Posts

Showing posts from October, 2016

Multiple Roles, Revenue Streams a Problem?

Some observers appear to believe it is somehow unethical or unsavory for an internet access provider to have multiple revenue streams, including simple access as well as content or application revenues.
It is an odd perspective, given that nearly all large contestants in the internet ecosystem now operate in multiple roles, and therefore have multiple revenue streams. Google operates in search, many other app roles, devices, connectivity and operating systems, for example.
Indeed, one might well note that some contestants have no option but to expand from their current roles, into new roles.
In 2015, connectivity represented perhaps 17 percent of internet ecosystem value. By 2020, connectivity might represent only about 14 percent of internet ecosystem value. In 2015, apps represented about 47 percent of internet ecosystem value. By 2020, apps might represent 52 percent of value.
That explains, simply, why connectivity providers constantly look for ways to move up the value chain, or “…

Why the Mega-Mergers?

Image
It would be logical if connectivity industry participants have wondered why, in the Internet era, retail prices for virtually all communications services generally fall, while video entertainment retail prices can climb.
The same sorts of questions are logical where it comes to market value of firms in various segments, or the prices paid by third parties to various providers of internet apps and services (advertising prices, for example).
Cable TV prices have risen every year over the past 20 years, and in each year, the rise in cable prices has outpaced inflation, virtually every analysis concludes.
That is part of a bigger story, namely the generation of value within the Internet ecosystem. Analysts at A.T. Kearny, for example, estimate that the total value of the internet value chain has almost tripled (up nearly 300 percent) from $1.2 trillion in 2008 to almost $3.5 trillion in 2015, a compound annual growth rate of 16 percent.
Revenue sources are diverse. The proportion of revenue…

CenturyLink's "Problem" is a Problem for Regulators as Well

Image
CenturyLink’s proposed acquisition of Level 3 Communications illustrates as well as any recent development how much high-level strategy requires that tier-one service providers dramatically outgrow their legacy revenue streams and lines of business.
For an industry as highly regulated as local telecommunications is, that eventually will have--or should have--key regulatory consequences as well.
Consider that CenturyLink has fixed network operations across 33 U.S. states, a footprint that arguably is more extensive than the footprint of AT&T, which operates a fixed network across 18 states.
Founded in 1968 and headquartered in Monroe, Louisiana, CenturyLink has 11 million fixed network voice accounts, six million Internet access accounts and 285,000 linear TV accounts, in 37 states.
The problem is that its consumer business is bleeding away.
Some will argue, increasingly persuasively, that “CenturyLink's legacy landline phone business is beyond saving.” Keep in mind, voice account…

Massive Disconnect Between App and Physical Layer Business Models

There is a massive disconnect between revenue and cost drivers in the mobile content ecosystem, and that disconnect now has to drive strategy for some of the providers in the ecosystem.
Consider only the key difference in metrics used in the advertising, content and commerce industries and the networks business where it comes to “usage.”
For advertisers, marketers, content providers and commerce businesses, what matters is user engagement (where they spend their time).
For advertisers, content providers or e-commerce providers, minutes of use (engagement) matters, since the markets move to where the users are, and where they spend their time.
For network facilities operators, capital investment comes first, where it comes to looking at usage, since usage primarily is a matter of capacity.
For “pipe providers,” it is the volume of bits consumed that matters. In other words, how much traffic, and where it flow, matter first. Only secondarily does “revenue” enter the discussion. Capacity …

Mobile Drives 75% of Internet Engagement Time

Mobile devices will account for 75 percent of global internet use next year, according to a new Zenith Media forecast. If Zenith’s methodology remains consistent, those figures are a measure of time spent with internet apps and content, not “data transferred.”
That is a key difference in metrics used in the advertising and networks business. For advertisers, minutes of use (engagement) matters. For network facilities operators, volume of bits consumed (traffic) matters.
The mobile proportion of internet use has increased rapidly, from 40 percent of total traffic in 2012 to 68 percent in 2016. Zenith Media expects mobile devices to generate fully 79 percent of total internal traffic by 2018, a perhaps astounding percentage. Mobile internet already accounts for 85 percent of internet use in Spain, in 2016. In Hong Kong,  mobile represents 79 percent of internet use.
In China, mobile generates 76 percent of internet usage, while in in the United States mobile generates 74 percent of total i…

Artificial Intelligence in Telecom: How Big, How Soon?

Image
Artificial intelligence now is a “thing” like “computing” was once a thing. But it might be quite reasonable to assume that, in the not distant future, AI will be embedded into products, processes and venue as routinely as computing now is part of the background fabric.
In the communications business, that should range from customer-facing service to the operation of core networks, enhancing pricing and packaging decisions, service configuration, resource allocation, network management, energy efficiency, use of assets to simple routing decisions.
Commercial AI revenues are expected, by some, to climb from less than $1 billion to perhaps $5 billion by 2020. Revenues might reach $31 billion to $38 billion, up to perhaps $41 billion, globally, different forecasts suggest, by 2024 to 2025.
Some forecasts are more aggressive than that, calling for a U.S. market of perhaps $67 billion for robotics applications by 2025.
Humana, for example, using AI to assist agents in its call centers, to …

Private Networks Deliver 39% of Global Traffic

The Internet has caused the biggest change in global telecom since the advent of mobility. To wit, former telcos now are participants in the broader Internet ecosystem, not the leaders of the “telecom” ecosystem.
One example of the trend: application providers already operate private wide area networks that account for 39 percent of global traffic. In a few years, it is likely OTT app providers will carry a majority of global traffic, largely on their own networks.
In other words, the app providers no longer rely on “telcos” to carry their traffic, and increasingly operate their own networks, as functional substitutes for telco services.
Likewise, OTT providers now offer services and apps that effectively replace telco voice and messaging services. That is highly significant as voice and messaging have historically represented the vast bulk of telco revenues.
Facebook and Google also have been active reshaping access networks as well. Access historically has been the province of “telco…

Few Actually Need a Gigabit: RCN

Image
As it launches gigabit service in New York, RCN has provided one of the easiest, consumer-friendly ways an ISP can easily explain which speed tier should be purchased.
“Gigabit” mostly is a marketing platform, not a reflection of actual end user demand, in virtually all cases. Indeed, how much bandwidth any account requires is a function primarily of the number of users sharing an account, and secondarily of the types of applications used (especially streaming video).
Though RCN suggests accounts using streaming video choose a 50-Mbps plan, that assumption is based on four devices being used. In fact, for single-user accounts, even 10 Mbps will be enough to stream Netflix and other services.
The gigabit plan is said to be best for accounts supporting 10 devices or more. The 330 Mbps plan is best for eight devices; the 155 Mbps plan best for six devices. The 10-Mbps plan is said to be sufficient for one to two devices, perhaps typically a smartphone or two, perhaps sometimes a PC and a …

30 Billion to 50 Billion "Things" to be Connected by 2020?

Image
There might be 30 billion to 50 billion Internet of Things (IoT) end-points by 2020, driving a total IoT market of up to $8.9 trillion, according to the GSA.
That represents huge numbers of new communications links, some of which might happen over non-paid connections such as Wi-Fi, but many of which will require mobile or other paid wireless connections. which explains the huge interest in IoT on the part of the mobile industry.
New developing markets, driving new communications standards and formats, typically begin with many different protocols contending, before markets pick commercial standards. That was true for videocassette recording formats, PC and smartphone operating systems, WiMAX and LTE mobile standards, for example.
GSA believes the same sort of winnowing process will happen for wireless IoT connections. Though it is conceivable that some new platforms will survive as niches, GSA believes mobile-based platforms ultimately will emerge as the mass market standards, for most…

CenturyLink Moves Further in Direction of Business Services

A proposed CenturyLink acquisition of Level 3 Communications might come as a bit of a surprise. Many of us thought Comcast would be the more-likely buyer. But the proposed deal, if it goes through, would provide ample illustration of changing business strategies by former rural telcos.
Simply put: a few of the larger rural telcos have raced to recreate themselves as provider of services to business customers. That is true for Windstream, Frontier Communications and CenturyLink. In fact, CenturyLink, with a market value of about $15.2 billion, would be acquiring Level 3 at a market value of about $16.8 billion.

In its second quarter of 2016, CenturyLink earned about 34 percent of total revenue from consumers. If one assumes the transaction is consummated, then business revenues might reach as much as 88 percent of total revenues.

That is the sort of deal that might be called a "transforming" event. In other words, CenturyLink would almost immediately become a company that earn…