MTS Allstream’s wireless prospects
Congrats to MTS Allstream for securing $340-million which it will use to secure spectrum and help build a national wireless network.
The commitment on the part of partners Blackstone Equity and the Canada Pension Plan Investment Board is significant to be sure - it has even been hailed by some as the advent of a new era in Canadian wireless communications.
So we should expect MTS Allstream’s financial results in future to soar given the success of Rogers, Telus and Bell in the field of wireless services - right?
Well, not really. In fact, the opportunity for MTS Allstream is smaller than one would think for a number of reasons.
1) MTS Allstream has very little wireless “green field” ahead of it; the Big Three providers that entered the field at various points over the past 25 years already “own” many of the country’s most valuable customers. The situation isn’t going to change by the time MTS Allstream enters the national arena, potentially as early as next year.
Furthermore, the percentage of the Canadian population that owns a cell phone, known as the penetration rate by industry types, will be at or above the 70% mark by in 2010, perhaps earlier, making the addressable market relatively low for any new entrant including MTS Allstream.
2) Increasingly, customers that will be added after this year will be of the price sensitive variety - they are customers that prefer to use their phones occasionally if they use a cell phone at all. They will be harder to please, are likely going to be less loyal and have less disposable income than those that have post-paid service now. That’s a typical scenario carriers in other industrialized countries have encountered once the population passes the 50%+ penetration rate.
There is also nothing to say all Canadians want a cell phone. Canadians are a rapidly aging lot - those older citizens may opt for the familiar and less costly landline than a cell phone.
These factors mean the ceiling for cell phone penetration is lower than 100% - there is even less opportunity than one would expect for MTS Allstream.
3) Furthermore, it will be a costly exercise to steal customers from the wireless incumbents - a lot more so than it would to be to add a net new subscriber to the ranks had the company entered the market earlier.
Even if MTS Allstream is able to secure spectrum at some point after May 27, when the auction begins, it will have to build costly towers and establish a wireless brand out of province too, potentially lengthy and costly exercises. It will probably also have to offer lower prices or offer more innovative (read: expensive) services, maybe both, to attract new customers and differentiate itself. You get the point.
4) MTS Allstream will also compete against Bell, Rogers, Telus and Videotron in Quebec, Shaw, Telus and Rogers in Western Canada, meaning it will be up against more competition than its ever faced for far fewer potential net new customers.
These are hardly the ingredients for financial success - Canada is a relatively small and expensive country to do business in. We do not offer entrepreneurs - God bless them - the economies of scale like those of the United States.
Nonetheless, it is easy to see why MTS Allstream is attracted by the siren call of wireless given the 50%+ margins generated now by some domestic carriers. More to the point, MTS Allstream needs to expand out of province and wireless on the surface appears to be the best way to do it.
But the company’s chances for financial success with its wireless venture are limited. However, a company with invaluable spectrum and national wireless offering looks plenty attractive as a potential takeover target.
Mark Cuban doesn’t get bloggers
Desperate times require desperate measures.
That’s the mantra Mark Cuban, the owner of the Dallas Mavericks pro hoops team, lives by these days as his team slides further down the NBA’s Western Conference standings.
The volatile owner and tech entrepreneur, perhaps sensing another lost season, recently decided to ban a blogger named Tim McMahon from the club’s locker room after he criticized Mavs coach Avery Johnson.
The post contained criticisms of Johnson for his decision to leave newly-acquired point guard Jason Kidd on the bench for the final 34 seconds of a Mavs-Spurs barnburner that the Spurs eventually won and correctly points out that Johnson was the coach in charge during two of the biggest playoff failures in NBA history.
One week after McMahon wrote the post, the Mavs banned bloggers from the locker room. According to McMahon, he was the only blogger granted access to the club’s locker room.
Predictably, Cuban said the team couldn’t accommodate McMahon any longer. The team’s weak response was something along the lines of ’sorry Tim there’s just not enough space for everyone.’ Here’s Cuban’s response to McMahon’s query about the new policy:
“We have to set limits somewhere, right? Should every blogger be allowed in? And when there are 25 of them, how do we decide who gets in or not? If they need access to a player, they can get an interview. It just won’t happen in a locker room.”
What about the timing of the new policy Mark? Odd that it came a week after McMahon’s post - no?
Clearly, Cuban and the club are trying to show McMahon who’s boss. Fall out of line and you’ll get smacked down - that seems to be message the Mavs sent McMahon and fellow reporters and bloggers. It’s a backwards and petty way to deal with critics for the following reasons:
1) It brings undue media and blogosphere attention to McMahon’s (correct) criticisms. Before today, I didn’t know the name Tim McMahon nor had I ever read his blog or the Dallas Morning News.
2) The move shows how thin-skinned Mark Cuban and the Mavs are these days - not exactly a reason to feel confident if you’re a Dallas Mavericks fan as the playoffs approacheth.
3) Cuban could’ve used the blogosphere to defend his coach’s strange decision to bench Kidd in the game against the Spurs - he could’ve also used the opportunity to defend his coach’s playoff record too. Instead, he chose the easy defensive route.
ESPN.com reader Joshua Wells may have put it best: “If this were the 1950’s, Mark would be keeping out TV reporters because only newspaper writers are real reporters, and a TV Personality is a TV Personality is a TV Personality.”
Cuban was a breath of fresh air for the NBA when he took over the Mavericks last decade. If he continues to pull blogger ban stunts, he’ll begin to alienate fans - that is he hasn’t already.
He should focus on his team’s performance and ignore the criticisms. Win a championship and all those nasty words will disappear.
MobiTV comes to its senses
It always amazes me when companies can’t see the forest for the trees.
Take for example MobiTV, a provider of content for mobile phones, that threatened to shut down HowardForums, the uber popular online exchange run by Toronto-based Howard Chui (which seems to be devoid of good mobile biz dirt these days) this week.
The MobiTV-Howard Forums (does anyone else wanna say Howard’s Forums?) Bay of Pigs started over a series of links published on Howard’s site that allowed virtually anyone to take a peek into MobiTV’s content for nada.
Don’t know how but some crafty users found security holes in MobiTV’s systems wide enough to accommodate a Mack truck. Instead of closing the hole, MobiTV decided to blame Howard Forums and its users when it warned of impending legal action; MobiTV threatened to shut the site down.
Why Howard just didn’t remove the links is beyond me - perhaps he saw a slippery content removal slope coming.
Here’s what Chui had to say.
"These feeds do not appear to be protected in any way, and it appears anyone with a compatible phone can view them," Chui wrote in a posting. He questioned why MobiTV was operating its service without authenticating its subscribers.
This is a classic case of "shoot the messenger." Instead of patching the hole and moving on, MobiTV decided to go after those that exposed its problem.
UPDATE: According to a posting on HowardForum, the issue has been resolved (MobiTV’s co-founder Paul Scanlan who wrote Howard Chui with a further explanation needs to use the spell check feature before he posts anything in future).
But MobiTV still has egg on its face - the company brought unnecessary attention to itself with its threats; not a smart move for a young, growing company trying to capture the imagination of North American cell phone users.
Next task - lower the cost of the MobiTV service in Canada; It’s outrageously expensive!
Apple App Store - A Game Changer
iPhone users take heart.
There is relief coming in the way of useful applications for the fast-growing device, something that has been sorely lacking across all mobile platforms.
Apple’s App Store/mobile application development strategy and kit, announced yesterday, means useful applications will probably be available in the second half of this year. The store, which is now in beta mode, will be ready to go in June.
By now, many of you probably know the details, but here are the highlights for the sake of review:
- developers will get 70% of the revenue from any application sold; no further charges for hosting or credit-card processing for example.
- developers must distribute applications through the iTunes store;
- no distribution of applications to the enterprise planned for the moment;
- developers must register with Apple but the SDK is free; registered developers get electronic certificates
Jobs called this “the best deal going to distribute applications in the mobile space.”
Don’t know about that but it’s a big step forward for the wireless application development industry. This may seem like a counterintuitive statement given that Apple is trying to build another walled garden in which it controls the applications people can download onto their iPhones.
I’ve never been a fan of closed systems but the other walled gardens - you know the ones built by the national wireless service providers in Canada and the United States - haven’t worked. Make no mistake about it - this is Apple’s attempt to co-opt the application selection process from the carriers.
“We define the software on the phone, we run the developer program, we’re distributing the apps,” said Jobs yesterday at the event where he claimed Apple’s relationship with the carriers is great. “This is our program, and we’re running it.”
Why will mobile application developers participate? After all, the BlackBerry, Palm and Windows Mobile camps allow for open application development. So how can Jobs and co. go against the grain you ask?
Well, Apple can because it’s Apple. The company likes to control all parts of the product development process - it has worked in past. One need only look the iPod for proof. Furthermore, wanna-be app dev stars will have instant access to 10+ million iPhone users by the end of the year (if Apple blesses the developer’s creation of course).
The results can’t be any worse than the crap that’s already available for the carrier-controlled decks - the applications available for wireless phones in North America stink for the most part.
To foster development, Apple should allow the developer to set their own prices for applications; something that looks like it’s in the cards. Apple should submerge its desire to control absolutely all facets of development and distribution; better applications will be created and developers will be able to sell more of their wares.
So far so good. With any luck, application developers will port their creations to all types of devices.
(Yes - this is Apple week at kevinrestivo.com it seems.)
The demise of Geosign
My friend and former colleague Robert Thompson wrote a great piece on the fall of Geosign, the Guelph, Ont.-based company that was the recipient of the largest round of financing in Canadian venture capital history, in this month’s Financial Post Business magazine.
Guelph, Ont.-based Geosign generated as much as US$100-million in revenue at its peak by arbitraging Google AdSense and Yahoo Ads but little was known about the company in its heyday.
Google, in effect, cut Geosign’s success short when it changed the terms of its popular AdSense program, making the company’s business model untenable. American Capital, the firm that gave Geosign US$160-million, eventually took control of Geosign and split it into two divisions.
Apple’s iPhone Software Developer Kit - (Announcement) First Impressions
As expected Apple released its iPhone SDK this afternoon but the company didn’t leave much up to the imagination.
Apple said the SDK will allow the iPhone to sync up with Microsoft Exchange so users can do push wireless e-mail and access their calendars remotely (yawn).
In addition, the iPhone can now work on virtual private networks - it also has offers automated configuration options, with remote data wiping an option too just in case the phone is lost or stolen.
These are all ‘me too’ smartphone features as far as I can tell - the BlackBerry and Microsoft-powered smartphones have similar options - and were widely anticipated to be enhancements announced by Apple today.
Nonetheless, enterprise IT managers won’t be able to slam their doors on employees who request that they be able to use the iPhone on a corporate network. That in and of itself is a net positive for Apple as it will allow the company to add corporate users and ultimately build on the 28% share (? is that right?) Apple claims to have of the U.S. smartphone market.
Apple admirers speak out
Apple fans have spoken and the majority aren’t happy with my prediction of the company’s slide, posted on this here blog yesterday, once Steve Jobs gives up the company reins. The topic of succession planning was broached at the company’s annual general meeting held on Tuesday. Here are some excerpts from some of the more polite readers:
1) AdamC - “Let face ivery (sic) company or country has it (sic) day in the sun, to day (sic) Apple is riding high and with the blue print of Steve Jobs in place we will it as it is today with or without Steve Jobs.”
2) James Horner - “Get your simple facts straight before you try things that are more complex.”
3) GoCatGo - “My concern about your doom-laced article is that you disregard the remarkable contributions of people like Jonathan Ive. Mr. Ive is a remarkable and talented individual … and not at all alone at Apple in this respect.”
4) GoCatGo (cont). “I appreciate your passion for technology, but don’t use your enthusiasm as an excuse to bypass the research such an article requires.”
Touch a nerve did I? I’m far from an Apple hater (I own a Mac), though the blind loyalty and cult-like behavior of its users does tend to annoy me I must admit. The more level-headed readers said references to the Apple “cult” devalued my other points - I concur even though they were made in jest. I will use the term sparingly, but in applicable circumstances, in future. One other clarification/correction, as pointed out by several readers in the blogosphere that commented on my post yesterday - I incorrectly slotted the creation of the Lisa computer under the watch of ex-CEO John Sculley. The mistake was corrected - I’d urge readers to submit the same correction to other sources on the Web.
I still believe, however, Jobs is the kernel (no, not the software kind) of Apple - without it the company doesn’t make the same kind of tasty popcorn. He is a rare breed - a company co-founder that can drive a company to new heights. (Yes I’m aware of that Gates fellow who helped Microsoft reach great heights as well before his relatively recent retirement.) Jobs is surrounded by very capable lieutenants; that doesn’t make them leaders. I also doubt an outsider can replicate or maintain the unique culture Jobs has fostered over the years. This culture, as one reader/Apple employee pointed out, has fostered creativity and helped the company’s employees make and market great products.
Look forward to your comments about Apple’s iPhone software developer kit, which I will cover in a post later this afternoon.
Windows Vista price cuts not about competition
Microsoft’s price cuts, announced Friday, to its Vista operating system are a sign the U.S. economy is ailing and that consumers don’t need to upgrade to a new version of Windows nearly as often.
For those PC users that missed it, the company said it will cut prices (in the U.S.) of Windows Vista Ultimate from US$299 to US$219 while the price for an upgrade version of Vista Home Premium will be slashed from US$160 to US$130.
The news made for lively newspaper stories and blog posts on Friday that described the competition between Microsoft and Apple.
It is true Apple’s Leopard OS is a vastly improved product & shipments of its Mac product lineup have jumped sharply in recent years. But competition on the OS front won’t be on Microsoft’s home turf which is the PC hard drive.
More to the point, Microsoft is having some trouble selling its operating system to consumers in part because of the ailing economy in the U.S. and also because XP is good enough negating the need to buy the latest and greatest operating system.
Consumers and businesses may also be waiting to upgrade to Vista’s successor. People have learned over the years it’s best to wait for at least a year after a release date before buying a Microsoft product as bugs and other hiccups have to be worked out.
Others believe Microsoft is losing pricing power, a plausible theory as well.
What’s for sure is that Apple or the Linux camp won’t beat Microsoft at its own game. Further market share gains on the part of Microsoft’s competitors but those companies will never beat Microsoft at its own game.
Nor are the price cuts about some sort of migration to the Web thus negating the need for Vista or any Microsoft OS. It’s that people simply don’t feel the need to upgrade nearly as often. The Vista horror stories, of which there seem to be no shortage of on the Web, have scared people off at least for the meantime. It’s about relevance. It’s harder and harder for ANY OS provider to sell an upgraded version.
The telltale sign of the operating system’s relevance, at least for Microsoft, will be future price cuts. As Nick Carr states: "To get a read on the long-term financial prospects of Microsoft’s core business, don’t focus on the market share report; look at the price tag."
The demise of Apple starts once Steve Jobs departs
It won’t happen overnight but once the co-founder and chief executive of Apple packs his black turtlenecks into a suitcase and calls it a career, the circus he leads will start folding its tent.
Jobs is the company’s public face and driving force - no one can replace the unique culture and emphasis on product detail and design he has instilled at Apple.
In fact, a successor could very well send the company back to the also-ran status it enjoyed last decade.
How would such a demise of a company with a market cap of US$108-billion unfold? Quite easily.
A new and possibly inept successor to Jobs will take over and eventually, if not immediately, fall on his face soon after Jobs leaves the company. It’s happened before - anyone remember the disastrous 12-month reign of Gil Amelio as CEO from before Jobs came back to lead his people? The stock hit a 12-year low under the watch of Amelio. Many of those problems were passed down by previous CEO John Sculley, who replaced Jobs after his first tour of duty (apparently in a power struggle). Sculley erroneously decided to embrace the PowerPC computer microprocessor when the whole world was going the way of Intel.
He zigged when everyone else zagged. Worse yet, the company had no cachet with consumers.
It took the return of Jobs in 1997 and the release of the iPod some years later to restore the company’s lustre. Some 11 years later, the topic of succession planning was brought up by a cult member, er, shareholder at the company’s annual meeting yesterday. It’s unusual when a topic or sentiment other than mass adoration for Jobs and the company’s products is bought up at Apple’s AGM.
In a low-margin business like computer hardware, which is Apple’s bread-and-butter, it’s a question worth further exploration.
Apple’s phenomenonal growth so far this century is already a tough act to replicate even for Jobs given market conditions and increased competition. The departure of Jobs would surely test the company’s wherewithal; probably shrink it sizably over time in fact.
Apple has gained ground on Microsoft in the more lucrative operating system market but it’s still a distant number two. Furthermore, market conditions have eroded to the point and products are good enough so that convincing consumers to upgrade their home computers, to the Mac or Windows platform, is difficult at best. The company is clearly the leader in the digital music player market but rivals have set their sights on it. In the smartphone game, the iPhone’s 10-million shipments expected by the end of year pale in comparison to the business generated by the likes of cellphone giants Nokia, Motorola and Samsung.
Point is Apple’s growth and sex appeal is inextricably linked to Jobs, its public face and leader.
The departure of Jobs, when it happens, will signal the beginning of the end for Apple, which has had a great run. The fact that the company is so dependent on Jobs, however, is yet another reason not to invest in the company.
UPDATE: Based upon the advice of a few level-headed readers, I’ve decided to eliminate all five (inclusive) references to “cult” and “Mac fanatic.” Apparently, the references devalue my otherwise valid points (my quasi interpretation). Could just be sour grapes too but I like to be responsive to reader requests.
Daft PR from Google and GrandCentral
Someone call David Letterman.
The late night talk s
how host should create a segment specifically for companies such as Google/GrandCentral, the search and unified communications vendor that decided to score some cheap PR points last week by announcing it will give away life-long phone numbers to the poor of San Francisco.
The segment could be called "Stupid PR Tricks" - the first guest would be the marketing and PR folks from Grand Central. (Google bought GrandCentral in July of last year.)
What a joke. It’s a cheap and unnecessary PR tactic. Besides, it’s been done before! It was cheap looking then and it’s cheap looking now.
Many if not most homeless people don’t have their faculties about them or are mentally incapable of doing much else besides wandering around on the streets.
Besides the service is already free. There’s another service in the region called Community Voicemail.
Why not "give it away" to someone that can actually use it like students?
Students may actually buy GrandCentral’s service at some point in future; heck they may even work for Google in future! Students are meant to be exploited; the homeless, well not so much since they’re already downtrodden. Students have hope; the homeless more often than not do not.
If you want to do something useful for the homeless of San Francisco, set up a shelter, give them food or maybe even a job. I’m guessing the needs of people in such unfortunate circumstances are more immediate anyways. The phone number can be given away (remember it’s free?) later.
Let me be clear - there’s nothing wrong with turning a profit but surely there are less abhorrent ways of making a buck other than exploiting the homeless?
For Google and GrandCentral, the real reason for the PR stunt can probably be traced to the office of San Francisco mayor Gavin Newsom who now owes the company a favour or two (read: tax break) as one corporate citizen looks like its trying to do something useful with respect to the city’s massive homeless problem.
To be fair, there are many that feel differently than I, including those from Community Voicemail. Nonetheless, I believe it’s still a cheap PR stunt.
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