By:  Athina Kontosakou and Gregory Bufithis

18 May 2012 - The US cable industry is very big and very profitable. The four large publicly traded cable companies – Comcast, Time Warner Cable, Cablevision, and Charter Communications – have an aggregate enterprise value of nearly $200bn. They face limited competition, have high and stable margins and spew out cash. Yet they are accused of being “dumb pipes” – mere distributors with little power over suppliers or customers.

The description fits if you consider only video distribution, which represents about half of the cable operators’ revenues. The reasons can be debated (competition from telecoms and satellite companies? cord-cutting? low household formation?) but video subscriber growth is in unmistakable decline. And pricing power seems to be slipping: growth in revenue per video customer (see chart below) at the big four has slowed recently.  And even as video revenue has flatlined, the cable companies’ programming costs have been growing a few points faster than inflation.  A nasty squeeze.

But these are not video companies, of course.  They are video/data/voice companies.  Their chief advantage is that one set of competitors (telcos) only offers video in select markets, and another (satellite companies) cannot offer data or voice.

And combined revenue (see chart above) from all services is still growing in the mid-single digits at the big four, though the pace of growth did slacken a bit in the first quarter.

The important driver is … data!  It accounts for about a fourth of the companies’ revenues.  As long as data subscribers keep growing at 6 per cent or 7 per cent (as they have been during the past year) and a bit of extra revenue can be wrung out of business services and advertising, the cable model will keep working.  Data subscriptions will eventually hit saturation, too – the big four have 36m data subscribers, up 4m in only 2 years, as compared to 42m video subs. That will leave price increases as the last, and hardest, route to revenue growth. But until that day comes, these pipes are plenty smart enough.

The US cable industry is very big and very profitable. The four large publicly traded cable companies – Comcast, Time Warner Cable, Cablevision, and Charter Communications – have an aggregate enterprise value of nearly $200bn. They face limited competition, have high and stable margins and spew out cash. Yet they are accused of being “dumb pipes” – mere distributors with little power over suppliers or customers.

The description fits if you consider only video distribution, which represents about half of the cable operators’ revenues. The reasons can be debated (competition from telecoms and satellite companies? cord-cutting? low household formation?) but video subscriber growth is in unmistakable decline. And pricing power seems to be slipping: growth in revenue per video customer at the big four has slowed recently. And even as video revenue has flatlined, the cable companies’ programming costs have been growing a few points faster than inflation. A nasty squeeze.

By: Gregory P Bufithis, Esq.
(with thanks to staffers Juan Di Lica, Andrea Valencia, Athina Kontosakou and Darius Champion)

30 April 2012 -  On the heels of Mark Zuckerberg paying $1bn to eliminate the threat to Facebook from Instagram (which we wrote about here), with Yahoo unveiling (yet another) reorganization under its fifth chief executive in five years, and with AOL selling a portfolio of 800 patents to Microsoft for $1.1bn … well, we thought it high-time we posted our Mobile World Congress coverage.

We attended the Mobile World Congress (MWC) in Barcelona last month, by far our favorite event of the year. MWC is every conference delegate’s dream. Despite being enormous … it runs 4 full days and this year some 60,000+ people attended … it is superbly organized and run by the GSM Organization which has a crackerjack staff that can resolve an problem you might have, make scores of suggestions concerning how to cover the event, where to take a eat/drink break, accommodations etc. Scattered throughout the event were video booths where you could do short clips that were instantly Tweeted, recharging stations for cell phone, laptops, tablets, etc., and scores of private “meet & greet” areas. It’s was our third year in a row here and we have a ball. 

Normally just the EAM Capital telecom/media team attends. But this year we decided to wear a second hat and brought staff from our sister company Project Counsel which covers the legal technology space. There were a lot of legal vendors and law firms attending MWC this year. Not  presenting, just attending.  Last year we encountered 3.  This year 12+.  Last year was especially fun because we had an off-the-floor presentation of how an ediscovery/forensics expert breaks out a mobile phone and extracts the data.  

All in all, this event is about revenue-building strategies for mobile-phone operators, financial services in a mobile world and how to capture more of the connected consumer’s time and money, convergence and the battle for dominance across a range of other telecoms-sector-related channels from smartphone operating systems.  We’ll have more on that in a minute. But some of our most intriguing chats were with the folks from Hitachi, IBM and Symantec, vendors with substantial e-discovery assets and some pretty big staffs at the show.

NOTE: And the big gorilla not in the room was Apple who announced their new iPad the week after MWC (funniest sidenote:  upstaging Google chairman Eric Schmidt by sending out the iPad event invitations just as Schmidt’s MWC keynote started).   The  smartphone and tablet poster child has “stayed the course” with its tradition of eschewing the trade-show circuit and not make an appearance in Barcelona.  Well … kind of not there.   Rumor had it that Apple quietly had some people there doing meetings, research, etc.   Meanwhile, there were are plenty of other companies representing Apple’s influence here: The app developers, mobile media companies, accessory companies, etc.

But it leads us to a point made by our Project Counsel companion company in their LegalTech 2012 review (click here) and why so many e-discovery vendors were at MWC:

“Mobile First”.   At LegalTech this year we saw two e-discovery data processing/data review presentations on iPads.  The future.  One of the technology trends that can no longer be ignored is the rise of the Apple platform across all enterprises, a trend I wrote about in January (click here). In one of the conference sessions at this year’s LegalTech, the sentiment from the floor was that the Apple iPad was now the device of choice for attorneys.  And we encountered e-discovery vendors who have developed a niche product line dealing with data collections from Apple products.

No surprise.  It’s a “mobile first” world.  As the folks from Forrester said at their presentation “companies need to realize that mobility is the new front end for engagement systems. Apps are increasingly context aware, fed by the cloud, sensors, history and social data. That requires companies to reconsider how they deploy apps for customers, partners … but especially employees around this enhanced form of engagement”.  Bravo.  Mobile apps from companies can’t just log data, they need to harness all the power of mobile and social to help people get specific jobs done in any particular industry. 

And so it will be for e-discovery applications based on the “industrial strength” presentations we saw at LegalTech.  All you need to see is Microsoft’s purchase of Skype, Google’s acquisition of Motorola Mobility and Deloitte’s acquisiton of Ubermind to realize that technology’s next phase will be those firms that boast the most compelling ecosystems of devices and cloud-based services.  And it also explains why e-discovery vendors attend the Mobile World Congress and learn more about technology, platforms and “industrial strenth” apps.

As the team from Symantec said, categories are blurring.  Cloud, social, mobile.  Trends in the workplace are driving enterprises to cater to the information needs of workers who are not only mobile but smart-device enabled and cloud integrated.  Knowledge management discussions were taking place all over MWC … not least by the e-discovery/information management folks.  We’ll discuss this in more detail below.   Cloud technology continues to grow as a model for delivery, with most vendors now offering that option even if their product was not originally developed for the cloud.

And Apple has had something of a head start in this race thanks to the visionary Mr Jobs, and they are clearly winning hearts and minds in the enterprise, but Amazon, Google and a host of other companies are now hard on its heels.  But the iPad has reached a position where it is becoming harder to find things the iPad can’t be adapted to than to list the uses it’s already being put to. 

This marvelous convergence of diverse technologies and applications and the “what is possible” makes attendance at events like the Mobile World Congress mandatory.  And with the natural of progression of technological disruption, the step-changes in competition such as Facebook’s entry into contextual search and Google’s further expansion into all elements of search, plus those polymaths at IBM with their Watson project and its natural language processing and information retrieval for applications in enterprise knowledge management and e-discovery … well, we’ll need another blog post for that.   We’ll have more comment on the e-discovery aspects of MWC on our Project Counsel site.  Right now, a focus on other elements of the event.  As always at an event like this there is simply too much to see, to do, to cover.  So just a few short observations:

▪ MWC is a “let’s make a deal” event

It’s easy to get distracted at MWC.   There were some 60,000 people, hundreds of booths, some product announcements, and oh, yes — an entire conference of panels and keynotes  But those panels and keynotes are in the background, not the main event.  MWC is a proper trade show – most people are here to do business, network, discuss deals, meet with press, and socialize, much more than they’re here to attend keynotes or panels, or even launch products.   The booths are big (and mostly devoid of Booth Babes) and well-staffed but the real work is in the scores of meeting rooms, and at dinners and parties.  As our chums at Orange said “Mobile World Congress really runs from 6 p.m. to 4 am”.    And well … it’s Barcelona and it’s beautiful outside. 

 
▪ The biggest theme at MWC: how to live in a connected world

The big thing at MWC wasn’t a phone or new network architecture or a gadget.  It was more about the subtle shift in focus on how we live in a hyperconnected world. This year the industry seemed to move beyond starry-eyed soothsaying about a world of 50 billion connected devices to start talking about how these mammoth networks of objects and appliances would actually work and how they would be managed. Ford Motor Company’s executive chairman, Bill Ford, delivered one of the keynote addresses.  It was on the connected car.  Ford has moved well beyond the idea of the embedded connectivity in vehicles being used for mere infotainment. Instead it dreams of a world where cars don’t just talk to the network but to one another, sharing information on their speed, direction and even destination in order to coordinate their movements across the world’s highways. Ford predicts there will soon be 4 billion cars globally, which will bring untold amounts of congestion to our roads. He implied that human beings acting as individual agents could no longer manage that congestion in any meaningful way, but a machine intelligence distributed among billions of individual vehicles could make the optimal decisions on where our cars are placed on the highway.

In an interview, Ericsson Labs’ Mikael Anneroth made the interesting point that if 50 devices in our home are connected, they will generate a lot of chatter, and that deluge of info could get very annoying. If the Internet of things is giving us too much information, is it really giving us no useful information at all?  (Can you make the Internet of Things shut up?)  Ericsson is looking further into the future, designing a social network of things in which devices communicate with one another, acting on the information they receive. As in Ford’s connected car, embedded objects behave with an intelligence of their own, and the user winds up seeing only the end results. For instance, if inclement weather is on the horizon, all of a user’s connected objects could go into storm mode: The windows close, the heat goes up, new route information is sent to your car’s onboard navigation system and your calendar is updated to give you extra time to make your appointments.

Of course, handing that much free agency to devices has its pitfalls. These connections have to be secure, and the artificial intelligence behind them has to be foolproof. What happens if these systems are hacked? Your kitchen appliances may go haywire, or worse, your car could start swerving to avoid phantoms.

▪ Telecoms change business models … well, try to change

Two of the more depressing keynotes at MWC were from executives at two of the most prominent mobile operators discussing the commoditization of revenue streams, investment in networks, and competition.   Franco Bernabe (Chairman and CEO of Telecom Italia) and Li Yue (President of China Mobile) focused on changing fundamentals and the ever-growing pressure on their margins.  Each of the operators is going through their growing up phase in the new era.  Some, like KPN and SMART, are seeing deterioration of their business fundamentals because of users choosing to text or talk via services such as Facebook and WhatsApp.   Many do realize that they need to do something, perhaps offer competing services, but are having a hard to time organizing themselves to actually make it happen.  As one telecom told us “entrepreneurs we ain’t”. 

▪ Tablets, the cloud, Apple, the cloud, tablets …

Did we mention tablets?  The cloud?  Apple?  Those braniacs from Forrester were at MWC with, as expected, with some interesting assessments on the course of technology growth.  And a lot flew in the face of that great scary, bogeyman  ”conventional wisdom” …  which always intrigues us.  Simply put, before cloud computing truly commands the attention of enterprise network architects and the Big Bucks are spent, a few other dramas currently in progress must play themselves out first.  And they involve Apple.  First, some shattering news:  Apple makes a tablet everybody really wants. And CIOs and CTOs may not actually know exactly how it does or should integrate with their networks, but unlike most any technology purchase to date, they’re willing to invest in it now and figure out the solutions down the road.

There was a ton of info … petabytes? … to consume so some salient points due to space limitations.  The rise of cloud computing in 2011 led to a rise in server equipment sales. But the principal buyers were actually just a handful of customers who needed a broad infrastructure platform now. One such player was Rackspace. Another was China.  Yes, as in “government of.”

But those purchases are made – they’re done. Meanwhile, Forrester survey results for Q2 2011 were the first indicator of trouble signs for enterprises smaller than the Chinese government, such as banks. Only about one-fourth said they really have an IaaS strategy, with many indicating they don’t really know what an IaaS strategy is.

What has enterprise executives’ attention locked up? Tablets, particularly the iPad.  Until CxOs (no, not the Chandra X-ray Observatory.  CxOs are top executives who have “chief” in their title — chief executive officers, chief financial officers, chief information officers and so on) stop staring at iPads like cats with yarn dangling in front of their faces, Forrester says the growth of cloud computing infrastructure within the enterprise will actually take a dip.  “In 2011, we estimate that Apple will sell $6 billion worth of Macs and an equal amount of iPads to the corporate market; in 2012, we project $9 billion in Macs and $10 billion in iPads; and by 2013, $12 billion in Macs and $16 billion in iPads,” Forrester’s report reads. “In contrast, global corporate spending on Wintel PCs and tablets will decline by 3% in 2012 and by 1% in 2013.” 

So, for the smaller businesses on the enterprise scale, the adoption of iPads has a long tail to it that brings in more Macs, particularly among members of the IT department themselves who evidently prefer working on Macs. Because of them, Forrester believes, Apple could double its worldwide sale of Macs (a majority of which are sold in the U.S.) in a two-year period, at the same time that spending on PCs levels off, and spending on Windows-based PCs declines. Note the forecast for “Wintel” PCs for 2013, which should be the year of Windows 8.  

▪ A stronger ecosystem, not a Nexus tablet, is what Google needs

The Google Nexus tablet was making the rumor rounds, but even if true, such a device alone won’t solve the primary problem Android tablet owners face.  The blog reporters were saying Google was partnering with Asus to build a 7-inch slate, possibly with a quad-core processor, that will sell for $199. Like all prior Nexus devices, the tablet would use a stock Android interface.  The rumor is certainly believable when you consider the the 7-inch tablet Asus previewed at the Consumer Electronics Show in January.

But issues.  As several developers told us at MWC, any developers that have the Google Edition Galaxy Tab 10.1 essentially have an orphaned device. The tablet came with Android 3.1 and received an update to 3.2 a few months later. Since then, however, no software updates have arrived from either Samsung or Google. And I’ve seen no reports of any planned updates. That doesn’t send an inspiring message to developers at an event that should generate excitement. How are devs supposed to create apps for Android 4.0 when the tablet they were given runs older software?

And there really hasn’t been a huge uptick in the number of Android tablet apps since then. Instead, Google added a function that zooms or upscales Android smartphone applications on a tablet. The entire point of the Google I/O device was to generate momentum for Android apps, but top-tier tablet apps and content available on Apple’s iPad are still missing from the Android ecosystem. Think Flipboard, for example, or HBO Go, which is available on Android smartphones, but not tablets.

Simply put: when it comes to tablets, very few developers are thinking Android first and iOS second. And why should this change when the iPad is still outselling all Android tablets combined? Programmers are following the money, which means targeting their wares on the best-selling tablet. 

▪ Data, IT, mobile gadgets … how to use it, them, things, stuff (eh, just go with Apple)

Notice to the IT Department:  stop viewing your “customers” as the problem and start seeing them as the biggest part of the solution. Educate your users. Make them aware of the ways they can access and use data safely, and how they should protect sensitive information.  Well-meaning but uneducated users are your biggest risk. So teach them, and make them your biggest asset.  Admission by an IT guy: “Fortunately, despite Apple’s completely unearned (and inaccurate) reputation for enterprise indifference, the iPhone and the iPad are (not surprisingly) amenable to central management — although certainly not up to the BlackBerry Enterprise Server, but good enough to set corporate security policies and network configurations”.  Yet another feather in the Apple cap.

And, we learned, Apple provides a free iPhone Configuration Utility that can be used to create standard configuration profiles containing device security policies and restrictions; VPN configurations; Wi-Fi, email, and calendar account settings, etc., etc. 

▪ Categories are blurring … cloud, social and mobile dominate

Trends in the workplace are driving enterprises to cater to the information needs of workers who are not only mobile but smart-device enabled and cloud integrated.  Knowledge management (KM) discussions were taking place all over MWC … not least by the e-discovery/information management folks.  The spike in mobile technology use, thanks to the growing use of smart phones and the iPad, has led to the incorporation of different KM technologies into the same application – for example, content management is becoming an integral part of customer relationship management. The use of social software platforms is expanding too, and social elements are being built into nearly every KM application. Cloud technology continues to grow as a model for delivery, with most vendors now offering that option even if their product was not originally developed for the cloud.

The most frequent comment in our KM discussions:  “The release of the iPad by Apple two years ago has been the catalyst for hunfreds of companies to begin exploring business intelligence solutions and on the fly analytics for mobile delivery.” 

And the chaps from Deloitte Analytics, Forrester and Gartner were (pretty much) saying the same thing: the killer app will be the ability to see all the information relevant to the type of work you are involved with. Through your primary application.  Workers in many different areas need access to content, but they want to do it through their primary application.

▪ IBM: a culture of analytics

What a company.  Hard to determine what these folks AREN’T doing.  We spent almost 2 hours with various members of their team, plus a brilliant presentation by the two primary brains behind Watson who ran through 12 current/proposed Watson applications.  Quite a bit of this I wrote about here after LegalTech (click here).   At MWC we learned more about IBM’s smarter commerce approach through its Cognos Solution and its partner Applied Analytix.  Using the Japanese fashion retailer Start Today as an example, IBM increased annual sales on their Zozotown website by a whopping 54.2%.   Their customer-centric focus uses Netezza and Unica to rapidly analyze massive amounts of data, letting them create personalized messages for each of their 3.8 million customers. Results? The solution helped increase the email open rate by five times, and the conversion rate by nearly 1000 percent.  We’ll have more in a special series “IBM: a culture of analytics” later this spring. 

You could spend the whole 4-days just learning about tech products. So just a few of the gadgets we saw or learned about at the event that caught our attention, some mobile related and some not:

▪ The Kobe e-reader Touch

Many pundits think the Barnes & Noble Nook is the best dedicated ebook reader. But we checked out the new Kobo eReader Touch Edition.  I think you can choose either the Nook Second Edition or the new Kobo eReader Touch Edition and experience the best in dedicated ebook reading.  The Amazon Kindle still has a large majority of the ebook market and I do think they are fine devices. However, I personally find little need for space wasted on a dedicated QWERTY keyboard and am not a huge fan of buying books just from the Amazon marketplace. Both the Nook and Kobo devices let you read EPUB books purchased from various online stores and those checked out from your local public library through Adobe Digital Editions DRM management software. The new zForce touch technology also gives you an ebook reading experience similar to a paper book without compromising the clarity of the display.  A cool device.  

▪ Kingston Technology DataTraveler 6000

USB sticks.  Almost all of us use them.  They are enormously useful, especially to move documents around from one computer to another, or so you can leave your laptop behind for that crucial meeting and stick a presentation on one.  But … easily lost and then security becomes an issue.

Ta da!  The Kingston military grade encryption USB stick from Kingston’s DataTraveler range. The DataTraveler 6000 range promises FIPS 140-2 Level 3 military grade encryption. This sounds impressive and actually it is.  So the USB drive is password-protected. Big deal, right?  Wrong.  There are minimum requirements in terms of how simple your password can be.  And if someone unscrupulous is trying to get at what’s on the drive, they may try what’s known as password brute force attacks.   In that case, the USB drive locks down after ten attempts, destroying the encryption key so nobody can get at the data. The brochure says that the encryption engine is so complex “that hacking into it would take decades”.  

▪ Olloclip lens for iPhone

A fisheye lens for your iPhone.  Well, the Olloclip doesn’t stop with just a fisheye lens. Compatible with both the iPhone 4 and 4S, the Olloclip is a quick-connect lens system that includes fisheye, wide-angle, and macro lenses in a tiny and convenient package (yes, I am lifting this from the sales materials).   Slide it on over your iPhone’s rear camera lens and you’re ready to take some very cool photos and videos. The fisheye lens captures a nearly 180 degree field-of-view. The wide-angle lens doubles the field of view of the iPhone camera.  And the macro lens lets you focus the iPhone within 12-15mm of your subject and applies roughly a 10X multiplier.   

▪ Vox.io : “Phone numbers are dead” 

These folks were not presenting at the show, but attending.  Vox.io lives in your web browser, and unlike Skype you don’t have to download an app. Users receive a URL, which they can link to their existing phone number. So, to call EAM Capital just Google “call EAM Capital” and hit the green button on the first link — our Vox.io profile — and you’ll be put through to us.  You see the beauty of this.  When you travel, you don’t need to send your latest phone number to anyone.  Your contacts can reach you straight through your profile, wherever you are in the world.  And users can create disposable URLs to send to people they need to speak to just once.  A new business model: disposable telephony.  Vox.io was founded in Slovenia but the company has since moved to San Francisco.  The service now has 100,000 registered users. 

▪  The Nest learning thermostat

Engineers from Google and Apple have stepped in to update a small gadget known to create large monthly energy bills: the thermostat.  It is called Nest.  Over time, Nest automatically learns about its homeowners through the homeowner’s actions, and automatically makes temperature changes that suit the user’s needs.  Nest consists of a circular screen and a dial-based interface that is clear and simple to navigate. It tells the homeowner what the current temperature of that zone is, and how long it will take to reach a desired temperature so that the user doesn’t constantly tweak it in order to reach that temperature faster and end up overcompensating.

Nest also has two types of proximity sensors. One sensor activates the screen as you near it, which saves internal battery power when you’re not directly in front of it. The other identifies your occasional presence in the room, which allows it to detect when you’re at home or away. It will automatically adjust its settings when you’re away to save energy. When a few degrees are adjusted for energy savings, a glowing leaf appears.

What truly makes Nest unique is its ability to learn. Over time, Nest automatically learns about its homeowners through the homeowner’s actions. For instance, if a homeowner has a fairly regular work pattern of leaving from 9 a.m. to 5 p.m., Nest will pick up on this pattern and adjust temperature settings accordingly. When heat or air conditioning settings are changed, Nest is paying attention to see what the user prefers. It only takes about one week for Nest to learn regular patterns and begins making these changes automatically for the homeowner. 

Next features: it will take out the trash when it detects “overload” and walk the dog when “pee alert” sounds.  Kidding.

▪  Forumtel and its “Sticky SIM” 

Forumtel is an Israeli company that offers some neat solutions such as their Sticky SIM. This neat little device is a micro-thin SIM that overlays your usual SIM card to provide direct access to Forumtel’s services such as mobile money and discount international roaming. It acts like an international calling card but without the need to dial extra digits – it’s a seamless way to lower the cost of your international calls or data roaming. The Sticky SIM also gives you access to a range of secure financial services such as bill paying and banking – it can turn your phone into your credit card for NFC transactions.

▪  Blackbelt offers security

Security is a big issue with mobile devices. They are easy to lose and often stolen and they tend to be stuffed with our personal data ranging from contact and banking details to our private photographs. Enter Blackbelt, a network agnostic and cross-platform security system on steroids. Blackbelt claim that, because it was designed for mobile rather than being ported from the desktop, it is 30x faster than the competitor offerings. As well as Anti virus, anti spam it also features some neat tricks triggered when you lose your handset. If your device is lost or stolen Blackbelt can not only remotely wipe your data but can also continue to track your device even if the thief removes your SIM. If the SIM is changed it locks the handset and secretly sends SMS messages to let you know where it is. It continues to track the device via GPS and even sends you a URL to open a map showing the stolen or lost handset’s present position.

▪  Dump your Garmin:  get an iGrip!

Mobiles are getting even more mobile nowadays with people mounting them to all manner of vehicles to take advantage of things like GPS and mapping systems. Everyone from mountain bikers to boaters are using iGrips to secure their devices to their vehicles. Produced and manufactured in Germany, the range of mounts and grippers made by this 50 year old firm is vast. They seem to have something to suit every handset (or tablet) and for any type of vehicle. The company uses the ‘Made in Germany’ tag as a USP in a world where everything seems to be made China. They boast that their products are flexible, multi-function and solidly engineered and, from what I saw, they certainly seem to live up to this claim.

15 February 2012 – Last year there were a series of dire warnings that app developers would be driven from the U.S. by the activities of NPEs. 

But lo and behold, TechNet (a telecom/technology CEO network that to which we subscribe) says au contraire.  The surge in mobile software and other apps has led to a surge in jobs, almost half a million just in the U.S. by their estimate.  

Dubbed the “app economy,” the million or so apps created just for iOS and Android devices represent jobs for programmers, designers, marketers, managers, support staff, and other professionals, according to the TechNet report entitled “Where the Jobs Are: The App Economy”  (you can read the executive summary by clicking here).

But how just many jobs?  The analysis conducted for TechNet by Michael Mandel, president of South Mountain Economics and former chief economist for BusinessWeek, found that the app economy has been responsible for adding an estimated 466,000 jobs in the U.S., up from zero in 2007 when the iPhone was first unveiled.

However, it’s important to point out, as the study notes in its executive summary, that these are estimates and “may represent ‘jobs not lost’ rather than net jobs gained.”

That total includes jobs at a business like Zynga, which creates Facebook apps, as well as app-related jobs at companies like Electronic Arts, Amazon, and AT&T. It also naturally covers jobs at top app players such as Apple, Google, and Facebook.

As detailed in the study, the core platforms in the “app economy” include Google’s Android, Apple’s iOS, RIM’s BlackBerry, Microsoft’s Windows Phone, and Facebook’s own apps.

The top metro spot for app economy jobs proved to be New York City and its surrounding counties, according to Mandel’s research. But San Francisco and San Jose combined exceeded the jobs created in and around NYC. California got the nod as the highest state for app economy jobs. But the rest of the country is also benefiting, with almost two-thirds of the jobs counted outside California and New York.

As the study notes, on an economic level, each app represents jobs — programmers, for user interface designers, for marketers, for managers, for support staff. Conventional employment numbers from the Bureau of Labor Statistics are not able to  track such a new phenomenon.

Query:  in the great scheme of things perhaps NPEs do not matter much at all. RPX Corp has just signed an agreement with Alcatel-Lucent that some observers believe could generate US$1 billion in extra licensing revenue for the telecoms company in 2012 alone.  The deal could be a win-win for everyone concerned.

Yes, issues abound.  As Google edges towards the launch of its first physical product,  there are major IP challenges that this move poses. In the same vein,  Facebook’s patent strategy has come under scrutiny as the company approaches its IPO.  In Europe, meanwhile, the European Commission’s competition chief sent an ominous warning to the smartphone sector in its Google/Motorola decision.

Don’t you just love turmoil?

1 September 2011 – No sooner do I touch down in Paris after 4+ glorious weeks at home in Greece but the DOJ decides to challenge the AT&T/T-Mobile merger. 

I have been involved in the merger on two levels:  providing attorneys (through two of my companies Project Counsel and The Posse List) for the massive document reviews involved in the DOJ AND FCC investigations plus independent work here at EAM Capital for a hedge fund client in the telecom business.   So I became involved early on (my first post was here).

As Sascha Segan of PC Magazine said in his post yesterday “sometimes the government works for the people … seeing through AT&T’s lies and its acres of Astroturf … The Department of Justice’s press release is so clear-eyed, I couldn’t believe it came from a government agency”.   It’s an interesting post.    (PC Magazine has done a brilliant job following the progression of this deal).

Now, whether Sascha is right when he says a “dead deal” will be good news for consumers, for phone makers who will still have T-Mobile to sell to, and for innovative technology suppliers who can provide ways for carriers to use their spectrum efficiently remains to be seen.   And as for T-Mobile’s German owners … well, there is that hefty $3 billion break-up fee.  But Deutsche Telekom could face the prospect of being left with an underperforming business, in a market dominated by AT&T and Verizon, where scale is crucial.   This could be as much fun to watch as that other “game changing” deal: the HP/Autonomy merger.

So the document review/antitrust investigation is over (I know: the FCC investigation is still in mid-stream), and the court battle begins.   And the fight ends when a  federal court hands down an order to block the merger, or AT&T decides it will just be too much trouble.  Or the deal gets a pass from the court.  All still an open question.   While the DOJ has signaled it is open to a settlement, the undertone is AT&T has a tough hill to climb.  And it doesn’t look like it will be solved by giving away spectrum and cell towers and adjusting prices on a temporary basis.  AT&T’s issue is competition.  As the DOJ’s complaint contends, none of the smaller telecommunications providers is large enough to provide meaningful competition to the big four carriers.

I am not alone in thinking that the battle is really simple:  the antitrust review/investigation … and the accompanying document leaks … completely undermined AT&T’s primary justification for the massive deal, and highlighted how AT&T was willing to pay a huge premium simply to reduce competition and keep T-Mobile out of play (read: out of Sprint’s hands). 

AT&T’s claims of job gains and network investment gained by the deal were not true at all.   (With impeccable timing, Sprint today released the study it had commissioned that debunks assertions made by AT&T that their proposed takeover of T-Mobile would be good for American jobs).    And while AT&T was telling regulators the deal will increase network investment by $8 billion, it was at the same time telling investors the deal will reduce investment by $10 billion over 6 years. 

Note:  based on historical averages studied by the DOJ, T-Mobile would have invested $18 billion during that time frame, which means an overall reduction in investment. 

Then there is the LTE issue.  LTE (short for Long Term Evolution) is considered by many to be the obvious successor to the current generation of UMTS 3G technology, which is based upon WCDMA, HSDPA, HSUPA, and HSPA. LTE is not a replacement for UMTS in the way that UMTS was a replacement for GSM, but rather an update to the UMTS technology that will enable it to provide significantly faster data rates for both uploading and downloading. Verizon Wireless  has already said that it will support LTE as its 4G technology of choice, abandoning its current CDMA based network.
 

To get the deal approved, AT&T’s key talking point to regulators was the claim that they need T-Mobile to increase LTE network coverage from 80% to 97% of the population.  Except it had grown increasingly clear from the documents … leaked and otherwise … that AT&T doesn’t need T-Mobile to accomplish much of anything, and likely would have arrived at 97% simply to keep pace with Verizon.  The DOJ came to the same conclusion.  The complaint reads that AT&T “could obtain substantially the same network enhancements … if it simply invested in its own network without eliminating a close competitor”.

And the analysts and critics who “crunched the numbers” said AT&T … who has fewer customers and more spectrum than Verizon (or any other company for that matter) … has all the resources and spectrum it needs for uniform LTE coverage without this deal.

So that became a real hot button item,  AT&T’s LTE coverage.  And when internal  documents showed that AT&T computed an internal cost of an LTE roll-out at $3.8 billion — well, quite a cost difference from the $39 billion price tag on the T-Mobile deal.    And as PC Magazine,  and EndGaget, and DSL Reports and countless other analysts said while the $39 billion price certainly would deliver AT&T customers, equipment, employees, and spectrum, most of T-Mobile’s network replicates AT&T’s existing resources in major markets, and T-Mobile’s network is significantly less robust in rural markets where AT&T would want to expand. 

So, the employment fudge, the build-out fudge and the LTE fudge gets you some problems.  Because nearly every politician and non-profit that has voiced support for the merger did so based largely on this “employment spike” and “investment build-out” promise.   Plus that huge problem in the DOJ review:  if the proof shows AT&T could complete their LTE build for far less than the cost of this deal that means the deal doesn’t meet the DOJ’s standard for merger-specific benefits.

So the reality appears to be that AT&T was giving Deutsche Telekom $39 billion primarily to reduce market competition.  That price tag eliminates T-Mobile entirely — and makes Sprint  more susceptible to failure given Sprint would have to face 80% AT&T/Verizon market domination.