Mexico Requires FM Radio Functionality for Smartphones

Mexico is set to become the first country in the world to legally require smartphone manufacturers to activate the FM chips that are included in nearly all the devices available on the market, so that consumers can listen to FM radio on their phones. Last week, the country’s communications regulator, IFT, introduced a legal provision requiring manufacturers to activate smartphones’ FM radio chips with a view to “preserving the right to access information.” The IFT cited a report by the Mexican Chamber of Television and Radio Broadcasters indicating that only a few smartphones have the FM chip activated because operators “make significant amounts of money from the consumption of streaming data” and would “lose revenue if users had the ability to access the radio for free on their mobile devices.”

The built-in FM capability of most smartphones is a well-kept secret as far as consumers are concerned. While it might seem out of place to get excited about a type of “old technology” at a time when smart-device functionalities are growing by leaps and bounds, the Mexican government is taking a stand on the issue in the name of consumer rights and basic fairness. Forcing manufacturers that want to export to the Mexican market to activate the  FM chips would enable Mexican users to receive radio broadcasts on their phones without using any mobile data, and with less depletion of battery power.

This is significant for mobile operators, because when those chips are activated, a free entertainment-content service can compete with the popular streaming entertainment content services that consume large amounts of mobile data, in particular 4G/LTE data. Not only does that stand to take revenue away from the MNOs due to reduced data consumption, but it would have an effect on the deals they have entered into with streaming entertainment services such as Spotify with the express purpose of attracting customers. For most device manufacturers, there would likely be no negative impact, but for Apple there easily could be, because FM radio via smartphone would be competing against iTunes and Apple Music.

The will to activate FM radio on smartphones could spread beyond Mexico. In the United States, FCC Chairman Ajit Pai, a regulator known for his pro-operator stances, has made some strong statements in favor of FM. This past February he said, “It seems odd that every day we hear about a new smartphone app that lets you do something innovative, yet these modern-day mobile miracles don’t enable a key function offered by a 1982 Sony Walkman.” He added that FM capability would be valuable from a safety perspective, too, because it would allow users to receive emergency broadcasts during catastrophic events if wireless networks stopped functioning. Nevertheless, Pai said that the FCC should not force device manufacturers to enable FM but instead leave the matter up to the market. The Mexican regulator takes a different view.

It should be noted that we have no idea to what extent FM radio would undercut streaming content. Obviously the selection of music on the radio at any given time is far smaller than what is available via the internet. At the very least, those users who consume data through streaming radio broadcasts could switch to FM transmission and save money. In general, we believe that while there would be an impact, it would not be very great, and for operators to be seen opposing the activation of FM chips would probably have a deleterious effect on their public image. 

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Warid Telecom, Bank Alfalah Partner on LTE Handset Offer

Pakistani mobile operator Warid Telecom has launched an LTE handset offer in partnership with the country’s Bank Alfalah. Warid’s postpaid customers who have a Bank Alfalah credit card with an adequate line of credit can avail themselves of an offer to purchase select smartphones on either of two installment plans—6 months or 12 months. The seven available devices include handsets from Huawei, Nokia, Samsung and Sony. Monthly costs for 6-month installment plans range from PKR 8,207.00 (US $81.34) for the Huawei Ascend P7 to PKR 15,513.00 (US $153.75) for the Samsung Galaxy Note 4. The 12-month installment plans, with the same range of devices, cost from PKR 4,503.00 (US $44.63) to PKR 8,157.00 (US $80.84) per month. Warid Telecom is also giving 8 GB of mobile data at no cost to customers who purchase any of the handsets on an installment plan.

Warid Telecom’s 26 December launch of 4G service made it the second of the country’s operators to launch 4G service, after Zong. It is not surprising that the country’s smaller operators launched 4G ahead of the larger ones. Pakistan experienced delays for many years in launching 3G service—it issued its first 3G licenses in April 2014—and with the country being so late in launching 3G compared to other nations in South Asia, it makes sense for the relatively small operators to move ahead faster with 4G deployment so as to gain advantage over their larger competitors. Warid Telecom’s strategy to promote 4G handsets in a partnership with Alfalah Bank, as well as the 8 GB of mobile data that customers who purchase these devices on installment receive at no cost, will likely help increase the operator’s 4G subscribers.

Although this offer requires the use of a credit card, it is interesting that Warid has chosen to partner with a banking institution, perhaps as a first step in trying to spark more use of mobile money by its subscribers. While the expansion of mobile money applications has been occurring quite dramatically in developing countries, Pakistan has witnessed relatively little of it in comparison with other emerging markets, particularly with regard to mobile wallet use by consumers. Warid’s offer, which appears to have been strategically developed to expand the ability to use 4G service, may also drive an increase in the use of mobile wallets by the country’s unbanked and underbanked population.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx

Verizon Plans to Launch OTT Streaming Video Service by 2015

Speaking at Goldman Sachs’ Communacopia Conference, Lowell McAdam, CEO of U.S. mobile and fixed operator Verizon, stated that the company plans to introduce an OTT digital video service by mid-2015. The service will directly compete with the likes of Netflix, Hulu and Amazon’s Prime in the U. S.’ crowded streaming video field. Besides the impending entry of Verizon, this market is expected to become even more competitive in coming years, with both Sony and satellite provider DISH Network planning their own services.

The new entrants in the digital content sector are largely drawn by a desire to capture the business of cord-cutting millennial consumers, who have tended to rely on streaming options rather than purchasing cable service, as past generations had. As these younger consumers begin to make up an increasing proportion of heads of households, designing packages that meet their expectations will become more crucial. A major, and possibly imminent, effect of this shift in the industry will be the likely decline in “all-included” cable television packages. Currently in the U.S., most fixed line providers offer a bundle that includes broadband internet, land-line service and a TV package that can include upwards of 300 channels. The inflexibility of this arrangement has long drawn criticism from consumers, who often only watch a small percentage of the channels to which they are subscribed. While these complaints have long been lodged against cable operators to no avail, operators are now scrambling to react because consumers have found another avenue for instant video content—the internet. Of this changeover, McAdam said, “No one wants to have 300 channels on your wireless device. I think everyone understands that it will go à la carte. The question is what this transition will look like.”

Despite the many competitors it will face, Verizon has several built-in advantages that could lead to success in this emerging field. First, the company already provides internet, TV and/or land-line service to 70 million US households. As such, it has the billing, customer service and marketing infrastructure in place to successfully roll out a new service on a broad scale. Second, and more important, Verizon can likely secure the digital distribution rights to some of the most valuable properties that have thus far eluded the likes of Netflix—live content, particularly sports. Even Netflix’s most recent deal with Fox (one of the major U.S. networks), has a one-year delay before the network’s content is available for streaming, with the service acting as an alternative to or an augmentation of the traditional syndication structure. Through its current cable television offerings, Verizon has in place the relationships with networks and the resources to expand distribution to its new OTT service. The greatest challenge to the operator in this field may be adapting culturally to the expectation of rapid change; companies like Netflix are constantly adjusting their offerings based on customer data. If Verizon is able to clear this hurdle, it will be well positioned to thrive on the frontier of content distribution.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx

 

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