Will Service Provider Costs Have to Decrease 40% by 2020?

There are several reasons why services delivered over fixed networks are going to face tougher competition from mobile services, ranging from orders of magnitude more mobile bandwidth to lower mobile network sunk costs to higher network utilization rates to changing end user demand.

Simply put, demand for consumer-focused mobile services now vastly outstrips demand for fixed network services.

According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons, globally. That abandonment of fixed network voice is occurring at the same time that mobile subscriptions have reached 98.6 percent.

To be sure, demand for fixed network Internet access grew, but slowly, in 2014. Fixed network Internet access subscriptions grew from 10.3 percent to 10.8 percent.

Also, relatively speaking, it is going to be easier to wring cost out of mobile platforms, compared to fixed platforms, in most markets.

Mobile networks cost less than fixed networks, and can be deployed and upgraded faster.

Though the pattern is by no means uniform globally, the cost of a mobile network, including spectrum purchases, is less than that of a comparable fixed network.

But mobile markets typically feature multiple mobile operators (three to five, for example) operating with their own facilities, while many fixed network markets feature only a single network operator, or possibly two, in some markets.

In addition, mobile network infrastructure costs are described in terms of costs to serve “people,” while fixed network costs are “per location.”

That makes direct comparisons somewhat more difficult. But a study of U.S infrastructure costs showed mobile or wireless networks were less costly than fixed networks when loop length requirements  were 12,000 feet, for example, when the comparison was a single new mobile network and a single new fixed network.

Total investment might differ if multiple mobile networks overbuild a single fixed network. In some cases, the total cost of all the mobile networks could be higher than that of a single fixed network.

Operating costs often also are lower for mobile than fixed networks, sometimes because the fixed networks have cost structures typical of former-monopoly providers, while mobile service providers often start with lower cost structures.

Also, as customers abandon the fixed network, more of the assets are stranded, and unable to generate a financial return. Rare is the cell tower that does not serve paying customers, or enough paying customers to earn an actual profit.  

And ability to reduce costs is going to be essential, if one believes, as does the International Telecommunications Union, that retail consumer communications service prices are going to drop by 40 percent by 2020.

To be sure, prices might not drop by 40 percent for every service, offered by every provider, in every market. Prices for fixed services might even rise, as consumers opt to buy more-expensive services running at higher speeds up to a gigabit per second in some markets, but easily to hundreds of megabits in more markets.

The analogy there is smartphone prices, which are higher than what consumers used to pay for feature phones.

Still, stranded assets and shifting demand are going to create increasing pressures for fixed network service providers. Mobile operators will not be exempt from the pricing pressures, either.

Some might already argue that many fixed network providers, and even some leading mobile providers, have business models that are going “upside down.”

U.S. Fixed Network Broadband is "Among Most Affordable" in the World, says ITU

From time to time, observers complain about the high price of fixed network Internet access, especially when prices climb. A typical line of argument is the retail price, expressed in dollars, compared to prices in other countries, also expressed in dollars.

Analysts who work across regions and nations globally know there are issues with such comparisons. To normalize “prices,” analysts often use purchasing power parity or measures that index communications spending to household income, for example.

Those methods often provide a more-realistic way of comparing prices, since they are expressed in terms that are normalized for purchasing power differences.

In that regard, an International Telecommunications Union report shows that U.S. fixed network broadband prices are exceedingly low, expressed as a percentage of gross national income per person. That is not the only way to compare prices across countries, but is instructive.

Using the per-capita GNI method, fixed network high speed access costs less than one percent of per-person GNI, making U.S. fixed network broadband services among the “most affordable” in the world.

source: ITU

In developed countries, the fixed-broadband basket has been relatively affordable for a number of years, but prices are no longer falling.

Between 2008 and 2013, the price of the fixed-broadband basket as a percentage of GNI per person fell from 2.3 percent to 1.4 percent. That figure remained unchanged in 2014.

While prices for fixed-broadband services are comparable in absolute U.S. dollar  terms across developed and developing countries, they remain much higher in terms of purchasing power parity values.

In 2014, fixed-broadband services in developed countries cost PPP$27, compared to PPP$65 in developing countries. This is not the case for fixed telephone and mobile prices, as prices expressed in purchasing power parity are almost the same in developed and developing regions.

source: ITU

No Network is "Always Best," But Mobile Comes Close, in Consumer Market

As a rule, no single access platform is “best” for every deployment scenario, even if mobile networks globally have proven to be the most-affordable for most people, most places.

Still, the relevance of satellite delivery, fixed wireless, specialized business networks and potentially new platforms (low earth orbit satellite constellations, balloons and drones) cannot be denied, even if it is likely most of those new solutions might wind up providing backhaul for mobile networks.

Sometimes the advantage of “specialized” networks comes from customer demand, at other times from the characteristics of the access platform.

Optical networks serving enterprises or satellite TV networks serving consumers in rural areas are examples of specialized demand or cost-optimized delivery.

Still, it is hard to discount the growing “primary” reliance on mobile networks for most consumer purposes. Since 2003, mobile network rural coverage had grown from a bit over 20 percent in 2003, in Africa, to as much as 84 percent by 2012.  

In other regions, such as Asia, rural coverage grew from 60 percent to 87 percent in Asia and from about 64 percent in North America to 96 percent. In Europe, rural coverage grew from about 90 percent to 97 percent.

In 2015, 73 percent of the world’s population is covered by 3G networks, one way of measuring potential Internet access coverage. The GSM Association estimates that 3G coverage will grow to 80 percent by 2020.

By 2020, some 60 percent of people will have 4G coverage.

Such forecasts are the reasons why some access or transport platforms can exist, even when mobile coverage becomes nearly ubiquitous. Mobile will not be the “best” network for all purposes, and will not be available in some geographies.

source: ITU

source: ITU

Mobile Data Services Now Drive Global Mobile Operator Revenue Growth

At least one global trend--adoption of mobile Internet access services--has sharpened over the last couple of years. On a global basis, adoption of mobile services has reached maturity, though growth lies ahead in some regions, especially Africa.

Other trends continue unabated. According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons. That abandonment of fixed network voice and growth of mobile  while mobile subscriptions have reached 98.6 percent.

Fixed network high speed access has grown slightly, from 10.3 to 10.8 per 100 inhabitants.

Growth in the penetration of active mobile-broadband subscriptions has, however, been very sharp, rising from 37.2 to an estimated 47.2 per 100 persons over the last twelve months alone.

Mobile broadband services, falling prices and the rapidly growing use of smartphones and tablets are driving that trend, the ITU says.  

Individual use of Internet and household access to it have continued their steady rates of growth, from 40.6 and 43.4 per cent, respectively, to 43.9 and 46.4 per cent at the global level.

One trend seems clear enough: “mobile broadband” is the way most people now are getting access to the Internet, globally.

source: ITU

Free Basics to be Offered by Airtel in 17 Countries in Africa

Facebook is partnering with India's Bharti Airtel to bring new services to 17 African countries as part of its “Free Basics” program. 

"In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate," said Mark Zuckerberg, Facebook CEO. "Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa." 

Free Basics will be offered to Airtel customers in Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.

Zuckerberg also noted that Facebook had partnered to launch a satellite to provide Internet coverage to remote areas of Sub-Saharan Africa starting in 2016.

It's a big day for connecting Africa. In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate.Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa.These new Internet.org launches will bring free services to Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.We also recently partnered to launch a satellite to provide internet coverage to remote areas of Sub-Saharan Africa starting in 2016. We've also partnered with the Praekelt Foundation to give developers the tools they need to build free basic services to reach people just coming online. Girl Effect is one of these services and in this video Elisha is using it as part of Free Basics in Kenya to access information to help empower girls to become leaders. Connecting people across the African continent is critical to our mission. We’re going to keep pushing forward to develop new ways to bring people online until the whole world is connected.
Posted by Mark Zuckerberg on Tuesday, November 17, 2015

Mobilink Merger with Warid Creates New Pakistan Mobile Market Leader

VimpelCom (operating as Mobilink) and Warid Telecom Pakistan will merge their Pakistan telecom businesses, creating the largest mobile company in Pakistan, with about 45 million customers.  

The companies believe the transaction will to lead to savings with a net present value of approximately US$500 million. The combined revenue of the companies for the 12 months ending in September 2015 was US$1.4 billion.

Warid’s Long Term Evolution 4G network will help the new company compete with Zong, the only other operator running an LTE network.

source: Apni Voice

source: Central Asian Cellular Forum

Internet Adoption is Not Simply a Case of Network Investment

Increasing use of the Internet in India will be driven by smartphone adoption, higher use of 3G and 4G networks, lower devices costs, more-affordable subscription prices and greater understanding of the value of Internet apps.

In other words, higher rates of Internet use will require investments and innovations both in the policy, business and technology realms. Networks reaching all potential users are necessary, but not sufficient.

Supplier business models arguably need to become more sustainable, consumers need to better understand the value of Internet apps and retail prices will need to be more affordable. And growth itself will cause new problems.

As has been the case recently, higher usage means more stress on networks, dropped calls being one clear example. That will be the case for Internet access quality of experience as well as usage climbs.

That will require more investment in spectrum and networks, which also means government policies that encourage investment will matter. And only government can release the additional required spectrum.

At the same time, consumers need to be convinced they need the Internet, and that is not universally the case, today.

By 2020, more than half of India’s people still will not regularly use the Internet, according to The Mobile Economy: India 2015 report. Most of the excluded population will live in rural areas.

The gender gap will remain, as well. Women in India are 36 percent less likely to own a mobile phone than men, which equates to 114 million Indian women.

Also, nearly 70 percent of the Indian population lives in villages, where network costs are higher than in urban areas, and sustainable business models are more much more difficult.

According to the Ministry of Communication and Information Technology, nearly 10 percent of Indian villages had no mobile coverage from any of India’s mobile operators as of March 2015.

A combination of a difficult terrain, characterised by mountains and sparsely populated farmlands, high energy costs and low income levels often makes it uneconomical for mobile operators to expand coverage to rural communities using conventional network deployment strategies.

A recent report by the GSMA analysed three broad strategies to address the coverage gap, namely network sharing, government support and alternative technologies (such as drones, balloons or satellites). The first two are particularly relevant to the Indian market, GSMA argues.

A study organized by a major mobile trade association might be expected to say that.

The cost of ownership of a mobile phone (which covers all the costs associated with both owning a phone and accessing mobile services) is a key factor in mobile internet adoption, particularly in India where nearly one-third of the population (360 million people) lives below the poverty line.

Data tariffs in India, at 0.5 to 0.7 cents per MB, are among the lowest in the world, but a significant proportion of the population is unable to afford this for regular internet use due to low disposable incomes.

A recent report by GSMA Intelligence found that many non-users lack awareness of Internet uses and available content. They do not feel the Internet is relevant or useful to them.

Creating awareness around the benefits of the internet and the availability of useful services covering a wide range of subjects, such as agriculture, education and healthcare, is crucial to bringing more people online.

Not coincidentally, that is why Facebook’s “Free Basics” program is viewed as so significant by Facebook and many others.

Most agree that mobile will be the primary Internet access platform in India. But that does not mean mobile will be the only platform. Fixed networks will have a role to play, both for access and backhaul, while new backhaul platforms might be more significant than some assume.

India Will Drive Nearly Half of Asia-Pacific Mobile Subscriber Growth, Driving Internet Access

India is on track to surpass half a billion mobile subscribers by the end of the year, according to a new GSMA Intelligence study. By 2020, India will account for almost half of all the subscriber growth expected in the Asia Pacific region.

The Mobile Economy: India 2015 notes that 13 percent of the world’s mobile subscribers reside in India. At the  end of 2014, India’s mobile subscriber penetration rate was about 36 percent of the population, compared to a 50 percent global average.

But that is going to change, fast.

The subscriber penetration rate in India is forecast to reach 54 per cent by 2020 as many millions more are connected by mobile.

India had 453 million unique mobile subscribers at the end of 2014, but is forecast to surpass 500 million by the end of 2015 and add a further 250 million subscribers by 2020 to reach 734 million.  

That matters for reasons beyond the ability to communicate using voice and text. Fixed broadband penetration in India is about 2.5 percent, and will not increase much more than that, for business model reasons.

In contrast, 60 percent to 90 percent of the population have access to at least a 2G mobile service.

That means the mobile network will become the dominant means of getting access to the Internet. The number of individuals accessing the internet over mobile devices had expanded from less than 100 million subscribers in 2010 to nearly 300 million at the end of 2014.

Although India only launched 3G services in 2009 and 4G deployments are at an early stage, the move to mobile broadband networks is set to gather pace over the coming years.

Mobile broadband networks (3G/4G) accounted for only 11 percent of Indian mobile connections 1 in 2014, but are expected to make up 42 percent of the total by 2020.

One factor driving the migration to mobile broadband networks is the increasing adoption of smartphones, made possible by low-cost devices.

More than half a billion new smartphones connections are expected in India between 2015 and 2020, bringing the total to 690 million, up from 149 million in 2014.

The penetration of mobile Internet has reached 24 percent of the population by mid-2015.

This figure will almost double again in the next five years to reach 44 percent of the population by 2020, with around 600 million mobile internet subscribers.

Millennials Will Buy Video, Audio Entertainment. News? Not So Much

Some 93 percent of Millennials buy some form of content, a study by the American Press Institute finds. The bad news for “press” entities is that most of that spending is for video or audio entertainment products, not “news.”

The two most popular types of paid subscriptions or content regularly used by Millennials are those that access online movies and TV (77 percent) and cable television (69 percent).

A majority of Millennials also use paid content for music (54 percent) and video games (51 percent).

The most popular paid news subscriptions or content regularly used by Millennials are print magazines (30 percent) and print newspapers (29 percent).

Fewer than 20 percent of Millennials regularly use paid access to a digital news app (19 percent), a digital newspaper (15 percent), a digital magazine (15 percent), or an email newsletter (15 percent).

source: Business Insider

Why Spectrum Sharing Matters

A new white paper on What is Spectrum Sharing and Why Does it Matter? is posted on the Spectrum Futures blog. 

Spectrum sharing matters because communications spectrum is a scarce asset, and demand is growing very fast, both because billions of new Internet access users will come online, and because new Internet apps and devices consume vastly more bandwidth.

Spectrum sharing martters, in large markets, because there is, for example, almost no uncommitted communications spectrum available in the sub-2-GHz range.

Though there is an expectation that much spectrum in millimeter bands (3 GHz to 300 GHz) can be allocated for communications purposes, most of that spectrum will be severely “short range,” and hence best suited for indoor or small cell applications.

Global mobile data traffic grew 69 percent in 2014, and each succeeding mobile generation seems to grow consumption by an order of magnitude, according to Cisco estimates. Long Term Evolution (4G) devices consume an order of magnitude more data than a non-LTE device, for example.

Any smartphone tends to lead to consumption of 37 times the data of a feature phone, according to Cisco. And smartphones are becoming the standard global device. Where today 28 percent of customers use smartphones, that will grow to perhaps 52 percentby 2018.

Use of Internet access plans might reach 84 percent by 2020, according to Ericsson.

In other words, smartphones will be as common as toothbrushes.

To be sure, spectrum sharing also introduces a new element of business model uncertainty, because spectrum sharing can replace a large measure of scarcity with a large measure of abundance.

Blue Origin (Jeff Bezos Company) Makes First-Ever Landing of a Reusable Rocket Booster

Blue Origin, a company owned by Jeff Bezos, has successfully, for the very first time, managed to land a rocket booster.

Once repeatable, that reuse of boosters could dramatically slice the cost of launching payloads. Some think a reduction to about 20 percent of today's launch cost is possible.

 

Mobile Money is Among Key Telco Innovation Successes

Some telco efforts to enter new markets succeed, while others fail.

Mobile money businesses appear to be a clear example of the former, while over the top voice and messaging services appear to be an example of the latter.

At least so far, there is optimism about Internet of Things initiatives. It is unclear whether cloud computing might become an example of the latter, as well.

Mobile success in banking-related services might come as a bit of a surprise, even if “financial inclusion” is a major problem.

As of 2014, 40 percent of the global adult population did not have any kind of formal financial account, bank based or otherwise, and as such were considered financially excluded, according to GSMA.

Emerging markets led the growth of global non-cash transactions between 2009 and 2013. The volume of non-cash transactions grew 13 percent compared to mature markets at six percent, driven by emerging markets in Asia, Central and Eastern Europe, Middle East and Africa, which saw growth rates of 20 percent per year.

As of June 2015 there were 255 live mobile money services around the world, with a further 102 services planned, according to GSMA.

More than half of the live services are in Sub-Saharan Africa, where mobile money has become a popular service not only for fund transfers but also for other transactions such as airtime top-ups and bill payments.

There are 300 million mobile money accounts globally and 2.3 million agent outlets extending mobile money services to customers who do not have access to a bank branch network, GSMA notes.

There also are more than 100 million active mobile money accounts in service. Some 21 services have more than one million active accounts, and in 16 countries the number of mobile money accounts is greater than the number of bank accounts.

source: GSMA

source: GSMA

High Consumer and Supplier Taxes Affect Mobile Adoption

Direct taxes on consumers for using mobile services. Taxes and fees likewise represent a huge percentage of operating costs for many mobile service providers.

In Pakistan, taxes represent 32 percent of the total cost of consumer mobile ownership and 33 percent of the cost to consumers of using mobile services.

In India, consumer taxes represent 23 percent of the total consumer cost of mobile ownership and 23 percent of the cost of using mobile services, according to the GSMA.

In India, “total outflow to the government in the form of all fees (spectrum, license, upfront, deferred) is an astounding between 25 percent to 35 percent every year,” says Parag Kar, Qualcomm VP, government affairs, India and South Asia, quantifying the impact of operator-specific fees. “This will impact operator’s ability to invest in networks and electronics.”

source: GSMA

In Emerging Markets, Mobile IS Internet Access, Says GSMA

With low fixed network Internet access availability in most emerging markets, mobile is increasingly becoming the key method for Internet access, the GSMA reports.

Coverage levels of 3G and 4G networks in emerging markets are expected to increase to 84 percent and 65 percent of the population respectively by 2020.

Given the increased availability of high-speed internet and the growing supply of sub-$50 smartphones, smartphone adoption will increase significantly to 2020, to account for 60 percent of total connections or more than 4.5 billion connections.By 2020, mobile Internet access will reach 100 percent in East Asia, 106 percent in South America and 131 percent in Central and Eastern Europe.

By 2020, mobile Internet access will have climbed from the 2014 level of 24 percent in the Middle East and North Africa to 71 percent. In Sub-Saharan Africa mobile Internet access will grow from 13 percent to 53 percent.

In South Asia, mobile Internet access will rise from seven percent to 41 percent, growth of nearly 600 percent.

source: GSMA

The growth of mobile Internet access will be propelled, in substantial part, by huge increases in use of smartphones.

source: GSMA