Friday, March 31, 2017

Verizon to Launch New Streaming Service

Verizon Communications plans to launch a new over-the-top streaming live TV service service that would compete with Hulu, Dish and DirecTV Now, Bloomberg reports. The service would not compete directly with Netflix or Amazon Prime, whose catalog largely is built on movie and other pre-recorded content accessed on demand. The Verizon service would instead compete in the “live streaming” segment of the market that is a replacement for linear TV.

In large part, the move is designed to capture demand from consumers for lower-cost, skinny bundles of channels. Comcast seems also to be preparing to offer a skinny OTT bundle.

Pricing is expected to range between $20 and $35 a month, most expect, as that is the range for the competing services.

The Verizon move shows the “harvest linear, grow OTT” strategy the leading linear video subscription service providers are following. The launch also shows the importance of video entertainment services as a driver of consumer service provider gross revenue.

Beyond that, the OTT video launch also illustrates the strategy for larger tier-one service providers, which is to participate at the application layer of the media business in the consumer segment, and in the Iot, M2M and mobile advertising platform businesses in the enterprise customer segments.

Thursday, March 30, 2017

OTT Video is a Challenge, But Not a Fatal Challenge for Access Providers

It goes without saying that the maturation of the linear TV business, and the growth of the streaming business, could have significant repercussions for revenue earned by telcos and cable TV companies in the U.S. and other markets from consumer customers, though not as great an impact as will the development of the internet access business.

The reason is that linear video has become a significant--in some cases very significant--contributor to fixed network telco revenues. Video represents a greater contributor to consumer account gross revenue per account than does voice, for example.



So a clear and key strategic challenge for fixed network providers serving the mass market is how to finesse the transition from linear to OTT formats. Some will point to leadership by Netflix and others as evidence that linear providers cannot make the transition to OTT. We do not know that, for certain, as linear providers have huge incentives not to cannibalize their existing business by moving prematurely to OTT.

Some 13 percent of US homes (15.4 million)  now buy internet access but not linear TV services,  according to SNL Kagan researchers. Kagan estimates that such cord-cutting  homes will reach 28 million by 2021, and possibly more.

It is not a new challenge. Telcos faced the same problem with OTT voice and OTT messaging. Some urged telcos to embrace OTT fully. The problem is simply that the financial returns for doing so (matching OTT prices and plans, for example) would simply destroy most of the existing business, where a strategy of measured decline (the course virtually all telcos have taken) actually produces better financial results.

That, in fact, was the strategy used by AT&T earlier: harvesting a legacy business as long as possible, to buy time to create a new set of revenue drivers.

Nor is lack of leadership in OTT a show stopper. U.S. telcos--especially Verizon and AT&T--have grown more through acquisition than organic growth.  When the time comes, assets will be acquired.

So it might not, in that view, be too alarming that the number of U.S. customers relying solely on OTT for video entertainment keeps growing. That is the current pattern, and a pattern that is expected to continue. So the classic past pattern--harvesting the legacy revenue stream while building new revenue sources--will hold.

Steps will be taken to retain as much of the linear business as possible. Effective price reductions (skinny bundles and triple play) are part of that strategy. At the same time, efforts to organically grow the OTT business will be undertaken. Ultimately, the tier-one providers will buy their way into the business. They have done it before. They will do it again.

source: IHS

"Dig Once" Might Not Help Much

There arguably are all sorts of barriers to broadband deployment related primarily to infrastructure cost or underlying demand. Some recently have proposed duct placement whenever federal highway funds are used to build new highways. Of course, some might note that the potential upside might come at a cost: less money to spend roads. Most of the reason internet access is suboptimal is access infrastructure, not long haul transport. And, of course, most highways are “long haul” infrastructure, not “access” facilities such as urban streets.


To be sure, middle mile infrastructure is a definite problem for most rural communities. Ductwork placed in the ground when new highways are built might not help solve that problem, as highways generally run between large population centers (east-west or north-south), and long haul facilities likely already follow those routes, as long haul lines already follow railroad rights of way.


Dig once” always sounds good. But it costs money, and might not typically actually result in more facilities-based competition. To be sure, so long as somebody else is paying for the conduit, there is a potential benefit, in principle, for any ISP needing to build new long haul infrastructure. It is not so clear that such conduit actually encourages service providers to build new access facilities, even if the long haul routes might prove useful for enterprise traffic purposes.


Indeed, there are advantages and disadvantages, the Government Accountability Office has said. Some enterprise customers (U.S. government, for example) do not allow their transport providers to use lease infrastructure. Capacity along the routes where conduit is available might not materialize, or develop robustly. Also, the nature of construction matters.


If conduit installation is required fro federal highway construction, one conceivably could end up with short sections of conduit laid (as the result of repair work, for example), with no actual connectivity, end to end, to anywhere. Also, redirecting funds to lay conduit might consume seven percent or more of the allocated road funds.


There are other practical issues, as when municipalities trade conduit access to internet service providers to promote access or metro communications builds.


The point is that “dig once” sounds good, but is likely to have almost no impact on additional internet access facilities, while stranding assets and reducing sums available to repair roads.



Wednesday, March 29, 2017

Price Matters, Where Public Wi-Fi is Concerned

Causation always is suspect when people say something needs to be done to spur economic growth by the means of better internet access. To be sure, virtually everyone behaves as though there is a causal relationship between internet access and economic growth, even if that cannot be proved.

Quite often, an argument can be made that the reverse actually makes more sense: quality internet access is a result of economic growth or existing wealth, not the cause of those developments.

On the other hand, it bears noting that value and price relationships do have a causal relationship to consumer buying. As with any desired product, lower prices cause more buying of that product.

Way back in the days of dial-up internet access, when most such dial-up services were sold on a metered basis, AOL leapt to leadership of the market by abandoning metered pricing, offering monthly access for a single flat rate.

The point is that, when new supply is added to the market, price matters. In most markets where there is high use of Wi-Fi hotspots for data offload or internet access, the incremental cost of using public Wi-Fi is zero. Low prices should spur incremental use in some markets, but just how much remains to be seen.

Public Wi-Fi now is seen as an important way to make fixed network internet access more widely available in India. As always, much will hinge on market dynamics. In many other markets where Wi-Fi offloading is prevalent, the offloading happens when consumers offload to their own personal internet services. In that sense,  high use of Wi-Fi is dependent upon, and derivative of, widespread fixed network adoption.

Public Wi-Fi (mostly amenity services) also tend to get significant usage because access happens “at no incremental cost” (“free”). It remains unclear how demand will fare in India, if public Wi-Fi hotspot access is a “for-fee” service.

Ironically, high public Wi-Fi usage might be a derivative of already-existing supply of internet access at affordable rates. not a driver of new and affordable supply. So it remains to be seen how well the new push for public Wi-Fi succeeds.

Nationwide Content Rights Mean Comcast Eventually Will Break With Past Industry Practice

Geography and industry culture sometimes can be barriers to success in the over the top applications and services realms. Note past efforts by Comcast to offer a streaming service only to consumers who live within Comcast’s fixed network geography.

That decision was partly an effort to avoid cannibalizing it own linear TV services, and partly to avoid competing with cable operators in other areas (cable TV operators virtually never overbuild over cable tV operators).

So Comcast’s latest move to gain content rights on a nationwide business is an important move. Eventually, success in the streaming service business will require ubiquitous availability, irrespective of which entity owns the actual access networks. That is a fundamental reflection of the way internet protocol networks operate, where any application can be used by any user on any public IP network.

But any such move to nationwide service availability will mark a huge change in industry practices, virtually requiring competing against other cable operators. The same will be true for cable operators who get into the mobile services business at the highest levels.

With roaming agreements, virtually any mobile service provider, such as any mobile virtual network operator, can offer service nationwide. But marketing sometimes is conducted on a regional basis. The main point is that the business now inherently requires nationwide scope, in terms of network coverage, if not in terms of marketing efforts.

Intel Says Moore's Law Not Dead

Intel insists it can keep innovating in ways that keep rates of progress based on Moore's Law a relevant assumption. Intel’s success or failure will have direct implications for the cost of many products requiring computing.  If other industries experienced innovation at the rate of Moore’s Law, car owners could drive a distance equivalent to traveling between the earth and the sun on a single gallon of gas, according to tacy Smith, Intel SVP.

Agriculture productivity would be so high we could feed the planet on a square kilometer of land, said Smith. As for the speed of travel, humans would be traveling at 300 times the speed of light.

So yes, Moore’s Law matters. But Intel is making some shifts in the way it measures progress, focusing less on the number of transistors and more on the cost of computing. Intel now will emphasize such matters as the manufacturing cost per transistor, which Intel expects to cut by about half with each new manufacturing process, which is in line with Moore's Law.

Moore's Law continues to face physical constraints, as the packing of more transistors into a finite space reaches physical limits, at least using silicon technology. So Intel now focuses more on output metrics, rather than input measures, such as transistor count. In fact, some might argue that Moore's Law is broken.

With the new measurements, Intel will be able to boast that its manufacturing improvements are surpassing Moore's Law. The company also said it would cut the manufacturing cost per transistor by half with each new manufacturing process, which is in line with Moore's Law.

Tuesday, March 28, 2017

Growth Gambles (Moving Up the Stack) are Dangerous, Difficult but Also Necessary

Not to pick on Ericsson at all, but the last several decades have not been kind to legacy providers in the telecom business, as growth has ended in some geographies (developed markets, mostly) , and is nearing the end even in emerging markets that are stronger now (Asia) , or poised to be stronger (Africa).

Many now are too young to remember it, but in the monopoly era  (pre-1980), both the United States and Canada were home to a couple of the biggest telecom infrastructure providers in the world (Northern Telecom and Lucent, formerly Western Electric). But some of that era’s leading firms also now have been absorbed, including Alcatel (to Nokia Networks), while the biggest growth has happened among the ranks of Chinese firms (Huawei and others).

At the same time, as activity and investment have flowed to all things internet, other suppliers traditionally more viewed as “computing” suppliers have surged, as virtually all networks now are “internet protocol” networks. To a large extent, that also means all “telecom” networks are “computer networks,” while the telecom industry is part of the larger internet ecosystem.

Some might fault Ericsson for betting it could create an important new business in media services. What else it might have done is the question, and there are no easy answers. In virtually every part of the legacy telecom business, questions about how to ignite growth have few easy answers, beyond horizontal acquisitions to add bulk.

Value has moved inexorably towards the separated application layer, as all apps now have become “over the top” apps, by design. In principle, and by design, IP networks are dumb pipes.

So “moving up the stack” essentially means transport service providers literally must create roles on the applications side of the business. That is never easy. The best template is provided by cable operators, who have in some instances “vertically integrated” (in a new way) by acquiring content assets.

Instead of trying to capture value by restricting content availability, the new pattern is to seek the widest possible distribution of those content assets. Though it remains to be seen how much that strategy might apply to enterprise apps and services in the internet of things realm, it seems clear enough that the really-big wins would come if and when access providers own highly-popular apps and services that are not restricted to customers of just one network.

In other words, it makes no sense to restrict HBO sales only to AT&T customers, or Netflix only to Verizon customers. Nor would it make sense for any access provider owning other assets (Netflix or any other popular app) to restrict access to its own customers.

It isn’t clear what else Ericsson might have tried, since it was going to have to step out of its comfort zone, no matter what it attempted. It will not be the last firm to struggle with a growth strategy. Growth now has to come in new areas outside the core competence. That is risky and hard.

Monday, March 27, 2017

Video is Important Revenue for Fixed Service Providers

The fixed network internet access business now is importantly augmented by video subscription services, which significantly boost average revenue per account. For defenders as well as attackers, video take rates have an important impact on the business model.

In the latest figures compiled by the US Copyright Office and reported and analyzed by MoffettNathanson, Google Fiber said it added a little over 15,000 video subscribers in the second half of 2016, boosting its total to slightly over 84,000 video customers in its seven markets.

To be sure, that represents a 57.8 percent annual growth rate, but from a small base. Perhaps more important, video account additions declined from the 66.2 percent year-over-year growth rate in the first half of 2016 and the 78.8 percent annual growth rate in the same period of 2015.

The data also show that video subscriber growth slowed particularly in Google Fiber's principal Kansas City market. "Google Fiber added 19 percent fewer customers in Greater Kansas City over the past six months than they did over the six months prior, and their six-month growth rate in the region slowed from 27.4 percent to 17.4 percent,” said Craig Moffett, MoffettNathanson principal analyst.

Video remains the single largest revenue contributor for Comcast, as you might expect. But even at Verizon, video service adoption was about 35 percent in the fourth quarter of 2015. In the third quarter of 2016 Verizon added video accounts at a rate about 40 percent that of Fios internet access services.

Since gross revenue for each video account can easily be larger than revenue for internet access, video has emerged as a key method for boosting account gross revenue and average revenue per account. In some cases, video drives as much as 60 percent of net additions.  

source: Comcast

Consumers Want Fresh Content, Fast Loading, Personalization

About half of consumers in Malaysia, Singapore, Thailand, and the Philippines now spend more than 16 hours online, though, surprisingly, older demographics spend even more time than that online, a study by Limelight Networks shows.


Regardless of the time spent online, consumers are doing so primarily via their smartphones.


When it comes to spending time online, social media is the most dominant activity followed closely by watching online video.


Although consumers in the LImelight Networks study have demonstrated the importance of website performance, even performance comes in second to “fresh and updated” content.


Together with a consumer predilection for “fresh and updated” content, 53 percent of respondents say they  want a personalized web experience. Most consumers (67 percent) surveyed want a website to remember them and make recommendations based on previous visits.

Nearly half (43 percent) of consumers surveyed will leave a website and go to a competitor if a web page takes too long to load. Also, some 84 percent of respondents report they expect equally fast load times on any device.

DSA Features Regulators

The  fifth annual Dynamic Spectrum Alliance Global Summit, which will take place in Cape Town, South Africa from 9-11 May 2017, will feature:
  • Mr. Pakamile Kayalethu Pongwana, CEO, Independent Communications Authority of South Africa (ICASA)
  • Hon. Hector Huici, Secretary of Communications and Information Technologies, The Ministry of Communications, Argentina
  • Dr. Martha Liliana Suárez Peñaloza, Director, Agência Nacional del Espectro (ANE), Colombia
  • Dr. Agostinho Linhares, Manager, Spectrum, Orbit and Broadcasting Division, Agência Nacional deTelecomunicações (ANATEL), Brazil
  • Mr. Peter N. Ngige, Assistant Director, Frequency Planning, Communications Authority Kenya
  • Mr. Mario Maniewicz, Deputy Director, Radiocommunications Bureau of the International Telecommunications Union (ITU), Geneva

AI Gets Practical for Content

The internet’s future, many believe, is intimately bound up with artificial intelligence, used in various forms. But AI already is a practical tool, used by Google to support its advertising operations.

Author Patrick Tucker argues that  “when the cost of collecting information on virtually every interaction falls to zero,”  insights gleaned from activity will transform those interactions. AI will be the enabler, allowing the sifting of huge amounts of data to glean insights and patterns.

To assess what the economic impact might be, some analysts compare AI to other innovations such as computing advances, internet access, mobility and industrial robotics. That is not to say AI will produce value in these stated industries in equivalent volumes, only to note that big and important innovations have produced estimated benefit in about such volumes.  

What is telling, though, is the importance content as assumed in the internet apps space as well as the internet access business.

“It is increasingly clear to us that content is the driver for future growth and AI is a core enabler to connect our user with highly personalized content,” said Fu Sheng, Cheetah Mobile CEO. Though Cheetah Mobile made its mark as a supplier of mobile utility apps, it now sees content services as its growth driver. “Looking forward, we remain both focused in implementing our mobile content strategy, leveraging the big data generated by a massive user base and AI technology to connect our user with more personalized leisure content.”

In fact, Cheetah Mobile sees artificial intelligence being “a very core technology” for content, he said.  
“There is a lot of commonality between robotics, especially in deep learning and AI that may have common applications for what we want to do on the Internet space.”

Rising Content Costs Help Netflix, Hurt Linear Providers

Netflix now is among the reasons video content costs are rising. Netflix, other buyers say, is boosting content prices by snapping up content creators and spending big to do so. But rising content prices are a primary reason linear video subscription prices climb, at rates above inflation, virtually every year.

That is why “skinny bundles” are now such a big trend in the linear video subscription business. With falling demand, ever-higher prices for traditional bundles are becoming unsustainable.

That is even more important when, in the future, most subscription growth is taken either by over-the-top providers or mobile services.


source: IHS

Spectrum Sharing is Likely Value to AT&T of FirstNet

Spectrum sharing fundamentally is important because it can change the business model for existing and new potential providers of communications services, much as increased availability of unlicensed spectrum likewise allows incumbent and new service providers to create services and revenue streams. In other words, shared spectrum is important because it changes the value and cost of spectrum rights.

Many would argue that the nationwide first responder network proposed in the wake of the Sept. 11, 2001 attacks on the World Trade Center in New York have gone nowhere for 15 years because the business model was quite questionable. That FirstNet now will be built and operated by AT&T suggests that something significant in the business model has changed, as is true for several other access technologies or approaches.

In the case of FirstNet, what seems to have clearly tipped is the perceived value of building and operating a network that has great potential societal value, but a questionable financial return. The difference now is spectrum sharing, and the impact that has on potential value to offset the capital investment and operating costs.

The other new element is a $6.5 billion initial subsidy (most of which will be paid back over the 25-year contract length) to help build the network. Estimates of construction cost range as high as $40 billion.  

FirstNet, though, will have to sell its services to first responder entities, so the venture remains a huge gamble. In that sense, the tangible benefits might well be the use of 20-MHz of new 700-MHz spectrum, whenever the emergency services personnel are not using the network. That might be “most of the time,” as the network will rely heavily on small cells.

But state entities already operate their own emergency networks, and will have to be persuaded to switch to FirstNet.  That likely means a long, slow process, so AT&T planners are not likely factoring much revenue into their business models.

So FirstNet is valuable, in all likelihood, mostly as a way of gaining shared access to 20 MHz of low-band spectrum.



FirstNet Gets Ready to Link 10,000 First Responder Organizations

FirstNet is one of the largest public-private partnerships in the U.S. communications business, planning ot build a nationwide 4G Long Term Evolution network to be used by as many as 10,000 first responder agencies across the country

Sunday, March 26, 2017

In Phone, App, Access Provider Business, "Winner Take All" Holds

The applications business now is said to have a winner take all structure, where one or two providers have 70 percent to 90 percent market share. The smartphone business long has been dominated by Apple and Samsung. The telecom business likewise seems to operate with a “few providers” structure.

So it is hard to ignore those basic observations when formulating business strategy, almost anywhere in the internet and communications ecosystems. AT&T, for example, now seems to see such limited results from offering a robust array of phones that it is simplifying its line.

BayStreet Research analyst Cliff Maldonado argues that while AT&T is streamlining its phone lineup, since it does not see too many marketing advantages from offering “AT&T-only” phones, while Verizon still appears to believe that device differentiation provides advantages.

Nor does AT&T feature some  traditional device promotions (buy one, get one free, phone-service bundles). In part, those changes reflect a mature market where customers understand they can make a phone decision separate from a service provider decision (using unlocked phones), since service providers no longer require such device bundles.

Internet and communications markets, at least for the foreseeable future, will be highly concentrated in terms of market leadership.

Friday, March 24, 2017

For Cable, Old Monopoly Behaviors are Going to Change

Telcos and cable TV companies historically have not generally competed head to head with each other on a facilities basis, though mobile companies quickly moved to facilities-based competition. That is not to say fixed network telcos and cable companies now are unused to competition. They compete with each other, with satellite and mobile companies and sometimes overbuilders (independent ISPs).


But, as a rule, telcos have not overbuilt other telcos and cable companies have not directly confronted each other. The direction, though, clearly is in the direction of growing competition, nationwide, albeit on the basis of “over the top” applications competition, and only partly in terms of physical facilities.


For telcos, mobile services were the big break from the historic monopoly pattern. Now AT&T offers nationwide video service for the first time, using it DirecTV asset. Over time, AT&T and Verizon are likely to compete nationwide, or globally, to an extent, in various areas related to applications and services related to internet of things, connected cars, connected health and other services.


For cable companies, it also is likely that mobile entry will lead, for the first time, to nationwide competition that oversteps the historic geographic boundaries. Streaming video is likely to be the other area where competition breaking the historic pattern will happen.


Comcast, for example,  has acquired rights from cable network owners to offer their channels nationwide.


To be sure, cable operators are likely to continue to avoid head-to-head competition in their fixed network coverage areas. That obviously will not be possible if and when both Charter and Comcast get into the mobile business. Should Charter and Comcast both wind up in the streaming video service business, they are likely to compete with each other directly, though not on a “facilities” basis.


Still, markets and services are going to push cable operators into unusual behaviors, such as competing directly with each other. Mobile companies have grown comfortable with that notion. Fixed network telcos have found their primary competition comes only from cable operators, as have cable companies, who mostly face only telcos as primary rivals. But that is the fixed networks business.

Mobile is a national basis, as are the major apps businesses. So change will come. The old adage used to be "we have the best of all possible worlds: we are an unregulated monopoly." That is going to be less true, in the future. At least in the "new business" areas, there will be no monopoly, and no avoiding competing against other cable operators. They'll eventually get used to it, as tough a change as that will represent.

No Mystery about Cancelled Google Fiber Installs

If one accepts the logic of building new fiber-to-home (FTTH) facilities on the basis of neighborhood demand--building first where there is the greatest chance of getting a significant customer base--then it makes sense that some potential customers who live in neighborhoods without such critical mass might have to wait for facilities to be built.

Some appear to think there is mystery around what Google Fiber is up to, as reports surface of customers in Kansas City having their install orders cancelled. There might be less mystery than some would think.

Google Fiber has halted expansion, using FTTH. It is just that simple. So potential customers in new areas are not going to get that particular service. That means cancelled orders in areas Google Fiber will not now reach. In some cases, it is possible that even new orders in existing areas might be refused. That tends to happen for a number of logical reasons.

An ISP might have made a decision to switch technology platforms. An ISP might be planning to sell the asset, or exit the business.

And, if an internet service provider decides it is having trouble with the business model for FTTH, then it is not unreasonable to see a halt, or a pause, in new construction, as was the case with Verizon’s FiOS deployments.

If you have been around actual installation operations, or the people who have to manage those operations, you know there always is a risk of irritation when a new network is built, as “demand that cannot be immediately fulfilled” is created. In other words, potential customers hear that a new network (cable TV where there was none, 4G or 5G, fiber to home, gigabit services) is coming, but do not understand that it might take several years to build out a whole metro area.

Similar irritation happens when a formerly-announced project is cancelled, because the business model comes into question. That seems a large part of the apparent “mystery” about Google Fiber’s pause in construction of FTTH in existing and proposed markets. There should be no surprise. Google Fiber is not the first to discover the potential business model challenges.

Nor is Google Fiber the first to discover potential customer irritation when construction does not happen everywhere, right away.  

In other words, almost by definition, some potential customers live in areas where demand is less than in other areas, which will be built first. That is the whole idea behind the “neighborhood” build approach. ISPs build first where demand--and therefore breakeven--can happen fastest, building revenue and cash flow to support more construction.

All that will cause some irritation, but not as much as when an ISP has to halt construction for some business reason.  

There is no mystery about why Google Fiber install contracts might be cancelled. Aside from the clear halt in network expansion for business reasons, and the possible use of different access platforms (which might not be ready yet), some neighborhoods might well be marginal in terms of business case, using any access technology.

There is no mystery here about cancelled install contracts.

"Tokens" are the New "FLOPS," "MIPS" or "Gbps"

Modern computing has some virtually-universal reference metrics. For Gemini 1.5 and other large language models, tokens are a basic measure...