India Fixed Network Broadband Problem Might Not be "No Network" as Much as We Think

India’s fixed network broadband penetration remains low and is heavily skewed towards urban areas.  While 65 percent of people live in rural areas, Telecommunications Regulatory Authority of India data shows that they account for a mere 5.6 percent of total fixed broadband connections. 

Paradoxically, that disparity is not as great as the figures suggest, looking at how facilities measure up, in terms of potential speed. 

A comparison of Speedtest Intelligence data against rural and urban locations (based on India’s 2011 census) fails to show a large disparity between the two when looking at TRAI’s new speed categories, with 58.7 percent of connections in urban areas falling within the “Basic” speed category, compared to 61.7 percent in rural areas.

The new definitions of fixed broadband speed are::

• “Basic” (2-50 Mbps),

• “Fast” (50-300 Mbps) and

• “Super-fast” (>300 Mbps)

As always, there is a difference between supply and demand; ability to buy service and the actual buying behavior; network passings and customer take rates. Looking at actual customers across rural and urban locations shows a disparity between urban and rural, but nowhere as great as population alone might suggest. 

 source: Ookla Speedtest 

In fact, rural customers over index and lower speeds and under index at the highest tier of speeds, but even there within a few percentage points of difference. 

 source: Ookla Speedtest 

One conclusion here is that supply is an issue, but demand is the bigger issue. Where networks are available, take rates are driven by conditions other than presence of the network. 

The Ookla data suggests fixed network availability in rural areas is not the main reason take rates are lower than in urban areas.

How Does Starlink Stack up Against Fixed Wireless and Geosynchronous Satellite Service?

Low earth orbit satellite constellations such as Starlink promise higher bandwidth, lower latency internet access that eventually might cover every part of the earth’s surface. With Starlink’s early commercial launch, how does the service stack up against other alternatives--fixed and wireless--in terms of value?

Starlink users in the United States and Canada have seen 50.5 Mbps download speed, 14 Mbps upload speed, and 52.5 ms latency, reports Speedcheck. Latency performance is better by an order of magnitude, according to Speedcheck. 

Compared to existing geosynchronous satellite offers, Starlink beats HughesNet for maximum downlink speed and trails Viasat. But value is a combination of performance and price. 

The Starlink price is arguably lower than HughesNet at 25 Mbps and Viasat at its top speed as well. But Starlink does not cap usage, as do Viasat and HughesNet. 

Company-	Starlink	Viasat	HughesNet
Price	Dish $499 + S&H, $99 per month	$299.99 (life time lease), $30-$150 (for the first 3 months)	$499.99, $59.99-149.99 (requires 24 months agreement)
Data Cap	No data cap- Unlimited	Yes, (12-300 GB/month)	Yes, (10-50 GB/month)
Speed	15 - 107 Mbps DL (Measured), *22.99 Mbps UL	12 - 100 Mbps DL (Advertised)	Up to 25 Mbps DL (Measured), 3 Mbps
Latency	* 33 ms, (Measured)	600-800 ms, (Advertised)	600-800 ms, (Advertised)
Accessibility	Limited-Only some cities of US and 11 other countries	All 50 states	Mostly Southern Sky. US, Brazil, Columbia, Peru, Ecuador, Alaska, India, parts of Europe

source: Speedcheck

Starlink also might be considered a reasonable value choice when compared to 4G fixed wireless access supplied by Verizon, but a bit less reasonable where Starlink competes against 5G fixed wireless. 

Both fixed wireless versions cost less than Starlink and do not require a satellite dish. But both fixed wireless options by Verizon also supply less bandwidth. 

All the services offer unlimited usage. But Starlink offers more downlink and uplink bandwidth. Latency performance is comparable to 4G but less than 5G. At the moment, Starlink and 5G fixed wireless do not overlap much in terms of coverage, while Starlink’s footprint covers southern Canada and the northern United States. 

Verizon 5G fixed wireless is only available in large urban areas of the U.S. Northeast. 

Company	Starlink	4G (Verizon)	5G (Verizon)
Price	Dish $499+S&H, and $99 per month	$80/month	$80/month
Data	Unlimited	Unlimited	Unlimited
Speed	50 Mbps DL, 13 Mbps UL	17 Mbps DL, 3.84 Mbps UL	40 Mbps DL, 9.74 Mbps UL
Latency	57 ms	58 ms	39 ms
Accessibility	Limited to parts of North America	Nationwide coverage	Only in big cities

source: Speedcheck

As is typically the case, Starlink will not compete well with fiber to home or cable modem services running at speeds up to a gigabit per second. 

Satellite remains a niche. “Because of the higher relative cost of bandwidth transmitted via satellite versus terrestrial technologies, satellite is currently primarily used in situations where fiber optic cables and other high-capacity technologies are not financially viable due to low population densities and large distances between high-capacity networks and last-mile networks,” the Asian Development Bank rightly notes. 

source: Asian Development Bank 

Low earth orbit satellite constellations such as Spacelink will allow satellite broadband provides to serve 3.5 million subscribers in 2021, growing at an eight-percent compound annual growth rate to reach 5.2 million users in 2026, according to ABI Research.

To keep that in perspective, in 2021 there are about 4.93 billion regular internet users, using 1.2 billion fixed connections and upwards of seven billion mobile internet subscriptions, supporting mobile phone users, PCs and internet of things devices.

The point is that, as important as LEO constellations might be, they will remain a niche supplier of internet access services. By 2026, says ABI Research, LEO service revenue might reach US$4.1 billion. 

In 2020 fixed network internet access in the United States alone generated more than $100 billion in annual revenue in 2013, by some accounts. 

5G Will Run on Wholesale Model in Malaysia and Brunei

Reliance on wholesale market structure--one physical network and many retail competitors--has been a feature of fixed network policy for some time. It also is becoming the foundation of 5G platforms in some countries as well. 

Malaysia and Brunei, for example, will build a single national 5G physical network, which will support all potential retail providers of 5G service in those countries. Both of those networks will be state-owned. 

It is not a return to a monopoly framework at the retail level, but is a return to monopoly and government ownership at the facilities level. 

In the 4G era, only a few networks were built using the single wholesale provider model, notably in Mexico, Belarus and Rwanda. A few others were cancelled, including networks in Russia, Kenya and South Africa. 

As you might expect, such approaches are considered unwise by GSMA and other private firms. The dominant mobile framework globally continues to be private ownership of multiple physical facilities. 

Still, there has been concern about the cost of communications infrastructure for some time. But cost is but one of several drivers of national communications policy. 

source: Citi Research

The realm of possibility is directly affected by the costs of future networks. If the application of new architectures and technologies plus infrastructure sharing or offload contains the cost of physical networks, especially wireless and mobile networks, there will be less pressure on the business model and therefore less pressure to shift to wholesale-only infrastructure models.

Cloud Native is Not Simply a Change of Computing Architecture

In a move that tells us much about how telecom network have changed, Telefónica will build its cloud-native 5G core network using IBM Global Business Services as the system integrator while Red Hat and Juniper supply the networking platforms. 

In prior generations of mobile networks, the network would have been purchased almost turnkey from a legacy provider such as Ericsson or Nokia (or Alcatel or Lucent). It was monolithic. 

Now the network is integrated by a major system integrator using open source technology and a distributed, cloud-based and cloud native computing platform. It is loosely coupled. 

In other words, one builds a telecom core network as one would build any other computing network intended to scale. In other words, apps and functions are built how apps are created and deployed, not where they are created or deployed.  

source: Medium

The former emphasis would have been on proprietary hardware; the new approach makes heavy use of commodity hardware. The older approach relied on closed, vendor-specific software. The new approach relies on open source approaches. 

The older approach would have been voice centric. The 5G core network is essentially a computing network that runs voice and other applications, but is designed to support any app. 

Some will view this as a “mere” change of computing architecture. Others will argue it also changes the range of business models a telco can consider. In a monolithic environment, the network owner controls all apps that are lawful on the network as well as which devices can be attached. 

The internet and all cloud architectures do not work that way. All lawful devices and apps may use the network. That produces the product opportunity called “broadband access” for internet service providers. 

That same change creates the whole regime of “over the top” and loosely-coupled app creation that is “permissionless.” Any lawful and technology-compliant app can use the network. Any user or customer with the proper credentials can use such apps. 

To the extent that roles are disaggregated, so are business models. Ownership and operation of the access network does not limit third party rights to create apps that use the networks. But neither are there barriers to telco owners creating their own “third party” apps that similarly use any lawful access. 

The change is that where such apps would mostly have been designed to run “on my network,” they preferably now would be designed to run “on any lawful  network.” The difference is potential customers “only on my network, in my region or country” versus potential customers anywhere globally. 

All of that places new importance on creating value in lots of potentially new ways, most of those ways centered on becoming a supplier of end user apps or platforms to do so. Some of those apps will be “owned” by the telco and designed to run “on my network.”. Network slicing is an example. 

But many others potentially will be designed to run as any other internet app, on any network and in any country where the apps are lawful. Yet others will be targeted geographically, for reasons of language preference, business strategy, capital or human resources availability. 

The point is that the technology change to a cloud native, loosely-coupled, distributed and essentially open architecture changes the realm of business possibility. More new things are possible, but many existing things could be threatened.

How Travel Industry Thinking on Digital Transformation Applies to Telecom

As a practical matter, it sometimes is easier to understand fuzzy concepts such as digital transformation by looking at how other industries see it. In the travel industry, a digital transformation report produced by Skift and Amazon Web Services notes that   

digital transformation offers:

• Customer experiences related to communicating, shopping, and buying

• Pricing, price, promotion,  distribution, and purchasing

• Agility when demand or competitive environment changes

• Analysis and forecasting 

• Revenue, cost, efficiency improvements

• Remain competitive

• Adapt to changing industry circumstances

Note that none of those benefits are quantifiable. They are qualitative changes. So one lesson is that digital transformation is not directly measurable. What can be measured are other business metrics related to the business model, customer satisfaction, acquisition and churn rates or operating costs, for example. 

sources: Skift, AWS

In other words, the emphasis is “transformation,” not simply “digital.” 

Though business process changes believed to be associated with digitalization can be measured, there are no direct quantitative measures of “transformation.” What can be measured is process performance.

sources: Skift, AWS 

What can be measured are the results of changes in business processes “digital strategy” was meant to address. That includes marketing, advertising, customer experience, analytics, automation, resiliency and so forth. More of this; less of that, in other words. 

Digital transformation is qualitative and non-quantifiable. Digitalization is quantifiable, but only as it relates to process outcomes. 

As all that might apply to connectivity businesses, the obvious answer is to focus less on the qualitative benefits (agility, speed, adaptability, revenue growth, cost containment, experience advantages) and more on the practical business outcomes and how digitalizing can help produce the desired outcomes.

Telco Disaggregation is Coming

As it is conceptually possible to separate simple replacement of existing processes with digital versions--keeping the processes intact--and the use of digital technologies to reshape and recreate processes (digital transformation), so it might now be possible to suggest future lines of development for “telcos and retail connectivity providers.”

In principle, as telecom and connectivity networks are virtualized, there are opportunities--or risks--related to reconceptualizing “who does what” and “who and what creates the value?” 

The risk is disintermediation: removing the distributor or middle man from the value chain. The potential upside is the ability to create higher-value services and apps faster, more affordably and more flexibly. 

We might then ask the question: “what is the value of the telco and where is that value located?” 

source: STL Partners 

In part, this is a shift from a vertically-integrated to horizontal model. That can have huge business model implications. The vertical model is closed; the horizontal model is open. The vertical model tends to come with higher costs; the horizontal model with lower costs. 

The vertical model tends to feature lower rates of innovation, while the horizontal model tends to increase rates of innovation. 

The vertical model entails more control of products and business model, while the horizontal model tends to lead to  less control by the telco. Think of the internet as a horizontal model, where functions are disaggregated: access networks are distinct from platforms. Platforms are distinct from applications running on those platforms. 

Another way of looking at the difference is to say that a traditional telco was at the center of its own business. In the internet era, telcos are part of the transport and access function, but not necessarily part of the applications or platform functions. 

In other words, think of telecom as becoming part of the computing business. In that business communications functions are demarcated from applications, hardware and platforms. 

Communications are required, but logically separated from the other higher-order processes. Local area networks require spectrum and access points, but the actual applications, platforms, hardware and functions are logically separated. 

Ethernet cables might be necessary for a local area network, but nobody would mistake connectors and cables for the value of devices, software and functions those cables support.

Disaggregation might lead to opportunities related to creation of vertically-oriented services and apps, but it might also limit the ability to benefit from scale, to the extent that extensive domain knowledge has to be mobilized, and that knowledge will not translate directly to other domains. 

Still, the move to disaggregated processes is subtle. Telcos might gain directly agility, but also face new forms of competition. Telcos might be able to rework cost structures and create revenue growth opportunities, but also face some additional commoditization of contributed value. 

There will be a new balance of “what we do” and “what others do for us.” It is a complicated, multi-dimensional set of changes. 

An analogy is disintermediation and something we might call “re-intermediation.” The internet makes it possible to remove retailers from value chains. That gives us online commerce. But online commerce also allows the creation of a platform and marketplace (Amazon, for example) that recreates a role for the distributor. 

To the extent that telcos are distributors, they face the danger of disintermediation. Look at the move by Google, Facebook and others to own and build their own wide area networks. That removes customers and demand from the retail capacity business.

At the time, there is at least the possibility that exchanges (for bandwidth, cloud computing, edge computing, security, private networks) could be created. Perhaps the form would be a federation of exchanges globally, as it seems unlikely any single entity could emerge on the Amazon model, in terms of scale. But regional exchanges seem possible, as Alibaba is dominant in some markets, Amazon in others, third parties functioning in yet other markets. 

In any event, there are possible positive and negative surprises. Disaggregation does raise, ast least indirectly, a key question: what is the unique core competence of any telco? And how does that get leveraged in a disaggregated network and business model?

Altice Loses Broadband Subs, Comcast Sees Slowdown: Early Signs of a New Trend?

Altice USA reported a lost of broadband accounts in the third quarter, something that has been virtually unseen over the past couple of decades. Comcast, for its part, reported a slowdown in net acquisitions in its third quarter.  

Telco broadband net additions are growing. In the same quarter of 2020, telcos lost subs. Some analysts now believe telcos will continue to gain share from cable companies as telcos scale up their gigabit fiber to the home networks. 

Where cable once had 95 percent share compared to telco digital subscriber line services, and now has about a 70-percent share of broadband lines overall, some now believe telcos will eventually grab half the market.