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Showing posts from May, 2017

Internet Trends Report: It's Now All About the Apps, Content, Games, Advertising

At a high level, the biggest takeaway from this year's Internet Trends presentation by Mary Meeker is how much she focuses on apps, games, content and advertising, not access. 

Access is not so much the issue anymore. And "access" is mostly a matter of smartphones. Meeker also spends quite a lot of time on two markets: India and China. 


Internet Trends 2017 Report from Kleiner Perkins Caufield & Byers

Spectrum Abundance Might Change Everything

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Business models in the telecom business have tended to change slowly. But everyone likely would agree that the pace of change now is much faster. And the biggest single assumption about telecom business models has been scarcity.
In the past, there was--by law--no competition allowed. That fundamental assumption underpinned the whole business model. But we no longer believe telecom is a "natural monopoly" (just one supplier is sustainable).
Most would agree it probably is an oligopoly (a few providers). But even that assumption is going to be challenged over the coming decade, as spectrum scarcity becomes relative or absolute spectrum abundance.
The global mobile business, like its predecessor fixed line networks business, was built on scarcity. Monopoly regulation created scarcity by policy decision, allowing only one firm to lawfully provide telecom services in a country. The whole business model therefore was shaped by the deliberate lack of competition.
But there are othe…

Will 5G Drive Massive Cord Cutting?

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Even if most of the attention in popular media is about “cord cutting” related to linear video subscriptions, internet access  cord cutting arguably is an equally-big potential issue.
According to Magid’s 2017 Mobile Lifestyle Study, an annual study of 2,500 U.S. consumers that focuses on emerging trends in the mobile market, more than three in ten smartphone owners expressed interest in cancelling their home broadband service in favor of just having 5G. Interest was particularly high among Millennials, exceeding 40 percent.
That is quite a lot higher than the 10 percent of consumers who reported they would consider mobile substitution for internet access found by some other studies. A study by Parks Associates suggests that perhaps 10 percent of U.S. broadband households are “likely to cancel their fixed broadband service” over the next 12 months, and use wireless or mobile data services as a replacement.
Some would argue that coming 5G networks could be a huge catalyst in that regard…

Are Price Wars, Speed Upgrades Dramatically Changing Customer Satisfaction? It Appears So

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One way of interpreting the latest consumer satisfaction rankings from American Customer Satisfaction Index (ACSI) is that, in general, consumer satisfaction with network-delivered services (mobile, fixed) increases as prices drop, and drops as prices are increased.
The caveat is that “price” likely has to be viewed in relationship to value. At least theoretically, consumer satisfaction could remain the same, or climb, if value increases even more than price, on some customer-perceived key dimension.
Xfinity (Comcast) subscription TV satisfaction scores dropped six percent to 58. That is a big change, for any industry and any company over a year’s time, perhaps more notably given the introduction of the voice-activated Xfinity X1 TV interface, which arguably makes it far easier for consumers to find something to watch.
Some might also attribute higher apparent satisfaction with lower prices in the mobile service industry.  
Customer satisfaction with mobile service climbed nearly three…

What is the Point of Heavily Regulating a Declining Product?

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As a rule, and with the caveat that other points of view exist, I tend to believe that increasing regulation of declining services, industries and products is ultimately pointless, and a waste of time and resources. When it is clear that a product is declining, and being replaced by one or more new substitutes, it just makes sense to allow as graceful a decline as possible.
Since the best outcome is a graceful harvesting of remaining revenues, as demand keeps shifting to the replacement products, it does not make sense to increase, and in some cases, even to maintain, high levels of regulation. Instead, it likely makes sense to allow customers to choose, and suppliers to market, whatever services they want, with less-burdensome overhead, wherever possible.
That would seem to be the case for the U.S. business data services market.  
The business data market has been shifting from legacy SONET/SDH to Ethernet for quite some time. By some estimates, SONET/SDH new hardware sales, for examp…

So Far, 26% of IoT Initiatives Succeed

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Some observers might be surprised that 26 percent of surveyed enterprises report they were successful with their internet of things initiatives. That should not come as a surprise.
For decades, success rates for information technology initiatives have generally failed more often than they succeeded. By some estimates, only about nine percent of software development projects at large firms are successful.
The same might be said of change initiatives generally, which some say tend to fail about 75 percent of the time.  
The Cisco study also found that information technology executives were quite a bit more convinced the projects were successful, compared to business executives who were more concerned with business cases.
So far, the Cisco study suggests, IoT initiatives are faring about as well as other information technology initiatives tend to, at larger enterprises.
source: Cisco
source: Cisco

Who Pays for IoT Communications?

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One pesky and important detail we have yet to fully work out is the business model for IoT appliance business models, for consumer appliances.
If you assume a world where nearly every in-home consumer appliance, and probably lots of other stand-alone sensors to track everything from motion to soil moisture to light levels, often on a “stick it on” basis (put a tracking sensor anywhere you want by peeling off the adhesive), and if you assume connectivity has to be provided, the issue is how that connectivity is supplied, and “who” pays for it.
Amazon provides one model, where the appliance supplier pays for connectivity (mobile network) if Wi-Fi is not available, and then uses Wi-Fi as the preferred connection. In that model, connectivity somehow is build into the use of an appliance (does a purchase become a rental?).
Wi-Fi might be an easy choice, as it shifts payment to the owner of the appliance (user pays for the internet access connection). In a few cases perhaps a third party pa…

No End in Sight for Margin Compression or Revenue Shrinkage?

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When observers say the “cost” of supplying telecom services is “too high,” and must be made more affordable, the obvious and direct implication is that somewhere in the supply ecosystem, some participants are going to see a reduction in value and revenue, allowing the final end product--internet access--to be provided to “everyone,” at prices they can afford.
As one example, “open source” network elements already have been developed by the Telecom Infrastructure Project (TIP), a consortium led by Facebook to develop open source transmission products that, in turn, reduce the cost of building and operating transmission networks.
Voyager, a long-haul optical transmission system, already been tested by Facebook and European telecom company Telia over Telia’s thousand-kilometer-telecom network. ADVA Optical Networking is manufacturing the device, which also is being tested by other carriers.
By definition, open source  telecom technology is designed to lower networking costs, which means …

AI is About "Insights"

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Artificial intelligence is an “exponential” technology that will be harnessed in lots of ways, argues futurist Rohit Talwar. Most of those ways will involve application of AI to develop better insights from mountains of raw data.
Forrester Research, for example predicts that “insights-driven” businesses will represent about $1.2 trillion a year in revenue growth by about 2020, essentially representing market share taken from competitors.
There is another potentially-important angle. Over time, virtually all larger companies--and more people within those companies--will be able to use AI to harvest information in a direct way.
While in 2015 only 51 percent of data and analytics decision-makers said that they were able to easily obtain data and analyze it without the help of technologist, Forrester expects this figure to rise to around 66 percent in 2017.
Some observers think that sort of spreading capability also will eventually lead to something we might call “artificial intelligence a…

Value Contribution of "Connection Services" is Dropping

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The total value of the internet value chain has almost trebled from $1.2 trillion in 2008 to almost $3.5 trillion in 2015, a compound annual growth rate of 16 percent, according to A.T. Kearney estimates published by the GSMA. About 17 percent of that total value is captured by connectivity providers of all types.
Many would argue it is possible, perhaps likely, that that percentage will shrink over the next decade or two. Where connectivity might today represent something less than 17 percent of total internet ecosystem revenue, that portion could drop to 14 percent by 2020 or so.
More than half the value of the total ecosystem will lie in the app provider realm, while 22 percent is earned by device suppliers.
source: GSMA source: GSMA

Enterprises Think "Cloud Computing" Very Important

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A survey of enterprise executives finds nearly-universal opinion that cloud computing is “very important” for “digital transformation,” a study released by 451 Research indicates. On a scale of 1 to 10, 80 percent of respondents ranked cloud's importance at 7 or above, and 20 percent gave it a 10.
Additionally, enterprises with a mature digital transformation strategy ranked the importance of cloud services 15 percent higher than companies in the early stages of a transformation, the study suggests.

source: 451 Research
Precisely what “digital transformation” means is debatable, but the 451 study emphasizes “competitive differentiation,” especially in four areas:

business agility managing business risk Improving operational efficiency Improving customer experience

Back to the Future: Narrowband Will Drive Revenue Growth and Use Cases

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For virtually all of the last 30 years, networking technologists and business leaders in the information and communications industries have rightly assumed that “faster speeds” and therefore higher data throughput rates were virtually directly related to financial outcomes.
In other words, the ability to send data faster increased the value of communication networks, made more use cases viable, and therefore drove revenues for suppliers of networking platforms, service providers.
So it is noteworthy that in the next phase of value creation and industry development, narrowband platforms might drive the next big wave of revenue.
That could well be the case if internet of things use cases develop as widely as expected. Look at the direction of standards extensions of Long Term Evolution, for example. Standards bodies that traditionally have worked to wring more performance out of networks now are working to create networks that feature less bandwidth.
Cat-1 for LTE networks tops out at 1…

5G Might be an Unwanted Watershed

We normally expect that each successive mobile network generation will also produce higher gross revenue or new services. That belief is held because it always has been the case in the past.
So 5G should not be different. We should see incremental revenue growth from new use cases. What we might not see is enough of that "new stuff" to keep pace with declines in revenue from legacy sources.
In that case, we might very well see 5G as a watershed, the first next generation platform that actually leads to lower total revenue, a contraction of suppliers and a reshaping of business models.
There is growing consensus that 5G could well mark a fundamental turning point in telecom industry history. If matters develop as hoped, a huge new wave of revenue growth, apps and services will be enabled.
And the biggest change of all is that the growth will come because computing actually becomes pervasive or ubiquitous, precisely as futurists have been predicting would eventually happen.
But…