89% of U.K. Fixed Connections are "Untethered"

It is a truism that any form of Internet access, tethered, untethered or mobile, is designed to get an end user connected to the core network. In that sense, all untethered or mobile access methods are tail circuits.

About 89 percent of consumer Internet access users in the United Kingdom report using a Wi-Fi router, for example. 

Revenue Sluggishness Will Propel Consolidation Wave

Whether telecom revenue is growing, flat or shrinking has enormous consequences for any communications service provider, for obvious reasons. Public companies whose revenues do not grow, do not survive as independent entities.

Privately-owned firms might, or might not, survive if revenues are flat. Few can survive, long term, if revenues are dropping. And there are some signs of trouble, in that regard, though as with virutally anything related to the Internet ecosystem, “averages” can be misleading.

Researchers at Ovum think global telecom revenues will remain roughly flat over the next few years, with a decline in spending on voice services counterbalanced by growth in spending on mobile and fixed (broadband) data services.

Others believe growth will continue. Gartner researchers expect 4.3 percent revenue growth, globally, for 2013. IDC also forecasts low single digits revenue growth.

The total worldwide telecom market grew by 3.2 percent during 2012, and IDC is forecasting growth of 3.4 percent during the 2013 time frame, with the market settling into a steady growth rate of about 3.2 percent," according to Courtney Munroe, IDC VP. But those service provider revenues will be unevenly distributed, growing in most regions, but shrinking in Europe.

Telecom retail revenue in Latin America will grow at a compound annual growth rate (CAGR) of 3.3 percent between 2012 and 2017, according to Analysys Mason.

But the European telecom service market decreased for the third year in a row in 2011, by 1.5 percent, the European Telecommunications Network Operators Association reports.

In the third quarter of 2012, European carrier revenue contracted, though growing in other regions such as China, the United States, India and South America.

Even in the United Kingdom and Germany, the markets with the brightest future, STL Partners forecasts a respective 19 percent and 20 percent revenue decline in mobile core services (voice, messaging and data) revenues by 2020.

Revenue in the French market will decline 34 percent by 2020. In Italy, revenue will drop 47 percent and in Spain revenue will drop 61 percent by 2020.

Overall, STL Partners anticipates a reduction of 36 percent or €30 billion in core mobile service revenues by 2020, a loss of about €50 billion for Europe as a whole.

Flat or lowish growth rates are not an insoluble problem, in the near term, as some firms can grow by making acquisitions. And the growth problems generally are most acute for fixed network service provides, not mobile service providers, for the moment.

What is clear globally s rapid growth of mobile usage and revenues, notably with European weakness. 

In 2001, there were about one billion mobile phone subscribers in total, most of them in developed countries. By about 2012  there were six billion subscribers, and 73 percent of those (4.4 billion) were  in developing countries that account for just 20 percent of the world’s total gross domestic product.

In just 10 years, mobile phones have almost reached saturation point in countries where people earn just a few dollars per day. Smart phone adoption is following a similar sort of trajectory.

In 2009, the Asia-Pacific region had 86 million smart phone users. In 2013, 738.2 million smartphone users. By way of comparison, that means the Asia-Pacific region has more than four times as many smart phone users as the next largest region, , Western Europe, which will have 161.1 million by the end of the year, and North America, which will have 152.2 million.

Furthermore, nearly 2.5 billion of the world’s 4.3 billion mobile phone users in 2013 will be in the Asia-Pacific region, according to eMarketer.

Research firm eMarketer estimates that 2.43 billion people in Asia-Pacific will use a mobile phone at least monthly in 2013, representing 56.3 percent of the world’s mobile phone users.

More than one billion of these mobile users will be in China alone, and about half that number will reside in India. By 2017, eMarketer estimates, Asia-Pacific will have nearly three billion mobile phone users out of a total 5.10 billion across the globe.

So smart phones might be the fastest-adopted technology in human history.

Mobile phone usage is growing exponentially in the Middle East and Africa as well, with Africa expected to become the second-largest mobile phone region, after Asia.

In the Middle East and Africa, 525.8 million people use a mobile phone at least monthly. .

Smart phone use in the region will nearly double  to 112.2 million, up from 67 million in 2012, while penetration of smart phones among the population as a whole in will increase from 5.1 percent to 8.3 percent.

In 2001, there were about one billion mobile phone subscribers in total, most of them in developed countries. By about 2012  there were six billion subscribers, and 73 percent of those (4.4 billion) were  in developing countries that account for just 20 percent of the world’s total gross domestic product.

In just 10 years, mobile phones have almost reached saturation point in countries where people earn just a few dollars per day. Smart phone adoption is following a similar sort of trajectory.

In 2009, the Asia-Pacific region had 86 million smart phone users. In 2013, 738.2 million smartphone users. By way of comparison, that means the Asia-Pacific region has more than four times as many smart phone users as the next largest region, , Western Europe, which will have 161.1 million by the end of the year, and North America, which will have 152.2 million.

Furthermore, nearly 2.5 billion of the world’s 4.3 billion mobile phone users in 2013 will be in the Asia-Pacific region, according to eMarketer.

Research firm eMarketer estimates that 2.43 billion people in Asia-Pacific will use a mobile phone at least monthly in 2013, representing 56.3 percent of the world’s mobile phone users.

More than one billion of these mobile users will be in China alone, and about half that number will reside in India. By 2017, eMarketer estimates, Asia-Pacific will have nearly three billion mobile phone users out of a total 5.10 billion across the globe.

So smart phones might be the fastest-adopted technology in human history.

Mobile phone usage is growing exponentially in the Middle East and Africa as well, with Africa expected to become the second-largest mobile phone region, after Asia.

In the Middle East and Africa, 525.8 million people use a mobile phone at least monthly. .

Smart phone use in the region will nearly double  to 112.2 million, up from 67 million in 2012, while penetration of smart phones among the population as a whole in will increase from 5.1 percent to 8.3 percent.

Virtually no observers seem to think global telecom revenue will shrink in the near term, despite regional weakness in Europe. The only real questions seem to revolve around the rate of growth, especially for mobile services, which are the growth driver in most markets.

U.S. 4G Users Consume 36% More Data

Faster networks have direct implications for the amount of data consumed by users, virtually all studies suggest. Users of Long Term Evolution 4G networks consume more data than users of 3G networks.

That trend also was found to exist for 3G networks, compared to 2G networks. According to a Nokia Siemens study, each 3G user consumes more data, close to 300 percent more, than a typical 2G user.

That higher level of consumption also typically leads 4G mobile users buy bigger data allowances than 3G users, a study by Mobidia has found.

U.S. users on 4G LTE networks consume 36 percent more data than users on 3G networks, Mobidia says. But consumption disparities are higher than that in some other countries.

source: Mobidia

Even though 4G’s share of mobile subscriptions was less than three percent at the end of the second quarter of 2013, it is expected to account for slightly more than 20 percent of the total data consumed on mobile networks worldwide in 2013.

After surpassing 3G networks in 2016, 4G networks will go on to capture 66 percent of data traffic by 2018, according to ABI Research.

In fact, 4G data traffic will grow at a compound annual growth rate of 82.2 percent between 2013 and 2018, ABI Research says.

If You Use the Internet, You Have Access at Home, Surveys Suggest

Just about every U.S. adult that uses the Internet has access to the Internet at home, using fixed network access, mobile access or both, new studies suggest. That suggests that account growth now is dependent largely on new home construction, continued use of the Internet when new households are formed, and a slight shift of dial-up to broadband.

Some 78 percent of U.S. households buy a fixed network broadband access service at home, and broadband now accounts for 94 percent of all Internet access services sold to consumers at home, according to Leichtman Research Group.

In 2004 about 33 percent of U.S. households buying Internet access service were buying broadband rather than dial-up service. That figure grew to 75 percent in 2008 and 92 percent in 2012.

In total, 83 percent of U.S. households buy a fixed network  Internet service for use at home, while 55 percent of adults also buy access to the Internet on a smart phone.

The number of U.S. adults using their smart phones to get access to the Internet has grown 44 percent from 2012 levels.

If about 15 percent of U.S. adults choose not to use the Internet, it is likely that most households using the Internet already are buying service, whether fixed, mobile or both, since 83 percent are buying a fixed access service.

Complicating the broadband adoption picture is growing use of mobile Internet access. Some

64 percent of fixed network broadband subscribers also access the Internet on a smart phone, up from 52 percent last year.

In fact, LRG estimates that 19 percent of homes that do not buy at-home fixed network broadband access use smart phones for Internet access, up from 12 percent in 2012.

The study also suggests that “broadband access cord cutting” is nearly non-existent. About one percent of households paid to subscribe to Internet service at home in the past year, do not currently subscribe, and do not plan to subscribe again in the next six months, LRG says.

Nor is availability of fixed network Internet access much of a problem. Less than one percent of all online households say that broadband is not available in their area. In 2008 that percentage was six percent.

In other words, if people do not buy Internet access at home these days, it mostly is because they do not use the Internet and therefore have no need for an access service.

The LRG findings corroborate a study by the Pew Internet and American Life Project suggesting

that about 15 percent of U.S. adults ages 18 and older do not use the Internet.

Of the non-users, about 34 percent reported that the “Internet is just not relevant to them,” meaning they are not interested, do not want to use it, or claim to have no need for it.

Some 32 percent of non-Internet users claim they do not use the Internet because it is not very easy to use. Such non-users say the Internet is difficult or frustrating to use, or they are physically unable to do so.

In other cases, non-users say they are worried about other security-related issues such as spam, spyware, and hackers.

About 19 percent of non-internet users cite the expense of owning a computer or paying for an internet connection.

In about seven percent of cases, non-users said there was a physical lack of availability issue or some other reason they could not get access to the Internet, the Pew Internet and American Life Project says.

Perhaps the moset surprising finding is that 44 percent of U.S. residents ages 65 and older do not use the Internet. In fact, such older people represent 49 percent of non-Internet users overall.

Earlier Pew  studies had found in 2012 that Internet use among older users was about 53 percent, so the 2013 findings are consistent.

According to Gallup, just about 17 percent of people 65 or older use the Internet every day.

Studies from the United Kingdom likewise have shown a usage gap, where about 30 percent of people 65 or older report using the Internet. Perhaps 14 percent of U.K. residents have never used the Internet, the The UK’s Office for National Statistics reports.

source: http://www.equalitysouthwest.org.uk/blog/view/internet-access

On the other hand, Internet non-users often are “using” the Internet indirectly. Though they themselves do not go online, self-described non-internet users often do so indirectly.

About 44 percent of reported offline adults have asked a friend or family member to look something up or complete a task on the internet for them, for example.

Google's 1998 Look

It hardly seems possible that in 1997 there was no Google. Here's the "look an feel" from 1998, with its minimalist design approach. 

Access Networks Increasingly are All About Video

In North America, real-time entertainment is responsible for over 68 percent of downstream bytes during peak periods, compared to 65 percent six months ago, according to Sandvine. 

Netflix continues to be the traffic leader, accounting for 32.3 percent of downstream traffic during peak periods. YouTube accounted for 17.1 percent of downstream traffic in the first half of 2013.

YouTube is the leading traffic generator on mobile networks, accounting for 27.3 percent of downstream traffic. Video and audio streaming applications will account for over 60 percent of mobile usage by 2018, Sandvine projects. 

Nearly 70 million U.S households will have Smart TVs by 2017

Nearly 70 million U.S households will have smart TVs by 2017, according to Parks Associates.

There also will be 175 million online video users in the United States in 2013, rising to 191 million by 2017. 

Whether you believe that represents a possible tipping point or inflection point is the issue. 

4G Nets Will Carry 66% of All Mobile Traffic by 2018

Users of Long Term Evolution 4G networks consume more data than users of 3G networks. 

In fact, 4G mobile users buy bigger data allowances than 3G users, a study by Mobidia has found. Users on 4G LTE networks also consume 36 percent more data than users on 3G networks, Mobidia says.

source: Mobidia

Even though 4G’s share of mobilke subscriptions was less than three percent at the end of the second quarter of 2013, it is expected to account for slightly more than 20 percent of the total data consumed on mobile networks worldwide in 2013. 

After surpassing 3G networks in 2016, 4G networks will go on to capture 66 percent of data traffic by 2018, according to ABI Research.

In fact, 4G data traffic will grow at a compound annual growth rate of 82.2 percent between 2013 and 2018, ABI Research says.

Fourth Revenue Wave Will be the Toughest

If one accepts the notion that the mobile business was built on customer revenues generated by voice, then messaging, then Internet access, one might also agree that, at some point, as voice and messaging decline, so will the ability of Internet access to sustain the revenue growth model.

If so, then a fourth wave of industry growth is necessary. Precisely what that wave will entail is the question. Most observers think third party apps will play a key role, as mobile service providers move to supply third party business partners with network-based services and features.

Many observers would argue a full flowering of that strategy is impossible so long as “best effort only” access services are lawful, since the most obvious value an access provider can provide to a business partner is assured delivery and quality of service.

There are some obvious implications. Unlike revenue sources in the first three waves, it is highly likely that the discrete revenue opportunities in a fourth wave, if based on revenue earned largely from over the top app providers partnering in some way with access providers, will be highly fragmented.

Unlike the largely undifferentiated voice, text messaging and mobile Internet access revenue streams, the fourth wave might feature lots of discrete markets, none of them remotely as large as the voice, text messaging or Internet access markets.

That will put new pressure on mobile service providers to control or reduce overhead costs, and create many sophisticated new forms of value to sell to potential business partners. The over-used phrase “agile” comes to mind, but the appellation is not far from the mark. Access providers will have to be much more nimble than in the past to support the many new types of business partners.

The danger, of course, is that other providers could enter the market. Some obvious names typically bandied about include Google, Apple, Amazon, Twitter, Microsoft, Facebook, Visa or PayPal.

What Drives Mobile Revenue Growth After M2M or Internet of Things?

One common facet of new technology adoption is that change often comes with a specific pattern, namely a longish period of low adoption, followed by an inflection point leading to rapid adoption.

That leads supporters to overestimate early adoption and vastly underestimate later adoption. Mobile phone adoption, and smart phone adoption, illustrate the process. You might think adoption is a linear process. In fact, it tends to be non-linear.

In developing regions, mobile phone adoption hit an inflection point about 2003, for example. What will happen, relatively shortly, is market saturation. That's also part of the adoption process.

In developed markets, saturation of mobile phone usage has shifted growth to mobile data. Inevitably, growth will saturate even for data, and service providers will make a transition to yet another growth mode.

In large part, that explains high interest in machine to machine or Internet of Things investments by mobile service providers. It is possible that the next wave of revenue growth will have to come from mobile devices not directly used by people.

It also is possible the following wave, after M2M, will involve some sort of shift to third party or over the top apps.

Granted, adoption rates for digital technologies have accelerated. It took 39 years for fixed line telephone adoption to grow from 10 percent to 40 percent. Electricity required 15 years to grow from 10 percent to 40 percent penetration.

In the past, 10 percent adoption of any new technology is an important milestone, as it tends to represent the inflection point, when adoption of some new innovation accelerates. Observers of technology adoption might say that happens because people adopt new technologies when somebody they know has done so.

But it also often is the case that it takes time for people to learn how to use a technology. Some would say a disjuncture between spending on new technology and measurable productivity gains can happen because the value of important new technologies often requires a redesign of business processes, not the automation of older practices.

One might also argue that technology sometimes leads to a change in consumer behavior only when a reasonable substitute product is available, and people have learned how to use the product or process.

Adopting a new technology is similar to  any other kind of investment, economists might argue. As in the case of the investment decision, the adoption of new technology entails uncertainty over future profit streams, irreversibility that creates at least some sunk costs and the opportunity to delay.

In other words, people can make a rational decision to delay adoption until it is clear of the value, and value outweighs the costs of acquiring and using the new technology.

In some ways, that is characteristic of consumer use of online video delivery, and the substitution of online video for traditional subscription TV.

In many ways, we are in a pre-adoption phase, in part because content owners will not support full online delivery of all content currently available as part of a video subscription. But what is happening is that people are learning to use the Internet, their PCs, smart phones and other devices as familiar ways to get and view entertainment video.

Percentage of Portential Video Cord Cutters Less Important than Widespread Adoption of the Behavior

In the past, 10 percent adoption of any new technology is an important milestone, as it tends to represent the inflection point, when adoption of some new innovation accelerates. Observers of technology adoption might say that happens because people adopt new technologies when somebody they know has done so.

But it also often is the case that it takes time for people to learn how to use a technology. Some would say a disjuncture between spending on new technology and measurable productivity gains can happen because the value of important new technologies often requires a redesign of business processes, not the automation of older practices.

One might also argue that technology sometimes leads to a change in consumer behavior only when a reasonable substitute product is available, and people have learned how to use the product or process.

Adopting a new technology is similar to  any other kind of investment, economists might argue. As in the case of the investment decision, the adoption of new technology entails uncertainty over future profit streams, irreversibility that creates at least some sunk costs and the opportunity to delay.

In other words, people can make a rational decision to delay adoption until it is clear of the value, and value outweighs the costs of acquiring and using the new technology.

If adoption of a technology requires complex new skills, and if it is time-consuming or costly to acquire the required level of competence, then adoption might be slow, in other words. 

In the case of online video, one might note that the investment in terminals (smart phones, tablets, PCs) already has happened, or is happening. So is the level of user familiarity with the process of finding and consuming online video.

In some ways, that is characteristic of consumer use of online video delivery, and the substitution of online video for traditional subscription TV.

In many ways, we are in a pre-adoption phase, in part because content owners will not support full online delivery of all content currently available as part of a video subscription. But what is happening is that people are learning to use the Internet, their PCs, smart phones and other devices as familiar ways to get and view entertainment video.

The point is that the habits necessary to underpin a massive change in business model are being created, little by little.

That is why the current, slow shift of some consumers to abandon traditional subscriptions is not the most important trend. What is more important is users gradual habituation to consumption of online video.

To be sure, willingness to consider video “cord cutting” is increasing, according to an analysis by Frank Magid Associates.

Magid says 2.7 percent of subscription TV customers say they are “thinking” about cutting the cord in the next year. That’s up from 2.2 percent a year ago, and 1.9 percent in 2011.

Skeptics will not those are relatively small percentages, and that more people “thinking” about cord cutting is nearly always less than the number of people who will actually do so.

That arguably is less important than the fact that people widely are becoming accustomed to finding and viewing entertainment video on smart phones, tablets and PCs.

More than half of the might-be-cutters say they would do consider video cord cutting because they get enough video to keep them happy via outlets like Netflix, Hulu and Apple’s iTunes, Magid says.

More than half also say they would do so for economic reasons. That further suggests there is latent demand for other ways to consume more-affordable video entertainment.

Either way, there is a growing sense that the value-price relationship is growing unattractive, for more people.

As you might guess, the study suggests 4.4 percent of 18-to-34-year-olds are thinking about cutting the cord, a higher than average finding.

Sports enthusiasts, as you also might guess, are less likely to say they’ would consider abandoning their video subscription.

Other studies also suggest who might guess is the case, namely that users who now have learned to rely on Internet video are more likely to say they would consider cord cutting.

According to a Diffusion Group study, 8.8 percent of adult broadband users with an Internet-connected TV and traditional video service report being highly inclined to cut the cord in the next six months. That compares to 3.5 percent of adult broadband users with video service who don’t use a connected TV.