Friday, April 29, 2016

U.S. Accounts for 46% of Global Data Center Sites

The United States now accounts for 46 percent of major cloud and internet data center sites globally, say researchers at Synergy Research.

China has seven percent of the sites, while Japan has six percent.

Australia, Singapore, Germany, the United Kingdom and Brazil each represent three percent to five percent of the global market.

DC footprint Q116On average, each of the largest 17 firms had 14 data center sites.

The companies with the broadest data center footprint are the leading hyperscale cloud providers such as Amazon Web Services,, IBM and Microsoft.

Each of those four firms has 40 or more data center locations with at least two in each of the four regions including North America, Asia, EMEA and Latin America.

Google, Oracle and Rackspace also have a notably broad data center presence.

The remaining firms tend to have their data centers focused primarily in either the United States (Apple, Twitter, Salesforce, Facebook, eBay, Yahoo) or China (Tencent, Baidu).

Alibaba has now opened data centers in the US, Hong Kong and Singapore.

Half the World Colocation Market Exists in Just 15 Cities

Metro Colo Q415Just five metro areas account for 27 percent of worldwide retail and wholesale colocation revenues, according to researchers at Synergy Research.

The top five metros include New York, London, Washington, Tokyo and Silicon Valley.

The next 10 largest metro markets account for another 25 percent of the worldwide market. So half the world market exists in just 15 cities.

Those top 15 metros include six in the United States, four in the EMEA region and five in Asia. .

Across the 15 largest metros, retail colocation accounted for 76 percent of fourth quarter  revenues, while wholesale sales accounted for 24 percent.

Equinix was the market leader by revenue in eight of the top 15 metros and Digital Realty was the leader in two markets.

Other colocation operators that featured heavily in the top 15 metros include NTT, DuPont Fabros, Interxion, China Telecom, 21Vianet, KDDI, @Tokyo, SingTel, Global Switch, CoreSite, CyrusOne and TelecityGroup (since acquired by Equinix).

In 2015 colocation revenue growth in the top 15 metros outstripped growth in the rest of the world by three percentage points, so the worldwide market is slowly being concentrated more in those key metro areas.

Top 15 metros with growth rates of 20 percent or more (measured in local currencies) were Shanghai, Beijing, Hong Kong, Frankfurt, Amsterdam and Singapore. Among the top five metros, Tokyo had the highest growth rate.

Amazon Dominates Cloud Computing Market, But Microsoft and Google are Growing Share 100%

Source: Synergy Research
In the public cloud business, scale matters.

Amazon Web Services (AWS) continues to dominate the cloud infrastructure services market with a 31 percent worldwide market share.

The big three followers--Microsoft, IBM and Google--collectively account for 22 percent market share.

The next 20 top-ranked cloud providers accounted for 27 percent.  

Microsoft and Google both achieved growth rates of well over 100 percent.

Outside of the big four, the next 20 cloud providers are growing at an average 41 percent per year, but in a market that is growing at over 50 percent that means that most of them are losing market share, according to researchers at Synergy Research.

Spectrum Auctions Could Mean Big Trouble for India Mobile Firms

Posting a huge operating loss of 3,100 million Norwegian Krone (around Rs 2,530 crore) for its India mobile business, Telenor executives warned that they would exit the Indian market if it was unable to secure new spectrum at reasonable rates.

At the same time, the Indian arm of Telenor looks to expand 4G footprint and said it would offer the lowest tariff for these services as part of its affordable pricing strategy.

“We are not able to compete with the current spectrum portfolio we have in the growing data market,” Telenor global CEO Sigve Brekke said. But Brekke also emphasized that the additional spectrum would have to be available at “a price that we can justify.”

Some fear widespread damage to mobile company business models if most of the spectrum India plans to auction later in 2016 is sold at or above present minimum prices.

That spectrum auction involves a huge amount of spectrum, and might prove problematic, for traditional and new reasons.

On one hand, the auction will release up to 2,000 MHz of spectrum, across a wide range of frequencies useful for communications purposes.

The problem is that some observers believe the service providers cannot possibly afford to buy all that spectrum, at suggested prices.

Some speculate that sold spectrum--assuming virtually everything is purchased--will amount to about US$83 billion, increasing mobile service provider debt loads as much as 185 percent.

At such levels, the auctions would represent more than 25 percent of the country's national budget for the financial year 2016-17, and more than double the combined revenues generated (around $38 billion) by all telecom companies during the financial year 2014-15.

In fact, of the projected $85 billion in potential revenues, the sale of 700 MHz spectrum alone is estimated to represent around $64 billion. It would not be unheard of for some spectrum to remain unsold whenever an auction is held.

It is possible the proposed spectrum auction in India might result in quite a lot of the spectrum, even desirable spectrum, remaining unsold.

Spectrum deemed useful both for coverage (700 MHz, 800 MHz, 900 MHz) and capacity (1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz) now are scheduled for sale.

To the extent that spectrum constraints contribute to call drop problems, the new capacity will help. But observers now warn that minimum prices are set at high levels, implying high prices for purchased spectrum.

In fact, some mobile service providers have called for postponing at least some parts of the auction, altogether.

Excessive prices been a problem in the mobile industry before. Overpayments for 3G spectrum nearly bankrupted a number of tier-one service providers in Europe, for example.

Business model stress might be a big problem in the wake of the auctions. For Telenor, it could mean selling its business.

Thursday, April 28, 2016

FCC to Re-Regulate Special Access, Include Cable TV for the First Time

The U.S. Federal Communications Commission is considering a major change in regulation of special access services, extending wholesale obligations for the first time to cable TV and fiber to premises connections, using a principle of “technological neutrality.”

The rules have not yet been made public, but in addition to bringing cable TV facilities under the mandatory wholesale regime for the first time, the order is expected to reintroduce price regulation of special access services. Many believe wireless backhaul is the main reason the new approach is being taken, essentially to “protect” prices for backhaul circuits for mobile carriers who do not own fixed network assets.

The problem, some argue, is that such wholesale rules always have some clear consequences.

By forcing carriers to provide competitors wholesale access to special access facilities, one provider takes the risk of investing in the facilities, while other competitors then are able to lease use of those same facilities at regulated rates.

That creates disincentives for access investment, many would argue.

Will Others Take Proposed Telco Platform Role?

At the risk of sounding unduly skeptical, when something doesn’t make sense, maybe that is because it simply “doesn’t make sense.” More positively, perhaps an ecosystem has simply not had enough time to develop.

Analysys Mason, for example, calls for telcos to shift to a platform-based model.

“Platforms are the key to success in the digital economy,” Analysys Mason analysts argue.To be clear, that means creating a role something like that possessed by Apple, AirBnB, Alibaba, Amazon, Facebook, Google, LinkedIn, Rakuten,, Uber, Xbox and others.

Platform providers build ecosystems around their core business. Apple and Google have thousands of developers and hundreds of accessory manufacturers continually creating complementary products for each ecosystem.

So the task to envision how any access provider similarly can create a platform--presumably for managed services of some type-since it seems unlikely an access provider actually can become a platform for Internet OTT apps.

Presumably that means telcos become a platform for managed services. That, in turn, probably suggests a “business-to-business” role, rather than a “business-to-consumer” role.

That assumption is driven by the idea that most consumer apps can be delivered and accessed directly by end users using Internet delivery. It is hard to see how any access provider becomes a platform for an Internet app or service, which are themselves platforms.

A managed service, on the other hand, might well require, or benefit from, platform services. Most industrial Internet of Things apps, autonomous vehicle systems and health monitoring services might provide examples.

It is becoming a common recommendation. Telcos can become “Integrated Digital Service Providers” (IDSPs) that function as platforms, Accenture argues, essentially getting out of the “communications” business.

In yet one more iteration of the “moving up the stack” strategy, Accenture suggests telcos can become “platform companies” that use social, mobile, analytics and Internet of Things tools  to build a business architecture and set of services that enables other businesses to rapidly develop and deploy the products and solutions needed to drive their digital strategies.

That probably sounds like “middleware” to some; “operating system” to others.

Time will tell whether any firms actually will be able to become “digital platforms,” or whether, in the end, the effort will fail. Once upon a time some thought mobile operators could emerge as primary “app stores.” Instead, it is the leading device ecosystems that operate the most-powerful app stores.

And even if a B2B IoT platform role does emerge, it might not be access providers who are the inevitable platform providers. Ericsson, for example, has launched an IoT accelerator service, much as it also earlier launched operations outsourcing services for telcos.  

The IoT Accelerator is a combination of Ericsson products and services, with an integrated marketplace for collaboration and monetization.

Scheduled for a global launch at the end of the third quarter of 2016, and to be offered as a service, Ericsson initially is targeting larger industrial and public contracts.

Ericsson says the IoT Accelerator will  help its customers overcome the cost and complexity barriers of trying to build their own platform up-front.

The spur to such thinking is simply the declining fortunes of the access business.

Telco 2.0’s generic model of revenue decline for converged telco in advanced market is not comforting. It suggests a steady decline in overall revenues from 2016 forward.

We can dispute the shape of the curve, but few might disagree with the direction of the change. Legacy revenues will be challenged, requiring a search not only for new products to sell, but perhaps even a changed role within the ecosystem.

Aggregate revenue could drop 13 percent between 2016 and 2021. Virtualizing more operations obviously helps if it can reduce operating or capital expense. But the bigger problem is simply that revenues to be derived from all legacy products are shrinking.
telco revenue decline

Wednesday, April 27, 2016

The Next 4 Billion Internet Users Will be Connected Using Wireless

There’s a very simple reason some of us spend so much time thinking about and working on ways to use wireless platforms to expand Internet access: it is the way the next four billion Internet users are going to get access.

“The next four billion (Internet users) will come online through some form of a wireless connection,” said Chris Weasler, Facebook global head, spectrum policy and connectivity planning.

“We have a number of different projects underway to address connectivity,” Weasler said. New access technologies and architectures have to be more affordable, Weasler said.

One example is Aquila, the solar-powered unmanned aircraft that Facebook expects and hopes will provide a new way to do backhaul. It “could be used by mobile operators, Wi-Fi operators” or others, Weasler said.

Facebook also has Identified bands of spectrum where Aquila  would not interfere with existing spectrum users, also would work for UAV platforms that are expected to provide quite a lot of bandwidth.

To that end, Facebook “got an agenda item” from the International Telecommunications Union’s latest World Radiocommunications Conference, potentially allowing exploration of ways to use the 20 GHz to 40 GHz bands for backhaul.

areppim chart and statistics of fixed-wired and mobile broadband technologies. Mobile technology and services continue to be the main driver of the information society. World subscriptions to Internet broadband services are expected to reach 2.8 billion, of which 700 million (25%) for fixed wired, and 2.1 billion (75%) for mobile broadband, by end 2013, according to ITU (International Telecommunications Union). It is likely that mobile broadband services will become soon as ubiquitous as mobile cellular telephony.
source: areppim

Mobile will not be the sole wireless access technology. But it will be the most often used by consumers.
areppim chart and statistics of mobile penetration rates 1980-2025. With about 6.8 billion subscribers by the end of 2013, 96% of the world population hold a subscription to mobile cellular telephony. The market penetration of the device grew exponentially, faster than the population, but it has likely reached the inflection point in 2008-2009, and initiated a decline of its growth rate, slowly approaching final saturation.

More Evidence that a Fixed Wireless Renaissance is Underway

Here’s one more sign that fixed wireless is undergoing a renaissance in the U.S. market: Verizon will first introduce 5G as a fixed wireless service.

With Google, Facebook and AT&T exploring, testing or intending to deploy fixed wireless  for Internet access networks, the fixed wireless industry is on the brink of major redefinition. AT&T alone has said it would use fixed wireless to serve 13 million locations.

Others such as Starry, also are hoping fixed wireless emerges as a major platform for providing Internet access.

In 2012, there were perhaps 2,000 to 2,500 fixed wireless Internet service providers supplying Internet access to two million to three million subscribers in the United States, according to the Wireless Internet Service Providers Association.

So just about any serious deployment of Google, Facebook or AT&T fixed wireless would immediately reshape the U.S. fixed wireless business.

At 13 million connections, AT&T alone would represent 87 percent of all U.S. fixed wireless installed base, even if Google Fiber and Facebook added zero new accounts in the U.S. market.

Comcast Boosting Usage Caps to 1 Terabyte, from 300 Gb

Comcast says it is boosting data usage limits in test markets from 300 Gbytes to one terabyte.

“Our typical customer uses only about 60 gigabytes of data in a month (by June 1, 2016),”
Comcast says.

“For the very tiny portion of our customer super users (less than one percent of our customer base) who want more than a terabyte, they can sign up for an unlimited plan for an additional $50 a month, or they have the option to purchase additional buckets of 50 gigabytes of data for $10 each,” Comcast says.

source: Economist

To Build a Big New Business Selling Internet Access at $2 a Month, You Need Lower Spectrum Costs

There is a good reason why spectrum policy has emerged as a key underpinning of efforts to eliminate the digital divide. Simply, connecting the unconnected will require infrastructure that costs far less.

For many, that means greater reliance on use of shared spectrum and license-exempt spectrum. The former promises lower license fees, the latter zero license fees. Both will allow business models that can work on lower retail costs.

“Singapore says they really only use 6.5 percent of allocated spectrum,” says  H Nwana, Dynamic Spectrum Alliance executive director. Spectrum sharing can allow much more intensive use of that fallow capacity, without relocating existing licensed users, and almost certainly at lower spectrum costs than a traditional licensed approach would require.

There is very little shared spectrum at the moment, says Richard Thanki, University of Southampton, even though Wi-Fi carries 57 percent of all mobile data traffic. But “a new spectrum consensus is developing,” he says. In the 1990s and 2000s, the thinking was that tradable licenses were the way to gain efficiencies.

“The new consensus is that a mix of licensing regimes, including shared spectrum, will be the paradigm,” Thanki says. “Sharing is likely to become the norm, not the exception.”

That should have positive impact on business models that require very low operating and capital costs.

A good example is the amount of money a household can afford to spend on communications, per month, as a function of household income. For the cohort including the first billion people, with annual income averaging $29,000 annually, a household can afford to spend $205 a month on communications, according to data developed by Richard Thanki, University of Southampton.

In contrast, for the cohort including the seventh billion, a household can afford to spend only about $2.25 per month. Those of you familiar with the mobile market in India will recognize the number. The average mobile account in India represents monthly spending of about $2.

Where the cohort including the second billion people has household income of about  $12,700, they can afford to spend about $53 per month on communications.

The cohort including the third billion, with income is $5,500, can afford to $23 a month on communications..

The cohort including the fourth billion has $2990 annual income, and can afford to buy $12 a month of communications services.

The cohort including the fifth billion earns $1770 annually, and can afford to spend $7 a month.

The cohort including the sixth billion can afford to spend $4.40 per month on communications. The cohort including the fifth billion people can afford to spend $7 per month.

Average annual income for the cohort including the seventh billion people is $540 per year. Africa and India dominate the seventh billion cohort, many would note.

Google Fiber Launching in Nashville

Google Fiber is launching symmetrical 1 Gbps in Nashville. By itself, the launch might not “move the needle” on the number of U.S. consumers buying, or able to buy, gigabit or other high-speed access in the hundreds of megabits per second range.

But it is hard to argue that Google Fiber has failed to change the market, even if competitors sometimes say, with an apparently straight face, that Google Fiber has not affected their thinking at all.

It is hard to argue that Comcast and other firms would be rapidly upgrading their high speed access services to gigabit levels had Google Fiber not entered the market.

On the other hand, it often goes unnoticed that Comcast also has increased Internet speeds for residential customers 16 times in the last 14 years, at rates equivalent to Moore’s Law, Comcast has said.

Comcast, for example, now plans to upgrade 100 percent of its access connections to 1 Gbps, with some 85 percent of locations able to order a 2-Gbps service as well.

There also is a possibly-noteworthy change. In the past, we generally have argued about fiber to the home as a way of enabling high bandwidth for consumers.

These days, the more-relevant issue is how to supply gigabit access, or hundreds of megabits per second of access, rather than physical media.

In the United Kingdom, for example, Virgin Media will use both fiber-to-home and hybrid fiber coax access platforms, supplying identical services and speeds for all customers, no matter which access platform is used.

What now increasingly matters is the level of service consumers can buy, the prices and terms of use that apply to each consumer offer, not necessarily the access medium. That is likely to be even more true once 5G mobile networks are activated.

What you can do, and what you can use, will matter much more than access platform.

Virgin Media Access Upgrades Illustrates Principle That Apps Matter More than Access Method

In the broader Internet ecosystem or the “telecommunications” business, it ultimately is the apps that matter, and less the details of infrastructure. Consider the way Virgin Media plans to upgrade access to 17 million U.K. households by 2019.

At least a quarter of the four million locations to be upgraded as part of Project Lightning will be connected using fiber to the home platforms, rather than the traditional hybrid fiber coax platform.

Customers will not see a difference, as the same set of services and Internet access speeds will be available to all potential customers, no matter what the access method.

Likewise, all consumers will use exactly the same modems and TV set-top boxes, no matter what the access method. The way Virgin Media is deploying its FTTH network uses a protocol known as Radio Frequency Over Glass (RFOG).

RFOG allows the cable operator to use the same headend and customer premises gear, no matter what the access platform, as well as standard HFC transmission techniques.

Only recently, with the rise of the Internet, has “access” actually become a mass market business for telcos, cable TV, fixed wireless and satellite providers. Until then, business models were based on apps (voice, then entertainment video, and later mobile voice and texting.

We sometimes miss the importance of “access” (dial-up, then broadband Internet access) now becoming a “product,” which consumers can buy on its own, in order to use all other lawful apps available on the public Internet, or managed services delivered through IP network tunnels.

Not until “Internet access” became a product did we start to hear about “dumb pipe” business models or the risk of “commodity” pricing and roles.

But that illustrates an important fact: business models in the consumer space always have been built around use of applications. In addition to that, we now have an essential function (Internet access) that is required so people can use apps.

That is not to say managed services have gone away; they haven’t. Carrier voice, messaging, linear video and mobile services remain dominant revenue sources.

Still, aside those managed services, the “dumb pipe” access function is becoming the growth engine. For this reason, all discussions of “dumb pipe” business roles and models often miss the point.

An ISP cannot avoid being a supplier of “dumb pipe” Internet access. In addition to that, many access providers will supply important managed services as well (carrier voice, messaging, video). But the dumb pipe portion of the business is driving growth, not the managed services.

The issue is how much, over time, the access “business” becomes an access “function” provided by some entity with multiple revenue sources, able to supply the access function at lower cost precisely because such access is an input to the overall business model, not the whole business model.

Verizon, EE, Telstra, KT Found LTE-B Alliance

Verizon Communications, Australia’s Telstra, South Korea’s KT and United Kingdom-based EE have formed the LTE-Broadcast Alliance, seeking to influence development of standards and equipment support for LTE Broadcast services, also known as “evolved multimedia broadcast multicast service.”

The goal: LTE-B support in “every top- and mid-tier device launched in 2017.

The business advantage is extreme bandwidth efficiency when sending many copies of a single media message or stream to many users. LTE-B is multicast--akin to TV or radio broadcasting--rather than unicast, the way people grab Internet content.

Though the obvious current set of applications includes local multicasting of sports content, inside stadiums, for example, supporters also believe there are other  applications including push notifications, digital signage and “Internet of Things” updates (Think of software updates for sensors and controllers).

Tuesday, April 26, 2016

It is Getting Harder to Compare T-Mobile US and AT&T; Business Models are Highly Different

Different business models now showing up in AT&T and T-Mobile US operational results. T-Mobile US touts its success gaining phone accounts. AT&T is growing in other lines of business, including video and Internet of Things.

One can compare the mobile net adds, certainly. Still, for T-Mobile US, mobile is the whole business, and ability to take phone accounts is what matters.

AT&T has shifted its growth efforts to Mexico and entertainment video, quickly. The two firms always had competed in different market segments. But that difference now has widened.

T-Mobile US appears once again to be capturing most of the net account growth in the U.S. mobile business in its first quarter of 2016, much as cable TV firms are gaining nearly 100 percent of the net growth in the fixed line Internet access business.

We will know for certain, soon enough, but some believe the first quarter will show that all the leading four firms gained net phone accounts.

Indeed, AT&T reported it added “2.3 million North American wireless net adds driven by connected devices, Mexico and Cricket.” That language is instructive.

Indeed, AT&T says that “Cricket and connected devices drive strong U.S. subscriber growth.” By omission, that suggests branded postpaid phone adds were not the strength in the quarter.

The market is “North America,” adding Mexico net adds. T-Mobile US reported U.S. adds only, since that is where it operates. Also, AT&T reported “Cricket” adds, which are prepaid accounts. T-Mobile US does break out account net adds that are not “branded postpaid.”

AT&T does report it added a net 712,000 branded (postpaid and prepaid) phone net adds. But that also suggests many of AT&T’s net adds were either tablet or other non-phone net adds, such as Internet of Things sensors.

On the other hand, T-Mobile US and AT&T now have business models that are quite distinct. AT&T has a significant operation in Mexico; T-Mobile US does not. AT&T is a leading provider in the U.S. entertainment video business; T-Mobile US is not. And AT&T is among the leaders in connections supporting the Internet of Things; T-Mobile US does not yet report such accounts as a significant matter.

AT&T has a global enterprise business that T-Mobile US does not support. Also, AT&T is the largest fixed network services provider in the U.S. market. T-Mobile US is mobile only.

T-Mobile US says it added 2.2 million total net adds in the first quarter of 2016 and more than one million postpaid net new accounts, of which about 877,000 were phone accounts.

T-Mobile US also had retail prepaid net growth of 807,000 accounts.

The quarterly subscriber results do indicate that T-Mobile is adding accounts, including important postpaid phone accounts. But the results also come from two companies with substantially-different business models.

Sales Friction Creates Barriers to Buying Behavior

Sales friction occurs when a sales process is: too long (the line at the grocery store) too complicated (working with real estate agents) a...