NetworkIP Blog

Early this morning Trevor Baca, VP of Software Engineering, Karthik Srinivasan, Director of Systems Engineering, & I jumped on planes headed for San Francisco to attend tomorrow’s Mobilize conference. This is the inaugural year for the Mobilize conference & with GigaOM behind this one it is sure to be a success & last for many years to come. This is an exciting time to be in the mobile space & we expect tomorrow’s conference will be just as stimulating & productive as it promotes to be.

The conference has pulled together thought leaders from Google, Nortel, Cisco, Motorolla, Sprint & many others involved in the mobile industry to cover topics that we’ve all been asking & that will enable us all to make informed decisions in this new market. The Mobilize conference also includes a launch pad session so companies like Cumulux, Fonemesh, Fonolo, Fusion Garage, Heysan, LuckyCal, MotionDSP, Pinch Media, placethings, Skyfire Labs, TuneWiki & Zecter can present their new mobile products.

Over the past few months we’ve been talking about how faster mobile data speeds (3G, 4G, & LTE) & open mobile operating systems (Apple, Symbian, & Google’s Android) are making this an exciting & opportunistic market for businesses & application engineers to develop new & innovative applications for the mobile space. As more companies & application engineers enter this space & find themselves supporting mobile consumers & mobile products they are realizing the need for faster, more robust, & more reliable transaction processing services. These companies & application engineers obviously understand the value of transaction processing services; however, they haven’t the time, the money, or the resources to develop them on their own. Their focus is where it should be; on their mobile products & services. So they rely on us & our proven experience in the transaction processing space to ensure their accounts & products are properly managed.

Our transaction processing services allow companies to manage all of their mobile consumer accounts & mobile products via simple API interfaces without having to invest any costs or resources to build a network, deploy hardware, ensure security standards, & manage complex databases. We do the heavy lifting so these companies & application engineers can focus on their existing mobile products, new mobile products, & most importantly their customers.

Brian Kirk
VP Business Development
NetworkIP & Jaduka

Since Google released its new web browser, Chrome, last week there has been so much chatter on the web about its features, how it stacks up to Internet Explorer (IE), Firefox, & Safari, & maybe the most important question on everyone’s mind is why has Google developed its own web browser.

I immediately downloaded Chrome when I read about its release. I’m not an application download junkie; however, for a long time now I have been looking to replace Internet Explorer (IE) because too often I have a single browser tab that crashes & then I loose the five to ten active browser tabs I had open. Chrome promises to fix this problem by treating each browser tab as a separate application. When one browser tab crashes, the rest of your tabs should not be affected. After a few days of using Chrome, I was able to test this “functionality” for myself & it worked like a charm. I am forever a non-subscriber to IE & now a happy Chrome user. I’m also a big fan of Chrome’s one stop shop (a single text box) to type in known URLs & do my web searching. The auto completion feature when typing URLs & doing Internet searches is also a great bonus to me.

The BIG question though isn’t what feature do you like or don’t like; rather, why did Google release its own browser? My opinion points towards the mobile market space for web browsing. According to research conducted by Nielsen Mobile, in 2007 mobile Internet use generated over $5 billion in revenue for companies & in the first quarter of 2008 mobile Internet use accounted for a total of $1.7 billion in revenue. Nielsen’s research strongly suggests that we will see a rapid growth in consumer adoption & mobile marketing in the years ahead.

Chrome fits this mobile Internet niche well. Chrome is a very light weight application. The total size of the browser is just 7-megabytes, making it a good fit for the relatively small hard drives that exist in today’s mobile devices. Chrome’s small size makes it a quick & easy application to download to most mobile devices. Chrome also has a minimalist user interface & it nicely accommodates the display size of mobile devices with Internet access. Lastly, when Chrome is running it uses very little memory, making Chrome an ideal application for mobile devices that have limited memory size.

The market research firm ABI Research sees the mobile web browser segment of this market accounting for the vast majority of growth over the next five years. They predict that the number of highly functional mobile browsers shipping per year will grow from 76 million in 2007 to nearly 700 million in 2013. From where I sit Google is quickly putting all the pieces together to dominate this mobile market space. They have already released a number of API’s that will further enable the development of mobile applications & mobile mashups, they have now released the mobile browser (Chrome), & soon they will release the mobile operating system called Android.

The way I see it, Chrome was just one of the few remaining pieces that Google needed to position themselves as a leader in this new mobile market.

Last week Juniper Research released a new report forecasting the growth of the Mobile Payments Market through 2013. The study projects that purchases using Near Field Communications (NFC) enabled phones coupled with money transfers are likely to total $600 billion globally by 2013. Howard Wilcox, the author of this report, points to the continued growth in mobile subscriber penetration & the availability of exciting & easy to use services as the driving forces to this type of growth.

Wilcox concluded that today’s mobile market is mostly dominated by the purchase of digital good such as games, ringtones, & music. The new opportunities in this space will include the future of NFC, mobile money transfer (MMT), & the purchase of physical goods via the mobile device. The report suggested that the Far East & China, western Europe, & North America will represent more than 70% of global MMT gross transaction value by 2013.

In order for this market to mature at the rate suggested by Juniper we’ll need to see a number of things fall into place. The good news is that the mobile operators can now support the bandwidth & speeds that these mobile payment applications will require. Also, mobile operating systems such as Symbian, Apple, & Windows Mobile are now open for us to develop these new mobile payment applications.

So what pieces to this puzzle are we still missing?

The mobile device manufacturers such as Nokia, Samsung, RIM, & Apple need to begin releasing new phones with NFC technologies built in. Without these devices in the market, retailers will not begin updating their existing Point of Sale (POS) infrastructure to accept contactless payments. Once released, the device manufacturers will need to make these new mobile NFC enabled devices affordable. Unless people are purchasing these new mobile devices, the retailers will still be reluctant to update their existing POS solutions.

Beyond the mobile devices & the POS infrastructure consumers need to be educated. Consumers must understand how these new mobile payment solutions will work, the value in using these solutions, & most importantly the consumer needs to be convinced that these solutions are safe & secure. There have been far too many reports of identity theft for consumers not to wonder how this solution is safer than what they are using today.

For those of us partaking in this new market the sky is the limit. Of course we still have some obstacles to navigate & it’s going to require platform providers like NetworkIP, mobile device manufacturers, mobile service providers, retailers, application developers, & the banking & credit card companies to all work together.

Last week’s Democratic National Convention (DNC) was interlaced with contactless & mobile technology from beginning to end.

First Data kicked the convention off by introducing their new GO-Tag; an innovative electronic sensor that is small enough to transform any device into a contactless payment solution. The GO-Tag which was distributed in the form of a small button at the DNC allowed the 5,000 lucky journalists & delegates who received them the ability to “purchase” free snacks & drinks by tapping their GO-Tag button on electronic sensors at concession stands installed throughout Denver’s Pepsi Center. In a recent BusinessWeek article, Michael Capellas, First Data’s CEO, is placing a major bet on the fast-emerging world of mobile electronic commerce. According to the article, the GO-Tag project is one of five new ventures that Capellas has launched since he took over First Data. The other four projects include information analysis, customer-loyalty programs, fraud detection, & consumer-behavior prediction. The article went on to say that Capellas believes that mobile commerce could add more than a $100 million to First Data’s revenues in 2009.

Then there was Senator Barack Obama who announced Joe Biden as his vice-presidential pick with a text message. Nielsen Mobile described this text message based ad campaign as “the single largest mobile marketing event in the U.S., to date.” Nielsen estimates that 2.9 million U.S. mobile phone subscribers received the text message launched by Obama’s campaign. Obama supporters can still sign-up for future text messages from Obama’s campaign by texting “GO” to short code 62262 (spells OBAMA). Supporters can even subscribe to specific types of information updates by texting specific keywords such as “HEALTH”, “EDUCATION”, etc. For more information about Obama’s mobile campaign you can visit Obama’s web site & while you are there you can even download wallpapers & ring tones for your mobile phone too.

Delegates attending both the Democratic & Republican National Convention also made good use of their mobile phones for communicating events from the convention. They sent & are continuing to send text messages to services such as Twitter which in-turn distributes these messages from the convention to their “followers”. These same people are also shooting short video, audio, & taking pictures with their mobile phones & then uploading them to their blogs as mobile blog entries (”moblogs” for short).

These are just a handful of examples on how contactless & mobile technologies are being used in larger scale mediums such as our current presidential election & more importantly these two technologies are increasingly becoming a part of our everyday landscape.

Last week’s Prepaid Press Expo in Las Vegas was a huge success for NetworkIP, our customers, & the prepaid card industry as a whole. The Expo brought seasoned veterans along with a good number of new companies entering the prepaid market.

In an effort to design the best conference possible The Prepaid Press partnered with the Pelorus Group & as a result the show offered a great array of conference tracks to include a look at the Prepaid Long Distance market as a whole (day 1), Prepaid Wireless (day 2), & Prepaid Alternative Payments (day 3).

On day 1 our very own CEO, Pete Pattullo, presented on the topic of “Building a Better Mousetrap” which focused on the technology of prepaid. Pete’s presentation discussed how we at NetworkIP have approached building a solution to stand the test of time received outstanding feedback from the audience. As Pete suggested, it takes a lot more than a VoIP box to develop a truly remarkable platform. It requires a combination of passion to build reliability, requires managing quality connections (our own iQT solution), ensuring competitive pricing, having the right information to make decisions, the evolution of the platform (we’ve been at it for 10 years & recently released our 8th major software revision – ICS8), innovation & the never-ending pursuit of excellence, & having talented experienced people with the right skills. These are the components that have made our solution the best in class!

Following our very own Leadership Summit Wednesday morning I caught a number of good conference sessions on Prepaid Wireless later in the day. Randall Walrond, VP of Product Management at IVR Technologies, discussed how the prepaid market can leverage the new technology of today’s mobile smart phones. He & I agree on a number of points on what these new devices & faster networks open up to the industry.

I also heard a number of compelling arguments suggesting that the average prepaid consumer isn’t ready for the new smart phones, the applications that run on these smart phones, & new technologies such as Near Field Communication (NFC). Oscar Munoz, President of Uni-Mas Corporation, provided compelling arguments that the average prepaid consumer can’t afford today’s smart phones & that technologies such as NFC are just to far out to invest in for today’s market. Munuz of course didn’t argue that smart phones & new technologies such as NFC would eventually reach the prepaid consumer. He simply suggested that it’s still a few years down the road & that we need to focus on the reality of today.

On day 3, Joel Stanton of Lightspeed Research presented on the value that exists in today’s alternative prepaid market. He discussed the pros & cons with of both the closed-loop & opened-loop gift card industry. Stanton’s presentation was then followed by a discussion on how to best distribute prepaid card solutions. Thomas Honey of Better ATM Services discussed the numerous problems with the distribution of gift cards & cited specific examples such as banks offering VISA & MasterCard gift cards.

Looking back on this year’s show & the topics that were discussed we noticed a significant shift in attention towards the mobile market. We too believe that the mobile market offers huge potential for prepaid. As network speeds increase & mobile phone operating systems, mobile devices, & the mobile networks continue to open up there is an abundance of opportunity for companies to leverage the services & applications that can be developed for this market.

Our hats off to the folks at the Prepaid Press who were able to put together such an exciting & informative event. It was definitely worth us attending, it was great for our customers, & we look forward to maturing the many new relationships that were made at this year’s event.

We are looking forward to hosting next week’s Prepaid Leadership Summit in Las Vegas at the 2008 Prepaid Press Expo. This will be our third year hosting the Prepaid Leadership Summit. The Summit provides us an opportunity to share our knowledge of the prepaid industry with our customers. We touch on new things that we are developing at NetworkIP, we provide our perspectives on what is happening in the prepaid industry (lot of regulatory items this year), & I have the pleasure this year of discussing new opportunities for our customers. This year’s summit is packed full of great information & is sure to be a HUGE success for all of our customers!

The Summit agenda is as follows:

Date: Wednesday, August 20th
Time: 8:00 to 11:00am
Location: Pisa/Palermo Room at Caesar’s Palace     

8:00 - 8:30am - Attendee Check-In & Breakfast

8:30 - 8:45am - NetworkIP Welcome Address
Speaker: Pete Pattullo, President & CEO

8:45 - 9:30am - NetworkIP Technologies & Features
Speakers: Nichole Janner, Vice President of Prepaid Services
Karthik Srinivasan, Director of Systems Engineering
Wendy Gauthier, Solutions Manager

9:30 - 9:45am - Regulatory Landscape
Speaker: Jennifer Begin, Regulatory Manager

9:45 - 10:15am - Mobile Opportunities
Speaker: Brian Kirk, Vice President of Business Development

10:15  - 10:45am - NetworkIP POSA & Transaction Services
Speakers: Doug Williams, Vice President of Transaction Services
Joslin Sansom, Transaction Services Manager   

10:45  - 11:00am - Branding Dashboards
Speaker: Pete Pattullo, President & CEO

A recent Cardbeat report from Auriemma Consulting Group reported that “contactless credit cards that allow cardholders to wave-&-pay at checkout terminals fitted with contactless technology sensors is not yet the smash-hit that industry leaders had expected.” The report also suggested that “consumers have indicated that contactless technology is not an easy sell. In light of the credit crunch, and increasing insecurity about the risk of identity theft, consumers need additional encouragement to acquire a new card – even if it features a compelling new technology.”

Other highlights from the report included that only 3% of the population is familiar with contactless technology & that 23% of consumers interviewed would not use contactless cards due to concerns with identity theft.

Like any new technology that is introduced, education about that technology is needed. Granted we do live in a digital age & IT gadgets are popping up everywhere; however, you can’t expect consumers to gravitate to your product if they don’t understand how to use it & more importantly if they are scared to use it.

Contactless payments offer a significant convenience factor for the consumer. Not only are they able to process their payments quicker, they are also able to reduce the amount of “stuff” that they have to carry with them on a daily basis. As this contactless payment solution finds its way to mobile phones — trust me, it’s coming — such a product will be even more attractive to the consumer.

I was in a big box office supply store a couple of weeks ago when I spotted a contactless payment setup at the check-out counter. I asked the clerk behind the counter how often customers use the contactless payment service. She said that in the 6-months that she worked at the store she has only had 2 to 3 customers use it & every time it’s been used something went wrong & she ended up manually typing in credit card information.

I know a bit about the solution that was deployed in this store & I doubt that the system wasn’t working. I believe it was the clerk (the retailer) that didn’t know what she was doing that was causing the problem. This example makes matters even worse. The consumer obviously had the education about the product & decided to adopt that product, but when clerks at stores for example don’t know anything about the product or how to support your product it does the consumer no good to use it. So not only is consumer education important, but education to those that are providing & servicing new products need to be educated.

Regardless of how great your product is & even if it does provide a solution to a problem, do *not* expect overnight success unless your market & the market distributing your product is well educated on the product you are offering.

Tomorrow AT&T will release its second-quarter earnings. It is projected that AT&T will fall short of their projections for this past quarter & many suspect that AT&T will lower expectations for 2008 as a whole.

AT&T, along with other major phone companies, has seen a significant decrease in landline services in Q2 of 2008. The Wall Street Journal reported yesterday that the phone companies used to be largely insulated from economic downturns because most consumers considered their home service a necessity. However, now that over 80% of Americans own cell phones, the home telephone isn’t the necessity that it used to be.

It is my opinion that many Americans realized long ago that the home phone wasn’t a necessity, however, we choose to avoid the hassle of calling up the phone company & turning off our service & then having to inform all of our family & friends that we now only use our mobile phone. Now that the price of gas is $4 plus dollars we are willing to accept these hassles & actually disconnect our home phone services.

The disconnecting of home phone services also points to a number of other realities. First, the wireless networks have improved such that we aren’t worried so much about poor quality during our phone calls. Two, the cost of mobile phone services has decreased significantly & the notion of domestic long distance no longer exists. Three, the mobile phone has become such an integral part of our daily lives that we always have it with us & it is no longer something that we only use when we are away from home.

As we see a decrease in home phone services I suspect we’ll see an increase in business for prepaid calling card providers. Regardless of how much better those mobile phone calling plans have gotten, it is still quite difficult to find a good international long distance rate for mobile phone calling plans. Prepaid calling cards offer a great alternative for consumers that are looking for a low cost & good quality international long distance plan. With many prepaid long distance services offering PINless* dialing features & auto-recharge options it has become more convenient for users to gravitate to this type of service. These services have become practically invisible to the consumers using them.

I suspect that over the next 5 years we will continue to see the number of home phones diminish. Not only will more Americans cancel their existing services, but younger generations won’t even bother having them installed. Mobile services will continue to expand & until mobile international calling plans improve the prepaid long distance businesses will prosper.

* PINless dialing is a convenient feature that allows you to register your phone number(s) at the time of purchase so that you can place long distance calls without having to dial a PIN.

My summer conference schedule so far includes the Prepaid Press Expo in Las Vegas in August & Mobilize in September in San Francisco.

NetworkIP is a regular at the Prepaid Press Expo. We’ve supported this event for many years now & it’s a great opportunity for us to get out & share with our clients what we are up to, what trends we see occurring in the prepaid industry, & what we plan to do to ensure our clients can take advantage of those new trends.

This will be our first year attending Mobilize, in fact I believe this will be the first year this show is held. We have the highest respects for the folks at GigaOm & believe they have pulled some of the brightest people together for this conference. We’ve been following the mobile space & working more closely with partners in this space this year. This event is sure to shed some light on where things are heading, or at least where we think this space is heading. With more mobile devices becoming open & network speeds increasing this is an exciting space for us to be involved in.

About the Prepaid Press Expo:

The prepaid industry has grown in three distinct branches – calling cards, wireless, and gift cards/alternative payments. These three diverse sectors converge at the retail level, but are still approached as different industries. No trade event today features the convergence…until now!

About Mobilize:

Mobilize is a conference developed by award-winning technology writer Om Malik to inform the entrepreneurial community about the opportunities present in the next phase of the mobile web. Working with Om on the program is GigaOM’s resident technologist Surj Patel.

Industry-leading speakers will share their unique perspectives with Mobilize participants to guide them through the emerging opportunities in the next phase of the mobile web. We will feature the best technologies, the best thought leaders and the most innovative and inspiring startups.

It was a month ago today that Steve Jobs announced the release of the new 3G iPhonefrom Apple. There has been much anticipation, chatter, & speculation about this new phone & this Friday, July 11th, the wait will be over. Many Apple stores in the U.S. will open at 8AM in an effort to get ahead of the rush of orders for the new iPhone.

With the 3G iPhone retailing for $200 USD I have no doubt that the lines outside Apple stores will be worse than they were when the first generation iPhone was released over ago (June 29, 2007). I confess that I was one of many who stood in line for hours outside the Apple store waiting to get my hands on that first generation iPhone. I’m sure I’ll eventually give in & purchase the new 3G iPhone, however, I will not be one of the early adopters who gets one this Friday. While the Edge network from AT&T has its flaws, I’m not ready to invest $200 for the phone & an additional $10 a month (data plan on the 3G version is $30, not $20 dollars) for 3G access & GPS support.

I am however eager to download the new iPhone software & the many new applications that will be available for the iPhone. I think many existing first generation iPhone owners will follow my lead & simply take advantage of the new software & applications. Om Malik, of GigaOM, posted an interesting poll yesterdayasking who really is going to run out & purchase the new iPhone. The reaction was mixed of course. Some folks love it & can’t wait & others could care less. Regardless, it’s going to be a good day for Apple & Apple stock.

I do wonder if AT&T’s 3G network is ready for the additional traffic. Unfortunately we’ll just have to wait & see what happens on Friday.