Showing posts from June, 2018

SP500 Changes Reflect Reality: Media, Communications, Internet Apps Increasingly are One Industry and Market

The S&P500 telecom services sector index will change in September, and be renamed “communications services.” And that is the least of the changes.
Internet app firms Facebook, Netflix, Google-owner Alphabet, Disney and Comcast will be in the index as well.
Irrespective of you views on the wisdom of putting traditional value plays into the same index with media and internet apps, the new index might lead to a reevaluation of the price-earnings multiple for telecom assets.
The new communications sector index implies a price-to-earnings ratio of perhaps 19 times (the impact of adding internet app firms) expected earnings, nearly double the sector’s current multiple, according to Thomson Reuters, reflecting the different profiles of internet sector firms.
That does not mean an automatic reevaluation of the underlying values of assets in the index, which will continue to feature some slow-growing and high-dividend firms, plus some fast-growing, low or no dividend growth plays.
Still, ma…

67% of U.K. Fixed Network Consumers Buy a Dual or Triple Play Bundle

Dual pay and triple play offers now are the foundation of the U.K. fixed network consumer business, with 34 percent buying a package of voice and internet access, while 33 percent buy a triple-play bundle of voice, video entertainment and internet access, according to Ofcom. T source: Ofcom

How Much Profit Margin Can a Telco, Cable or Municipal ISP Expect?

Government owned and operated internet access networks are opposed so fiercely by private suppliers because those private suppliers are quite realistic about the potential implications for their business models.
The possibility exists that such networks could essentially displace current providers of internet access services, driving one or more out of business in local markets where a municipal provider takes significant market share.
Craig Moffett, then an analyst at Bernstein Research, estimated in 2012 that a 15-percent drop in access lines would lead to a 15 percent to 20 percent increase in operating cost for AT&T, while for Verizon a 15-percent drop in access line customers has caused a 20- to 25-percent increase in operating cost.
So one might infer that a loss of 30 percent market share could lead to something like a 40 percent increase in operating costs for an AT&T or Verizon fixed network operation in any market where a robust new competitor is able to get 30 perce…

IoT Annual Spending to Reach $1.2 Trillion by 2022

Internet of Things (IoT) spending will experience a compound annual growth rate (CAGR) of 13.6 percent over the 2017-2022 period and reach $1.2 trillion in 2022, IDC now predicts. And among the segments with greatest growth will be vehicle use cases.
From an enterprise use case perspective, vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) solutions will experience the fastest spending growth (29 percent CAGR) over the forecast period, followed by traffic management and connected vehicle security, according to IDC.
The consumer sector will lead IoT spending growth with a worldwide CAGR of 19 percent, followed closely by the insurance and healthcare provider industries, IDC predicts.
Manufacturing and transportation will each exceed $150 billion in spending in 2022, making these the two largest industries for IoT spending.
source: IDC Almost by definition, the greatest mobile operator opportunities in the broad internet of things area are those use cases requiring mobility, as …

Where is the Edge, for Computing?

Edge computing is a subject of enormous interest for mobile service providers, some internet service providers and telcos, cloud computing and data center operators as well as suppliers of enterprise software and devices, as edge computing could create substantial new markets for communications, solutions and computing facilities.
Of course, we have to define “edge,” and the answer might be application dependent. In some cases, such as an industrial sensor that aims to aid decisions about when a particular piece of machinery is dangerously hot, and has to be shut down, to prevent damage, the edge is the device itself.
In that case, communications is not essential. The device must act autonomously, on its own.
In other cases, the edge might be someplace on the enterprise premises. In such cases, enterprise servers handle the processing load, and there is no need for wide area communications.
source: Industrial IoT Consortium

The sweet spot for remote edge computing starts with use cases …

How Big is UCaaS Going to Be?

I realize I am a skeptic about claims that unified communications “as a service”  is a “young” or especially fast-growing segment of the industry.
I do not see UCaaS as especially young. Keep in mind that suppliers have been touting and selling hosted communications solutions for two decades, and UCaaS still is purchased by less than 18 percent of U.S. businesses, for example, even using generous definitions.
By most estimates, actual UCaaS revenue is growing rather slowly. In its historically fastest-growing market (North America), UCaaS is growing about four percent annually, according to Transparency Market Research, although some forecasters believe license growth will be higher.
UCaaS growth rates of 10 percent are seen as realistic, some forecasters believe, a growth rate with some historical precedent.
That is not to deny the possibility of a step change in adoption; an inflection point where growth accelerates. If you consider UCaaS an information technology innovation similar…

Use of Facebook to Get News is Falling

Use of Facebook for news has been falling since 2016 in many countries, according to the latest Reuters Digital News Report.
At the same time, more people have been using messaging apps such as WhatsApp to get news content, more than doubling to  in four years.

The point is that leadership in the internet ecosystem is not permanent.

Build or Buy Content Assets?

Netflix likely has proven that a streaming service does need to create original content to achieve market leadership, but also suggests such a firm does not need to own a separate content creation company to do so. Apple’s recent decision to acquire the services of Oprah Winfrey might also validate the principle.
Does that mean that Comcast, Verizon and AT&T (or other connectivity services providers) could do the same? That cannot be determined, as each has acquired content creation firms.
But there are other reasons why Comcast, AT&T and Verizon have done so. Ownership of content assets, at scale, creates the foundation for advertising revenue streams, wholesale content revenue streams and some retail bundling opportunities as well.
That matters as content creation and aggregation might represent as much as 70 percent of the total value of the TV content ecosystem, with distribution representing about 30 percent.
In other emerging ecosystems requiring distribution and connecti…

Except for Asia, Africa, Mobile Phone Business has Saturated

If you want to know why mobile service providers are so interested in internet of things, this graph suggests a key reason: sales of services and products to human beings using mobile phones is near saturation, and actually went to negative growth rates on two continents in the first quarter of 2018.
On other continents, growth rates were in low single digits. Africa and Asia are the two continents where double-digit growth continues to happen.

source: Ericsson
Projections of potential IoT connectivity revenue also suggest why many tier-one service providers will be looking beyond connectivity, at other parts of the ecosystem, for new revenue and roles. Simply put, most IoT connections will not use the mobile networks.
Though mobile internet of things connectivity will grow fast, most of the connections will use some other form of connectivity, a couple of new forecasts suggest. However, by about 2023, mobile connections might take leadership, in terms of new sales.
That should provide …