What if 5G Produces No Net Revenue Increase?

The conventional wisdom is that 5G is going to create new revenue sources for mobile operators. That undoubtedly will prove true, to an extent; and perhaps to a significant extent.

What remains unclear is whether 5G actually will produce a net increase in mobile broadband revenues, even if 5G produces a gross increase in such revenues.

In other words, on a net basis, it is conceivable that 5G literally produces no net gain in access revenue. The reason is that, unlike the case in the 3G era, the 5G mobile internet market is going to operate in a mature environment in most markets.

In the transition from 2G to 3G, one might note an overall increase in mobile operator revenues, as the internet access market was young. By the time 4G arrives, growth mainly is substitution, not net growth. That is likely to be the case in the 5G era as well.

To wit, new 5G revenues will include some element of actual growth (IoT subscriptions, for example). But many of the 5G accounts will simply be substitutes for existing 4G subscriptions, so there will be no net gain in subscriptions.

Some will hope for higher average revenue per account. Initially, that could happen. But ARPU will fall fast. So, on a net basis, it is possible there will be no actual gain in mobile data or total mobile revenue.

Some might well ask, “then why do it?” The simple answer is that “doing nothing” might plausibly result in serious negative revenue growth, which is worse than “flat revenue.”

source: Strategy Analytics

No Good Retail Pricing Options for One Small Telco

Ogden, Utah is a one-square-mile town with about 823 households, Ogden Telephone Company is the entity providing fixed network communications services to “over 1500 households and businesses” in Boone County, with internet access speeds up to 200 Mbps, costing between $30 a month for 3-Mbps service up to $330 a month for the 200 Mbps version.

Residential phone service retails for about $30, after the taxes and fees. The firm also provides video subscriptions, supplied over a fiber-to-home network. And there is no local cable TV operator competing for customer attention.

Apparently, customers not choosing a bundle including voice service now have to pay an $80 fee. Other telcos seem to “solve” their revenue problems in similar ways, charging more money per-unit for purchases of “naked internet service” without voice than for a bundle including two or three services.

Sometimes, especially on promotional plans, the cost of buying voice service is low enough to entice customers to buy a triple play plan.

Now, though, it appears Ogden Telephone charges customers who do not buy voice service a fee of $80 a month. Obviously, it makes more sense to buy voice service even if a customer does not plan to use it.

The plan obviously is going to irk customers who otherwise would not buy a voice line. Telco executives are likely to say they have an investment in fixed infrastructure that has to be covered. That is true enough.

But there are other ways to structure retail fees, within regulatory reason. Stand-alone service price could be raised, with discounts on full bundle purchases. Charging a basic “network connection fee” with additional sums for discrete services is likely not lawful. Perhaps none of the alternatives are ideal.

And that is the larger problem. One might question the future viability of most smaller telcos in the United States as all legacy services mature and as service alternatives proliferate. Ogden does not seem the type of community where a new competitor would want to build a fixed network.

So wireless or mobile alternatives, some more exotic than others, would seem to represent the hope for heightened competition in the market.

One is not popular suggesting that, in many situations, any fixed network solution is the “wrong” way to supply communications services in the 21st century. Nevertheless, that might become a reality. And even that outcome might be debatable, in many nations, as even mobile or wireless access businesses face revenue and profit pressure.

Simply stated, without subsidies, there is no viable business model for many rural and small telcos. Those problems are exacerbated as consumer demand for telco products shifts and drops.

What Verizon's Pole Attachment Stance Tells You

For every public purpose there are corresponding private interests. Consider pole attachments.

Attackers generally support less-costly, simpler, faster processes for gaining the right to string communications cables on telephone and light poles. Incumbents generally oppose such moves, as faster, easier, cheaper pole attachments mean more potential competition, faster.

Of course, interests are not simple. Cable TV companies, which once were attackers, argued for simpler pole attachments, until they became incumbents. Now the tier-one cable companies oppose “one touch make ready” and other measures to ease the process of creating an access network.

But even in the tier-one incumbent arena, business interests vary. AT&T generally opposes such measures, while Verizon now supports easier pole attachments. There is a simple reason. AT&T has the largest fixed network footprint, and so is an incumbent in much of the United States.

Verizon, in contrast, serves a relatively small portion of U.S. homes, so Verizon homes passed are about 21 percent of the roughly 126 million U.S. homes.

AT&T homes passed are about 66 million, or about 52 percent of U.S. homes. In other words, AT&T is the defender in 52 percent of locations, while Verizon is the defender in about 21 percent of locations.

Though AT&T already has some efforts underway to compete out of region, Verizon has the bigger opportunity out of region.

So Verizon’s position on easier pole attachments tells you at least one thing: Verizon intends to move out of region, where it will have to attach its cables to poles owned by somebody else.

AT&T likely also is planning to do so, but will defend in roughly 52 percent of cases, attack in no more than 48 percent of cases. There is a slight advantage for AT&T to take the position it does.

With 60-MHz Channels, Sprint Expects 3 Gbps to 6 Gbps Per Sector

Sprint plans to deploy Massive (multiple input, multiple output) MIMO radios with 128 antenna elements in its 2.5 GHz spectrum to increase capacity to reach 3 Gbps to 6 Gbps per sector on its 4G network, Sprint notes.

When deployed on the network, Massive MIMO can provide all mobile device users with performance improvements, and those with the latest generation of devices with the most antenna elements will see the best performance.

In recent field testing, Massive MIMO Samsung radios, equipped with vertical and horizontal beam-forming technology, reached peak speeds of 330 Mbps per channel using a 20 MHz channel of 2.5 GHz spectrum.

Capacity per channel increased about four times, cell edge performance increased three times, and overall coverage area improved as compared to current radios.

With 60-MHz channels, Sprint believes it will be able to boost capacity up to 6 Gbps per tower sector.

Millimeter Wave Moves to "Permissionless Innovation" Model

There are many ways spectrum use is moving away from command and control methods of allocation in the U.S. and other markets. As with Wi-Fi, spectrum users now are allowed rather wide flexibility of use case, devices and business models.

In other ways, spectrum sharing now contributes to that trend. The Citizens Broadband Radio Service allows blocks of spectrum to be shared between primary license holders and commercial secondary users, plus tertiary users who have best effort access on the Wi-Fi model.

TV white spaces systems use databases to allocate users and avoid interference, without fixed rules about who may use specific blocks of spectrum, and when.

As millimeter wave spectrum is released for commercial use, the Federal Communications Commission will issue flexible-use licenses as well as release huge amounts of unlicensed spectrum.

Flexible-use licenses will allow licensees to continue to innovate. Without the requirement to use particular technologies or supply particular applications.

In other words, policy is aligning to support “permissionless innovation.”

Disruption Takes Scale

Sometimes markets work. As unhappy as U.S. consumers seem always to have been with linear video services, the advent of the over the top framework is going to solve the “choice” problem. Some (industry suppliers, for example) might argue there is not a problem, given the historically high buy rates, which approached 90 percent of all homes at product peak.

At the same time, even as they bought the product at very-high rates, virtually all surveys suggested that consumers were dissatisfied. They bought, but seemed to dislike buying.

The explanation is that they had no real choice. True, they could switch from cable to satellite to telco, but the basic offers were quite similar, and there has not been too much price differentiation. Programming contracts account for much of the sameness, while “cost of goods” accounts for the roughly uniform pricing.

OTT video now offers significant choice, and more is coming. In fact, even some providers of linear TV now say the product cannot be sold at a profit, or offers very slim profits. In fact, many believe the business case for OTT video will be better than for linear video.

Though consumer happiness with subscription TV rarely, if ever, has been high, that problem is on way to solution.

Year after year, some industries simply did not fare as well as others, and subscription video has been a prime example. In fact, linear video subscription TV has in recent years ranked at the bottom (sharing that distinction with internet access services) of multi-industry satisfaction scores tracked by the American Consumer Satisfaction Index.

But that problem will be solved, to a great extent, by OTT choices being made available at scale.

And scale matters. A recent Consumer Reports survey, for example, had small providers such as EPB and Google Fiber earning the highest marks for both value and reliability. But scale is an issue. EPM only serves Chattanooga, Tenn. Google Fiber has negligible take rates.

All the linear providers with scale rank at the bottom of those survey rankings. Netflix has scale. So services such as Netflix will change the market.

We sometimes believe that small startups can disrupt whole markets. They do, but only after the firms have gained huge scale. No startup disrupted the global phone market. It took giant Apple to do that. You can make the same argument about other markets disrupted by Google, Facebook or Amazon. It takes scale to disrupt.

Thailand to Provide 10 Mbps Village Internet Access for $1.47 a Month

Thailand will connect 3,920 border villages across 62 provinces by mid-2018, providing the core network as well as one or more Wi-Fi distribution points in those villages offering end users 10 Mbps internet access service starting at 50 baht (US$1.47) per month, with unlimited data usage.

source: NBTC