Over 15 Years, Average Internet Speed Ceilings Have Become Floors

source: PCmag.com

Progress is very swift in the Internet access business. In 2009, the average Internet access speed in Australia was about 12 Mbps. So at the time, a boost to 25 Mbps, the minimum national speed promised by the National Broadband Network,  sounded pretty good.

In 2009, the average Internet access customer In the United Kingdom was getting 4 Mbps. So a boost to “superfast” (24 Mbps to 30 Mbps) likewise sounded pretty good.

That same year, typical U.S. speeds were in the 5 Mbps range. By 2015, though, average U.S. downstream speeds had climbed to nearly 36 Mbps.

So we don’t hear much about 24 Mbps or 30 Mbps being “superfast.” The U.S. Federal Communications Commission, in fact defines broadband as being a minimum of 25 Mbps downstream.

source: PCmag.com

In 2016, the biggest cable TV ISPs offer downstream speeds ranging between 49.6 Mbps and 39 Mbps. Verizon matches the top average speed of 49.6 Mbps.

Among other ISPs, Google Fiber is the absolute fastest, offering average downstream speeds of 354 Mbps.

In other words, what once was a “goal” now is simply a “fact.” For expensive, long-lived assets such as Internet access networks, all that shows how dangerous it is to make too many assumptions about “where we are, and where we are going,” where it comes to the Internet and Internet access.

Give Google Fiber credit for kicking off a major upgrade cycle in the U.S, market, despite some mocking of that role by AT&T.

But typical speeds have been increasing fast. In fact, Comcast, the leading U.S. Internet service provider, has been increasing speeds at rate equivalent to Moore’s Law--doubling about every 18 months.

With 5G coming fast, even mobile Internet access is going to happen at gigabit speeds.

source: Akamai

source: Ookla

Australia’s NBN now says the whole network will be finished by 2020. The NBN expects to earn about A$5 billion in wholesale revenue, with average revenue per user forecast at A$52.

The network also will deliver speeds of at least 50 Mbps downstream to 90 percent of fixed line premises.

Perhaps oddly, only customers served by hybrid fiber coax networks will be able to get gigabit per second service.

Flexibility or Debilitating Uncertainty From New Proposed EU Net Neutrality Rules?

Sometimes, it is sensible not to create hard and fast rules to cover circumstances that are expected to be novel. In other cases, the same stance can create such uncertainty that innovators will be dissuaded from trying to create new things.

New proposed rules on network neutrality are likely to cause just that problem.

As a practical matter, network neutrality is based on a principle that “providers of internet access services shall treat all traffic equally,” a concept initially seen as primarily relating to the notion of “best effort access only,” with no prioritization of packets by sender, receiver, terminal or access network.

Even if some think ISPs--or consumers, app providers and ISPs--should be free to create access services with quality of service measures, the default “best effort access only” principle is at least clear.

Other newer proposed principles are not so clear.

The net neutrality concept has been broadened, in some quarters, to rules about zero rating of apps or data received by a user or customer.

New proposed regulations  by the Body of European Regulators for Electronic Communications (BEREC) do not necessarily create clarity on that matter.

The guidelines prohibit zero-rating in circumstances "where all applications are blocked or slowed down once the data cap is reached," though the document also acknowledges that some cases are "less clear-cut."

Therein lies a problem. The proposed rules do not clearly permit or outlaw zero rating. Instead,

BEREC says practices will have to be looked at case by case.

Companies are not going to take many risks, under such circumstances, even if consumers want such features, services and price points.

There are other issues as well, but the creation of uncertainty is a clear problem.

Bandwidth Inequality is Going to Increase, at Least Momentarily

source: M. Hilbert

There are times when the amount of communications capacity, as available to consumers across the globe, becomes more equal, and times when there is more inequality. We seem to be heading for a time when gaps grow again.

Since 2006, gaps have tended to shrink, globally. In 2012, by one analysis, gaps began to grow again. The reason is that the introduction of new platforms tends to happen unequally, first in developed markets, later in developing markets.

source: 4G Americas

With 5G coming, platform-based inequality will grow, for a time. But there are some other

developments likely to widen gaps. In the U.S. market, unprecedented amounts of new spectrum are going to be released, while spectrum sharing and massive amounts of unlicensed spectrum also are coming.

At the same time, North America is witnessing huge leaps in bandwidth supply from cable TV companies about to innovate at their own pace, separate from what all other suppliers using traditional telecom technology can do.

At the same time, significant new uses for fixed wireless, especially in conjunction with new platforms, new radio and antenna technologies and use of shared and unlicensed spectrum, are going to make possible huge increases in delivered bandwidth, at prices lower than possible using fiber to the home.

As small cell technology is more-widely deployed, gaps between rural and urban users also will start to increase again.

AWS, Other Cloud Computing Leaders Best Telcos in U.S. Market

With NTT as the exception that proves the rule, tier-one telcos have not been able to outcompete the application and commerce providers that, oh by the way, have decided to monetize their cloud computing assets.

The “bundled services” strategy Verizon and AT&T attempted, melding cloud services with private internet networks, security, data storage and service guarantees, has failed to gain traction, compared to Amazon Web Services, Microsoft, IBM and Alphabet (Google).

Some would argue that the market changed. Though colocation remains a distinct segment within the broader “data center services” market, the cloud computing market arguably has changed because the original concerns about security have faded.

In substantial part, those buyer perceptions changed because the leading app cloud computing services were able to create security mechanisms strong enough to allay the original fears.

In other words, a buyer would often have closen AWS for cloud computing, unless convinced security was not sufficient. If AWS could prove that fear was unjustified, then it was going to make sense for customers to buy from AWS, rather than other suppliers without AWS moxie.

The other issue is that AWS and other leading cloud computing companies arguably were quicker to build ecosystems around their cloud offers, as well as making it easier for developers to create new features, services and apps in a cloud context.

Some will draw larger conclusions from those developments. Some will say that, once again, tier-one telcos have proven they are not adept at innovating. There is historically much truth to that argument.

Why "One Talk" Now?

source: Software Advice

One obvious question about the new Verizon “One Talk” service, a unified communications offer that, among other things, forwards landline calls to mobiles, is whether Verizon can take significant share from other existing providers such as 8x8, RingCentral, Vonage or West, for example.  

One other obvious question is why the new offer, and why now. And a high level, the issue is that Verizon now is mostly a mobile services company, with a declining business customer base.

A new business phone service heavily based on the mobile network suits Verizon more than a number of other providers.

At the same time, if hosted PBX is a business Verizon really wants to be in, it has to make moves to gain market share. While Verizon is not an “also ran,” neither is it in the top ranks of the business, based on seat licenses.

To some extent, the offer also aims to provide a solution small businesses say they want. Some 29 percent of small businesses surveyed by Software Advice want a phone system that forwards calls to alternate devices.

That survey also found that small businesses tend to rely more heavily on mobile devices than on other kinds of phone system endpoints such as softphones and traditional desk phones.

The price for One Talk is typically $25 per month per user, but customers also need to buy new IP desk phones.

Of course, there are other potential savings, for any business considering a full installation or replacement of a premises phone system.

source: Software Advice

Factoring in hardware costs (the hardware itself, plus the installation), along with the wiring and the man-hours to run and terminate all those cables, plus the new phones to work with the system you’ve bought, you’re looking at costs between $500 and $800 per user, says John Macrio, Edgewater Networks VP.

For a 25-user installation, that’s between $12,500 and $20,000. With the VOIP option, the phones are all you buy, which will run you between $100 and $250 each.

If much of the cost now is the cost of buying a switch, and wiring or rewiring a location, then the attraction of a mobile-based offer is clear: no switch, no wiring.

Adding the Verizon One Talk dialer to a certified device (e.g., Samsung Galaxy S6 or Galaxy S6 edge at launch) with no shared endpoints on the same mobile line, costs $15 a month.

The Auto Receptionist and Hunt Group numbers are $20 each month (buyers get one feature free of each) per business account. Each additional number is $20 is month.

The Software Advice survey confirmed that small businesses rely on auto-attendant features, so the auto receptionist feature offered by Verizon is significant.

Verizon One Talk Feature	Description
6-Way Conference	Expand a voice call to include up to 6 participants without dialing in a conference bridge.
Account Codes	Codes that allow you to associate individual calls with a specific code for tracking purposes. The system administrator can later view the calls placed using each code.
Anonymous Call Rejection	Your business will not receive calls unless there is a Caller ID number from the caller.
Automated Receptionist	The Automated Receptionist will answer incoming calls to your business and allow the caller to select which department or person they wish to speak with.
Automatic Callback	Automatically redial a busy number until it is available.
Bridge Line	You can allow your number to ring on one additional desk phone.
Call Forwarding	Keep your business in touch with callers by automatically forwarding incoming calls to the best available resource. There are various options available to best fit your business needs.
Call Waiting	Alerts you and allows you to take a second call while you are on the phone with someone.
Caller ID Blocking	Prevents your number from being sent on outgoing caller ID.
Calling Line ID Delivery	Define a number from your Simple Talk group that will be sent to other callers when you call them.
Calling Plan	You can require authorization codes for dialing outside of the Simple Talk business group; that could include calls to Local/Long Distance and/or International numbers.
Custom Ringback	Use the default or upload a custom audio file that gets played when callers dial a Simple Talk business line. This would replace the standard ringing tone.
Group Forwarding	Quickly forward multiple user lines to the same destination/number; most commonly used for business continuity.
Hunt Group	Set and apply rules for passing incoming calls to the first available line in the pre-defined group of users/lines.
Messaging	Mobile devices associated with either One Talk Dialer or One Talk Mobile App can send and receive SMS messages.
Pre-Alerting Announcement	Play an audio file of your choice while the caller waits to be connected when your number is called.
Remote Call Pickup with Barge In	Allows other members of your business to remotely pick up your line while it is ringing or join your call in progress with or without a warning tone.
Remote Group Pickup	Ensures calls are answered by allowing you to remotely pick up someone else's ringing line in the group from your phone.
Schedule	Allows the company to set office hours of operation and holidays. These scheduled hours can be used for call management features at the user and group level.
Selective Call Acceptance/Rejection	Only accept specific calls based on conditions you define, or reject incoming calls based on pre-defined conditions you set.
Simultaneous Ring Service	Have more than one phone number ring when someone calls your number.
Video Calling	Telephone numbers associated with video capability can receive and send video in a 2-party call.

Looking only at the number of seat licenses sold, in 2016 the market leaders were RingCentral, 8x8 and Vonage.

source: 8x8

T-Mobile US "Unlimited" Offers (Not)

T-Mobile US, touting the end of all usage plans (data buckets) with its new  T-Mobile One plan, has emphasized that the new plan offers unlimited data, text, and calls starting at $70 per month for the first line, $50 for the second line, and $20 for the third up to eight lines.

What that plan does not support is high-definition video streaming or tethering at any speed faster than 2G. Customers seem to have objected to both those limitation, so T-Mobile US has now introduced a One Plus plan that, for an incremental $25 per line, per month, supports unlimited video streaming in high-definition format,  along with tethering at 3G speeds of 512 kbps.

The move shows that execs now are willing to alter new mobile offers as soon as consumer irritation emerges, a possibility most would agree is due to social media, which allows dissatisfaction to be expressed fast.

The new offer also shows how subtle the crafting of new offers has become, as well. Though some might see the new “unlimited” offers as strategically damaging in the long term, the actual details show some important limitations of potential stress.

One concern some observers have with “unlimited” plans is that they potentially limit mobile operator ability to tie consumption to revenue, at least broadly. But the way T-Mobile US has constructed its plans (limiting One image quality to standard definition, while limiting tethering speed to 128 kbps), limits the potential impact.

High-definition quality generally consumes about four times as much bandwidth as standard definition video. In addition, streaming  on 4G rather than 3G networks likewise boosts data consumption (some would argue by as much as an order of magnitude).

Tethering likewise boosts data consumption, by as much as an order of magnitude per unit of time.

source: GigaOm

And some of us who tether quite often might consider 2G tethering unacceptably slow, and 3G highly bothersome.

Limiting tethering to 2G or 3G speeds effectively discourages such usage. So T-Mobile US has limited its exposure to dramatically-higher data consumption driven by the end of usage limits.

The new One Plus plan will likely apply mostly to users who want to watch significant amounts of HD video on their mobile devices. Most likely, few consumers who really need to tether are going to be much happier with 512 kbps access.

The point is that the new “unlimited” offer actually is constructed in such a way that some highly-intensive apps (tethering and high-definition streaming) are limited.

For consumers who want HD video, the premium plan costs an extra 25 percent for the first line, 33 percent more for the second line and a premium of 56 percent for the third and subsequent lines.

Many consumers are going to find that image quality on a smartphone screen at standard definition actually is good enough, compared to high definition quality. The implication is that incremental usage, and therefore stress on the network, will be limited.

Some of us would find it unlikely that a customer who really wants to tether on a significant or “mission critical” basis would even consider a tethering limit to 512 kbps.

The bottom line is that the T-Mobile US unlimited offers have been constructed in ways that limit the potential network stress that could result from too many customers actually watching more video or tethering.

Why Markets Consolidate

Source: Marketing Science Institute

Over time, markets tend to consolidate, and they tend to consolidate because market share is related fairly directly to profitability. One rule of thumb some of us use is that the profits earned by a contestant with 40-percent market share is at least double that of a provider with 20-percent share.

And profits earned by a contestant with 20--percent share are at least double the profits of a contestant with 10-percent market share.

That is why one of the main determinants of business profitability is market share. Generally, entities that have high share are much more profitable than their smaller-share rivals.

And that is likely to be especially true for business products that are not purchased frequently, or are hard to understand, such as business communication products and services.

Source: Marketing Science Institute

For infrequently purchased products, the return on investment of the average market leader is about 28 percentage points greater than the ROI of the average small-share business.

For frequently purchased products (those typically bought at least once a month), the correspondingly ROI differential is approximately 10 points.

There are reasons for that differential.

Infrequently purchased products tend to be durable, higher unit-cost items such as capital goods, equipment, and consumer durables, which are often complex and difficult for buyers to evaluate.

One might argue that communications services also are products buyers generally find complex to understand and hard to evaluate on metrics other than recurring cost or upfront investment.

Since there is a bigger risk inherent in a wrong choice, the purchaser is often willing to pay a premium for assured quality.

Frequently purchased products are generally low unit-value items where risk in buying from a lesser-known, small-share supplier is less crucial.

Source: Marketing Science Institute

Such differentials also occur when buyers are fragmented, and no small group of consumers accounts for a significant proportion of total sales.

In such cases,  the ROI differential is 27 percentage points for the average market leader.

However, when buyers are concentrated, the leaders’ average advantage in ROI is reduced to only 19 percentage points greater than that of the average small-share business.

When buyers are fragmented, they cannot bargain for the unit cost advantage that concentrated buyers receive.

And that tends to be true even for highly-fragmented markets or sub-markets. So it is that six regional master agencies (sales organizations for telecom and cloud services)  have teamed up to form Technology Solutions Exchange (TSX).

The stated goals include broadening their footprints, improving negotiating power with suppliers and growing revenue. All of those motivations are consistent with the general principle that market share matters.

TSX members include P2 Telecom, TDM Inc., Connectivity Source, CTG3, Netstar Inc. and Telcorp International.

The entity is lead by Bill Patchett, founder and CEO of P2 Telecom, and Robert Bowling, president of TDM, who were elected as co-chairs.  

The formation of TSX illustrates the business advantage of market share.

source: Glen Berg