloymarketresearch.blogspot.com/2011/03/should-have-known-mobile-payment.html). Instead of taking their toys and going home, Isis appears to have taken a much more mature approach and called for open standards that would allow everybody to participate. (I mean, seriously, Isis, did you think you could have your own nationwide financial transaction system and leave VISA and MasterCard out of it? Seriously?)

What did Isis do?

The Fierce Wireless article by Jason Ankeny says,

Citing sources familiar with the matter, The Wall Street Journal reports the three operator partners are now in talks with Visa and MasterCard to bring the credit card giants into the Isis equation after determining building a rival payment network would have been too complex and time-consuming.

"Too complex and time consuming? I'd like to add "nearly impossible" to that list.

The article also says,

Isis previously said it would partner with Discover Financial Services to build out the necessary mobile payment structure, but in April the firm stated the service would be available to all payment networks, merchants, banks and mobile carriers. The Wall Street Journal notes many merchants expressed major doubts over Discover's reach: In 2010, 57.2 percent of debit or credit card purchases were transacted through Visa, nearly a quarter were executed via MasterCard, and Discover accounted for a market share of only 3.3 percent.

What does this mean for mobile payments in the US?

ViVOtech 4500m Contactless transaction device

Forget the doom-and-gloom sound of the headlines. What this about-face really represents is the first acknowledgment that the carrier-centric closed mobile payments system was not really practical from a commercial point of view. There are a lot of people who need to own part of this and Isis appears to be taking steps to open things up.

The best approach would be to offer a handset that provides a way to use Near Field Communications technology to securely include credentials and payment methods from a wide range of sources, including financial institutions, credit card issuers, loyalty cards and even identification cards like your library card or gym membership.

A mobile wallet that can replace your leather wallet is going to require an open system. If that’s where Isis is headed, I can once again be optimistic about getting mobile wallet in the US.

Due to a Overwhelming Interest, Symbian has Been Canceled

While this is outside my customary topics for this blog, it represents work I have been doing in forecasting handset and smartphone shipments. Recently, GigaOM Pro published my global five-year smartphone platform forecast at almost the same time Nokia made an earth-shaking announcement.

Nokia Drops the Bomb
It wasn't all that long ago -- back on February 11th 2011 -- Nokia announced it was getting to bed with Microsoft and turning its smartphone platform from the incredibly successful Symbian to the incredibly unsuccessful Pocket PC Phone Edition/Windows Mobile/Windows Phone/Windows whatever-Microsoft-is-calling-it-this-month.

Naturally, industry watchers went nuts, including this Wired article saying Nokia was "killing Symbian." (Such statements, by the way, violate my First Rule of Thinking About Technology).

And the impending death of Symbian? Well, that's not entirely accurate. The official press releases said they have, "the intention to form a strategic partnership with Microsoft to combine complementary assets and expertise to form a global mobile ecosystem and to adopt Windows Phone as our primary smartphone platform..." [emphasis added].

Seriously? You Think Nokia's Gonna Kill This?
What a shock we got two months later when Nokia announced two new Symbian-based phones: The E6 and X7, both with the latest update of the Symbian OS. The world was aghast! How could Nokia bring out new Symbian devices when they were about to kill Symbian??!!

First of all, in a letter  to developers released the same day as the Microsoft announcement, Nokia said it is still planning to sell an additional 150 million Symbian devices... nearly two years worth of sales even with a declining market share.

But what happens after that? Does Nokia kill Symbian altogether?  In 2010, Symbian was the most popular smartphone OS in the world with more than one-third of the global market. There were nearly as many Symbian phones sold as iPhone and Android combined. I don't see any killing there at all. With all its troubles, don't you think Nokia would continue to embrace the most popular smartphone on the planet for as many years as it can?

Nokia's Possible Scenarios
I'm thinking there are three things Nokia could do at this point:

1. Dump Symbian and lose the lower end of the market (and the majority of smartphone sales). This seems to be what is expected.
2. Dump the new strategy of CEO Stephen Elop--who, by the way, was just hired away from Microsoft--and continue with the Symbian growth curve.
3. Let the two platforms live side-by-side and move Windows to the upper end while continuing to support Symbian at the lower end as the market adjusts to more-expensive  smartphones worldwide.

Know which one I'm betting on? Number 3. Give it a year or so and watch what Nokia does.

The Forecasts
The Nokia/Microsoft announcement came at a time I was just finishing up a forecast for GigaOM on mobile handsets and smartphone platforms. I'd been working on it for a LONG time and was eager to just get it published.  And, to tell the truth, I don't believe  Nokia would embrace Scenario 1 above and dump Symbian, regardless of all the other  forecasters seemed eager to do. So now there's some controversy -- even from within GigaOM in an article called When, Exactly, Is The Timing of Symbian's Demise -- about the validity of all the forecasts in this market.

My forecast calls for this: Android and iPhone continuing their dash to market domination. Combined, they'll eclipse Symbian's market share during 2011. However, my  assumption is that Nokia sees that it can sell more than 700 million Symbian phones by 2015, instead of stopping at 150 million in 2012.

Here's one other assumption that's being made by other forecasters (look it up... don't make me call them out): That Microsoft's OS will magically replace Symbian's market, nearly phone-for-phone. I'm here to tell you, the resource-hungry Windows Phone system will not become the worldwide bestseller -- after 10 years of struggling -- simply because Nokia's out there trying to sell it to their (decreasingly) loyal customers.

Here's what my original forecast looks like. If there were a title for it, I think it would be, "Nokia realizes what a good thing it has in Symbian before it's too late."

Source: Alloy Market Research, February 2011

If Nokia doesn't change its strategy, it's likely that the greatest increase will be in the "Other" category, epitomized by the Samsung "badu" platform, as they rush to fill the void left by Symbian. Eventually, Microsoft will start to improve its position, but during the 5-year forecast period is unlikely to rise higher than fourth place in market share behind Android, Apple iPhone and BlackBerry.

Hold the Phone! NFC Isn't Just About Mobile Payments

The buzz about mobile payments is becoming overwhelming these days.

• Apple is going to have NFC in the next iPhone
• Apple ISN'T going to have NFC in the next iPhone
• Everybody wants mobile payments
• Nobody wants mobile payments
• RIM wants to own the customer
• Why aren't NFC mobile payments here yet?

Despite the fact that I'm a big fan of Near Field Communication (NFC) being used for mobile payments, I think it's important not to lose sight of the fact that it can do so many more things. And those other functions are going to become critical to the well-being of the NFC ecosystem.

Here's why:

1. In the US, the battle has broken out among all the players who make up the mobile payment ecosystem, just as I predicted last year (and in my first Mobile Wallet report from 2006). This could delay or totally derail the NFC payment world as these giants battle over the three- to five-cent fees most mobile payment transactions will generate.
2. Handset vendors, point-of-sale terminal makers, application developers and merchants will be forced to wait-and-see which technology will ultimately win out. While they're waiting, they're not building compatible NFC devices or apps.
3. HOWEVER, if there is some other reason to use NFC -- some reason other than mobile payments -- you can get a head start on making handsets, applications, and building  a profitable ecosystem.

So what sort of things could you do with an NFC-equipped smartphone?

• Ticketing for public transportation
• Movie and other performance tickets
• Point-of-sale information (imagine if your product's mobile entire web site could pop up on a buyer's phone with a single swipe)
• Location-based services such as search and navigation
• Loyalty cards (such as your supermarket discount card)
• Coupons
• Membership credentials (gym membership, library card, even checking in at the doctor's office)
• Personal information transfer (swap business cards by bumping phones)

It's time to focus on non-payment NFC applications and devices

It's time to get away from the focus on mobile payments and start thinking about ways to make NFC useful for everything else. That way the warring banks, mobile operators and handset makers will have to follow and we won't have to rely on them to lead in that direction.

Should Have Known Mobile Payment Prospects Were Too Good to Be True

Yeah, it's started. The bickering and squabbling among the players.  Now I'm on a roller coaster of thoughts about how soon we'll start to see mobile payments using Near Field Communications (NFC) on our cellphones.

Cool New NFC Logo

I was quite pessimistic when first I wrote about mobile wallet in November 2010. I thought all the players who would be involved would spend so much time bickering over technology. And there is always the problem of figuring out who gets paid.

Then I was just ecstatic when the joint venture Isis was announced just a few weeks later. "At last," I thought, "maybe the key players will actually learn how to agree on things and get along."

Nope.

My mistake. They're fighting already. Before things get off the ground.

In a Wall Street Journal article called RIM, Carriers Fight Over Digital Wallet, by Phred Dvorak and Stuart Weinberg, say the battle is now coming down to, "who owns the customer?"

The dispute centers on where key data related to mobile payments will reside on the next generation of smartphones, slated to come out later this year. Now, such information is stored in the magnetic strip on a credit or debit card. RIM [makers of the BlackBerry] and other handset makers are poised to make phones that will store this data, known in industry parlance as "credentials," in the devices themselves. In a transaction, the customer would wave the phone near a special electronic reader at a store's checkout.

 But RIM and carriers like Rogers Communications Inc. in Canada, and AT&T Inc. and T-Mobile USA in the U.S., disagree over exactly where on the phone the credentials should reside—and thus who will control the customers, revenue and applications that grow out of mobile payments.

Great.

What's the big problem?
Apparently, if your credentials/password/bank account info is stored in one part of the phone, the handset vendor "owns" you. If that's all stored somewhere else, the carrier owns you. And, I'm sure, it won't be long before your bank thinks it should own you, your credit card company wants to own you, Starbucks wants to own you and iTunes wants to be in there as well.

What does it mean?
These squabbles will all lead to more delays (or, at worst, total failure) for mobile wallet and mobile payments using NFC. Already, the lack of standards has caused Appple to wave off its first attempt at NFC, which was expected to be in the iPhone 5.

Is there any hope?
Of course there's still hope. There is no question that NFC payments work; systems have been in place for years in Japan. But the key is that Japan's system was built with cooperation among all the players. All the mobile operators in Japan have adopted the same technology and all their phones are compatible. But it works. And it could work here in the US... providing, of course, everybody finally agrees how it's going to be done.

The Three Revolutions in Cell Phone Design

There has been a lot said about "disruptive technologies" and how important they are. but in the 25+ years since we've had cellphones, there have been only three revolutions, three changes that have actually changed the way we think about the design of mobile phones.

Stuff car phone components in a bag and you have a hand-portable cellphone!

Where We Started: The Bag Phone
Cell phones were car phones. There was a handset inside the car with a transmitter/receiver mounted in the trunk. Your car's electrical system supplied 12 volts to run the thing. Was that good enough? For the first couple years it was, until the need for portability arose and all the components were stuffed into a bag... handset, transceiver, antenna and a 12-volt lead-acid battery. It was big and heavy, but you could carry it anywhere. Plus, it operated at 3 Watts, five times the power of portable handsets. Those bag phones would operate even in very low signal areas (and, face it, in 1991, there were a LOT of low signal areas).

Motorola DynaTAC.

First Revolution: The Brick
Starting with the venerable Motorola DynaTAC, (was that a great phone, or what?) there were generation after generation of "brick" phones, that gradually became smaller until they became what we now describe as "candy bar" phones. They got smaller, added features, lost the external antenna and got made over with fancy color screens. But it was still the same basic design (reading from top to bottom):
Earpiece
Screen
Buttons
Mouthpiece

The Second Revolution: The Clamshell Phone

Motorola StarTAC, 1996

In 1996, the Motorola StarTAC turned the cellular world upside down. Designers at Motorola split the basic candy bar phone in half, putting the earpiece above the hinge and the screen, keyboard and mouthpiece on the other half. If you don't remember, the StarTAC was an absolute sensation. Cellphones were still the province of the wealthy and connected at that time, and crazed stockbrokers were paying two and three times the suggested price to own one of these treasured devices.

Yes, they were mostly analog models in the US and, yes, you would have to buy several batteries to get through a whole day of usage. But the clamshell put Motorola at the top of the industrial design market for cellphones. The ultimate expression of that was the beloved - and later reviled - Motorola RAZR.

The Third Revolution: iPhone

Apple iPhone, 2007

If you missed the excitement the StarTAC generated, you got to witness it with the iPhone in 2007. Aside from all the hyperventilating about the user interface, iPhone has created an even greater revolution in the deployment of applications to mobile phones, forever altering the relationship between the cellular customer and the cellular operator.

The longer-term effects of the iPhone have been to breed another classification of device: the tablet computer, (re)introduced as the iPad, which is little more than a big-screen iPhone.



Looking Back From 2011
Cellular networks were launched in 1983 and started to come into their own in the early 1990s with the DynaTAC and other portable devices.

It was nearly 10 years before the StarTAC revolutionized handset design and another 10 years before the announcement of the iPhone. In the meantime, cellular networks matured, went through three generations themselves. If you're extrapolating the changes in phones, look for things to change significantly... in 2017

My rules for thinking about technology

I spent more than a decade working as an industry analyst covering telcommunications, wired and wireless.  I was part of the emergence of cellular systems, mobile internet (which we called "wireless data"), and witnessed the rise and fall of the competitive local exchange carriers during the ill-fated dotcom boom.

During those years, I developed ten rules for people who were doing my job and had the chance to witness first hand the benefits of following those rules and the problems caused by ignoring them.

Here are Chamberlain's Rules for Assessing Technology:

1. Ignore either/or beliefs about technology (e.g., Remember "WiMAX thrives therefore 3G dies?") 
2. Reality-check your assumptions by looking around you. Would YOU adopt the technology that you are expecting millions of people to use?  Would your friends?  Your Mom?
3. It is dangerous to drink Kool-Aid when technology vendors are serving. 
4. Incumbents, especially highly regulated ones, are extraordinarily adept at protecting themselves from competition.
5. “Success” for a new business or technology does not necessarily require mass consumer adoption or the creation of a publicly traded multinational corporation.
6. Remember the better mousetrap: The world, not the inventor, beats the path to the door. There are very few true technology revolutions. 
7. “Cheaper” or “free” is not a business plan, let alone a recipe for world domination. 
8. If the most compelling argument supporting a new technology includes the words “bits per second,” it isn’t very compelling.

Netheads vs. Bellheads: Disrespecting "the cloud"

I continue to believe there's a big difference between Netheads and Bellheads, but there's something I heard this morning that really points out a huge disconnect between those two worlds.

What started me thinking was a sponsor message this morning on National Public Radio that promised improvements in business by taking advantage of "the cloud." 

Mmmmm... what a lovely image. Light drifting shapes that appear and vanish all by themselves,  with no intervention or control by those of us who live on the Earth. Who made the clouds? Nature. Who controls the clouds? Thermal currents, winds, humidity, terrain. Some might even attribute clouds to the benevolent Hand of God.  Farmers and their crops depend on clouds. The utility businesses of our cities and towns rely on clouds to supply drinking water and light. 

Real clouds

But listen more carefully to the use of "the cloud" when it comes to computing.  Folks, the computing cloud is anything but light drifting shapes beyond the control of those of us on Earth.  In fact the computing cloud was built and continues to be maintained by some of the biggest and most important companies in the world. Each of those links between servers, between your computer or smartphone and "the cloud" were built at great expense by telecommunication companies, some of whom rose and fell during the dotcom boom of the late 1990s.

What does that mean in this world? It points out the difference between those who use the network (the Netheads) and those who built the network... the Bellheads. Google, Apple, and others are building by attaching devices and services to either end of The Cloud but have little responsibility for the creation and maintenance of The Cloud.

Google and Apple can't live and can't thrive without The Cloud. Will they someday compete with and even replace the companies that provide The Cloud? I have my doubts.  I think the Nethead business case falls apart when the realities of the enormous capital and operating costs (as well as the pressures of providing world-class quality-of-service) is factored in. 

 

Ireland Axes Mobile TV Plans

An article by the GSM Association published January 10, 2011 indicates the Irish regulator is withdrawing its plans to offer mobile broadcast. The article, quoted in its entirety below, says:

ComReg, the Irish telecoms watchdog, said it will “not be proceeding further” with a plan to offer a mobile broadcast licence covering five urban areas of the country, stating that following a consultation period, “it became apparent to ComReg that use of the identified spectrum to provide a Mobile TV service in Ireland was not the subject of particularly strong interest to potential operators, and interest in the proposed procedure to grant the authorisation diminished.” After seeing further information on interest from stakeholders, it received just one response, from Vodafone Ireland, which agreed with the decision not to go ahead with the plan. The regulator says that it will “keep under review the potential for the identification of spectrum which would enable the award of dedicated licences for mobile TV,” and that future, technology-neutral awards of UHF spectrum could be used for mobile broadcast services.

The decision further highlights the lack of success for mobile broadcast services on an international basis, having once been seen as a potential “big thing” for the industry. The most high-profile failure was Qualcomm’s MediaFLO venture, which is to be closed imminently having failed to become a viable service. While there have been a number of pilot and commercial mobile broadcast launches globally, these have not led to significant subscriber interest, and in South Korea, which has been something of a market leader, ecosystem participants have struggled to monetise services. According to a Juniper Research study, the number of mobile broadcast subscribers will not reach 10 million globally “until 2013 at the earliest,” at which point more than 180 million subscribers will be accessing multimedia services via 3G, 4G and Wi-Fi networks. Trials are also underway of mobile broadcast technology which is more closely related to mobile standards.

DVB-H cellphone

It's certainly not the only place that this business model has struggled.  Operators have shut down operations in Switzerland and returned spectrum in France while mobile TV operations in Hungary and Germany are at a standstill

What's significant about this? The "operator" mentioned in the GSMA article is not a broadcaster but cellphone company Vodafone Ireland, which responded with a bored, "whatever" when told they might not be able to provide mobile television service.  This spectrum was intended to be broadcast to cellphones using the same business model attempted by MediaFLO in the US.

Are they ever going to get it right? Maybe. It's worth noting that ComReg is considering "technology neutral awards of UHF spectrum." In other words, perhaps it's not going to be dedicated to the cellphone-centric DVB-H service. DVB-H is intended to be offered on a subscription basis by cellphone operators, a business model which, the article points out correctly, has "... struggled to monetise services."

It points up what I've been saying all along... the local broadcasters are in the best position to offer TV, mobile or fixed and the cellphone-based subscription model will continue to struggle if not die off altogether.

Google Voice a Threat to Mobile Operators. We Mean it This Time.

How many times have we heard this? “A new technology that is starting to gain acceptance signals the death knell of the incumbent telecommunication operators.” Let’s see. What was that technology again?

Wi-Fi.

Skype.

Vonage.

WiMAX.

And on and on and on. Now, in the article CNN Money by David Goldman, Google: Your Next Phone Carrier  breathlessly predicts Google will become a mobile operator by using its voice over IP application. Based on what evidence? The article cites the fact that Google might be buying dark fiber, might become an ISP and once bid on some wireless spectrum. But the key information is here:

“Google already allows people to bypass their mobile carrier's service. Google Voice lets customers send free text messages, and the new version of Android ("Gingerbread") supports VoIP Internet calling, allowing users to make calls over over Wi-Fi networks.”

Wow! It’s wireless Skype all over again, which has had exactly zero effect on the mobile operators. And hasn’t really cut the legs out from under the wireline companies, either.  And, really, all this talk ignores some of the most important facts out there: 

• Wi-Fi isn’t a wide area network. Isn’t now. Won't ever be. Tried a couple of times and crashed (remember municipal wi-fi networks?”). Even Google’s own experiments in San Francisco have tanked.
• If you’re going to have mobile access, you will have to use a mobile network. 4G doesn’t yet have enough footprint and will end up being controlled by the mobile operators anyway. 
• It’s not easy to build a mobile network. The vaunted Verizon Wireless has achieved its current network coverage after more than 20 years of buildout. AT&T has also had 20 years and Sprint 15. People are still complaining about coverage.

A couple of scenarios:

“I’m going to replace my AT&T/Verizon Wireless/Sprint/T-Mobile with the Google network.” Assuming a deployment twice as fast as those companies were able to accomplish, it would be 2021 before there would be similar coverage. And, as rich as Google is, it still doesn’t have the financial resources of the telcos. Come back in 10 years. Oh, wait. It’ll be at least two years before they can complete the paperwork with the FCC and obtain nationwide spectrum. And all those communities who are already sick of putting up cell towers? They don’t want more. 

“Google Voice will replace the mobile operators because the price is zero.” OK, where are you going to get mobile access? From a mobile operator who is charging you a for a voice plan whether or not you use it. Or you could go with a data-only plan using a 3G/4G dongle for your laptop. Great: 1) you’re still tethered to a laptop, which is tough to use at the bar when you want your buddies to come down and 2) you’re still using AT&T/Verizon Wireless/Sprint/T-Mobile and paying $60 a month… about the same as a basic voice plan.

“I’ll use Google Voice on Wi-Fi.” Great idea. But where? Home, Starbucks, McDonalds, home, someone else’s home and… where else? Wi-Fi’s not a mobile network (something I’ve been saying since 2003). Terrible coverage. Not useful where you want to make calls.

What it really means: Nothing. Is Google going to become a serious mobile operator using its Android phones, some spectrum somewhere or Wi-Fi? Probably not. Skype didn’t. Vonage didn’t. Once again, Nethead domination of the telecommunication space will remain a fantasy. Bellheads, ultimately will be responsible for paying for, building, and maintaining very complex, very expensive networks. And consumers will keep paying – and paying a lot – for access to those networks.

Mobile Payments vulnerable to hackers?

The excitement has been building in the community of mobile banking, payment technologies and near-field communication (NFC) after major announcements a couple weeks ago supporting mobile payments.

However, that excitement must be tempered by warnings about hackers attempting to get at personal information in smartphones… phones that don’t yet support mobile payments! What will happen when they try to attack phones that are also linked directly to your bank account, credit card or – God forbid – your Starbucks card?

Well, you’ll probably lose some money. But there’s one important thing that will prevent those losses, and this remedy has nothing to do with technology or smartphones or NFC.   Get a pencil and write this down, because it’s important: “Don’t be stupid.” 

Here’s what the hackers are doing to get your banking information, according to the FBI’s Internet Crime Complaint Center (also called “IC3,” which sounds so much better than “complaint center”)

“[C]riminals set up an automated dialing system to text or call people in a particular region or area code (or sometimes they use stolen customer phone numbers from banks or credit unions). The victims receive messages like: “There’s a problem with your account,” or “Your ATM card needs to be reactivated,” and are directed to a phone number or website asking for personal information. Armed with that information, criminals can steal from victims’ bank accounts, charge purchases on their charge cards, create a phony ATM card, etc. 

Sometimes, if a victim logs onto one of the phony websites with a smartphone, they could also end up downloading malicious software that could give criminals access to anything on the phone. With the growth of mobile banking and the ability to conduct financial transactions online… attacks may become even more attractive and lucrative for cyber criminals.

IC3 gives a couple examples of how these scams have been working recently: 

Account holders at one particular credit union, after receiving a text about an account problem, called the phone number in the text, gave out their personal information, and had money withdrawn from their bank accounts within 10 minutes of their calls.

Customers at a bank received a text saying they needed to reactivate their ATM card. Some called the phone number in the text and were prompted to provide their ATM card number, PIN, and expiration date. Thousands of fraudulent withdrawals followed.

So if you get a message requesting personal information, the smartest thing would be to not give away your personal information. See? No technology involved other than the Human Brain.  YOUR human brain.

And thank goodness that the FBI is looking out for us and sounding a warning. However, could they find agents that are a little better at naming these scams? The FBI is calling them “Smishing” and “Vishing” for SMS phishing and Voicemail phishing. “Smishing?” Really, FBI? Surely you can do better than that.

Should this keep us from using mobile payments? Personally, I don't think so. We can't protect everybody from themselves. If you're the kind of person who gives your ATM personal identification number to strangers, well, everybody needs to learn that lesson. Some people will just have to pay more for tuition than others. 

But even if you never give out banking information and don't follow unknown web links, you could still misplace your phone in a taxi, restaurant, or anywhere else, just the same as you could lose your leather wallet full of cash and credit cards.  In that case, you might, indeed be able to rely on technology: Make a phone call to your bank and you can shut down all financial functions automatically. 

By the way, here are some other tips from IC3

• Don’t respond to text messages or automated voice messages from unknown or blocked numbers on your mobile phone. 
• Treat your mobile phone like you would your computer…don’t download anything unless you trust the source.
• When buying online, use a legitimate payment service and always use a credit card because charges can be disputed if you don’t receive what you ordered or find unauthorized charges on your card. 
• Check each seller’s rating and feedback along with the dates the feedback was posted. Be wary of a seller with a 100 percent positive feedback score, with a low number of feedback postings, or with all feedback posted around the same date. 
• Don’t respond to unsolicited e-mails (or texts or phone calls, for that matter) requesting personal information, and never click on links or attachments contained within unsolicited e-mails. If you want to go to a merchant’s website, type their URL directly into your browser’s address bar.

Two Worlds: Netheads and Bellheads creating our future.

In a previous post, I alluded to what I consider to be two different worlds in the mobile payments space. In reality, those two worlds are facing off in almost everything mobile.  I call people from those two worlds "Bellheads" and "Netheads."

Bellheads, as you might guess, are people who work for the phone companies. Call them what you like... telcos, telecom carriers, incumbents. Their business has always been to connect two phones and make one of them ring. And, of course, keep meticulous records so they can charge for every minute of use. All of the US telephone companies and cellular operators are run by Bellheads

Netheads, on the other hand, come from Silicon Valley and are wrap their businesses around computers and communication via the Internet. You know the Netheads by name: Apple, Google, Microsoft, Dell, Yahoo!

Bellheads are network builders. Netheads are network users.

Bellheads want the meter running for everything. Netheads prefer unlimited bandwidth.

Even though they'd been eying each other warily for years, the real collision came in 2007 with the release of the iPhone when the Netheads showed the Bellheads their best. And, because of their success, the Netheads got to dictate some of their own terms.

However, despite the fantastic hardware and all the App Store applications, there's still one place where the Bellheads have the upper hand: Capitol Hill.  Their influence is strong, they are savvy and they know how to make legislation and FCC rulings go the right way.

"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.

Back from the dead... NFC shows up in cell operators' plans

I had all but given up on near-field communication (NFC) for financial transactions in the US. It's extremely popular in Japan, but I've been pessimistic about the ability of diverse companies to put aside their competitive differences and pull together behind a single standard.

And yet, here's news from two different fronts that suggests that a technology I've been trying to champion for the past four years may actually be gaining a foothold. In one corner is Google. In the other corner is a consortium of rivals from the cellular and financial industries.

First, there's this New York Times article by Claire Cain Miller about Google's new phone including an NFC chip. Google's CEO, Eric Schmidt, was quoted in the article saying:

Phones will know when someone walks into a store and can provide relevant information, he said. The technology reduces the risk of fraud, he said, because the person and their phone must be present at the point of payment, and could be connected to a person’s credit card number.

“This could replace your credit card,” he said. “The reason this N.F.C. chip is so interesting is because the credit card industry thinks the loss rate is going to be much better, they’re just more secure.”

Sounds a lot like something I'd said a couple weeks ago.

Isis

Second, there's ISIS, a consortium of AT&T, Verizon Wireless (it's hard to picture them in the same room) and T-Mobile along with Discover Card said:

Isis is working with Discover Financial Services' payment network ... to develop an extensive mobile payment infrastructure for the joint venture.  Barclaycard US, part of Barclays PLC, is expected to be the first issuer on the network, offering multiple mobile payment products to meet the needs of every customer.

Realistically, what does this mean? Unless your favorite color is purple, don't hold your breath while you wait for ISIS to allow you to make payments from your cellphone.  Here's what will need to happen before the first card swipe (or phone tap) happens:

•  Develop and distribute NFC-compatible card terminals to millions of retail locations (somehow, convincing those retailers that they need to purchase the new terminals, with are exactly like existing credit card readers, but also have a touch-and-go capability)
• Arrange with credit card companies, retailers, banks and other financial institutions to accept this new technology
• Convince cell phone vendors that there are enough compatible card terminals at retailers to spark demand for the phone
• Convince wireless subscribers to buy an NFC-equipped smartphone
• Convince owners of NFC-equipped smartphones that they are safe and secure enough to use them as a credit or debit card

That looks daunting, almost impossible. Yet, I'm really optimistic about mobile payments, much more than I have been for several years.  First of all, these three mobile operators have access to about 200 million US mobile users. That covers it from the telco side.  Plus, Google, and its incredibly successful Android smartphone operating system are pushing from the other direction. If the mobile operators don't get there first, they're going to have to cede yet another battle to the Internet companies.

But if these diverse groups are willing to cooperate on the telco side and compete with the Internet world, I'm suddenly full of hope that you'll see this soon. My guess is that it will be routine within five years... call it 2015.

Go back and read my pessimistic post about the leather wallet vs. the smartphone from only two weeks ago. That vision is not likely to happen without NFC, and NFC wasn't likely to happen in the US before these announcements.

(But what do we know about ISIS? Well, according to Wikipedia, Isis is "also known as the goddess of simplicity, protector of the dead and goddess of children from whom all beginnings arose." She also had a baby with her brother Osiris, which would pretty well disqualify her from, say, being a Supreme Court justice or holding any other public office.  

Video services come to smartphones, and vice-versa. AT&T U-Verse on Windows Phone 7

Now that they are delivering Windows Phone 7 smartphones, AT&T has decided to include their U-Verse application, which is already available on Android and BlackBerry phones (U-Verse is AT&T's home video service that delivers tv programming over a broadband connection.)

If I look through the press release for the exciting parts, it seems to be two-fold: First, Windows Phone 7 users can get U-Verse applications even if they're not current U-Verse customers.  Second, you can use it for an entire month at no charge! After that, it's 10 bucks a month for non-subscribers and U-Verse customers who pay more than $80/month get it for free.

So what does the U-Verse mobile application do, exactly?  I'm sure it makes a lot of sense when you're using it, but it's kind of hard to describe.

• Program the digital video recorder remotely to record new programs or delete recorded shows
• View the channel guide and program descriptions
• Download and view popular TV programs

About that last item... yes, you can download TV programs to your Windows Phone 7, iPhone, Android or BlackBerry phone... with some limitations.  First of all, it's not the entire U-Verse channel lineup that's available, it's a smattering of popular network shows. And second,  you have to download the shows over Wi-Fi, even though the phone is also connected to AT&T's fast 3G network. After that, you can watch the episode for about two weeks, whereupon it will "expire" and be deleted from your device.

The content is fairly limited, with episodes from about 50 shows from ABC, Disney Channel, ESPN, Disney, Animal Planet, TLC, and Discovery Channel. You can see Grey's Anatomy, Ugly Betty, Desperate Housewives, Cougar Town, Scrubs, Lost plus other shows like Phineas & Ferb, Whale Wars, and Mythbusters.

What does it all mean? What comes through loud and clear is that even the mobile operators are considering TV viewing a routine part of the cellphone experience. Obviously, there are cross-marketing opportunities for AT&T to push U-Verse to mobile users who aren't getting it yet. Plus there's the upsell to existing consumers ("The application is free if you upgrade to the U300 level").

It's vaguely disappointing, though. I'd rather see something like "view every U-Verse channel you have now from any location at any time over any network."

It's not that.

But it's a step in the right direction.

Mobile DTV prospects improve: people remember commercials (plus: video of actual Mobile DTV receivers)

OK, who doesn't love their TiVo or other Digital Video Recorder (DVR) that allows them to skip past all the commercials.  Or watching online? When you can go do something else until the commercial is over? One of the greatest inventions besides the television, right?  All it takes is a huge hard disk drive to store up all your favorite TV shows and let you skip forward and back through them.

Well, digital video recorders are great inventions unless you're an advertiser who wants you to watch their commercials or you run a TV station that relies on the money from those (increasingly less-effective) advertisements.

Now comes Mobile DTV, which is designed to go into a small package that operates from a battery like the Samsung Moment below.

It has a receiver, it has a screen, it has an antenna and a channel selector. But it doesn't have a giant hard drive, and, therefore, it doesn't let you skip the commercials or record your programs for later.  Mobile DTV is, at this point, back-to-the-50s TV that runs program in specified time slots and if you miss it you miss it. And if you want to watch, you have to watch the commercials, too.

Which is, I suspect, why advertisements on Mobile DTV devices are so effective, according to this article by Joe Mandese from Media Daily News. The article says the TV Bureau of Advertising ran several public service announcement commercials during the DTV Showcase in Washington DC.  Commercials were shown as 30-second anti-drunk driving PSAs, along with banner ads on the channel selection page and during the few seconds of dead air while the channel changes.

And the exciting news from this test is... PEOPLE REMEMBER SEEING THE ADVERTISEMENTS! Which is a really big deal if you are buying or selling advertising.

Recall of anti-drunk driving advertising by mobile phone users in the Showcase more than doubled, from 15% prior to the launch of the campaign to 34% post-campaign. 

The majority of users who recalled seeing the ads saw them while they were out of home (69%). 

A large number also recalled that they'd seen the ads when away from their homes.  According to the article, here's what this all means for Mobile DTV:

Abby Auerbach -- the executive vice president and CMO of the TVB, who oversaw the bureau's participation in the project -- said that the fact that more than two-thirds of viewers said they saw the spots while they were out-of-home was especially encouraging for advertisers and local TV broadcasters, because it means mobile may actually extend the reach of local television to places and at times when viewers aren't otherwise able to watch it. In essence, she said, the digital platform is a net positive for local broadcasters and advertisers, not a negative.

She said more research needs to be done on when, where and how consumers utilize mobile digital TV, but that the initial finds are very encouraging for the broadcast TV industry, which is working with the OMVC to try to convince consumer electronics manufacturers -- especially cell phone, smartphone and hand-held computing device manufacturers -- to install special chips and receivers into their devices that will enable the mass market to access digital mobile TV signals.

Some of the people who were watching those ads were were using a Samsung Moment smartphone that was specially equipped to receive the signals.  Here's a YouTube YouTube video from Samsung that shows the Moment in use.  Most interesting to me is the external antenna.