The volume of proximity payments--using a mobile phone to buy something at a store--is growing. But the market remains highly fragmented. Those transactions are facilitated by use of smartphones, but “telecom” involvement is nil to non-existent (in the United States).
Major device manufacturers, on the other hand, have introduced their own payment systems (Apple Pay, Samsung Wallet).
Perhaps this is one more example of how the internet ecosystem now works. “Access to the internet” (the revenue model for mobile and fixed network service providers) actually does not confer as much natural advantage as you might suspect, where it comes to creating a robust applications or service business.
The phrase “dumb pipe” is an accurate description of the broad limitations on telco roles: they supply the access. Almost all other value is supplied by devices and app suppliers.
So “mobile proximity payments” illustrates the value of “moving up the stack,” and the danger of remaining a dumb pipe, instead of becoming a supplier of key apps.
That is why mobile content makes sense to AT&T. It is a tangible way of moving up the stack for an anchor consumer service, with value beyond direct revenue.
Compared to the linear video business case, mobile video is weighted more towards incremental advertising revenues, mobile customer retention (churn reduction) and streaming revenues (on AT&T’s own network and over the top on other mobile networks).
As AT&T has argued, for at least 20 million U.S. households, price is a barrier to buying linear TV subscriptions. Those households tend to be younger, with lower income, without children. But most of those households also are mobile-only and mobile-centric.
Succ
Proximity payments might represent a case of failed telco ability to create a role in a new ecosystem. OTT and mobile video are proving, so far, to be an example of success.
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