Worst of the Week: The junk I’m going to run on Verizon Wireless’ network

Hello!
And welcome to our Thursday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWirelessNews.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
So it seems Verizon Wireless is going to open its network to any device and any application starting next year. This is great news because I’ve got plenty of new devices and applications I would like to run on Verizon Wireless’ network. Now all I have to do is learn how to design and build devices and applications. That can’t be too hard, right?
Anyway, Verizon Wireless’ move to an open-access paradigm got me all excited because now I finally have a place to run all my junk. See, the best part of all this is that, no matter how stupid or useless the device or application is, Verizon Wireless will run it. This opens up the possibility for lots of stupid and useless stuff-which I excel in.
Here’s a list of the devices and applications I’m going to run on Verizon Wireless’ network when it becomes open:
1. An auto-dialing application. Users will be able to install this Java application onto their phones. Once launched, the application will constantly place prank calls to my arch-nemesis Dan Meyer. The beauty of this application is that it will be a viral, social-networking, ad-supported application, which means that a bunch of people will install this app and all of them will constantly prank call Dan Meyer all the time. And I’ll make money from it. (I haven’t figured out that last part yet).
2. A wireless football. This will essentially be a cameraphone/football, so that you can see all the action in real time from the view of the football.
3. A wireless baseball. It’ll be the same thing as the wireless football, but as a baseball.
4. A wireless soccer ball. It’ll be the same thing as the. well. you see where I’m going with this.
5. A minute-tracking application. This application will track how many minutes you’ve talked on your cellphone during a month, and will warn you when you’re getting close to the limit of your allotted minutes.
6. A poop-tracker. You’ll be able to install this tiny wireless microchip inside a baby’s diaper, and it will send you a text message every time that baby poops. This will help prevent diaper rash.
7. A Chuck Norris speakerphone. You’ll be able to wear this device under your shirt, and it will wirelessly record the conversations you have throughout your day. If you ever get into an argument, the voice-recognition software will automatically select an appropriate Chuck Norris quote and play it on the speakerphone, as if you were saying it yourself. So during the middle of an argument, you would automatically come out with a stinging comeback like: “One night you’ll close your eyes, and when they open, I’ll be there. And it’ll be time to die.” Or, “I don’t step on toes, I step on necks.” And it’ll be in Chuck Norris’ voice.
8. Wireless pants. I think this one is self explanatory.
Well, I could go on, but you get the idea. I’m so excited to get my stupid and useless devices and applications onto Verizon Wireless’ network. Can you hear me now, indeed.
OK! Enough of that. Thanks for checking out this Worst of the Week column. And now, some extras:
Normally I fill this area of the column with nonsense and unnecessary zingers. However, this time I’m going to try something different. A few weeks ago I wrote a column about mobile banking called “Worst of the Week: An m-commerce sellout.” I received a number of interesting letters on this subject, which I have published below:
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There is no question that the underlying technological issues for mcommerce are not particularly radical-no quantum computing here. The devil, as it always is in financial services delivery, is in the details. Mcommerce is hard for business and operational reasons, some of which are arcane:
1. We are trying to push broadly standardized, widely accepted models of economic interaction through a bunch of artificially walled gardens. This leads to a lot of things that aren’t much fun to implement against: varying handset and OS models, varying network behavior, and, most importantly, powerful entities who are extremely jealous of their customer relationships. We take something like a credit card, with nearly universal acceptance on the part of consumers and merchants, driven by a few, worldwide brands, and pretend that we can get away with a Sprint version, an AT&T version, etc.
2. Financial services delivery is highly regulated, even more than telecommunications delivery. It’s not enough to have your on-phone application properly display a balance. You have to be concerned about how you got the balance data, what networks the data traveled through (and to the banks, the carriers’ networks are black boxes, and I don’t mean that in a good way…), and how we know who the person is who holds the handset. Get this wrong and bad things happen to you. Look at ecommerce retailers: After some spectacular security failures, they are now being forced by the card associations to adopt PCI. Visa says that 1 of 3 large retailers and over half of small retailers are NOT compliant today. The amount of work required to bring the rest on board is very large (PCI audit is a cottage industry), and will take at least another 3 years to complete. Where are we with mobile on this? Do carriers or mobile technology shops know what Regulation E and Z are?
3. Financial services delivery is not automated in the way people think it is. Just as several Internet banking providers went through a baptism of fire when they learned financial services automation is not “plug-and-play”, the same will happen in mobile. There are so many things you have to get right, and it sometimes seems that every one of the 18,000 financial institutions in the U.S. does it a different way: customer authentication, dispute/exception processes, customer service, transaction returns and chargebacks, core system interfaces, multi-region practices, siloed product models, the list goes on.
Now, in terms of the delivery concepts themselves, I agree that deserves some scrutiny:
1. Virtual shopping-Nice application that makes the carriers big money. What’s the problem here? Simple: The distribution model has been combined with the payment model. Carriers deliver third-party content on their decks and under their brands. Carriers get paid anywhere from 25 – 80%, depending where in the world you are. Fine. However, once you buy said content, the charge is settled to your mobile bill in most cases. Not so fine. As it turns out, settling, billing, supporting, returning, etc., financial transactions is actually a messy business that you have to do right in order to not screw up its very thin cost model. The carriers could be doing a lot better for the users and themselves with this, in my opinion. They should get to know better how the banks and processors do this.
2. NFC. Not a fan. Every time we in the electronic payments industry have tried to displace traditional magstripe with something “new and wonderful”, we have fallen flat, especially in the U.S. We need more people who suffered in the smart card wars to be on the NFC teams. As you point out, how do we get customers to change a behavior we have spent 20 years helping them develop? And fraud control? Here’s the dirty secret on fraud: Visa reports that their actual systemwide hard fraud figure is less than 10 basis points on dollar volume, and that includes Internet, card-not-present fraud! Not an earth-shaking number. And lastly, the average age of a POS terminal in the US is 7 years. And there are over 6MM of them deployed. How do we get them replaced before I retire? Will customers tolerate a mixed magstripe/NFC world? Smart money says no….
3. Mobile banking. As a friend of mine in the business says, no one walks around town just itchin’ to do some bankin’. Yes, it is true that new users of mobile banking check their balances a lot. But that’s a “wow” thing, in my opinion. You’re actually going to get folks to use this interface over a home PC browser for standard banking tasks? Let’s hope that we don’t spoil the fun of mobile phones with the drudge of personal financial management. Now, I am a fan of alerts and notices through mobile. I would like to see rules-based systems that actually allow a user to automate personal financial management tasks. Let Jeeves check my balance, and then text or IM me if something is out of whack. I’d rather use that time to play Tetris…
4. Yeah, until the FTC or the Justice Department gets a hold of it. Or even better, someone with a gambling problem who claims their debts are unenforceable because the phone let them place bets that were in fact illegal. Just ask Visa about that one…
In the end, will we have mobile banking/payment? Of course, because mobile phones are PCs and carriers will eventually have free and open pipes (don’t tell them I said that). Is this the next Google? Of course not. Banking is one of those death and taxes things in life: Very important, but I want to do as little of it as possible.
Roger Applewhite
Avenue B Consulting Inc.
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You are correct sir. Qualcomm is not stupid. Greedy, perhaps, but not stupid. And as the market maker they can set the price based on anticipated market penetration to maximize their return and still set the bar low enough to keep out competition.
Baseline: QUALCOMM paid $210 Million for Firethorn.
Business Plan #1
U.S. has 250 million wireless subscribers (let me know when the door opens and the light comes on.)
$1 per subscriber at 84% penetration and they have their money back. At 50 cents per month they have it back in two months. $1 per month per subscriber at 12% market penetration and they have it back in a year. And who says $1 per month is the right price? There are an infinite number of ways to position this service (high cost, low penetration; low cost, high penetration, or anywhere in between). So if they charge $1 per month they only need an average 12% penetration over the first year and they recover their acquisition costs in the first year.
Business Plan #2
AT&T Mobility has upwards of 55 million subscribers last time I looked and has bought the Firethorn service already.
$3.81 per subscriber, 100% penetration and they have their money back. At $1 per month, it will take 4 months to recover their costs, at 100% penetration.
At $1 per month at 33% penetration, it will take a year to recover their investment and face a 100% annual rate of return going forward. Again there are an infinite number of pricing cases.
Step 1 if you are going to charge $1 per month or thereabouts for something this simple, you have to make it complicated. People will pay $1 per month to have their credit card glued to the back of their phone if you make it sound complicated enough and don’t actually use glue. Something about “fooling all of the people some of the time”. Alternatively they can fool “some of the people all of the time”, and charge a higher rate with lower expected market penetration. The media is helping with this complication process.
Suppose subscribers are smart and refuse to pay a miserable $1 (US, or $.95 Canadian!) per subscriber per month at a high enough penetration to offer a 1 year payback?
Business plan #3:
Downside is a loss of up to $210 Million, less the value of the AT&T deal, which has to be large enough to fund operating costs plus some dilution of the loss, and could be expected to grow, leaving a cost that is not a huge financial problem for Qualcomm especially if they can flip it and sell it.
Upside is an annual rate of return in excess of 100% at a very modest baseline cost of $1 per month plus service fees (tied to usage?) at very low market penetration. Get half the 250 million users on board and the annual rate of return rises to >600%.
Qualcomm didn’t get this big by missing this kind of opportunity. Firethorn may have sold too cheaply.
What I really want is a combination cellphones and ATM machine, so I can enter my PIN and get money out of the phone. THAT I would pay for.
Just a thought….
Name withheld by request
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I completely agree with you on the m-Commerce issue. m-Commerce is just another service they’re touting to “make life easier” that you don’t actually need and probably won’t make much of an impact on the average consumer’s life. How about we focus on areas in the wireless industry that actually need attention. Like, how can we make mobile games that don’t suck, or how about we see if we can cram a phone into something the size of a Bluetooth headset? Or why don’t we worry about fixing the services we have that people are complaining about? Or how can we implant our special mind control chips into the remaining 53 million people who don’t have a cellphone?
Seriously, guys, you’re planning world domination through mobile technology, but you haven’t stopped to think about these little things? Some global dictators you’re turning out to be. I mean, c’mon, Thunderball had his giant crab, the least you could do is mind-control chips.
That’s why they need us to come up with their grandiose schemes.
Justin Abbott
Janess Business Services
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I welcome your comments. Please send me an e-mail at mdano@crain.com.