Showing posts from January, 2017

Biggest Impact of Gigabit is Sales of Lower Speed Services, AT&T Finds

Success-based deployment of capital is one way access providers try and match incremental capital investment to incremental revenue. That is why firms from Google Fiber to AT&T build gigabit networks in neighborhoods, not whole cities; where demand for gigabit services and faster speeds is higher than average.
In its latest statements about take rates where it is building its fiber-to-home networks, AT&T suggests it is finding what other internet service providers have tended to find, when offering a range of speeds. Among the primary effects of launching gigabit service is that it spurs buying of services at lower speeds (40 Mbps, 100 Mbps, for example).
“After we launch our 100-percent fiber network in the new market, we're seeing about half of the new broadband customers buying speeds of 100 megabits per second or higher with 30 percent of the customers taking a gig,” says John Stephens, AT&T CFO.
In other words, 70 percent of customers buy speeds other than a gigab…

"Free" is a Powerful Price Point

“Free” is a powerful price point, as shown by mobile account additions in India in October 2016, where Reliance Jio is grabbling most of the account growth in the whole market. It is a reasonable question how many of those customers--which seem to include a goodly number of mobile customers who added Reliance Jio as a secondary provider--will keep those accounts once they have to start paying for service.
Reliance Jio is going to make it very attractive to switch, continuing to offer very low prices, once the promotional pricing period ends in March 2017. source: TRAI

Some Telecom "Moats" Might Actually Exist

An installed base of internet access customers is not necessarily a “moat” protecting an internet service provider from losing customers, but it really helps. So, apparently, do service bundles that offer more value and bigger discounts.
In mature telecom markets, customers simply do not switch providers all that often.
According to a 2014 study by Ofcom, the U.K. communications regulator, just eight percent of adults fixed network voice customers in the last 12 months. About nine percent of broadband access customers switched in the last year.
Just six percent of mobile customers switched providers over 12 months, while just five percent switched their subscription TV provider over the same time frame.
What that means, for any mobile service provider in a mature market is that only about one half of one percent of current customers chose another provider in any given month.
Likewise, Parks Associates consumer data show that almost 50 percent of U.S. mobile phone service customers did n…

How Much Connection Revenue Will IoT Drive?

By 2020, nearly two billion devices with mobile connections capability, 2.7 billion devices that can connect to one or another low-power communications network and 3.3 billion devices with Wi-Fi capability will be shipped, or more than eight billion total devices in one year, according to IHS Markit.
If correct, and if all those devices are connected to networks, then perhaps 4.7 billion devices will likely represent new “public” potential network connections. The 3.3 billion Wi-Fi connected devices will mostly use existing public network connections.
Public network revenue will feature lower average revenue per device than public telecom network services providers have been used to when serving “humans,” however. If a mobile phone account might represent roughly $40 per device in monthly revenue, an IoT device might represent about $1 or $2 a month or less, depending on the amount of data any particular sensor has to transmit, over a month’s time.
That is one important reason why lar…

Telecom Failure Within 10 Years is Possible if Carriers "Do Nothing"

The telecom industry is on course to becoming “unrecognizable” within 10 years in a “do nothing” scenario, say researchers at McKinsey. That might seem alarmist. It is not, McKinsey seems to argue.
Over the past five years, the telecom business has entered a period of slow decline, with revenue growth down from 4.5 percent to four percent, EBITDA margins down from 25 percent to 17 percent, and cash-flow margins down from 15.6 percent to eight  percent, McKinsey says.
Just a few years ago, over-the-top messaging represented nine percent of revenue, OTT fixed voice 11 percent and OTT mobile voice two percent.
Forecast alternatives prepared by McKinsey & Company suggest that, in the most aggressive scenario, OTT messaging could be 60 percent share, OTT voice could be 50 percent of fixed voice revenue and 25 percent of mobile voice revenue.
In the “best” outcome, OTT messaging share of revenue would be 40 percent, share of fixed network voice 25 percent and mobile voice share could be …

Sure, AT&T and Verizon are "Unfocused" on Mobile; They Have to Be

Some argue that T-Mobile US is focused; AT&T and Verizon unfocused, where it comes to mobile services, and that explains why T-Mobile US is gaining share, while AT&T and Verizon struggle to add net new subscribers.
As with all observations, there is some grain of truth. T-Mobile US is a mobile-only operator attacking the  market to gain share, and does not have to worry about its future in the same way as AT&T and Verizon do, for one key reason.
T-Mobile US is a strategic seller, while AT&T and Verizon are strategic buyers. That has implications. T-Mobile US only has to add accounts and grow market share. It essentially knows it will eventually be acquired; it only does not know, yet, who the buyer will be.
Even profitability, and the ability to pay dividends, is not an issue for T-Mobile US: growing market share and cash flow are the actual objectives.
AT&T and Verizon must think and act seriously about growing new products and lines of business beyond mobility, a…

Video is a Huge Deal, for Telcos and Cable

The most-important fixed network bundle for U.S. consumers might be the dual-play “internet access plus linear video” package. There are several reasons. TV has the highest average revenue, and therefore the greatest impact on potential service provider cash flow.

Internet access arguably is the foundation service; the single most-important single service sold by any access provider, and arguably is the service with the highest profit margin for cable TV providers.
Comcast, for example, earns perhaps 46 percent of total revenue in its cable communications segment from video, while internet access contributes 27 percent. Voice represents just eight percent of revenue.
For telcos, the math is different, but equally strategic. Even when telco video services represented only five percent market share in video entertainment, video drove 60 percent of net telco account additions.
source: Market Realist

source: McKinsey

First FCC Action Under Chairman Pai is to Fund Rural Broadband

In its first action under Chairman Ajit Pai, the Federal Communications Commission voted to provide up to $170 million from the Connect America Fund to expand broadband deployment in unserved rural areas of New York State.
The $170 million in federal funding will be coupled with at least $200 million in state funding and private investment to jump-start broadband deployment and close the digital divide in these unserved areas.
“This is a first step of many to fulfill my promise to empower Americans with online opportunities, no matter who they are and no matter where they live,” said FCC Chairman Pai.

U.S. Mobile Customers are Rational Consumers of Network Bandwidth

When evaluating the ways U.S. consumers use Wi-Fi or mobile networks, one must distinguish between sessions, data consumed and average session time.
Session time and data consumption tend to be directly correlated on Wi-Fi, while negatively correlated on mobile networks. In other words, mobile sessions seem to be bursty, short sessions, while Wi-Fi sessions seem to be used for more-data-intensive purposes.
A reasonable person would argue that is a direct result of consumer behavior in response to tariff levels. -
Consumers also seem to be rational. On networks with “lowest perceived cost,” consumers use the mobile network more.
On networks with “highest perceived cost,” users restrict network usage. T-Mobile US and AT&T customers are most likely to use the mobile network, in terms of sessions. Sprint customers use both Wi-Fi and the mobile network about equally, in terms of sessions. Verizon customers rely more heavily on Wi-Fi.
LIkewise, when looking at time connected to either Wi-…

Enterprises, Service Providers Do Not See Eye to Eye on Enterprise Priorities

Service providers do not always meet enterprise expectations for security, cloud or mobility services, a study commissioned by Tata Communications found.
Enterprises consider service providers best equipped to increasing their network capacity or reach (73 percent), or delivering hybrid networking (66 percent) services, while around half (48 percent) of enterprises feel that their network service provider is best suited to address their cloud needs.
That makes sense. Connectivity is what communications carriers always have done. Cloud is not only something new, directly supporting computing functions--something telcos never have supplied on a major retail basis--but also a function that megascale suppliers (Amazon Web Services and others) do more efficiently and effectively.
Service providers logically believe (76 percent) supporting employee mobility is key for enterprise UCC strategy. Only 26 percent of enterprises rank this as a top priority.
Some 27 percent of enterprises say lack …

How Can Telcos Create New Value as OTT Cannibalizes Industry?

It will come as no surprise to anybody who follows the industry that value in the communications (internet) ecosystem is shifting from access to apps.
Access provider share of the ecosystem profit pool has declined from 58 percent in 2010 to 47 percent in 2015 and is forecast to fall further, to 45 percent in 2018, the World Economic Forum (WEF) says. Among the beneficiaries are digital content creation, distribution and aggregation companies such as Google, Netflix and Facebook.
Together with device manufacturers, the combined share of industry profits of these segments (apps and devices) is expected to increase to 40 percent in 2018, up from 29 percent in 2010.
“Telecom players, already lacking OTT businesses in this respect, face a real threat of being left to compete on two inherently contradictory fronts – price and throughput – that could put margins under further pressure,” says the WEF. “Telcos could be left to compete as IP-connectivity pure plays.”
“In the extreme scenario, in…

IoT, Virtualization Will Drive $1.3 Trillion in Industry Value Over 10 Years, WEF Says

The biggest revenue opportunities for the global telecom industry will come from deploying next-generation networks and creating services beyond access, the World Economic Forum believes. The next generation of networks could be worth $440 billion, while apps and services beyond access could represent $650 billion worth of value.
WEF believes Internet of Things (IoT) solutions, consumer and enterprise digital services and communication leveraging natural human interfaces and augmented reality or virtual reality are the areas where new apps will develop.
WEF believes virtualization and an abstraction of the physical hardware layer, to create self-optimizing and secure zero-touch networks will represent the value from next-generation networks.

source: World Economic Forum

Is Verizon Seriously Considering Sale of its Whole Fixed Network?

Is Verizon contemplating selling its whole fixed network infrastructure? Can it do so, and who are the potential buyers? That would have to be among the potential outcomes if Verizon really is contemplating a purchase of Charter Communications.
The rumored Time Warner merger with Charter Communications likely would be viewed as a horizontal merger, not a vertical merger, as AT&T proposes with its acquisition of Time Warner. That is going to be a tougher sell, to regulatory and antitrust authorities, without huge asset dispositions.
Charter passes 48 million homes. Verizon passes some 27 million homes, with significant overlap in New York, Maine, Massachusetts, New Jersey, Virginia, Pennsylvania, Rhode Island, Connecticut and Delaware. In other words, asset dispositions across most of the Verizon footprint would be expected.
Assume there are a total of about 135.7 million total U.S. homes. Charter passes about 35 percent of U.S. homes, arguably at the limit of traditional antitrust…

AT&T, Verizon Quarter Revenue Slips

Both AT&T and Verizon reported lower revenue in their most-recent quarterly reports, but that might not be the bigger story. AT&T arguably has done a better job than Verizon at entering big new businesses that move away from the legacy “communications” business. And even if both firms remain largely U.S.-based businesses, future growth almost has to involve more international expansion, something AT&T has begun and Verizon has yet to embrace.
That also assumes that new domestic internet of things and machine-to-machine services also emerge in significant fashion.
But there are many wild cards. At least in principle, 5G-enabled fixed wireless might allow telcos to compete more effectively against cable companies in the internet access and video businesses, out of region as well as in region. While that would not change the strategic situation, it could help marginally in terms of bolstering the legacy businesses.
The maturation of the legacy communications business--includin…

New FCC Chairman Emphasizes Investment to Erase Digital Divide

In one of his first public remarks since being named chairman of the Federal Communications Commission, Chairman Ajit Pai reiterated his commitment to closing the digital divide, a theme he talked about when an FCC commissioner.
“I believe one of our core priorities going forward should be to close that (digital) divide; to do what’s necessary to help the private sector build networks, send signals, and distribute information to American consumers, regardless of race, gender, religion, sexual orientation, or anything else,” said Pai.
In the past, Pai has talked about creating investment zones to promote investment in internet access facilities in urban areas, for example. That is likely to be proposed in the new FCC administration as policy.

Hyperscale App Providers Drive Global Undersea Demand

Some themes never change, in the undersea or long haul transport business: new cables are lightly loaded, but eventually reach capacity, requiring upgrades; prices per unit keep falling and demand is driven by over the top application providers.
But one important change has happened. “Content providers are removing a large portion of the customer base,” says Brianna Boudreau, TeleGeography senior analyst. That “makes the rest of the market extremely competitive.”
In other words, despite huge increases in capacity requirements every year, most of that growth is “private capacity,” used directly by the likes of Google and Facebook, and not part of the “public networks” market (that capacity is not purchased from a public networks supplier).
“Now networks are being built by hyperscalers,” says Tim Stronge, TeleGeography VP. That is a historic change.
On Latin American routes, about 70 percent of total traffic now moves over private networks. In other words, only about 30 percent of unders…