Showing posts from July, 2017

Verizon Makes Huge Innovation in Fiber-to-X Network Designs

Mass market optical fiber designs do not change radically, very often, in the U.S. market. Over a process of three to four decades, we have settled into some clear design buckets, including the cable TV hybrid fiber coax network; fiber to the home (FTTH) and fiber “to the neighborhood.”
There has been a shift from active to passive designs for FTTH, but the fundamental choices have been fairly well understood for some time.
But give Verizon credit for making a huge innovation that recasts the whole "fiber to the premises" issue. You might argue the change separates the entire issue of drop (access) media from the issue of how to build trunking networks.
The new fiber-deep design essentially builds a multipurpose optical distribution network (trunking network) and leaves the actual drop media decision for later (supporting either optical access for business or wireless access).
Verizon now is building the fiber-deep trunking network in Boston, and likely will follow in other …

Boot Camp for a Radically-Different World

The non-profit PTC has for some time held training events for mid-career professionals. This year, for the first time, PTC has organized a week-long program of value to promising members of regulatory and policy organization staffs.

source: Nokia
At the Industry Transformation Boot Camp (including Spectrum Futures and PTC Academy), students will learn:
Strategy for a business consolidating from 810 service providers to 105, in 10 years What drives the change What industry structure will emerge How revenue will be earned How 5G sets the stage Who wins, who loses, as part of the change How to prepare for the changes

The educational event earns students a certificate of completion, and also immerses them in tutorials and case study exercises preparing them for the most-rapid transformation of the telecom industry in half a century.
The week-long training event, including Spectrum Futures and

If I Do Not Buy a Tesla, Is that a Supply Problem?

If a particular product is widely available, and yet consumers do not want to buy it, is that a market failure, or simply a reflection of consumer choice? That is among the potential issues report on U.K. internet access might raise when it is released.
Initial reports suggest the report will show a wider availability gap than prior reports have suggested. That might be a methodological issue, many argue, as the report conflates availability with take rates. In other words, it mixes demand and supply metrics when it ought to measure either supply or demand, but not both, as a single measure.
That is important. To use a common example, I might choose not to buy a Tesla, even when Tesla availability is not an issue. That is not a market failure. That is a consumer choice.
In other markets, such as the United States, there is likely to be continuing gap between locations that can buy a gigabit internet access service, and accounts or locations that choose to buy.
When gigabit internet ac…

Can Telecom Industry Afford its Coming Consolidation?

While there always are lots of reasons why a particular merger idea does not get traction, one is worrisome for any weaker firm: potential acquirers believe the asset is going to depreciate further.
That, in fact, is one strategy some have floated for “when” to make a bid to acquire Sprint, or any other major set of telecom access assets.
Not now” is the rationale some would put forward, even if a later bid makes sense. Some would argue Sprint has not stabilized its business. Others might argue the asset will be available for less money, later, because they sense Sprint cannot fix its problems.
That is likely to be a growing issue over the next decade as a huge wave of consolidation starts to sweep over the telecom industry. At a high level, here is the problem. It will take huge amounts of capital if 85 percent of today’s telecom assets are acquired over a 10-year period.
One can question whether enough borrowing power exists to get that done, if at the same time capital is plowed i…

Verizon Touts Shift to Fiber Products, Net Growth is Nil

“Organically, fiber-based products grew more than three percent” (in the second quarter of 2017) said Matthew Ellis, Verizon CFO. Many will interpret that as a sign of clear progress for the FiOS network, and it is, in many respects.
One always has to evaluate “new” revenue from next generation platforms on a “net” basis, as is the case for other statistics such as mobile account gains. The simple reason is that a legacy or incumbent provider mostly finds that the next-generation platform cannibalizes some existing revenue, while hopefully creating incrementally-new revenue streams.
So it is with Verizon’s fixed network operations. “On an organic basis, wireline segment revenue decreased 2.8 percent compared to a decline of 3.2 percent last quarter,” said Ellis. “This shift in the wireline revenue trend towards fiber is growing.”
So FiOS and fiber-based revenue was up three percent, while segment revenue was down 2.8 percent. source: Verizon
In the fixed networks business, a good example…

Value is What the Customer Says it Is

In the end, “value” is always what the customer says it is, even if suppliers spend lots of time trying to shape those perceptions. Consider “gigabit per second internet access.” That’s better than 40 Mbps or 100 Mbps, right?
As with all “you would rather?” or “which is better?” exercises, nothing much matters until price is part of the decision matrix. I would tell you a Tesla is better than a Hyundai, but that is an abstraction. The chances I’d actually buy a Tesla, compared to a Hyundai, are very low, because value is the issue, not only “quality.”
So it is that most Comcast customers, able to buy gigabit internet access service or lower speeds for less money, likely choose to buy the midrange speeds at the midrange price.
“Nearly 55 percent of our residential customers take speeds of 100 megabits per second or higher,” said Michael Cavanagh, Comcast CFO. All that one statistic tells you is that 45 percent of consumers buy speeds less than 100 Mbps.
It does not yet tell you what perc…

Innovation can be Democratized in Era of Artificial Intelligence and Big Data

AI will be good for smaller firms trying to innovate.

5G Will be About Enterprise Use Cases

By 2025, the percent of enterprise traffic, now at perhaps 28 percent of total, could reach 96 percent of total, according to Bell Labs.
If you want to know why some of us believe the future for 5G is enterprise use cases, that is part of the reason.
On a separate level, Bell Labs also predicts that as much as 61 percent of all enterprise traffic will be terminated or originated using some wireless mechanism.
If 5G and some variation of Wi-Fi account for 61 percent of traffic, that leaves about 35 percent of total enterprise traffic that is neither 5G nor some form of Wi-Fi, but still wireless.
You might therefore guess that some of that traffic will be fixed wireless local access or some other form of wireless access, including specialized low-power, wide area networks of sensors.

By 2025, 69% of Enterprise Employees Might Use a Software-Defined VPN

Software-defined wide area networks (SD-WAN) are the current rage in enterprise networking circles, and probably for good reasons. According to Bell Labs, by about 2025, perhaps 69 percent of enterprise employees will be connecting by a software-defined virtual private network, which is what an SD-WAN provides.
source: Bell Labs

Third Telecom Era Approaches

As revolutionary as was the change from telecom monopoly to competition, we appear to be on the cusp of a third era.
For a number of fundamental reasons, “telecommunications” roles are becoming more porous, diffuse and shared. The notion that “anybody can be an internet service provider,” in contrast to “there is only one lawful provider of service,” illustrates the point.
Depending on the use case, an enterprise (public hotspot) or even consumer (cable homespot, mobile tethering) can act as the ISP. For purposes of delivering e-books, Amazon acts as a special purpose ISP. Google and Facebook act as ISPs in a variety of settings and roles. Google Fiber competes directly with telcos and cable companies as a general purpose fixed internet services supplier.
In India, Google and Facebook partner to operate Wi-Fi hotspots in public locations and villages. There may be other roles and platforms in the future.  
Beyond that, as we move towards an era of pervasive computing. Value moves inexo…

Underestimating Demand is as Bad as Excessive Optimism

The launch of AT&T’s DirecTV Now streaming service reminds me of its launch of the Apple iPhone. As you will recall, the iPhone launch appeared to have caught AT&T somewhat by surprise, in terms of the added usage of its data network.
Roughly the same thing seems to have happened with the DirecTV Now launch. In both cases, customers complained about quality issues that appear related to capacity to support the new services.
You can guess what comes next. AT&T took steps to fix the capacity problems related to iPhone customer behavior patterns, and likely has spent the last few months figuring out how to better support scaling of its DirecTV Now service as well.
You might well expect a renewed growth spurt, as a result. It’s just a reminder of how networks are dimensioned: you have to make assumptions about consumer behavior. Overprovision and you waste capital. Underprovision and consumers will have a troubled experience. It is hard to get it right, for new services that pr…

AT&T DirecTV Acquisition Seems to be Working

AT&T’s acquisition of DirecTV was not universally acclaimed when it happened. Some observers said AT&T needed to spend the money on better internet access. Others pointed out that the linear video business already was in decline.

Supporters argued that the move made AT&T a nationwide quadruple play supplier for the very first time. Others pointed out that the free cash flow almost singlehandedly would fund AT&T’s dividend for some time. Some added that the additional scale would improve economics for the firm’s video business now, while creating a much-stronger platform for OTT video to come.
So the new way to reassess that particular choice is whether you think AT&T or Verizon is in a better position, today, strategically.
If you believe all access providers will have to replace half of current revenues within 10 years, the only question is how to do so. In principle, you can make horizontal or vertical acquisitions, invest in new lines of business or grow organic…

Go Horizontal or Vertical in Acquisition Strategy?

Access services are a mature market in developed countries, and eventually will become mature even in developing markets, even as new revenue sources are created to replace declining legacy services. That has business consequences.
Most large tier-one service providers (cable, telco, satellite) eventually grow more by acquisition than organic growth. That is not the pattern for smaller firms, but you get the point. In any “mature” market, where accounts are essentially saturated, any provider tends to get account growth mainly by taking an account away from another existing provider.
So supplier consolidation is a long-term process in the global telecom industry. The only question is how fast, and how intense, that process is at any moment in time.
But what sorts of acquisitions make sense? The easy answer has been to make “horizontal” acquisitions to gain scale in the existing business. In other words, acquire more access assets.
That is the thinking when analysts float trial balloon…