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Showing posts from November, 2018

Build it and They Will Come

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Like it or not, our history with 4G networks, which was in many respects a “build it and they will come” exercise in hope, will characterize 5G as well. Few claim to be sure precisely where new revenues will be created, though as a generic, most believe internet of things and other ultra-low latency use cases will develop, at scale.
In the near term, the more-prosaic use cases will be capacity to support consumer mobile broadband. The near-term new use case is 5G fixed wireless. Ever since 3G, observers have expected creation of many new use cases killer apps and revenue streams, but such use cases have had to be discovered and created.
It would not be unfair to characterize the actual use cases as somewhat unexpected. Early on in the 3G era, video calling was a hoped-for new “killer app.” That did not happen. But it has become commonplace on 4G networks. In a similar way, content services were expected to flourish in the 3G era. That did not happen until 4G.
Augmented reality apps were…

Video--With All its Issues--is the Biggest Consumer Market Opportunity for Fixed Network Telcos

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Fixed network telcos face extreme threats to their core business models as sales of legacy products diminish and as average revenue per unit sold drops, even as usage skyrockets. But there is some disagreement about the wisdom of telcos getting into the video entertainment business, and in what roles.  
Consider only the role of video distributor. One conclusion many observers reach about linear video services is that the product is declining enough that it is not a fruitful area for telcos to pursue.
Linear video in the U.S. market is past its peak, to be sure, even as streaming alternatives proliferate. Most believe the revenue implications are clear enough: linear services with higher average revenue per unit (ARPU) will be displaced by streaming services with lower ARPU. But many, perhaps most streaming customers will buy more than one service. So, ultimate revenue impact is not as clear as one might suppose, if there were a one-for-one substitution of streaming for linear accounts…

How Much Share of the Enterprise Edge IT Market Can Service Providers Take?

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Market share in the software-defined wide area networking market is difficult to pinpoint, as it combines sales both of networking hardware and carrier services.
SD-WAN hardware includes appliances and routers, SD-WAN software that includes orchestrators, gateways, cloud routers and firewalls, dashboards, management systems among others, and SD-WAN services that includes service provider managed SD-WAN services.
Beyond that, early estimates vary by nearly an order of magnitude. Observers might debate the importance of SD-WAN as a service provider product, but the strategic upside comes in two ways.
First, it is possible that SD-WAN, as a way of connecting branch offices, becomes a growth market in its own right, displacing other solutions enterprises have used. So it is possible that carriers can take much market share from appliance and software suppliers.
source: Gartner
The longer-term possibility is that SD-WAN becomes the enabler of other value and revenue service providers can su…

FTTH or Time Warner? It Is Not a Close Call

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Would AT&T have generated more incremental revenue if it had not bought Time Warner, and instead had plowed that capital into a massive fiber to home upgrade?
The numbers suggest AT&T made a better choice buying Time Warner.
AT&T spent $85 billion to acquire Time Warner, with an immediate quarterly revenue boost of $8.2 billion. Were AT&T able to invest in fiber to home and then take an incremental five percent share of market everywhere it operates, is perhaps $2.2 billion in annual revenues, assuming $50 a month in gross revenue, or about $180 million a month in incremental revenue.
It is not clear how much upside exists for AT&T, in terms of fixed network internet access revenue, even if it were to dramatically extend its FTTH footprint, but you might argue that the best case for AT&T, for a massive upgrade of its consumer access network, is about 10 percent upside in terms of consumer market share, facing cable operators already leading the market in account…

Global Telecom Revenue Flat (Not Adjusting for Inflation) Through 2022

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On a non-inflation-adjusted basis, global telecom services revenue will grow at a compound annual growth rate (CAGR) of 0.8 percent, IDC researchers now predict. In any market with inflation rates of at least 0.8 percent, actual revenue will decline.
Product segments within the industry can have faster or slower growth rates. In fact, revenue earned in the fixed network segment generated by data services will grow 22 percent in 2018 and at a four-percent CAGR through 2022, IDC predicts, driven by uptake of internet access services.
Mobile revenue will grow at 1.2 percent through 2022, but fixed network voice revenues will decline at five percent annually to 2022.
"Developed and mature markets will only show marginal gains now, driven by technology migration and bandwidth needs," said Eric Owen, IDC group vice president, EMEA Telecommunications & Networking. South Asia and Africa are the two regions that will see the fastest revenue growth, IDC predicts.
source: IDC

Watch What Telecom Execs Do, Not What They Say

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How will U.S. service providers grow revenues over the next three years? A clue: watch what company executives do, and what they have done, not what they say.
Mergers and acquisitions, partnerships and organic growth is what U.S. executives tell KPMG will drive revenue growth.  KPMG’s 2018 U.S. Telecom CEO Outlook provides insights from 82 telecom industry CEOs in the United States on their expectations for revenue growth.
But with organic growth so slow in telecom, neither organic growth nor growth generated by channel partners is going to move the revenue needle too much. source: KPMG
source: KPMG

Consider only the matter of price increases between 2011 and 2017. The consumer price index has grown slowly over that period, up about nine percent. Over the same period, telecom business service provider prices have not grown at all, declining a bit less than one percent. source: USTelecom
One reason for that flatness in business services is product substitution. Though the products might n…

Someday, "Connectivity" Will Not be Your Value Proposition

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With the caveat that any attempt at predicting the future is inherently hazardous, Nokia Bell Laboratories is creating a Future X Lab to illustrate its thinking about how networks will supply value in coming decades.  
That effort supports a vision of the future centered on the FutureX network that dramatically reshapes understanding of the purpose and function of a next generation network that will have moved beyond connectivity as its source of value.
“Creating time” is one way of illustrating the difference between “we connect you” and “we create time” as the core value proposition. By “creating time,” Bell Labs means greater productivity, in both personal and work spheres.
source: Nokia Bell Labs
In this illustration, note the base of the “analog needs” pyramid: “free Wi-Fi.” That illustrates the connectivity conundrum, which is that revenue per bit keeps falling, while value shifts to other areas higher on the stack.
In the coming era, the value proposition will have to be recreate…