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Showing posts from April, 2018

Sprint, T-Mobile US HHI Numbers Probably Will Not Pass Antitrust Muster

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The proposed merger between Sprint and T-Mobile US is going to have a tough time getting around its score on the Herfindahl-Hirschman Index (HHI), a basic tool used by the U.S. Department of Justice and most other antitrust authorities globally.
The Justice Department will generally investigate any merger of firms in a market where the Herfindahl-Hirschman Index (HHI), a test of market concentration, exceeds 1000 and will very likely challenge any merger if the HHI is greater than 1800.
The U.S. market has an HHI of about 2500.
Three years ago, the very same proposed transaction would have occurred where the U.S. market had an HHI score of about  2,766. But following a merger of Sprint and T-Mobile, the score would be 3,252. Is the market less concentrated now?
The last time Sprint and T-Mobile US tried to merge, three years ago, Craig Moffett of MoffettNathanson calculated that the wireless industry currently had an HHI score of 2,766.
But following a merger of Sprint and T-Mobile, the …

Will Federated Networks Ever Have "Owners Economics?"

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Have you noticed how there is a need for, and move towards “federation” in most parts of the computing and telecom ecosystem? In other words, interoperability between networks and systems is federation.
Federation can be defined as “a group of computing or network providers agreeing upon standards of operation in a collective fashion.”
The typical practical arrangement is when two distinct, formally disconnected, telecommunications networks, that may have different internal structures, interconnect. When different messaging platforms agree to interconnect, that is another example of federation.
In computer systems, to be federated means users are able to send messages from one network to the other. In other words, federation means interoperability. You can see this federation trend in the move to multicloud computing, when resources from multiple cloud providers can be amalgamated to work as one functional system.
Google Project Fi federates mobile device access from Wi-Fi, Sprint or T…

Sprint T-Mobile Merger Approval Still Seems Questionable

The odds that the new proposal to merge Sprint and T-Mobile US could clear antitrust review do not seem to be different from three years ago, when the same deal was proposed, and was opposed by the U.S. Department of Justice.
In fact, DoJ opposition to the vertical merger of AT&T and Time Warner assets, would suggest the conditions are worse. Win or lose their antitrust lawsuit, has DoJ signaled it is more open to big horizontal mergers of the specific type it opposed just three years ago, and when it has opposed a vertical merger many believe should not have caused concern?
Some argue this is not an instance of “consolidation.” That is simply untrue. We would move from four facilities-based tier-one suppliers to just three, at least until some time in the future, when one of the three experiences a major business reversal and some tier-one supplier in the internet ecosystem decides it needs such assets.
“This isn’t a case of going from four to three wireless companies,” says T-Mobi…

Internet.org Sponsored Access Helped 100 Million People

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Facebook’s Internet.org efforts “have now helped almost 100 million people get access to the internet who may not have had it otherwise,” according to Mark Zuckerberg, Facebook CEO.
Ironically, this form of sponsored access is among the practices many “network neutrality” supporters want to outlaw. After all, giving users “no charge” access to a suite of popular apps--but not the “full internet”--does not “treat all bits and apps the same.”
That is among the objections some of us have to strong forms of network neutrality. Consumers should have full access to all lawful apps. That is among the original ways that neutrality originally was conceived, and still makes sense today.
But it has never made sense to some that, in addition to that openness, access providers should be legally barred from offering sponsored access, in the same way that internet.org works, or the way “toll-free calling” has been lawful in the voice business.
App providers routinely use content delivery networks--pa…

Sometimes Unhappy Customers Continue to Buiy

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Two and three decades ago, it was somewhat hard to explain why buy rates for linear video were so high (up to 95 percent of U.S. households), but satisfaction routinely was so low. That sort of flies in the face of our general belief that happy or satisfied customers are good predictors of buying behavior.
In fact, even unhappy customers will continue to buy products for which there are no effective substitutes.
The answer is that, despite their mixed feelings, consumers did not actually have choices. If you wanted access to content diversity, the only choice was subscription TV.
That is no longer the case, so we should not be at all surprised that consumers are abandoning linear services for streaming alternatives that replicate much of the value, at far lower prices.
Linear video entertainment subscriptions have gotten more expensive for all U.S. consumers, but arguably most so for households with smaller incomes.

Though prices have virtually always risen annually, the issue is wheth…

U.S. Mobile and Internet Access Prices Have Fallen for 2 Decades

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Between 1997 and 2017, the cost of mobile service in the U.S. market dropped 50 percent, according to the U.S. Bureau of Labor Statistics.
According to the U.S. Bureau of Labor Statistics, prices for internet services and electronic information providers were 22 percent lower in 2018 versus 2000.
Between 2000 and 2018, internet access services experienced an average inflation rate of -1.36 percent  per year. “In other words, internet services costing $50 in the year 2000 would cost $39.10 in 2018 for an equivalent purchase,” says the BLS.
The overall inflation rate was 2.07 percent during this same period, BLS says. Likewise, prices for mobile services also have fallen. source: Bureau of Labor Statistics
There often is a big difference between posted retail prices for internet access and the packages consumers actually buy. Available plans can be expensive or cheap, but what matters are the buying habits of actual customers, who may or may not pay those posted prices.  
These days, as so…

Taiwan Regulator Warns of Dangers of Excessive Competition in Mobile Market

Up to a point, competition is good for consumers, leading to better prices and greater value. But there is such a thing as “ruinous competition,” which drives prices below the point at which suppliers can sustain themselves or invest in new products and features that provide more value.
That is a problem in the Taiwan mobile market, says  National Communications Commission (NCC) spokesperson Wong Po-tsungj. The problem is price wars.
Chunghwa Telecom, for example, recently introduced a 4G service plan costing NT$499 monthly (about US$17 a month) for unlimited access to mobile Internet and unlimited phone calls between Chunghwa Telecom subscribers. That basic plan was matched by competitors.
“If telecoms simply want to boost their market shares and revenue by luring subscribers from competitors, rather than with innovative business models, it would not be positive for the development of 5G in the nation,” Wong said.
“What they are doing does not help to make the pie bigger,” said Wong. A…

Fixed Wireless Now Generates as Much Global Revenue as Business Voice, Unified Communications

As vital as business voice and unified communications capabilities might be, they do not drive huge service provider revenues, globally.
By some measures, the global market for all business voice and unified communications, including the value of business access to support voice and UC, is perhaps US $28 billion a year.
Of that $28 billion or so of revenue, perhaps $10 billion consists of internet and data access circuits, implying that the value of hosted voice, unified communications apps and phone systems is about $18 billion annually.
So compare that to just one other product, namely fixed wireless internet access, admittedly a niche.
The global fixed wireless access market will grow 30 percent in 2018 and will generate $18 billion in service revenue, according to ABI Research, boosted by new use of 5G platforms to supply fixed wireless.
The point is that the fixed wireless revenue segment already is about the same size revenue contributor as business voice and unified communicatio…

Verizon is Optimistic About 5G; Others are Skeptical. Both are Right

As always, public company perceptions of upside from new markets is conditioned by their own view of ability to capitalize on those new markets. In many regions and markets, heavy recent investments in 4G mean service providers have less appetite for another round of investment to support 5G, as you would expect.
In other regions, where profits in the 3G and 4G era have been tough, there is some caution about revenue and profit upside from 5G. In addition, specific contenders have their own business reasons for seeing potential or danger. In other words, skepticism about the size of the 5G market opportunity, as well as optimism, are specific to particular firms, in particular geographies, for reasons having to do as much with current business environment as anything else.
For U.S. service provider Verizon, a relatively-small fixed line footprint, and the ability to compete in new markets with mobile-based alternatives to fixed network service, are a clear upside.
“We continue to be v…

Connectivity Not Necessarily a "Commodity?"

Some statements properly need to be qualified and understood in context, even if our typical phrasing lacks that nuance. We might agree there are a few instances where "connectivity is not a commodity." But that characterization hinges on our understanding of the term, in context, in all its range of connotations.
When observers say that connections to the internet (business or consumer) are a commodity, that typically is phrased as access or connectivity being a “dumb pipe”
The other implied terms span a range: low value, low price, slow-growing, low profit margin, declining growth, saturated market or any other modifier that suggests the connectivity is old, stagnant, saturated, hard to differentiate, lacking growth opportunity, is not innovative,  or some similar notion.
So when a telecom executive implies that “connectivity is not a commodity,” that claim also has to be parsed. Stefano Gastaut, CEO of Vodafone IoT, does not believe that connectivity will be a commodity fo…