Bill Bennett

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Facebook’s biggest test

Facebook looked unstoppable. Then a series of home truths caught up with the tech giant. Now it faces its biggest test.

At one point last week Meta’s share price was down more than 25 percent. The company formerly known as Facebook lost US$240 billion from its market value after publishing its latest results.

Since then it has drifted lower and is down by almost a third on this time a month ago.

Last week’s fall was the biggest single day market value drop in business history. The event saw the Nasdaq index drop two percent.

Not Facebook’s first stumble

We’ve seen Facebook stumble before. This is different.

Growth has slowed. The core product looks jaded. Costs are spinning out of control.

Meta tells an unconvincing story about where it wants to go with the metaverse.

The company is not about to collapse or go away, but it will change. You may not recognise what it becomes.

Competition strikes at Meta’s core

Facebook looked unstoppable. It soaked up a huge slice of the world’s advertising spend, roped off a significant segment of the available online destinations and altered the course of elections.

In comparison Meta looks vulnerable. It faces intense competition on two fronts. The regulatory challenges continue to mount and the leadership does not appear to on top of matters.

Apple’s app-tracking transparency feature was always going to hurt Facebook. If anything, its effect was more pronounced than analysts expected.

Apple’s privacy move

When iOS 14.5 was released last year, Apple gave iPhone users more control over the private information companies like Facebook could track.

To no-one’s suprise, many iPhone users chose not to give consent. As many as three in four have cut off Facebook’s snooping. That undermines Facebook’s pitch to advertisers.

That cost Meta US$10 billion in lost advertising revenue. At 8.5 percent, the figure is getting on for a tenth of Facebook’s annual revenue. More important, it is one quarter of annual profit.

This time it is different

On its own this would be a blip for Facebook. The business has faced similar threats and recovered. However, while this is going on over here, a second front has opened over there. TikTok is eating Facebook’s lunch with young adults.

Increasingly Facebook is the place for old people. Their children and grandchildren prefer the Chinese-owned TikTok app. It now has more than a billion users.

TikTok poses an unusual threat. Because it features short video clips, it sucks up even more attention than Facebook. Facebook’s surveillance capitalism model depends on how much user attention it can grab. TikTok does a better job of this.

You may remember Donald Trump attempting to ban TikTok. When he was president he claimed it was a security threat. The biggest threat it poses is to Facebook.

Saturation

A third problem is falling user numbers. For the first time the number of daily users on Facebook has fallen.

It’s possible this is temporary. But an equally likely interpretation is that Facebook is losing the allure it once had.

When a product like Facebook is growing, there’s a network effect. As more people climb onboard there are more reasons for others to join. If this goes into reverse, there could be a downward spiral.

You may choose to quit Facebook if the friends you value the most are no longer there.

Meta- washing the toxicity

Part of the reason for changing from Facebook to Meta was to wash away the toxicity associate with the brand. But that’s not the only reason.

Facebook, or Meta, needs to find a path from the immediate and longer term problems it faces.

A switch to being the metaverse company may not be the right strategy, but it is a strategy. It has billions it can throw at research and development. The company plans to invest US$10 billion a year in the metaverse. There are huge resources of smart people, patents and other intellectual property.

Throw enough of these ingredients about and something can emerge. It can come from left field. The Apple Mac emerged from expensive yet wacky-looking research projects carried out by Xerox.

Zuckerberg – the problem that’s hardest to fix

Meta CEO Mark Zuckerberg is at the centre of the problems surrounding the business. His personal reputation is at a low, many see him as a villain. In an another business he might have been replaced, but Zuckerberg controls the board and voting rights.

In part the huge share sell-off was a vote of no confidence in Zuckerberg. He was lucky once turning a website for ranking hot collage girls into a major corporation. Can he do what Steve Jobs managed and repair the business he founded as it enters a new, difficult phase?

What emerges will not be the Facebook you know today. That isn’t going away soon, but its power and influence will diminish. It’s unlikely the metaverse vision that Facebook has outlined will be the answer either.

Dealing with a monopsony

America’s regulators watching big tech firms have shifted their focus from monopoly to monopsony.

Monopolies remain a problem. They are when a single company dominates a market from a sales point of view.

Customers have no choice who to buy from. That can lead to monopolies abusing their power and charging high prices.

One buyer to rule them all

A monopsony is where there is a single buyer. Their customers have no choice who they can sell to. Monopsonists can decide what they pay for a product or service.

In the case of technology, monopsonic transactions tend to be at the wholesale level.

Apple is, in effect, the only buyer of apps for iPhones or iPads. Any company wanting to reach customers has to go through Apple’s App Store.

That’s not the whole story. An app developer can try selling direct to customers, it won’t get far.

A similar monopsony exists with Google’s Play Store. While there are alternative stores selling Android apps, Google dominates.

Amazon monopsony

In the same way, Amazon has the ability to decide what it pays to companies wanting to sell products through its online store.

Google and Facebook have control over publishers who want to sell online advertising.

As always with these cases, the powers are not absolute. Sellers have alternatives, but they are rarely practical. A company not selling iOS apps through the App Store will sell a fraction of what its rivals selling through the App Store might achieve.

It’s a new approach for American regulators looking at the tech sector.

There’s a counter argument from the tech giants.

App Store wealth

Take Apple, its App Store has created untold wealth for many software developers who might otherwise have struggled to find customers.

At the same time, it creates value for consumers. People can buy apps from Apple’s store confident that they meet basic standards. Having a central point of sales simplifies buying and finding suitable apps. And there’s a case to be made this process means that apps are more affordable than they might otherwise be.

Developers complain about a lack of flexibility, Apple’s rules can seem rigid and, at times, arbitrary.

The other complaint is that Apple takes a hefty 30 percent cut from every transaction. There is no question this creates a huge revenue stream for Apple. In 2020 the store took $64 billion.

Yet this is in line with the margins software developers offered retail sales back when software was sold in boxes on store shelves. And at that time there was a distributor cut on top of the sales margin.

2degrees-Orcon merger, will it shake market?

Last week the Commerce Commission published “a statement of preliminary issues” on the 2degrees-Orcon merger.

It says the Commission will allow the merger to go ahead if it doesn’t reduce market competition.

On a simple level that question looks straightforward.

There are about 90 retail telecommunications companies in New Zealand. Removing one through a merger may not make much difference.

Yet not all retail telecommunications companies are equal. 2degrees and Orcon, formerly Vocus, are the third and fourth largest.

Teasing out all the arguments is not easy.

Mobile competition

Before the merger there were three mobile carriers. That doesn’t change.

The merger removes New Zealand’s largest Mobile Virtual Network Operator from the market.

There are overseas competition watchdogs who see MNVO health as a sign a market is competitive. New Zealand has never had a healthy vibrant MNVO sector.

The market is not open as it looks

Spark, Vodafone, 2degrees and Orcon are the four largest telcos. They account for about 95 percent of the market.

You could argue they are the only companies worth considering in any analysis of market competition.

In effect, Spark, Vodafone, 2degrees and Orcon are the market.

Moving the NZ telco market

The rest are important and essential, but none of them can move the market. The big four can.

The next largest is Sky Network Television with around a one percent market share. Trustpower comes in at sixth place with roughly the same share.

At a stretch you might consider these in an analysis. After the top six you are dealing with minnows.

From that point of view taking out one of the big four changes the competition landscape a great deal.

It may not reduce consumers absolute choice on paper.

They remain free to pick from 90 service providers. Yet the majority of consumers will pick one of what could soon be the big three. At best they will consider the top five remaining players where there were six.

In that sense, the merger means a significant reduction in competition.

Expert view

Competition experts at the Commerce Commission will chew over this in coming weeks. They’ll get input from rival telcos, consumer groups and other industry players.

2degrees and Orcon suggest a stronger number three will ‘enhance’ competition.

That does not make sense if you agree consumers are reduced from four to three choices. Or, let’s be generous and say from six to five choices.

Does a merger enhance competition?

It does not make sense from another point of view.

Spark is more than three times the size of 2degrees. Vodafone is about two and a half times the size of 2degrees.

Adding Orcon to 2degrees does not make it much bigger. 2degrees is 12.5 percent of the market. Orcon is four percent. Together they are make up 16.5 percent. Spark and Vodafone have a 77 percent market share.

They will continue to dwarf the merged business.

The merged company won’t unnerve the big telcos in the short term. It will be an irritant more than a threat.

Smaller telcos

A merged, resource-rich business higher up the market could be bad for Sky or Trustpower.

Meanwhile the new business is as likely to increase pressure on the smaller telcos. Wiping them out would not be good. If they struggle as a result of the merger, then competition would suffer.

This is what Commerce Commission experts need to balance: the marginal impact of a slightly larger third player on the top two versus the impact of a larger third player on the remainder of the market.

Cost savings

In the past companies looking to merge would talk about ‘synergy’. It almost never happens. New Zealand’s telecommunications sector has a poor record when it comes from deriving rationalisation value from a merger.

There are potential cost savings1 and the opportunity for 2degrees to sell mobile to the 4 percent of customers arriving from Orcon.

None of this is to say the Commerce Commission will or won’t refuse the merger. But we can’t assume the decision is straightforward. There’s more to look at than meets the eye at first sight.

https://comcom.govt.nz/news-and-media/media-releases/2022/statement-of-preliminary-issues-released-for-vocus2degrees-merger


  1. Although previous mergers show integration can be harder than it looks. Think of Vodafone and TelstraClear or iHug. ↩︎

How long should you keep a phone?

New phone models arrive all the time. The main phone product lines each get an annual refresh.

Apple holds its annual iPhone launches all at once. In recent years this has always happened three or four months before Christmas.

Android phone makers like Samsung, Xiaomi and Nokia have more than one product lines. Each line gets its own annual update. The phone makers tend to stagger launches throughout the year.

Add in the smaller brands and we see a dozen notable smartphone launches each year.

Goodbye two year phone refresh cycle

Phone makers expect you to hang on to a device for at least two years even if they refresh their model lines every year.

Carriers agree. Their phone plans are two-year contracts. Remember carriers make money when you to buy new phones and roll over two-year contracts. While two-year contracts remain popular, they’re less common today than five years ago.

New Zealand’s Inland Revenue Department depreciates phones at 67 percent a year. That implies a life expectancy of under two years. Depreciation rates are similar in other countries.

We’re holding on to phones for longer

Most of us now hold onto phones for considerably longer than two years. No-one forces us to operate on a fixed timetable. People think nothing of keeping PCs and other devices for much longer.

There’s a noticeable difference between Apple and Android phones. Android phone users tend to keep their phones for a shorter time than iPhone users.

Apple’s sales figures reflect this. iPhone revenues peaked in 2015. Apple now focuses more on selling services to its customers to make up the revenue shortfall.

Android phones last less than iPhones

In 2016 Benedict Evans reported Android users keep phones for under two years. Back then, Apple iPhones stayed in use for more than two years. In many cases closer to three years. There are interesting theories about this in the comments on Evans’ post. This also explains why second-hand iPhones hold their value better than Android phones.

One reason people now hold on to all brands of smartphones for longer is that hardware and feature upgrades are more incremental than in the past. A few years ago there would be dramatic changes from one year to the next. Now phone makers emphasise cameras and cosmetic changes.

It’s no accident that phone makers hold launch events that look like fashion shows. They want to create the impression that you need this year’s design.

You almost never do.

Android support cut-off

Android phone makers are still more aggressive about moving customers onto new models. In early 2022, Google announced it will stop support for the Pixel 3 phone.

As the media reported, this meant there would be no more operating system or security updates for what would otherwise be a perfectly usable phone.

This sounds awful yet it is an improvement on what used to happen with Android phones. Until the last three or four years many Android users would get the operating system that was available when the phone launched and never see an official update. There were workarounds, but it could be hard for non technical people.

Compare this with Apple. The iPhone 6s was released more than six years ago. Late in 2021, Apple updated its phone operating system to iOS 15. That includes support for the iPhone 6s.

It’s worth noting that phones will work after they are no longer supported. They may not be as secure and there may be things you’d like to do, but can’t.  If you take care, you can continue to use an old phone without upgrading.

The latest version of iOS will not work with an Apple iPhone 5 or older. Yet there may be security updates for older Apple models.

How long should a phone last?

Phones can take a beating. Owners handle them many times each day. They get dropped, knocked, scratched and soaked.

Yet, there are few moving parts to seize up. (Avoid any phone that does include moving parts such as a pop-up camera.)

If you look after your phone and it doesn’t pick up too much moisture, the battery is the first part to wear out. Constant use and charging cycles mean they degrade over time. After about three to four years use they hold as little as half the charge they managed when they were new.

You can replace phone batteries, even those in sealed phones. It can be difficult, there are official repairers and a cottage industry exists.

Although it may look expensive, paying someone NZ$100 to replace a battery is cheaper than a new phone.

Officially Apple has given iPhone owners the right to repair their phones. Later this year it will sell spare parts and the tools needed to make repairs. It’s not for the fainthearted.

Screen life

Screens last three to ten years depending on the technology, build quality and your use. Often the screen backlighting goes first. Again, repairers can fix these problems.

There are times when a new phone model is compelling.

Sometimes moving from one year’s model to the next brings a must-have feature. Even so, you can expect to get at least two years from a device. They should last for three or more. Five years is no longer exceptional.

There are users who give their phones a pounding. If that’s you, or a family member, you have two choices. You could buy a more robust phone model. Or you could opt for a cheaper model that won’t break the bank when replacement time rolls around.

How long should you hold on to a phone?

There’s no simple answer to ‘how long should you hang on to a phone’. What works for one person doesn’t work for another. You should hold on for at least two years. Yet that’s unambitious.

For some people the best time to replace is when the battery life is not enough to get you through the working day. For others it’s when the operating system is no longer supported and there is a security risk. That’s six years for Apple iPhone users.

If you think that is bad, spare a thought for Android users. Six years is more than double the official supported life of Android versions.

If you love Android and worry about phone longevity, chose a Nokia phone. The company has a policy of keeping phone software up to date.

It guarantees two years of updates but to date has extended support beyond that time. It may be far less than Apple, but that’s better than rival Android brands.

This post was updated on January 29, 2022 to reflect recent changes including Google cutting off Android support after three years and Apple giving customers the tools and parts needed to repair old phones. 

Photo by David Mellis. Creative Commons. 

Rural fixed wireless costs three times urban price

Spark charges unlucky rural customers almost three times as much as city dwellers for fixed wireless broadband.

The banner price for Spark’s Everyday Wireless plan is $60 a month. For that you 4G fixed wireless broadband and unlimited data. There are contracts, but you can get an open term deal meaning you can go elsewhere when you choose without a penalty.

Meanwhile Spark’s Naked Rural Wireless plan costs $176 a month if you use an antenna and $166 if you don’t.

Naked Rural Wireless is built on the same 4G technology as the Everyday Wireless plan.

Rural fixed wireless data caps

There is a data cap of 300GB. If you want more data, that costs a dollar per gigabyte.

To get Naked Rural Wireless you have to sign for a 24 month contract. If you want to leave before the contract finishes there is a $350 early termination fee.

Vodafone has a $65 a month unlimited 4G wireless broadband plan for urban customers. It sells rural plans through its Farmside subsidiary. A rural plan with a 200GB data cap costs $166 a month. Extra data is $20 for 15GB.

Broadband competition

In the cities and towns, Spark and Vodafone sell fixed wireless broadband in direct competition with fibre and copper based broadband services.

While there can be competition in rural areas, that isn’t always the case. In effect there are places where Spark and Vodafone have a local broadband monopoly.

To be fair. It costs more to provide telecommunications services to rural areas. There is more low-hanging fruit in urban areas.

Yet it doesn’t cost three times as much to service a rural customer. In many cases a government subsidy helped pay to build rural towers.

Wireless Internet Service Providers

Wireless Internet Service Providers or Wisps offer rural services in competition with Spark and Vodafone-Farmside.

They tend to be small, regional players. This makes it hard to compare their prices directly with Spark and Vodafone-Farmside,

Yet in places, they can offer a similar fixed wireless product at a lower cost.

At the time of writing Taranaki-based Primo has a $99 rural wireless plan with 250GB. The company’s unlimited plan is $149.

Filling the rural broadband coverage gaps

Wisps, do a great job filling in the rural broadband coverage gaps. Anecdotally they are more popular with customers than the large telcos and are more flexible.

Prices for fixed line telecommunications services are the same throughout New Zealand. This applies to the UFB fibre network and the copper phone network.

The idea that everyone pays the same is part of the Telecommunications Act. In legal terms it is known as non-discrimination.

Another idea that’s important is known as equivalence.

Can’t play favourites

In plain English non-discrimination and equivalence mean network operators can’t play favourites. They can’t favour partners or wholesale customers, even if they are part of the same business.

Chorus has to give equivalence and non-discrimination undertakings to the Crown on its copper network. All the fibre companies do the same on the UFB network.

There are similar undertakings for the Rural Broadband Initiative covering Chorus, Vodafone and the Rural Connectivity Group. There are no undertakings for Wisps.

In effect, Vodafone can’t charge other telcos more to use its rural towers than it charges its own retail business. This should encourage competition.

Fierce competition in towns

As things stand in early 2022, the competition for urban broadband is intense. Prices are stripped back, margins are lower and customers get great deals.

Out of town the competition can be less intense. In many rural places there is a limited range of options, if any. And customers can need to join a waiting list to get a connection.

Fresh competition from low earth orbit satellites like Starlink will give the market a shake. We’re not seeing that make a huge impact yet. Give it time.

Government could give many rural customers better broadband options by extending the fibre footprint. Soon New Zealand’s UFB fibre network will reach 87 percent of the population. Realistically the fibre footprint could extend further, say to 92 percent or more.

It will cost money, but it would be a powerful nation-building investment. We managed to foot the bill building a New Zealand-wide copper network when there was far less money around.

Yet, for now, unlucky rural fixed wireless broadband customer have to pay three times as much, can consume less data and face stiffer contracts than their urban cousins. We can fix this.

Belkin Soundform Rise True Wireless Earbuds review

At NZ$130 a pair, the Belkin Soundform Rise True Wireless Earbuds are a low-cost alternative for people who want cord-free sound.

You can pay four times as much for noise cancelling wireless earbuds. Belkin offers the more upmarket Soundform Freedom earbuds at close to twice the price.

Which means the price is going to be a major selling point for the Soundform Rise Earbuds.

What do you get for NZ$130? The short answer is that you get earbuds that are good enough for casual use.

They aren’t going to win prizes for sound quality or features but they get the job done without emptying your wallet.

Bass boost

The sound quality isn’t bad. There’s audible bass boosting which can be tiresome after a time. I took them as loud as I dared without hearing distortion.

The Soundform Rise earbuds do rock better than other forms of music. Classical tracks sound unnatural, electronic music misses something in the mid-range.

If you are an audiophile, you’re not going to buy these. Otherwise, you won’t hate the sound. At the same time, if you switch to other, more expensive alternatives, you may be surprised by what you were missing with the Rise earbuds.

There is no active noise cancelling. You shouldn’t expect that at this price.

Away from music, the sound is great for making phone calls and using voice controlled apps. There’s a small amount of Bluetooth fuzziness, but you’ll hear callers and be heard when you make calls. That’s what matters.

Belkin’s physical design is not up to Apple, Sony or Bose standards, but it is serviceable.

Could be more comfortable

They are not as comfortable and don’t fit as securely as rival wireless earbuds. There are three sizes of earbuds, which should cover your needs. This is one of the compromises you make buying low-cost wireless earbuds.

Like other modern earbuds there are touch controls. At first it’s not obvious what actions trigger the functions – you’ll get used to that soon enough.

One thing that annoyed me in testing was how easy it is to hit the wrong command. I found music leaping forward to the next track or back to the start when I wasn’t expecting that to happen.

Unlike rivals, Soundform Rise earbuds don’t stop playing when you take them out of your ear. This may be a good thing for you.

Bluetooth pairing is harder than with other earbuds. This could be a reviewer-only issue, I’ve tested many Bluetooth sound devices in recent years. Yet I found I needed to restart pairing more often that I’d like.

Belkin says you get five hours battery life. And 19 hours with the case. This was hard to test, but it felt like the manufacturer’s claims were optimistic.

Verdict: Belkin Soundform Rise True Wireless Earbuds

There’s nothing exciting or earth-shattering about the Soundform Rise earbuds. They get the job done. They are not expensive. You won’t be delighted, but nor will you be disappointed.

If you can stretch to the NZ$230 needed to buy the Belkin Soundform Freedom earbuds, then you’ll get a better experience.