Fiber to Home No Longer is the Key Metric: Gigabit Access Is the Issue, and Pessimism is Completely Unwarranted

Vern Fotheringham, V-Satcast executive chairman, asked an interesting question at the Pacific Telecommunications Council’s 2016 annual conference: “what percentage of U.S. homes now are connected to by fiber?” Eventually answering his own question, he said “five percent.”

As with all such figures, context is required. The Fiber to the Home Council estimated in 2015 that 26 million U.S. homes were passed by fiber-to-home connections and could buy service. If there are 134 million U.S. homes, then perhaps 19 percent of U.S. homes are passed by fiber to the home networks and are able to buy service.

As always, though, the issue is not where we are, but where we are going, and there the FTTH statistics do not tell the story. FTTH is one method of providing very high speed Internet access. But it is not the only way.

Cable TV networks able to provide gigabit service would, for many, be a functional substitute for FTTH access.

Also, the issue is the impact of new fiber providers such as Google Fiber, as well as stepped-up gigabit programs by AT&T. The way some of us would frame the issue is the percentage of homes able to buy gigabit service, not the number using a specific access technology.

That paints a different picture. With the commercialization of Data Over Cable Service Interface Specification (DOCSIS 3.1) platforms, cable operators can upgrade Internet access speeds up to 10 gigabits per second by means of a software change to modems and routers.

The DOCSIS 3.1 platform supports speeds up to 10 Gbps, depending on how much bandwidth a cable operator wishes to devote for that purpose.

Comcast, for example, already has announced it will upgrade its entire consumer high speed access base (both customers and passings) to gigabit speeds using DOCSIS 3.1. Comcast originally believed it might do so in 2015 or 2016. It now has said that could happen, nationwide, by 2018.

Make no mistake: that will change the picture dramatically. Comcast has shown it can increase high speed access speeds at Moore's Law rates. Comcast passes 54 million U.S. homes. So once the gigabit upgrade is completed, Comcast alone will represent gigabit coverage of 40 percent of U.S. homes.

Cox's consumer gigabit service will be available in all of its markets by the end of 2016. Cox passes 9.2 million U.S. homes. That adds another seven percent.

So Comcast and Cox alone will pass 47 percent of U.S. homes, with unduplicated gigabit coverage.

Assume Charter’s acquisition of Time Warner is approved by regulators. Time Warner passes 30 million homes. That is 22 percent of homes. So Comcast, Time Warner and Cox eventually will provide gigabit access to an unduplicated 69 percent of U.S. homes.

Telcos are moving as well.

Separately, CenturyLink is deploying gigabit access as well, though those locations will overlap with some of the Comcast and other cable operator homes.

AT&T is expanding its GigaPower service to parts of 38 more cities. It's now in 56 metro markets.

AT&T's GigaPower service now reaches one million addresses, with plans to double that in 2016 and ultimately reach 14 million homes and businesses, Goldman Sachs said in a research report.

MoffettNathanson, for its part, says AT&T has committed to expanding its fiber-optic service to 5 million "customer locations" by the end of 2017, 8.3 million by year-end 2018 and 12.5 million through July 24, 2019, as part of conditions tied to the approval of its DirecTV acquisition. Based on regulatory definitions, MoffettNathanson contends the 14 million "locations" will translate to 9.9 million "cable equivalent" homes and businesses, or 7.3 percent of U.S. households.

Google Fiber is on a path to serve Chicago and Los Angeles, as well as the 4.3 million or so homes it already could potentially reach with its already-announced deployments of gigabit service.

The point is that the present and coming competitive market business model for high speed access will change dramatically over the next several years. Where we are does not matter. Where we are going matters.

Fiber to the home availability is not the metric you want to watch. Watch for gigabit access to become the dominant and normal advertised speed across most locations cable can reach. And keep in mind, cable reaches 98 percent of all U.S. homes.

Soon, cable alone will potentially reach 70 percent of U.S. homes, with Google Fiber and telcos offering a second provider option across some of that cable footprint.

Fiber to the home passings do not tell the real story.

56% of U.S. Cities See No Service Degradation from "Stay at Home" Policies

For the week of March 15 to March 21, 2020, internet access services in 200 U.S. cities are maintaining service levels, though 13.5 percent of cities have seen average speed dips of 20 percent of typical ranges, according to Broadband Now. 

source: BroadbandNow

About 44 percent  of the 200 cities have experienced some degree of network degradation over the past week compared to the 10 weeks prior. Fully 56 percent of cities have seen no slowdowns. 

Three cities--Austin, Texas, Winston Salem, North Carolina, and Oxnard, California have experienced significant degradations, falling out of their ten-week range by more than 40 percent.

100 Mbps Access Will be Common by 2020. Ubiquitous 1-Gbps Access Might Take 10 Years

Policymakers, policy advocates and many bandwidth-dependent interests are calling for either 100-Mbps or 1-Gbps Internet access as a “standard” U.S. reality by 2020 or so. Some will doubt that is feasible. As daunting as that objective sounds, history suggests the goal is achievable.

In fact, some relatively standard forecasting techniques suggest the 100 Mbps target is inevitable. Perhaps the only question is when the 1-Gbps speeds might be common.

Give it a decade. In 2002, it is hard to remember, only about 10 percent of U.S. households were buying broadband service. A decade later, virtually all Internet-using households were buying broadband access service.

Researchers at Technology Futures continue to suggest that 100 Mbps will be a common access speed for U.S. households by 2020, for example.

In 2009, Technology Futures predicted that, in 2015, about 20 percent of U.S. households would be buying access at 100 Mbps, about 20 percent at 50 Mbps, and something more than 20 percent will be buying service at about 24 Mbps.

That might have seemed a bold forecast back in 2009, but Technology Futures uses a rather common method of technology forecasting that has proven useful. In fact, Technology Futures has been relatively accurate about access speeds for a couple of decades, at least.

The 2009 forecast by Technology Futures furthermore seems to be a reasonable approximation of reality. Technology Futures had expected that roughly 20 percent of U.S. households would be buying 1.5 Mbps service by about 2010, another 20 percent would be buying 24 Mbps service, while 40 percent of U.S. households would be buying 6 Mbps service.

The Technology Futures estimates of 2009 seem to match other data reasonably well. An Akamai study suggested that typical U.S. access speeds. were about 4 Mbps, on average, in 2010,

Separate test by Ookla cited by the Federal Communications Commission show widely varying speeds in different cities, but running generally from 8 Mbps to 12 Mbps in 2010.

Recall the Technology Futures forecast that 40 percent of U.S. households would be buying services of about 6 Mbps, with 20 percent buying 24 Mbps and 20 percent buying services of about 1.5 Mbps. Average them all together and you wind up somewhere between 6 Mbps and 12 Mbps.
But the forecast of 100 Mbps by 2020 requires movement of two orders of magnitude in less than a decade, and three orders of magnitude to reach 1 Gbps.

You can count Netflix CEO Reed Hastings as among those who think the typical U.S. household will be buying quite a lot of access capacity by 2020. The difference is that where Technology Futures believes 100 Mbps would be typical in 2020, Hastings thinks 1 Gbps could be a reality.

Back when modems operated at 56 kbps, Netflix took a look at Moore’s Law and plotted what that would mean for bandwidth, over time.

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO.“If you drag it out to 2021, we will all have a gigabit to the home.”

The difference between the Netflix expectation and that of Technology Futures probably can be accounted for by the fact that Moore’s Law applies to only a relatively small amount of access network cost. Physical costs other than semiconductors account for nearly all access network capital investment and operating cost, and none of those other cost elements actually follow Moore’s Law.

The point is that, whether government policies and incentives are in place, or not, it is highly likely typical access speeds will be relatively widely available by 2020 or 2025.

With most things broadband, a decade is plenty of time to bring surprising speed increases into common and typical use.

IoT-Assisted Parking Will See Winners and Losers

As with any other important economic change, internet of things will have winners and losers. Consider only the matter of parking costs. As that process becomes more efficient, consumers will pay less. But that also means sellers of parking spots and gasoline, to name a couple of examples, will earn less money.

Some retailers might incrementally gain store traffic, while online alternatives might incrementally lose a bit.

INRIX today published a major new study combining data from the INRIX Parking database of 100,000 locations across 8,700 cities in more than 100 countries, with results from a recent survey of nearly 18,000 drivers in the U.S., U.K. and Germany, including close to 6,000 across 10 U.S. cities.

On average, U.S. drivers spend 17 hours per year searching for parking at a cost of $345 per driver in wasted time, fuel and emissions, according to a study by Inrix.

On average, drivers in New York City spend 107 hours per year searching for a parking spot at a cost $2,243 per driver in wasted time, fuel and emissions, amounting to $4.3 billion in costs to the city as a whole.

Los Angeles drivers trailed New York with the most painful parking experience (85 hours – $1,785), followed by San Francisco (83 hours – $1,735), Washington D.C. (65 hours – $1,367), Seattle (58 hours – $1,205), Chicago (56 hours – $1,174), Boston (53 hours – $1,111), Atlanta (50 hours – $1,043), Dallas (48 hours – $995) and Detroit (35 hours – $731).

Hours Spent Searching for Parking

source: Inrix

U.S. drivers also routinely pay for more parking, “just in case,” in the same way they buy mobile data plans larger than consumers expect to require, to avoid overage charges.

In the U.S., drivers add an average of 13 hours per year when they pay for parking. The cost of overpaying for parking amounts to more than $20 billion annually, on a national basis.

Drivers in New York City add the most extra time when paying for parking, averaging 96 hours a year, or an extra $896 in parking payments.

Extra Time for Parking Sessions and Parking Fines

Of the 6,000 U.S. drivers who responded to the survey, an alarming 63 percent reported they avoided driving to a destination due to the challenge of find parking.

Some 39 percent of respondents avoided shopping destinations because of the lack of parking, 27 percent didn’t drive to airports, 26 percent skipped leisure/sports activities and 21 percent avoided commuting to work. Some  20 percent of U.S.  motorists surveyed did not drive to the doctor’s office or hospital due to parking issues.

U.S. 4G Network Performance Drops 40% to 50% Over Last Year

Source: TwinPrime

T-Mobile US had the fastest 4G mobile network speeds, according to an analysis by TwinPrime, meaning T-Mobile US got access to the network faster, and could download content faster.

T-Mobile US also had the lowest 4G network latency performance, at an average of 52 milliseconds, followed by Sprint at 55 milliseconds, and Verizon Wireless and AT&T Mobility both at 56 milliseconds.

Verizon Wireless ranked highest in terms of LTE network reach, covering 95.3 percent of the U.S. population, compared with 91.7 percent for T-Mobile US, 91.2 percent for Sprint and 91 percent for AT&T Mobility.

As eventually happens as networks become more-heavily loaded, performance is showing signs of  strain. LTE 4G networks now carry 91 percent of total U.S. mobile traffic.

The study found median LTE performance in most U.S. cities has dropped by 40 percent to 50 percent compared to our previous report. This staggering drop in performance could partly be explained by the increased LTE traffic share in these cities, or an increase in overall mobile data consumed by LTE devices.

Source: TwinPrime

Furthermore, the study also found that Wi-Fi tends to outperform LTE in every major city in the United States by a factor of two. In real user conditions, that translates to it being twice as fast to use an app over Wifi than over LTE.

That is a return to the situation that used to hold for 3G mobile networks, when Wi-Fi often was used because Wi-Fi was faster than 3G. Other tests had been showing that LTE 4G network access speeds outperformed Wi-Fi.

If you want to know why mobile operators argue they need more spectrum, the TwinPrime tests provide the answer.

Traffic is growing fast enough that performance now is visibly degraded. That same pressure is why small cell architectures are deemed strategic: small cells allow networks to reuse more of any amount of available spectrum.

Those same concerns drive interest in shared spectrum, bonding mobile and Wi-Fi spectrum, and LTE 4G networks accessing Wi-Fi directly.

The study includes over 6 billion data points collected from 600 apps with traffic across the United States, India and Europe, more than 1,500 different network operators and 2G, 3G, HSPA, HSPA-PLus, LTE and Wi-Fi networks.

How Big is Service Provider IoT Opportunity?

How big is the Internet of Things opportunity for mobile operators? One has to be careful when big numbers are thrown around.

Internet of Things represents a US$1.8 trillion in global revenue for service providers by 2026, according to Machina Research. That does not mean service providers will earn that much revenue themselves. The $1.8 trillion almost certainly includes the total ecosystem activity, much as “e-commerce” includes the retail value of goods sold, but not direct revenue or profit for any single part of the ecosystem.

Having not read the full study, and without knowing the methodology,  it is hard to say whether the $1.8 trillion includes the full value of all exosystem sales (likely, in my opinion) or something more important for communications service providers, namely mobile participation in connectivity, applications, devices and platform revenue streams.

My guess has to  be that the forecast represents Iot ecosystem revenue, not service provider revenues.

It is hard to see how service provider IoT revenues could be as big a market as $1.8 trillion, simply because global mobile revenues in 2012 were about $1.2 trillion. In fact, GSMA estimates total industry revenues will only be about $1 trillion in operator revenue in 2020.

There is no way IoT, in 2026, generates more revenue than the entire global mobile industry in 2017.

source: machinaresearch.com

The research also indicates that the Americas region will account for an estimated US$534billion, or approximately a third of the total revenue.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 percent of all LPWA connections, Machina estimates.

By segment, consumer demand for connected home will be US$441 billion, consumer electronics will be US$376 billion) and connected car technologies will represent US$273 billion in activity.

However, other areas such as connected energy look set to reach US$128 billion by 2026 as a result of local governments and consumers seeking smarter ways to manage utilities. Similarly, revenues from connected cities are forecast to reach US$78 billion by 2026, Machina Research sys.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 per cent of all LPWA connections.

source: Machina Research

source: Machina Research

source: machinaresearch.com/

IoT is crucial, strategic and necessary if the global mobile industry is to replace expected lost revenues from voice and text messaging, as well as slower growth of mobile data services and device revenue.

But IoT will not be as big a connectivity revenue stream as some believe. Success really hinges on mobile service providers becoming key suppliers in other areas of the ecosystem as well.

The Science Behind the Definition of Broadband as 25 Mbps

Some criticize the Federal Communications Commission for wanting to keep a minimum 25 Mbps broadband definition instead of boosting it to some other figure.  Keeping in mind that figure is a minimum floor, not a ceiling, there is clear science behind the chosen definition.

After about 20 Mbps, there is little to no improvement in user experience when using webpages, for example. The key caveat, however, is that multiple users on any account make a difference, if multiple users or devices are used simultaneously.

source: FCC

Generally speaking, even in a household with multiple users, only 4K ultra-high-definition streaming will stress the connection.

source: High Speed Internet

That noted, even in many rural gigabit speed service is available at levels that would surprise many.

And typical speeds in cities routinely are far above the minimum. “The median download speed, averaged across all participating ISPs, was approximately 72 Mbps in September 2017,” according the most-recent Federal Communications Commission report on U.S. broadband service.

Platform continues to matter. “While cable and fiber providers had median speeds ranging from 78 to 120 Mbps (with only one outlier provider with 56 Mbps median speed); the DSL and satellite providers had median speeds that ranged from 2 to 20 Mbps,” the FCC notes.

source: FCC