Showing posts from November, 2018

What AT&T Revenue Segments Suggest About its Strategic Challenges

One way of gauging the strategic value of various AT&T revenue segments is to examine either revenue or earnings contributions.
The Mobility business unit represents about 50 percent of AT&T’s adjusted cash flow (EBITDA). WarnerMedia represents about 17 percent of the company’s revenue and adjusted EBITDA.
Business Wireline represents about 17 percent of the company’s adjusted EBITDA. Entertainment Group represents about 15 percent of the company’s adjusted EBITDA.
In terms of revenues, mobility represents 40 percent, entertainment group 26 percent and business wireline about 15 percent of total quarterly revenue of $45.7 billion.
So 99 percent of cash flow comes from those four revenue segments. But what might really stand out is the 15 percent contribution from AT&T’s landline voice, video distribution and internet access products (the triple play suite). These days, consumer internet access, voice and entertainment video (recall that AT&T is the largest U.S. subscripti…

Streaming Services With Biggest Customer Bases Have Lowest Churn

Customer churn is a big concern for any supplier of a consumer application or service, and it generally is recognized that much churn happens in the early days of any engagement with a new customer. Conversely, churn tends to be quite a bit lower for accounts with some longevity.
That is fairly easy to explain. New customers without prior experience with any given service or service provider, appliance or app have a learning curve to climb before most of the value of the product is grasped. For many software as a service products, most of the churn happens in the first 90 days.
source: Cohorts
So it is probably not surprising that U.S. customers of streaming video services seem to churn least on services that have the longest tenure and the greatest number of accounts.
Basically, most of those customers have had time to decide whether they value the services enough to keep paying for them, have concluded that the value-price relationship is satisfactory and have learned how to navigate …

Double Down on Connectivity or Diversify?

What tier-one communications service providers should do about revenue growth is a matter of huge disagreement. Some favor a “stick to your knitting” approach. Others believe connectivity growth prospects are so limited that movement into new lines of business, to create new revenue sources, is imperative.
It is not hard to find critics of the Time Warner or DirecTV acquisitions that argue AT&T should have invested in its fiber to home capabilities or its 5G network. Many prefer the “pure play” approach taken by Verizon or T-Mobile US, for example.

That might or might not be strategically wise. Globally, revenue growth in the mobility and fixed network segments is flat or slowing. Significantly,  revenues in developed markets are declining, and have been since perhaps 2011.

Nor has AT&T or Verizon been able to budge market share too much since about 2012. To be sure, where AT&T had 17 percent share in 2000, it had 31 percent share in 2012. Where Verizon had 25 percent shar…

Access Network Traffic Gets More Asymmetrical

Though an argument can be made that a shift to symmetric internet access will lead to applications being created to take advantage of bandwidth symmetry, present traffic trends do not favor heavy internet service provider investments in symmetrical bandwidth for consumer connections.
With the caveat that a big shift to peer-to-peer distribution of consumer entertainment would have a big effect, growing internet distribution of content has intensified the asymmetric pattern of internet access traffic. That matters since video dominates core, metro and access network traffic load.
Globally, IP video traffic will be 82 percent of all IP traffic (both business and consumer) by 2022, up from 75 percent in 2017.
Upstream traffic has been slightly declining as a percentage of total for several years, Cisco says. It appears likely that residential Internet traffic will remain asymmetric for the next few years, at the very least.
Global IP video traffic will grow four-fold from 2017 to 2022, a …

Internet of Things (Machine-to-Machine) Drives Connected Device Growth

Internet of things (machine-to-machine) devices will underpin global connected device growth through 2022, Cisco says.
Machine-to-machine (M2M) connections (internet of things sensors, cameras, monitors) will be more than half of the global connected devices and connections by 2022, Cisco says.
The share of M2M connections will grow from 34 percent in 2017 to 51 percent by 2022. There will be 14.6 billion M2M connections by 2022.
source: Cisco

The number of devices connected to IP networks will be more than three times the global population by 2022, Cisco now predicts.  There will be 3.6 networked devices per person by 2022, up from 2.4 networked devices per capita in 2017.
Globally, there will be 28.5 billion networked devices by 2022, up from 18 billion in 2017, Cisco forecasts.

source: Cisco

Rural Internet Access is Tough

Any reasonable observer would say that a 1 Mbps internet access speed costing $80 a month is less than adequate, as it costs in Fort Yukon, Alaska.
The problem is that current solutions to boost access speed are not commercially viable, owing to geographic isolation and the small number of potential users.
Fort Yukon has a total population of 547, and is served by three internet service providers (one using satellite, one using fixed wireless, one using digital subscriber line).
There are an average of 2.6 persons per home, implying a total of 210 homes, of which 38 percent are occupied seasonally. Some estimates suggest full-year occupancy is 40 percent.
So assume full-year occupancy is about 62 homes to 84 homes are the universe of home broadband services.
Assume 62 percent of homes buy internet access. That implies a universe of 38 to 52 potential customers. Recall that Fort Yukon is isolated. Fort Yukon, located northeast of Fairbanks, is not served by the GCI TERRA network.


Some Industry Professionals Believe Connectivity Will be Less Important in 5 Years

One always should be on the lookout for anomalous data. So it is with a survey of 550 industry executives from 11 countries, conducted by Osborne Clarke for The Economist Intelligence Unit. Note that executives in the digital business, energy and utility and financial services verticals say they believe “connectivity” will be less important in five years.
Conversely, professionals in real estate/infrastructure and transport/automotive industries believe connectivity will be more important in five years. So what to make of those results? Some argue that real estate and transport traditionally have been slower adopters of information technology.
Also, financial services and digital businesses have been early adopters.
source: The Economist Intelligence Unit
The results might also indicate that, in some industries, connectivity itself is less an issue, while other elements of business success are viewed as more significant.

NASA Spacecraft Lands on Mars

Never get bored with a Mars landing!

Is 5G as Big as the Internet?

Is 5G going to be as big an innovation as was the internet? It is too early to tell. But here’s an exercise, taking a range of claimed Internet benefits and simply substituting the word “internet.”
“Unlike its predecessors though, Internet is a technological paradigm shift, akin to the shift from typewriter to computer. And it isn’t just a network. Internet will become the underlying fabric of an entire ecosystem of fully connected intelligent sensors and devices, capable of overhauling economic and business policies, and further blurring geographical and cultural borders. It will be capable of delivering at every rung of the ecosystem’s ladder, and will provide seamless, continuous connectivity for business applications.”
source: OECD
“Internet will be a fundamental shift in the way communications networks are managed and operate; a marked distinction from previous mobile generations Internet is no longer just about communications, but connectivity solutions. Data rate and capacity have …

Are Telecom Prices Too High?

One argument we always hear about any communications service is that it is “too expensive.” That clearly is true in developing or lesser-developed nations, where mobile internet access can cost 14 percent of gross national income per person. In developing markets, mobile internet access can cost about six percent of GNI, per person.
Consider mobile internet access. In developing countries, mobile internet access costs about 0.7 percent of gross national income, per person, according to International Telecommunications Union data. source: ITU
Much the same story holds for fixed network internet access as well. Fixed network internet access in developed nations costs less than one percent of GNI per person, perhaps 11 percent of GNI per person in developing nations and as much as 30 percent of GNI per person in lesser-developed nations. source: ITU
One rather impressionistic bit of evidence that prices are not excessive might be gleaned from industry profits. On a global basis, revenues d…

Half of Global Fixed Lines Support Internet Access

In 2017, about half of all fixed network lines globally supported voice. The other half (the growing half) consisted of internet access lines, according to International Telecommunications Union data.
Fixed Network Lines, Voice and Broadband, Lines in Millions
2014 2015 2016 2017* Fixed-telephone subscriptions Developed 503 490 479 471 Developing 592 556 524