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Showing posts from September, 2012

How Big a Problem is Growing Mobile Data Demand?

Replacing declining legacy revenues with new sources is a key strategic challenge for service providers. So a key practical issue is whether new broadband access, video entertainment or managed services will grow fast enough to match voice revenue diminution.

In fact, Rupert Wood, Analysys Mason principal analyst, warns “there were already signs two years ago that the shifting balance between smart phone and mobile broadband would result in lower growth of mobile data traffic.” 

In other words, the problem is not "exploding growth," but not enough growth. 

Wood predicts mobile data revenue growth in Western Europe, for mobile service providers, will drop in 2012, for example. And though it might have seemed an improbable development, Wi-Fi has become a virtual default network for most smart phone and tablet traffic.

That doesn’t mean untethered mobile devices are best served by Wi-Fi when users are on the go, but the most data-intensive traffic will tend to get consumed indoors,…

“Pipe” Services Will “Always” Drive Most Service Provider Revenue

Communications service providers dislike the phrase “dumb pipe” for obvious reasons, since it implies–often falsely–that a telecom supplier is “just” a provider of low-value, commodity access services. The notion is partly accurate, but has nothing to do with profit margin on “dumb pipe” services.

What, after all, is “best effort” Internet access but a “dumb pipe” service? The access is one thing, while nearly all the content and services are provided by third party suppliers. But profit margins on U.S. high-speed access are in the 40-percent range, hardly a low-margin, commodity service.

There are threats, but those threats are potential future threats, such as ever-increasing amounts of supplied bandwidth, for the same, or less, revenue. But service providers already are moving to tie consumption to revenue in a more-logical fashion, so the potential danger is unlikely to surface as a present danger.

Also, very few service providers are “just” Internet access providers. Video, voice, s…

Questions About Investment Return for IP Networks as PSTN Shutdown is Pondered

As policymakers and service providers ponder the implications of a future “shut down” of the public switched telephone network, they will face a new series of questions.

Since the robustness of investment in new networks will hinge on expectations about profits, many of the questions will flow directly from the more challenging business model. As the regulatory framework had to change in the shift from a monopoly model to a competitive model, so the framework arguably will have to change again with a shift to all-IP networks.

When service providers worry about the implications fo “dumb pipe” or “over the top” business models, they simply acknowledge a key change in the foundation of the networks business, namely that network access and applications now are logically distinct.

Whatever else might be said, it is obvious that “certainty” is not a key feature of the fixed network business anymore. That’s a problem since uncertainty is the enemy of investment.

FCC Initiates Review of Mobile Spectrum Policies

The Federal Communications Commission (FCC) has adopted a Notice of Proposed Rulemaking (NPRM) to reexamine its mobile spectrumholding policies, last reviewed comprehensively more than a decade ago. 

The FCC review makes sense, many would argue, in light of the greater importance of terrestrial mobile broadband, compared to fixed or mobile satellite services, and the shifting of spectrum to terrestrial use. 

Also, the coming spectrum auctions for former broadcast TV frequencies necessarily will raise issues about the quality and quantity of competitor spectrum holdings, pro-competitive measures that might be taken and an overall need for clear and stable rules to stimulate investment.

As always, the setting of new rules necessarily will create concrete business advantage for some contestants, compared to others, likely creating new opportunities for at least some new or smaller contestants. 

In related moves, the FCC also is looking at its licensing rules for satellite services, with a ne…

U.S. Needs “More Mobile Spectrum,” But When?

If there is any one "rule" that has "always" been right in the mobile business, it is that, over time, more bandwidth is consumed, and therefore more spectrum is needed. That isn't to deny the other ways any existing amount of bandwidth can be employed. There have been clear advances in coding and modulation that wring more usable bandwidth out of any amount of spectrum.

Traffic offloading using Wi-Fi also has become important, and networks can be redesigned using smaller cells, to effectively increase the amount of bandwidth any given amount of spectrum can provide. But the costs of shrinking cells grows as the cell radii shrink. 

At some point, there arguably is a point where the cost of tweaking existing bandwidth is more expensive than can be supported by retail service rates, and when allocating additional spectrum is the more affordable choice, from a national perspective of supplying lots more bandwidth at reasonable cost.

Some argue that there is no spect…

Mobile Already is the Preferred Way of Accessing the Internet

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It isn’t hard to argue that mobile is the preferred way most people around the globe want to use voice services.

Globally, there were  87 mobile phone subscriptions for every 100 people in 2011. There were in 2011 about 18 fixed line phone subscriptions for every 100 people.

What now is happening that mobile is becoming the way a majority of people access the Internet. A large part of the reason is that smart phones increasingly represent the way people use the Internet.

For the first time in history, the installed base of smart phones will exceed that of personal computers at the end of 2012.  
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There were 589 million fixed broadband subscriptions by the end of 2011 (most of which were located in the developed world), but nearly twice as many mobile broadband subscriptions at 1.09 billion, the International Telecommunications Union broadband report says.

Of a stock of 5.97 billion mobile cellular subscriptions worldwide by the end of 2011, some
18.3 percent related to mobile broadban…

How Big is SMB Revenue Opportunity?

While the U.S. cable operators in 2012 may generate over $7 billion in annual revenues providing telecommunications services to businesses, they "will be chasing a declining business telecom services segment" and face fierce competition from entrenched telco providers with very deep pockets ready to staunchly defend their existing base, according to a study from The Insight Research Corporation.

Cable operators will gain some market share, but "they will remain small players in a big industry with low margins and little cash flow," Insight Research argues. 

That the small business market is fragmented is uncontestable. That the market is "declining" is more contestable. 


By way of contrast, other analysts say services aimed at small and mid-sized businesses will be among the top-three fastest-growing communications services for fixed network providers, according to Atlantic-ACM. 

Machine-to-machine services, business Internet access and business VoIP all have…

News Consumption Now is an Indirect Concern for More Telcos

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Until the past couple of decades, changing trends in news consumption would have had tangential, if any relevance, for telcos and mobile service providers. That began to change when telcos became video entertainment service providers, making TV news consumption at least a minor point of interest.

To the extent that consumers shift news consumption from print to television, that indirectly drives demand for video subscriptions.

Over the past couple of years, a shift to online consumption of news began to be more important, at least to an indirect extent, first as PC consumption created needs for broadband access, and more recently as "on the go" consumption has become an indirect driver of smart phone and mobile data service plans.

The percentage of Americans saying they saw news or news headlines on a social networking site "yesterday" has doubled from nine percent to 19 percent since 2010, for example. 

Among adults younger than age 30, as many saw news on a social ne…

Mobile Marketing More Used than Mobile Payments, at the Moment

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At least so far, use of mobile devices to "pay for purchases" remains a less frequent activity than using devices to compare prices or check product reviews, as you might expect at this point in the development of a range of mobile commerce, mobile advertising and mobile operations options for retailers and consumers.  When asked whether they have used a mobile to compare prices and look at product reviews while out shopping, 61 percent of U.S. respondents 18 to 34 and  51 percent of U.K. respondents reported they had done so. But there are key age differences.  Only a minority of shoppers in older age group brackets said they had done so,Econsultancy reports. 
The results also suggest the importance of mobiles when shoppers are out and about. When asked what they would do if a particular store did not have what they were looking for, 45 percent of U.K. respondents and 46 percent of U.S. respondents indicated they would try and find the item at another store. Some 32 percent of …

Dish Talks to Viacom About Over the Top Delivery, Not Tied to Subscription

Dish Network Corp. reportedly is talking to networks such as Viacom, Univision and Scripps Networks Interactive about licensing some content to a new Dish over the top video offering that would not require purchase of a Dish Network video subscription, Bloomberg says. 

That would be a break with "TV Everywhere" packages that require customers to buy a linear video subscription first, before being able to use the TV Everywhere feature. 

The expectation is that Dish could create lower-cost online services that virtually any U.S. consumer with broadband access could buy. The issue is whether an appealing package, costing perhaps $20 a month, for users watching on tablets and smart phones, for example.

35% of Smart Phone Data is Consumed Using Wi-Fi

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On average, smart phones are making eight Wi-Fi connections per day and offloading as much as 35 percent of total data consumption to a Wi-Fi network, while heavy users offload as much as 70 percent , according to DeviceScape

You might think such statistics point to heavy smart phone data consumption, but that seems not to be the case. 

The overwhelming majority of customers on AT&T, Sprint, T-Mobile and Verizon networks studied by NPD Connected Intelligence don’t even use 2 GBytes worth of mobile data per month, which suggests most consumers do not need “unlimited” service plans. 


NPD Connected Intelligence tracked users on 1,000 Android smart phones as part of the study. T-Mobile USA has users who consume more, though. Some 11 percent of T-Mobile USA customers use more than 3 GBytes per month, compared to four percent of AT&T and Sprint customers who consume more than 3 Gbytes a month. 

About three percent of Verizon customers use more than 3 Gbytes a month NPD Connected Intel…

The "Real-Time Cloud" has Implications for Mobile, Fixed Service Providers

The coming era of" real-time cloud" services will have clear implications for access providers. Real time services include apps such as voice and video, for example, as well as any number of business processes. If those services are hosted in the cloud, one would have to assume the existence of access mechanisms that can support real-time applications well.

One also would assume real time cloud services would be consumable by any device with Internet access, especially mobile devices, with low latency a virtual requirement for user experience. And, of course, any real time cloud environment would be ideal for over the top real time applications.

That means more competition for carrier-supplied voice and messaging.

52% of U.S. Households are "Mobile Only" or "Rarely Use" Landline Phone

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Just over 38 percent of U.S. consumers surveyed by iGR indicate they do not have a landline phone, with service from any telco, ISP or cable company (they are mobile only households). 

Of those respondents who do buy fixed network telephone service, just 24 percent of consumers said they use their landline phone "a lot." 

Another 23 percent said they use it "sometimes."


About 14 percent reported having a landline they used "rarely or never." Add that to the 38 percent of wireless-only households and a majority of U.S. households might now be functioning exclusively or nearly exclusively in mobile mode. 

The 38 percent of mobile-only users are more likely to be under 35 years old, as you might expect. 

At the moment, a higher percentage of households headed by older people use landline phones. There are at least a couple of ways to characterize that finding. One might argue that users find new uses for landline phones as they get older. 

Or, one might argue that…

"Closed Versus Open," "Context or Distribution" Debates Never Die

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Remember "Videotext?" Few now do. Before there was a public Internet, before browsers and the World Wide Web, AT&T and other telcos, as well as cable companies were experimenting with what we might today call multimedia.

And the approaches illustrate how some fundamental business and technology challenges oscillate over time, but never really are firmly settled. The "Viewtron" system was closed. The service providers were in charge of programming the service just as video entertainment service providers select which channels to carry. 

At the time (early 1980s), that might have appeared the only feasible way to aggregate and present electronic content on a widespread basis, as the PC had yet to clearly emerge as a mass market device. 

Later, we saw the first iteration of the "open versus closed" approaches to software or hardware platforms, a debate that never seems fully settled. 

Likewise, executives and observers of the video entertainment business hav…

Amazon Could Be Working On A Square Competitor

As each new mobile payment service launches, the number of suppliers offering lower transaction fees grows. The latest rumor has Amazon readying a mobile payments product that could compete with Square, Intuit GoPayment and PayPal Here, TechCrunch reports.

Amazon is said to be targeting smaller chains of retailers, a logical positioning given the value of a smart phone or tablet dongle approach for a smaller retailer.

Amazon could be offering significantly lower credit card processing fees for merchants as part of its pitch. Rumors are that Amazon could be offering a rate as low as 1.9 percent. Current offerings include fees of around 2.7 percent.

Such a move would put Amazon into the physical retailing environment in a new way, and also shows why growing competition in the payments processing business is leading to lower fees for retailers who use the services. 

A survey by the National Retail Federation in 2011 found that while only six percent of retailers said they used mobile point-…

Eric Schmidt, Gangnam Style

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Dish Laucnhes 5 Mbps, 10 Mbps Satellite Broadband Access Services

Dish Network Corp. has annoucned the launch of DishNet, providing 5 Mbps and 10 Mbps satellite broadband access largely aimed at rural customers.

The service will start at $49.99 a month for download speeds of 5 megabits per second, and  $59.99 for stand-alone service at 10 Gbps.Combining DishNet with Dish’s satellite TV service saves customers $10 a month on either plan.

ISPs Want to Tax App Providers, Now Newspaper Wants to Tax ISPs

Internet access providers have floated the idea of new business models that essentially charge large app providers a fee for imposing "load" on access networks, a move aimed primarily at apps that involve video, ranging from FaceTime on a mobile network to Netflix on a fixed network. 

In a twist, a writer at the Guardian newspaper goes the other way, suggesting that ISPs be taxed to support user consumption of newspaper products. 

"A small levy on UK broadband providers – no more than £2 a month on each subscriber's bill – could be distributed to news providers in proportion to their UK online readership," the article argues. "This would solve the financial problems of quality newspapers, whose readers are not disappearing, but simply migrating online," The Guardian argues. 

Both arguments rest on the assumption that value is being delivered in the Internet ecosystem without "reasonable" participation in the created revenue streams.

But the argu…

Comcast Using FTTH Overlay to Deliver 305 Mbps Residential Service

Comcast Corp. is using the fiber-to-the-home (FTTH) capabilities of its "Metro Ethernet" platform to power a new residential broadband service with a maximum downstream speed of 305 Mbps and a potential 65 Mbps upstream, not DOCSIS 3.0. 

In other words, Comcast is using an overlay approach, running a discrete new fiber from a transceiver node directly to a home, instead of using the cable modem standard and network. 

The movesuggests Comcast believes demand for the 305 Mbps service will be relatively limited. If high take rates were anticipated, Comcast would simply move to Docsis 3.0. At low penetration, the fiber direct overlay means the entire spectrum plan for each local network can operate without disruption, while still accommodating some growth of the 305 Mbps tier of service.

Netflix "Watch Instantly" Dominates On-TV Streaming Video

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Netflix "Watch Instantly" is the dominant application for U.S. household Web-to-TV video, NPD says. Of people viewing online video on the TV, 40 percent use their connected TVs to stream video from Netflix, 12 percent access HuluPlus, and four percent connect to Vudu. 

Over the last year, the number of consumers reporting that the TV is their primary screen for viewing paid and free video streamed from the Web has risen from 33 percent to 45 percent,  according to The NPD Group. 

During the same period, consumers who used a PC as the primary screen for viewing over-the-top (OTT) streamed-video content declined from 48 percent to 31 percent. 

This shift not only reflects a strong consumer preference for watching TV and movies on big screen TVs, but also coincides with the rapid adoption of Internet-connectedTVs, NPD argues. Up to this point, it has more commonly been a game console that has served as the gateway to watching streamed video on a TV set. 




Fitch Cuts Forecast for Global Growth, will Mobile be Affected?

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Communications and entertainment services are not immune to broader economic downturns, though consumer spending on communications and video services seems to have been affected in subtle ways during the Great Recession of 2008 and its aftermath which has seen sluggish growth in many regions, and an actual contraction in Europe. 

The impact of the Great Recession beginning in 2008 is easy enough to describe. According to TeleGeography Research, revenue growth slippedfrom about seven percent annually to one percent in 2009, returning to about three percent globally in 2011.
It isn't clear yet whether another recession, of broader scale,is coming. But it is reasonable enough to assume stubbornly tough conditions will endure for a few years. 

That should mean less spending, on a typical account, but not fewer subscriptions. 



Fitch Ratings has pared back its forecasts for global gross domestic product growth to 2.1 percent, citing “persistent weakness” in the global recovery. That is dow…

Spectrum Strategy Comes to the Fore

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Spectrum issues are not always primary strategic issues in the communications business. Most of the time, other concerns dominate executive thinking. But spectrum issues now are emerging in a variety of ways as strategic matters, as typically is the case early in a new era of business and network deployment. The U.S. mobile duopoly, for example, was broken by the issuance of new "Personal Communications Service" spectrum.

New blocks of Advanced Wireless Service and Wireless Communications Service spectrum are underpinning the emergence of U.S. Long Term Evolution networks, for example. In Europe, major spectrum auctions of former broadcast TV spectrum will create the foundation for LTE in Europe.

Also, though, periods of intensive spectrum purchases also are times when debt loads become an issue. In fact, European service providers were widely in danger after many overspent for 3G spectrum.

In recent years much of the spectrum auction activity has been for LTE spectrum in th…