Google Will Switch Access Between Sprint, T-Mobile US, Wi-Fi Dynamically

Although we typically believe smaller start-up firms are most likely to disrupt an industry, sometimes only a large firm can do so. So it is that Google will try to disrupt AT&T and Verizon by launching mobile service based on its becoming a mobile virtual network operator, with a new twist.

In addition to using third party Wi-Fi, Google apparently has signed up both Sprint and T-Mobile US as underlying access providers because Google wants devices used by its customers to switch between Sprint and T-Mobile US and Wi-Fi based on which network has the best signal “right now.”

In case you missed it, this is the same concept touted by supporters of fifth generation mobile networks.

Perhaps only a firm as large and wealthy as Google could try this, something that has not been attempted before (using two different wholesale providers), and which has a chance to disrupt the market more than any MVNO to date.

You might remember that it took Apple to revolutionize the relationship between handset manufacturers and the mobile service providers. Perhaps it is Google--more than T-Mobile US or Sprint--that now will disrupt the U.S. mobile market.

Google is Vertically Integrating the Internet Ecosystem

Google now has announced launches of Google Fiber in Atlanta, Charlotte, N.C., Raleigh-Durham, N.C. and Nashville, Tenn. Those launches come as Google also is said to be preparing to enter the U.S. mobile service provider business and has invested $1 billion in SpaceX, Elon Musk’s satellite firm.

SpaceX, in turn, has announced plans to build a new constellation of low earth orbit satellites to provide Internet access to people in Asia, Africa and elsewhere.

Separately, Virgin Group and Qualcomm also are investors in the WorldVu “OneWeb Ltd.” service, which hopes to launch a constellation of 648 satellites to provide Internet access to users in Asia, Africa and elsewhere.

Investor Richard Branson thinks the total number of satellites launched could eventually be higher than 648. Branson also says voice service will be part of the core service.

Those efforts of course follow on Google’s Project Loon effort to test use of balloons to provide Internet access, as well as earlier Google investments in Clearwire, municipal Wi-Fi, as well as pledges to invest in spectrum in past mobile spectrum auctions.

Then there are the Android mobile operating system initiatives, Nexus tablets and phones.

So the shocking new development is that it might be Google that is slowly assembling the sort of vertically-integrated service that telcos once provided. Shocking, isn’t it?

Cablevision to Launch All-Wi-Fi "Mobile" Service

Cablevision Systems Corporation will launch Freewheel,  a new low-cost, all-Wi-Fi phone service in the first quarter of 2015, and possibly as early as February. In other words, unlike some other services that rely on Wi-Fi, but default to mobile networks, Freewheel will operate exclusively using Wi-Fi.

In essence, Freewheel is launching using a pattern described by management professor Clayton Christensen, where disruptors enter a market “on the low end,” with offerings that offer clear value for some customers, but do not have all the features, or necessary the performance, of the market-leading offers.

The expectation is that, over time, as the upstart service gains traction, it starts to upgrade capabilities, until, in the end, the feature set and presumed value are equivalent to the market leaders.

Freewheel is the first all-Wi-Fi service to be introduced by a U.S. cable provider and will be offered with the Motorola Moto G smartphone, selling for $99.95.

Freewheel customers also will have automatic access to the Optimum Wi-Fi network of 1.1 million hotspots. The no-contract service will work anywhere in the world where Wi-Fi is accessible.

The service will cost $29.95 per month or $9.95 per month for Cablevision’s Optimum Online customers.

Freewheel primarily will be heavily marketed in areas where Cablevision offers triple play services.

In part, Cablevision is counting on a shift in mobile use cases, and a critical mass of Wi-Fi environment users, to drive demand for Freewheel.

Where ubiquity has been a requirement for voice and text messaging, Freewheel will try to build on some specific customer segments, including users that mainly want to use their mobiles at home, at work or on campus. In that case, the user can live without ubiquitous mobile coverage.

A somewhat related customer target are people who live in areas that have poor mobile signal coverage or are looking for an affordable service for children.

Cost-conscious customers worried about data plan spending, or do not like contracts, are other targets.

Cablevision has considered such untethered or mobile service in the past, exploring a GHz to 1.9 GHz range in the early to mid-1990s. The idea was to launch a service that cost less than mobile service and would not be usable at automobile speeds, but would work fine for consumers who were stationary or walking on the sidewalk.

Cablevision never ultimately launched such a service. The PCS spectrum allowed Sprint and what became T-Mobile USA to attack the mobile market directly, with lower prices, so a separate market for a new type of lower cost, lower functionality service never developed.

But Cablevision thinks it is time to try again. in a different time, with a different end user value proposition. Compared to 1993, untethered mobile Internet access is vastly more important, fully mobile voice and texting arguably a bit less important.

As often is the case, ideas sometimes are “too early.” That was the case for “application service providers,” in many ways the precursors of today’s cloud-based apps and business models.

That also might be said to have been true for the vision of PCS Cablevision originally had developed.

The point is that we now will get a test of whether Wi-Fi actually can provide an alternative to mobile service, a question that has been debated, off and on, at some level, for decades.

250 Million Connected Vehicles by 2020?

By 2020, there will be 250 million connected vehicles on the road, enabling new in-vehicle services and automated driving capabilities, according to Gartner forecasts.

That would represent about 20 percent of all vehicles on the road worldwide with some form of wireless network connection by 2020.

Telematics, automated driving, infotainment and mobility services are among the key new capabilities the connections will support.

Gartner also forecasts that 4.9 billion connected things will be in use in 2015, up 30 percent from 2014, and will reach 25 billion by 2020.

By 2020, the connected kitchen will contribute at least 15 percent savings in the food and beverage industry, while leveraging big data analytics, Gartner also forecasts.

Sling TV Could Succeed Even if it Fails with Target Milliennials

Dish Network's new Sling TV streaming service has been designed to appeal to Millennials who do not find subcription TV appealing. 

Whether the service works, and for whom it works, remain to be tested. In fact, it is possible the service might appeal to consumers other than Millennials.

Ask Auto manufacturers how difficult it is to forecast demand for automobiles produced to appeal to a Millennial audience. 

The Chevy Sonic is aimed squarely at 18-to-30-year-olds. 

But the largest segment of customers for vehicles such as the Sonic--about 42 percent of buyers in 2013--are Baby Boomers, according to Edmunds.com. 

Five years ago, the proportion of older customers buying cars in this category was 29 percent.

Conversely, the percentage of buyers 18 to 34 buying new subcompact cars fell to 12 percent in 2013, down from 17 percent in 2008. 

In other words, even the best marketers cannot predict how vehicles designed for younger customers will appeal to that demographic, compared to others.

So Sling TV might succeed even if it does not appeal to Millennials, if the ulimate base of customers actually is people who want to watch linear TV, but don't want to spend very much. 

Near Zero Pricing and the Internet of Things

Lots of things are possible if you rip an order or two of magnitude out of the cost of enabling technologies or whole products.

The Internet of Things is possible because we have reduced some sensor costs about 50 percent in a decade. At the same time, computing device energy efficiency has doubled about every 1.5 years.

Also, bandwidth costs have dropped 40 times in 10 years, while processing costs have dropped 60 percent.

In 1981, for example, storage cost was something more than US$100 for 128 kilobytes. But storage prices drop about 33 percent per year.

As much as some people complain about the cost of bandwidth, the products people now buy are not the same as in 1980 or 1990. People buy the equivalent of DS3 circuits (45 Mbps) or dedicated optical connections, not dial-up modem lines.

So cost per bit, cost of a computation and cost of storage have plummeted.

In 1998, the cost of Internet transit across the backbone was about $1200 per Mbps, per month. In 2015 the cost is likely to be 63 cents per Mbps per month.

As with so many other parts of the telecommunications business, one wonders where the trend to marginal cost pricing, which for most bandwidth services is near zero, also means that one more category of product, namely Internet transit, is destined to become a feature of a network or service, rather than a product.

That seems implausible, since networks are extremely capital intensive. But marginal cost, once the networks are built, is quite literally “near zero.” And if all retail pricing trends, over time, towards marginal cost, near zero pricing is inevitable.

That means stress and change for bandwidth providers, but enables the Internet of Things.

How Much Demand for Fixed Line Voice Actually Exists?

Some issues never seem to fully be resolved. Whether consumers “prefer” a la carte or bundled services is such a question.

How much demand there really is for some services is another related question.

Service providers sometimes argue that consumers “want one bill” rather than three or four bills. It is argued that consumers want bundles of shows and channels.

And it is clear that consumers prefer to save money, which is the primary attraction of triple play bundles.

But many services are not sold unbundled. “Naked digital subscriber line ” is one such product in many countries. DSL cannot be purchased without a tied purchase of a fixed phone line. Such product tying is an old practice, and often provides consumer value.

In other cases, the “headline price” differential between a bundled “DSL plus voice line” is significant.

A triple play package generally costs much less than all three services purchased separately, at least for an introductory period.

Some consumers would prefer to buy all of their communication services one by one (a la carte), with no bundling. But discounts matter. Prices matter. So many consumers buy a triple play package because it actually is cheaper than buying two services they really want.

Competition, in many markets, for high speed Internet access and TV subscription services means that bundle deals of three services often are comparable in price to two services at full price.

If the price of the bundle is within $5 to $10 per month of the cost of two services at full price, then even some consumer advocates might recommend purchase of the triple play bundle, especially if the third service is home phone service.

In fact, current promotional offers in the U.S. market, especially when an account can be switched from a competitor, often provide lower prices for a triple play service than a dual play, at least for a year or two.

But that does raise another question. If in fact many consumers are buying triple plays to save money, how much demand actually exists for each of the products?

Many surveys suggest the highest demand of all is for fixed network high speed access. In fact, demand might rival or beat mobile service.

Video entertainment also is purchased by more than 80 percent of U.S. households, while fixed network voice subscriptions have been falling since 2000.

So one wonders how strong the remaining demand is for voice, and might eventually be for the more-expensive video subscription packages, if the assumption is that high speed access is the number one priority for nearly all consumers, along with their mobile service.

To put the matter sharply, were purchase of a fixed network voice line not a requirement for getting high speed access, demand for voice lines would be lower.

Were the price of a triple play service not so affordable, compared to buying just two services, far fewer phone lines would be sold.

The point is that we do not actually know how much demand there really is for fixed network phone service.

One way of assessing demand is to look at what happens in recessions, where consumers have to make harder choices about what to buy.

In recessions, for example, overall revenue falls, as consumers spend less.

The impact of the Great Recession beginning in 2008 is easy enough to describe. According to TeleGeography Research, revenue growth slipped from about seven percent annually to one percent in 2009, returning to about three percent globally in 2011.

But that is “growth rate,” not absolute growth. According to some studies, U.S. consumer spending on communications actually grew, overall, in the wake of the Great Recession. One might hypothesize this is because of the adoption of mobility services, sold to people, not places.

Looking at spending on phones, which grew about 17 percent from 2007 to 2010, one might argue mobile devices drove the increase, for example.

One might also argue that high speed access had become so important, and faster access relatively more important, causing consumers to spend more in that category. But mobility is probably the driver for the revenue growth.

That would be in line with findings that consumption and consumer spending fell virtually across the board in the Great Recession.  

But that might mask some important indicators of value. Some surveys found that device purchases slowed during the Great Recession. Some surveys found less willingness to cut high speed access than other services.

In fact, some surveys found consumers would rather abandon their mobile service than give up fixed high speed access. If they had to give up one service  (video entertainment, mobile, broadband), U.K. consumers would ditch video (49 percent) or mobile (30 percent) before their fixed network broadband connection (two percent), a survey of  more than 10,000 U.K. consumers found, for example.

Consumers have indicated the would give up other products as well to keep their broadband access.

The point is that high speed access arguably is highly resilient in a recession, and arguably the most-valued service, perhaps even be more valued than mobility. But mobility likely would rank as among the next most important service.

By some studies, consumer spending on mobile devices increased during the Great Recession of 2008 and spending also increased for communication services. That pattern hasn’t changed.

But most consumers simply found other ways to economize during the last recession, scaling back premium services for video, for example.

It does not seem that there was much recession impact on subscription video entertainment spending, though some consumers might have dropped a premium channel in favor of expanded basic service.