Wednesday, April 26, 2017

If Using Roads is Free, Then Your Business has to Use Roads, Not "Be the Road"

Mobile video has been a problem for operators because competitive pressure prevents them from usage pricing in a way that would realize much incremental revenue from the shift, Tom Nolle, Cimi Corp. principal, notes.  “They’re stuck with another reason for revenue per bit  to decline, sinking into the realm of dumb, cheap, plumbing,” Nolle says.

“And, of course, if the road is becoming free, then you have to make money on what’s traveling the road, which is video content,” Nolle adds. That is a fundamental insight into present and future business models for many access providers who once earned most of their revenue from voice or messaging.

Across the full range of applications and services, “telcos” (including even cable TV companies, which are a segment of the telecom industry using a different access platform), the value and revenue from traditional apps has fallen. That is starting to be true even for the “newer” legacy services, such as internet access or entertainment video.

There are clear analogies in the internet era, when virtually any app or service can be created and delivered over any public IP network, with no participation by the access provider. With the rise of substitute products, that often means severely disrupted legacy revenue streams.

Voice services on U.S. fixed networks pose a huge stranded asset problem, as fewer than half of locations reached actually generate revenue.

Also, voice is a severely-limited revenue generator. A recent survey of mobile industry executives found that half now view voice as a low value service useful mostly in a multi-product bundle.



The key strategic insight is that since access has become a function that is largely commoditized, with value having shifted higher in the stack, or elsewhere in the ecosystem, at least some service providers must recreate application roles with higher value, higher profit margins and higher revenue, as application or service providers.

In other words, “you have to own at least some of the content and apps that flow across your access network.”

Tuesday, April 25, 2017

Verizon "Goes Gig" for 8 Million Locations

Verizon has launched “Fios Gigabit Connection,” said to be “the nation’s largest deployment of gigabit Internet connection service.” to eight million U.S. homes. Comcast has pledged to upgrade all of its customers on all its networks, to gigabit levels of service in the near future, but Verizon is the only operator that now has done so across its entire footprint of fiber-to-home connections, and has done so using a symmetrical bandwidth approach.

AT&T has been adding gigabit access across its footprint of metro areas, but on a neighborhood-by-neighborhood basis.

Fios Gigabit Connection provides downloads as fast as 940 Mbps and uploads as fast as 880 Mbps.

Priced at $69.99 a month standalone and starting at $79.99 a month for a triple play bundle when ordered online, Fios Gigabit Connection for the first time in some years allows Verizon to argue that “no cable provider comes close to offering the speeds and power of Fios Gigabit connection on this kind of scale.” In addition to scale, Verizon is offering symmetrical bandwidth, something Comcast will not be able to do.

The upgrade is important as it puts FiOS in the lead, as far as fixed network internet access provided at scale, a lead Verizon had lost as cable operators such as Comcast pushed speeds to match Verizon’s FiOS service, in the downstream direction.

Verizon had upgraded speeds 750 Mbps symmetrical service for about seven million homes in early 2017.  Standalone internet access at such speeds were priced at $150 a month.

The gigabit service is priced at $70 a month on a standalone basis, showing continued improvement not only in speed but also in price, for a leading U.S. internet service provider.

The larger point is that, despite some skepticism, U.S internet access speeds are not somehow lagging world averages, though that might once have been the case. Rather, speeds are growing--at least for some major suppliers-- at rates nearly what one would expect if Moore’s Law applied.

source: Technology Futures

Threat and Reality of Common Carrier Regulation Reduced U.S. telecom investment $150 Billion to $200 Billion

Between 2011 and 2015 (the last year data are available), the threat of reclassification reduced telecommunications investment by about 20 percent to 30 percent, or about $30 to $40 billion annually, according to George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist.

In other words, over the interval 2011 to 2015, another $150-$200 billion in additional investment would have been made “but for” Title II reclassification, he argues.

Actual investment averaged $126 billion annually. But the average investment over the five-year window would have been about $160 billion (or more) annually, in the absence of concern over the rules, Ford argues.

“Notably, I find no decline in investment following the release of the FCC’s “Four Principles” to promote an Open Internet in 2005, suggesting it is reclassification—and not neutrality principles—that is reducing investment,” says Ford.

In other words, rules that ensure that consumers have access to all lawful apps, without blocking or hinderance, did not seem to reduce investment. Common carrier regulation did, Ford argues.

Internet of Things Tops Mobile Executive LIst of "Most Important" Apps for 2017

With the caveat that we might all turn out to be very wrong, a survey of executives conducted by GSMA suggests that internet of things is, far and away, the area of greatest mobile operator interest for 2017.

Conversely, 50 percent  of respondents said that voice is a “low value, bundled service.” About  16 percent of respondents said voice “has no future and revenues will dwindle” as users turn to other communications formats.

Asked which new business areas will be the most attractive in 2017, 48 percent of respondents said internet of things would be most important, not only for access account potential, but also for additional roles in the value chain.

No other category ranks that high. The next largest opportunity, for example, was mobile payments, chosen by 14.5 percent of respondents as important in 2017.

Will Customer Service Ever Cease Being an Issue for Access Providers?

Comcast customer service scores are improving--apparently by substantial amounts-- in Oregon, where Comcast has been testing new procedures and processes to improve customer service, the company says.  Comcast says complaints have dropped 25 percent in two years.

Oddly enough, one of the changes involves a new use for an old trouble-detecting mechanism. Decades ago, a cable operator would learn it has a problem because trouble calls started to pour in. Now, in a new way, Comcast monitors one specific behavior--customers using speed test apps--as an indicator it might have a problem in a neighborhood.

It really is not easy being a network-based service provider of any type, whether the service is electricity, mobile or fixed phone service, internet access or linear subscription video.

For years, customer satisfaction scores for internet access service and linear TV have been at the bottom of industry rankings, though there are signs of improvement, recently. That seems to always be the case.

Other “recurring services,” such as electrical utilities, fixed network voice or mobile phone service, also score relatively worse than many other types of products.

It never is so clear to me why that is the case, though any number of possibilities exist. Given the number of hours a television is used (often on in the background, and perhaps not being actively and intently watched), any network outage is going to have a higher chance of being noticed than if a fixed phone line drops. People do not actively use fixed line phones that many minutes per day, and an outage can occur without user awareness that has happened.

Others might suggest the “problem” is the recurring bill, a monthly reminder that a customer is paying for a product where there is some unhappiness with the value proposition.

Poor customer service can be an issue in any business where billing errors are likely to be common, as is any communications service with usage charges. Mobile service providers a decade or two ago had somewhat more common failures in that regard, though most of us would agree that customer service has gotten quite a lot better.

Internet access provider might suffer from the instability of IP connections generally, as well as the somewhat disparate experiences across the day. Wi-Fi channel performance also tends to vary significantly, all of which can lead to a user experience that seems--and is--unstable or disparate.

That does not help.

2012
2013
2014
2015
2016
2017
72
74
73
68
71
70
68
68
71
69
69
69
69
68
72
69
68
68
67
69
70
67
67
67
NM
NM
NM
NM
65
66
NM
NM
NM
NM
67
66
66
66
68
65
63
65
69
68
69
66
66
64
59
61
63
60
54
62
NM
NM
NM
NM
57
62
59
59
64
60
63
60
67
63
65
63
62
59
59
63
60
56
51
59
NM
NM
NM
NM
51
54
source: ACSI

How Soon Will Use Cases Beyond "Capacity" Emerge for 5G?

Coverage is not likely going to be the primary reason for deployment either of Release 15 or Release 16 5G networks, according to GSMA. The early 5G networks based on LTE Release 15 will be deployed in dense urban areas to boost capacity for human users of mobile networks and will use macrocell architectures, GSMA predicts.  The emphasis there is capacity and smartphones.


Those early deployments, in all likelihood, will allow operators of 5G networks to experiment with other potential new revenue sources and use cases. Still, the early deployments will not primarily support new revenue sources to a major extent.

It is possible that specialized low power, wide area platforms separate from 5G will be early to emerge as enablers of many new applications.


With a few exceptions, 5G is the first mobile platform developed with new categories of lead apps in mind. Most significantly, it is the first mobile next generation platform intended to support sensors and other machine applications.


But the traditional uses of next generation platforms (additional capacity for human users) likely will drive the initial deployments, as the business case is clearest.


If and when that happens, it is likely to happen with 5G Phase 2 (LTE Release 16, based on small cell deployments). But that also is where the uncertainty about business drivers is most unclear. If the assumption is that “adding capacity” is the primary application, in dense urban areas where standard macrocell architectures will work, then the question arises: what drives the demand for an overlay network of small cells?


Cost is the principal concern, GSMA says. The basic rule of thumb has been that shrinking the cell radius 50 percent quadruples the number of cells.


So dense small cell networks in urban areas will require considerable capital investment. A small cell network will require shrinking cell radii far more than 50 percent.


Access to, and ideally ownership of, dense urban fiber networks will be a “prerequisite,” GSMA says.


Mobile operators’ need for a new business model is most stark here. If new use cases do not emerge that support investment, then under the current operator business model rollout is likely to be patchy and slow, GSMA says.


That search for new services, use cases and revenue drivers already is mirrored in access provider response to the disaggregated application market, where the way most apps get created is by third parties, not app providers directly.


That is one reason why access providers who can do so invest directly in third party app, content, advertising or transaction firms. That replaces the older “vertically integrated” model for creating applications such as voice or mobile text messaging. In colloquial terms, the strategy is pretty simple: “you need to own at least some of the apps that flow over your network.”




On the other hand, one might argue, there is no need for a small cell overlay, if standard macrocells work for dense urban areas. Others might well argue that using new millimeter wave spectrum, in any setting (urban, rural or suburban) will require use of small cells, for signal propagation reasons. In that view, most 5G deployments will be of the small cell type.

Operators are expected to roll out 5G at a similar rate to the deployment of 4G, attaining coverage of 34 percent of the global population, 2.6 billion people, by 2025.

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