Wireless: Verizon vs. AT&T

Wireless: Verizon vs. AT&T

Verizon wireless and AT&T wireless just posted very different Q3 2012 results.  Both companies pointed to many metrics to show improvements, but some of this is the overall market.  What matters to me is their relative performance over time.  Let’s explore some key comparisons before concluding who actually won the quarter:


Gross Adds

For gross adds, we have focused on postpaid retail numbers only.  This is the profit engine and the proving ground for sales and marketing success.  Our calculations suggest that Verizon wireless loaded 4 million gross postpaid retail subscriber to AT&T’s 2.4 million.  While Verizon needs to load more gross to stay flat, since it has a larger retail postpaid base, this certainly is a decisive win for Verizon.


Postpaid Gross Adds – Calculated

Listening to the AT&T quarterly call, we believe this was in part due to AT&T’s decision to keep all the iPhone 5 stock for existing customers.  This shows in their postpaid churn which improved significantly over Q3 2011 despite the earlier launch of the iPhone.



Churn is traditionally measured as a percentage of the base on this metric, Verizon came in with a stellar 0.91% postpaid churn while AT&T also improved to deliver 1.08% postpaid churn.


Postpaid Churn

This means that Verizon lost approximately 2.4m postpaid subscribers in Q3 to AT&T’s loss of 2.2m postpaid subscribers in Q3.   For AT&T this was around 100k fewer losses versus Q3 2011 while for Verizon this was in fact more than 30k more subscribers lost.  The second learning we get from this is that while AT&T could have achieved their entire gross from Verizon losses, the converse it not possible.  This leads us to believe that Sprint and T-Mobile continue to lose significant customers who signed up at Verizon.


Postpaid Churn Volume – Calculated

Together gross adds and churn provide us with what looks like a very unbalanced quarter in terms of net adds.


Net Adds

Again we will focus our analysis on postpaid retail.  Here Verizon added 1.5m postpaid subscribers, more than the last 2 quarters put together and nearly double last Q3.  AT&T on the other hand added a dismal 150K postpaid retail subscribers.  It looks like they really did keep all the iPhones for existing customers!


Postpaid Net Share




The smartphone numbers were particularly interesting.  Both had record loads for smartphones, Verizon loaded 6.8m smartphones in the quarter to AT&Ts 6.1m.  Considering AT&T’s gross was approximately 2.4m this is over 4m (and close to 6% of base) that were upgraded to smartphones.  Verizon on the other hand did approximately 3.6m smartphone upgrades which was less than 4% of their base.  The second point of interest in smartphones was the iPhone.  Verizon loaded 3.1m iPhones of which 650k (or 21%) were iPhone 5.  AT&T on the other hand loaded 4.7m iPhones of which 1.3m (or 28%) were iPhone 5.   This has two impacts:  Firstly operators have to subsidize iPhones more than Android and other smartphones, costing precious EBITDA in the short term, but secondly iPhone customer generate higher ARPU and are more loyal.  So short term loss for AT&T, but long term win.




Verizon stopped reporting ARPU, so our analysis only includes a calculated ARPU which is not accurate, but is probably directionally appropriate.  Our calculations suggest that despite being approximately $10 per subscriber higher on ARPU, that AT&T had a postpaid ARPU increase of 2.37% to Verizon’s (our estimate) postpaid ARPU increase of 2.59%.  We concur with the executives of both companies that the data share plans will be accretive, especially if they can attract customers away from value destroying unlimited plans.


Postpaid ARPU




We were very impressed with AT&T’s network numbers.  It is about time they invested in a big way and we believe that network superiority is a necessary (but not sufficient) condition to attract and retain the best customers.  Well done.



Both enjoyed improved margins and higher revenue.  Where most operators around the world are struggling to maintain ARPU, both Verizon and AT&T have enjoyed data growth faster than voice melt.  If they can continue to manage the transition from voice to data, they are already better than most operators globally.



While AT&Ts quarter was not as good as the headlines suggested or Verizon’s, it was a good foundation for future quarters.  Verizon continues to be the clear winner and we cannot see any amount of M&A or foreign investment changing this in the short or medium term.   If AT&T can use their new LTE network to deliver the speed and consistency of Verizon’s they could alter the balance of power while Verizon goes through a more complicated migration from EVDO to LTE.



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Verizon Wireless Q2 2012 results

Verizon Wireless Q2 2012 results

This last quarter Verizon Wireless really blew the lights out.  This shows what a combination of a good strategy and good execution can achieve.  If in any doubt as to who is winning in the market, look at the charts.

Revenue Growth

Retail Service Revenue grew 8.6% y/y to $15.2Bn on the back of Retail postpaid revenue growth of 8.3% and retail prepaid revenue growth of 27.2% y/y.  Data revenue was up 18.5% y/y to $6.9Bn.  Data revenue now accounts for 43.6% of service revenues.  Considering the overall economy in the USA, these growth rates are fantastic.

USA wireless quarterly revenue

Verizon Q2 2012

Net Adds

While retail net adds were down to 1,178k from 1,318 in Q2 2011, retail connections still grew 4.9% y/y on the back of very impressive churn numbers.

They added 888k retail postpaid nets and 290k retail prepaid adds, resulting in an increase in retail prepaid base from 5% to 5.6% y/y.


Retail postpaid churn dropped to a very impressive 0.84%, which was down sequentially from 0.96% and from 0.89% y/y.  This was the lowest retail postpaid churn in 4 years.  Only 7% of retail postpaid base upgraded during the quarter, we suspect this is the iPhone 5 waiting game?

USA wireless postpaid churn

Verizon continues to win on the churn front



Retail Smartphones grew 13.8% to reach 50% of the base.  5.9m smartphones were sold in Q2 and 73% of postpaid phone sales were smartphones.  41% of smartphone upgrades came from phones, rather than other smartphones.  Low churn and more smartphones together drove ARPU improvements.  There were 3.2m 4G LTE devices sold in the quarter, bringing the total to 10.9m devices reaching 12.2% of retail postpaid connections.


Retail Postpaid ARPU grew 3.7% y/y to $56.13 while overall phone ARPU grew 4.9%.  Retail postpaid data ARPU was up 15.4% y/y to $24.53.


Even in this market Verizon managed to improve ARPU


EBITDBA Service margin reached an impressive 49% on the back of $2bn in expense reduction target in 2012.



Great quarter.  We assume the iPhone 5 launch will cause significant upgrades and new additions once launched.

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FiOS speed success impact on Canadian Cable Companies?

Will the FiOS speed success impact Canadian cablecos?


Verizon launched new Quantum speeds

With the new speeds, Verizon users will enjoy speeds true broadband download at 300Mbps.  At these rates, it will only take a couple of minutes to download an HD movie.  This currently takes about 30 minutes on average for the fastest cable-base internet speeds.  But the real advantage is not in the download speeds, but in the upload speeds.  For anyone who wants to do HD videoconferencing, wants to host a seminar or meeting using Web-Ex or GoToMeeting, you will know that the slow responses are not on the Audio quality, but rather the slow response times of relaying your presentation to your audience.


Impact on Canadian Telecoms?

We believe that the move to GPON is a smart one offering speeds and bandwidth that cablecos will not be able to replicate.  But the Canadian telecos have not invested in significant FTTP, but rather are more focused on FTTN.  While FTTN should give both more consistency and faster upload speeds, cablecos can still compete (albeit through significant node splits, which are not cheap).  Hopefully the success of FiOS and good results from the Bell trials in Quebec and Bell Aliant confirm that FTTP is the best short and long term investment strategy.


Impact for Canadian Cable companies?

In the short term, we can only see the negatives of FiOS success and increasing speeds for the Canadian telcos, but there might be some long term upside?  If the USA based cablecos all rally together to make DOCSIS 4.0 a reality (or significant feature upgrades to DOCSIS 3.0) or all invest in a fibre based solution that can compete with the telcos, this could have some upside for the Canadian telcos who could benefit from the USA cable companies collective investments in next generation broadband and TV.   But it is all negative in the short term:  with TELUS more aggressive on their footprint and happy to meet Shaw on price, we expect a significant swing towards TELUS.  Bell has been slower to rollout, but we are excited about what could be if their FTTP efforts in Quebec City offer a good return.  Rogers have been losing TV customers and Bell has not even turned up the heat yet.  Cogeco is losing to TELUS in Quebec and only Videotron (and probably Eastlink) are holding their own.



Even the modest improvements in user interface, combined with the advantages of a standards based solution versus the cable industry’s proprietary approach and decades-old UI have given IPTV the upper hand over CableTV.  Losing the speed war will widen the gap.  We expect high end customers who are reasonably close to a telco CO to flock to IPTV / FTTN ISP solutions while Canadian Cable companies will continue to lose customers to OTT and free-to-air antae providers on the lower end.  The squeeze is on for cable companies, but maybe the increased pressure in the USA will drive some innovation?

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iPad 3


Yesterday we read a really interesting article by Jameson Berkow iPad 3 has tablet owners wanting to upgrade in then FP TECH DESK.  The article points to a survey saying that 42% of current iPad 2 owners plan to upgrade once the device is released.  We think this is an incredible situation.  Gone are the days when subscribers are loyal to their carrier, now it is all about the devices.  This cult-like following has many implications and causes concern at many levels.

innovation adoption curve

Rogers Innovation Adoption and Diffusion Curve

Firstly, Apple products are defying the most sacred of business principles – that of Rogers, who developed the product adoption curve and diffusion of innovation (no relationship to the Canadian carrier).  Rogers did over 500 studies on innovations that all showed the progression from innovator (2.5%) to early adopters (13.5%), to early majority (34%), to late majority (34%) to laggards (16%).  This bell curve (also no relation to a Canadian carrier) has held steadfast since its publication in 1962.  But is 42% of current iPad 2 owners plan to upgrade, this theory could be completely shattered?  Product life-cycles have also been dramatically shortened.

Secondly, this changes the ability for retailers to sell the iPad 2 since the market will almost certainly be flooded by less than 1 year old iPad 2’s that will probably all be in perfect working condition.  Also retailers normally sell on price (which is fixed) and features of one product vs alternatives, but in this situation, it seems that the masses will buy it no mater what the specifications, so only availability determines a retailers profitability.  Those who have good relationships with Apple will enjoy more profit.  This is also a shift in power from retailers to manufacturer(s).

Thirdly, while US and Canadian subscribers have become accustomed to handset subsidies, including on expensive iPhones, this shows that iPad fans, who surely overlap with iPhone fans, are willing to spend their money on unsubsidized devices.  This could become another loyalty problem for carriers, who have retained customers by locking them into long-term contracts in exchange for handset subsidies.  Carriers should discount the rate plans of customers who choose to bring or buy their own handsets.  Shorter product life-cycles also put carriers, who are trying to lengthen associated contracts, churn strategies in jeopardy.  This is a shift in power away from carriers to handset manufacturers.

If the new iPads do have LTE, watch how this will turn up the heat on LTE deployment globally, shifting the balance of power to carriers who have the financial strength and spectrum to deploy quickly.  With the unlocked, unsubsidized iPad 3, LTE laggards will see all tablet users defecting to better networks.

Finally, this pre-launch hysteria is bad news for RIM.  RIM recently did the long waited and much delayed upgrade to their tablet Playbook OS 2.0, but we have not heard much buzz since the press release, which seems only to placated people who already bought the playbook.  Now playbook users can do email on their playbook!  And RIM is due to release Q4 results on March 29, but earlier this week, Jefferies Analyst Peter Misek warned that there was a greater than 50% chance RIM would negatively pre-announce 4th quarter earnings, which most analysts believe could miss expectations.  Apple’s timing seems immaculate; remember that they launched the iPhone 4S after RIM had a 3-4 day global outage, where nobody received emails.  Seems like Apple even has the luck of timing on their side.   With the iPad the apple of consumers’ eye, RIM’s tablet could be relegated to oblivion.

So Apple is not just taking extreme market share from it’s competitors, it is taking loyalty, power and revenue from carriers, revenue and power from retailers and is systematically re-construction the value chain in wireless.  We love Apple products, but would also like to have a choice.  Wireless looks like it is on a similar path to music, which was a big, competitive and long established market with significant players, but now in dominated by Apple.  Make no mistake, consumers did benefit from cheaper and more convenient music, but artists do not make more, there is less industry investment in new talent (we don’t have facts to back this up – it is just speculation), the labels are a shadow of their previous incarnation and we will leave it to better critics than ourselves to decide whether music is better or worse?   We are not sure that it is reasonable to prevent the at&t merger with T-Mobile USA while sitting on the side lines while value transfer moves from all players to one company.  Perhaps the enlarged at&t and a strong Verizon would together have been enough to at least maintain the balance of power between Apple/Google and at&t/Verizon?

The wireless industry is changing more than in many years.  Look for the once mighty carriers to be dis-intermediated and content and device players to contribute more in the overall value chain.  Good news for Apple and some consumers, maybe not so for RIM and the carriers.

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Unlimited wireless plans?

Unlimited plans

From a marketing perspective it is always very attractive to have unlimited, but delivering unlimited is always difficult when the resource itself if not unlimited.

Have you ever heard of an unlimited gas plan or unlimited electricity?  We have not; in fact it looks like the only thing that we do not pay for in measured quantities is air.  And even with air, we have recently read many articles discussing how people from countries with air pollution problems are immigrating to North America for improved air.  So even air might have a levy or volume based rate at some point.

In telecoms the fixed costs are high and the marginal cost of delivering bandwidth very low, but not free.  If the capacity of your network is sufficient to handle all the traffic, then it makes sense to price additional usage very low, but this is not the case when incremental investment is required.  Then the type of service really matters as well as the source and destination of content.

For example, in circuit switched voice, true each conversation takes a whole circuit, which is expensive, especially if there are silent periods, but then at least there is a limiting factor – it takes at least two people to be present for the service to be used, and since most people need to eat, sleep and talk to other people, it does not happen that they can occupy that circuit continuously for 24 hours a day.  Note that there was a notable exception to this in the UK, when a new wireless provider gave away an extra handset with every subscription and offered unlimited (with no caveats) calling between them.  The urban legend says that many families took these plans and used the devices 24/7 as baby monitors, allowing parents to nip out to the local and still be constantly listening to their young ones.  Most operators have learned from this and unlimited plans generally have a fair use policy, which allows the service provider to disqualify obvious abuse.

But data is different in a number of ways, some good, some bad for the provider:  On the positive side is the fact that a whole circuit is not used and even VoIP calls use the network much more efficiently than their circuit switched alternative.  On the negative side, data does not require two people to be present at the same time. Indeed massive amounts of data can be moved without anyone consuming it.  One example is streaming content vs broadcast.  In a world where homes are increasingly moving away from cable and satellite towards an IP-based world of streaming, the economics for service providers can get ugly quickly.

Cable companies can choose not to provide a particular channel at a node level if nobody is watching it allowing them to re-use that bandwidth, if one home in the node is watching the channel, there is no incremental cost of the bandwidth if a second home starts watching the channel.  In streaming, the math is very different.  Each stream will use incremental bandwidth.  This is fine if they paying for the stream in a pay-per use model, but in a world where catalog content’s margin cost is zero (through Netflix for example) then incremental network is used for every viewer.  This get really nasty when all content is online, for example, when a home is streaming live TV, live radio and other content at the same time.  But when someone leaves the room, or forgets and leaves a stream on all day, then the usage can get extreme.

Data today is also more like voice in the past in one way however, it is becoming more symmetric.  So ADSL and cable DOCSIS 3.0 networks that have been built to deliver content to homes, does not have enough upstream capacity to deal with the new generation of user generated content.  How significant is this?  Very.  Over 60 hours of video are uploaded to YouTube every minute.  Over 4 billion videos are viewed every day.  There are 800 million unique visitors per month.  Finally, more video is uploaded to YouTube every month than the 3 major US networks created in 60 years!  And this is just YouTube.  So our networks do have to change to accommodate.

USA Canada Spectrum Holdings

USA Canada Spectrum Holdings

Wireless networks are much better at uplink – indeed many carriers in north America today offer faster uplink speeds over mobile than they do over ADSL or Cable.  So speeds are great, but bandwidth is very limited.  Cable companies have between 650MHz and 750MHz of bandwidth per household, Verizon has 87MHz, AT&T has 89MHz, T-Mobile has 50MHz, Sprint has 35MHz, MetroPCS 19MHz and Leap 16MHz, Rogers 101MHz, Bell 61MHz and TELUS 68MHz.   (Note that all of these are averages of major markets as any carrier might have more in one market than another. )  New entrants in the USA and Canada have significantly less.  So there is not unlimited capacity even with spectrally efficient technologies like HSPA and LTE.

Carriers in the USA and Canada launched with unlimited plans and now have three problems:

  • They cannot continue to build networks fast enough for the demand
  • There is not enough spectrum for the number of carriers
  • They have set expectations with customers that unlimited is desirable

This is further exacerbated by the fact that all carriers have a few users or ab-users that use the vast majority of the traffic.  If their usage was moderated, the rest of use could happily survive of today’s networks assuming reasonably quick allocations of spectrum and additional carrier investment.   AT&T recently suggested that the top 5% of users in their unlimited plans used 50% data than the top 5% of users in tiered plans.  Now they are resorting to throttling these users to lower their usage, but it is always difficult to go back on what you originally promised.   Unfortunately it also looks like some of the non-abusers were effected by the throttling, which has gone down like a concrete parachute.

Bandwidth is a limited resource and while carriers should not try to overcharge as a result, we should all pay in line with our usage, but at moderated unit costs.  Sure one should get volume discounts if you consistently buy a lot, but unlimited plans self-select ab-users and everyone else has to pay for it.   Let’s all work together to re-align thinking around delivering the scare resource of bandwidth in a fairly priced manner.  This means we all need to reset our expectations, abusers will have to pay more, governments will have to allocate more spectrum and carriers will have to invest more.   Finally carriers can reduce their investment by sharing parts of the infrastructure in a wholesale and retail market.  (c) Alphasynn

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Wireless wholesale networks – can we make them work?

Wireless wholesale networks

So far wholesale networks have not worked in the USA and as far as we can see in Europe, the winners in wholesale deals have been the MVNOs, not the wholesale providers which are usually the national provider turned national enemy with a regulator hell bent on creating competition by constraining the incumbent.   In Australia and New Zealand the governments have taken strong positions to create a wholesale market.  It is early days, but certainly an exciting approach which is designed to offer all consumers broadband access.  Despite the complete lack of evidence that a wholesale carrier can exist and thrive, we are big proponents of the wholesale model.

Economics of wholesale:

Wireless networks are like railways.  If you want to get the prices for consumers down you ensure there is competition.  But there are many forms of competition.  Would prices go down if a new railway company simply put another set of rails right next to the existing railway?  Maybe they could take some shortcuts or change the rail gauge to make the trains faster and safer?  I don’t think so.  It would probably be prudent to simply have more than one train company using the same set of rails?

Telecoms is similar and none more  so than in wireless, where a competitors network can cause interference and reduce the performance of all networks.  The predominant model in the world is build your own network and compete. But let’s examine where else this happens;  How many electrical wires are run into homes?  One.  How many water and gas supplies are run into your house?  Again one of each.  Urban homes my have one telecom line and one cable line and although they perform similar functions, they were not run into homes with that understanding.   It seems like the predominant model in infrastructure is one supply.   One might argue that wireless is less like roads and more like air travel, but here again although there are many airlines, there are few airports that are mostly shared.  There is no need to beat on this drum anymore, we think you get the point.

So why build what you can share?  Well there is the spectrum thing, which makes it pretty difficult to share and then which incumbent wants to drop the biggest barrier to entry for a new possibly more nimble competitor?  None, right.   So we have to find a way where wholesale networks can survive and even thrive without onerous regulation.  Some incumbents argue that network quality is at the core of what they do.  We disagree – please see Wireless network quality myths.

So assuming carriers cannot differentiate on network, how can we make it in their best interest to share?  We have a few thoughts:

  • Make is a requirement for winning additional spectrum or do a spectrum set-aside for wholesale networks only?
  • Reward carriers with tax incentives to invest in shared infrastructure
  • Cost plus or retail minus based wholesale price regulation
  • Discount the cost of wholesale spectrum vs. retail spectrum.
  • Require industry structural separation?

While none of these is very appealing, we believe it is too early to give up on wholesale wireless and would encourage everyone to contribute their ideas on how we can make this work.

Good luck to both LightSquared and Clearwire.  (c) Alphasynb

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Wireless network quality myths

Wireless network quality myths:

In the past companies like Verizon in the USA and Rogers in Canada built their brand and customer base on the back of superior networks, but shortly after Virgin Mobile launched the first MNVO on T-Mobile’s UK network, a third party customer satisfaction survey revealed some startling results:  Virgin was rated as having the best network of all the operators by their users and T-Mobile was rated as the worst of the five networks.  So despite being on the same network, customer’s perceptions varied greatly.  The conclusion we came to was that how your marketing department markets your network is more important than the underlying network itself.  This of course assumes that you have a reasonable network that is telco grade 5-9s and does not drop calls frequently.  Verizon and Rogers were both pretty good at marketing the advantages of their networks.  Interestingly, Bell and Telus ran on the same network technology as Verizon but could not convince customers their network was better until they deployed their joint HSPA network.  On the other hand AT&T had the same network technology as Rogers, yet they were unable to convince the American public of their network quality and Rogers did so very effectively.  Moving forward it seems like there are fewer choices in network standards, vendors and topologies, so we expect that in the fullness of time all networks will basically be IP only data networks that operators will find no longer be a point of differentiation.    Do you agree or do you think consumers will measure and purchase based on ping times, lost packets and data network rates?

We believe that actual network quality differences between well capitalized incumbents will not be discernable to the average punter who just wants a great high speed wireless data pipe.  What do you think?

In the future wireless network quality will probably not be a differentiator?  (c) Alphasynb

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Lightsquared CEO quits – but why?

LightSquared CEO quits

In a letter to the board Sanjiv Ahuja has resigned as CEO of LightSquared.  We find it interesting that he gave no reason other than his contract had expired.   It seems he may continue to serve on the board.  Sanjiv is a smart guy and must have many options globally but we really thought that LightSquared could have been his calling.  Not that he needs to prove himself, his track record is fantastic.  So why quit now?  He must have known that the technology had risks and it was going to take time and persistence to ensure success in a venture where they were going after the mighty AT&T and Verizon?  So a small little hitch like the US regulators withdrawing launch permission is enough for him to throw in the towel?    It does not make sense, he likes a challenge, has vision, experience and is probably well paid, so why not stick it out?

Could it be that there is something wrong with the economics of building a wholesale network?  Or he realized the technology would never work?  Or could Harbinger have panicked after already investing $2bn of the originally committed $14bn?

We will explore all of these alternatives over the next few days, starting with the myths of a wireless network performance.  (c) Alphasynb


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Mobile Commerce – e=mc2

e=mc2 ?

Does this mean that e-Commerce is equal to m-Commerce squared?  For that to be true, mobile operators and banks had better starting getting their stuff together and provide something that just works, or else someone else will rewrite their equations.

It seems that operators have not learned any lessons from past mistakes:

When data networks arrived we finally had networks that were capable of providing a wide range of new services like picture messaging, video conferencing , music and TV.  But instead of agreeing common standards for all of these like they did for roaming (which created GSM as the global standard) and SMS which could be sent and received on any phone over any network, they all decided to compete for customers by launching proprietary services.  Who were the winners:

  • Music = Apple
  • Video Conferencing = Skype and Apple
  • Picture messaging = free IM, Whatsapp and Apple
  • TV = still no perfect global solution, but old fashioned streaming seams to be the de facto standard, which is not network friendly.  Europe, Asia and America have all had their broadcast solutions, but a single standard would have gone a long way.

Yes, no carriers won!

The lesson I take out of this, is if the industry had worked together, everyone would have been better off, except maybe Apple.  Even the music industry would have been better off, since their music would not have been as discounted and they would not depend on one distribution channel so much.  It has been good for consumers however, since artists have had to go back to concerts to make money.

So what have we learned about working together as an industry when it comes to mCommerce?  Ah…nothing.  In fact things in m-commerce are worse, because banks have to be involved in these conversations and it is not just one part of the bank.  Merchant acquirers need to be involved, issuers need to be involved, the payment networks (Visa, Mastercard, American Express, Discover, JCB and debit systems) and of course handset manufacturers need to be involved.

Then the issue is who owns the customer?  The banks do not want to give up their monopoly on payments, and neither will not VISA and Mastercard.  The mobile operators want a piece of the pie and so does every part of the old and new value chain.

So what is happening and why is it taking so long?

In the USA:

Verizon, AT&T and T-Mobile teamed up to form Isis.  (Not to be confused with Isis the Egyptian goddess of religious beliefs, or the International Species Information System).  Unfortunately they left out Sprint and the other smaller players.  They have also included some but not many card issuers, Chase, Capital One and Barclaycard.  It will be available in two cities, Salt Lake City and Austin, Texas.   Last summer they announced deals with Discover, VISA, Mastercard and American Express, so at least this will not be a constraint.  While the mobile wallet will work with existing near field terminals, deployment of these has been slow, as they have to be funded by merchants or merchant acquirers and those are the two that do not really benefit in this new world.

So if you have the right phone, the right carrier, live in one of two cities, have an account with one of three banks and happen to visit a merchant who has a wireless payment terminal, you are in luck, this summer you can use your mobile wallet.

In Vodafone countries:

But Verizon wireless is a joint venture between Verizon and Vodafone.  And today, Vodafone also made an announcement, saying they had partnered with VISA and will offer a mobile wallet based on a prepaid VISA card that will be rolled out globally this fall.   So at least you will not be constrained by who you have your bank account with.  They are going head to head with card issuing banks.

In the UK:

Vodafone (again), O2 and Everything Everywhere have teamed up to form a joint mobile payment platform in the UK called project Oscar.  They have excluded Three, a mobile carrier in the UK.  Together they will submit a proposal to Brussels for a mobile payment system that includes advertising and mobile commerce.  Three is playing spoiler tactics.

In Google:

Then there is Google, who announced a deal with Citibank in the USA.  I believe they will also offer their own prepaid cards.  The Google wallet will work on any Android phone with NFC and they plan to integrate offers into their payment solution.  It also works online through Google buy and Google checkout.  There was an apparent security breach with their solution, but who honestly knows how valid this was.

In Canada:

We have Zoompass.  Which is a joint venture between Rogers, Bell and TELUS.   To my knowledge all new entrants have been excluded, but I could be wrong.  Zoompass has teamed-up with Western Union for international transfers, Mastercard for a prepaid card and also offers person to person payments like Paypal.   It does not seem to have integration into offers like the Google solution or into advertising like the UK consortium.   Also the mobile phone version does not work with any NCF phones yet, so you can’t actually use it in a store yet, but you can use your prepaid Zoompass Mastercard card!  Awesome.

Separately Rogers applied for a banking license and there are many banks that are frantically trying to be first to market.

In Africa:

In 2007 M-PESA was launched in Kenya.  They have over 23,000 agents who effectively convert cash into M-PESA accounts.  You can also withdraw cash at these agents or through an ATM.  You can pay bills, transfer money via Western Union, buy airtime and manage your account from your phone.  They also have mobile ticketing for travel, hotels and taxis.  Even businesses can process bulk payments and receive payments for goods or services using M-PESA.   M-PESA has nearly 15 million users in Kenya alone.   The service has launched in other countries including neighboring Tanzania, South Africa and Afghanistan, but it seems that it has struggled to get the same traction.


Although this is by no means an exhaustive list of all of the ongoing m-commerce initiatives, indeed we did not even mention Bump, Paypal or Starbucks, the message is clear:

The banks can do this without the carriers, and the carriers can do it without the banks.  The merchants only benefit if the transaction costs go down and this is unlikely since VISA and Mastercard seem to be at the heart of all solutions.   Consumers get to carry one less vital object around, but this will not work until m-commerce is ubiquitous.   Wouldn’t it be easy to solve the car key and house key thing and then we can leave the keys at home on purpose?

If the wireless carriers do not team up and agree a set of standards, they will not participate in the future opportunity.  Payments are global so we need a global solution.  We cannot afford to exclude any carriers and should not take sides with individual banks.

If the banks want to be part of this, go around the carriers and team up.  But you have to be quick.  You are not competing with other slow moving banks, but rather with wireless carriers that create more new products a day than most banks do in a year.  How many extra customers do you think you will get if you launch first?  And what if they leave their mortgage at their current bank and jump ship back to their mortgage provider when they too have a mobile solution?

Too many variables make it impossible for merchants and consumers, so hurry before Google and Apple solve the problem for you. And keep it simple.

It seems like it will be a while before e=mc2?  What do you think?


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Sprint Board Rejected MetroPCS Takeover – WSJ.com

Interesting in light of what is a happening with our new entrants in Canada.  MetroPCS has done incredibly well, adding over 1 million net subs for many years in a row.  Sprint Board Rejected MetroPCS Takeover – WSJ.com.

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