How Many Broadband Access Market Positions are Possible?

Most large and mature markets develop segments. And one wonders when and if this could happen in the communications business, which historically has organized around "enterprise" and "mass markets," a rather undifferentiated approach, compared to automobiles, for example.

The opportunity for much more significant differentiation would seem to be enhanced by "big data" driven segmentation, by the proliferation of devices, applications, usage modes and even network suppliers. Specialized machine to machine networks could provide one example.

Large mature markets are susceptible to disruption, in part because their large size means an attacker could hope to create a meaningful business by taking some market share. 

And it always is possible, in a big market, to offer a product that offers the "same features, at a lower price." That possibly raises the question of whether discrete segments could be created in the broadband access business, beyond the speed tiers or mobile or fixed distinctions that already exist.

At least at first, though, disruptive attacks emphasize "lower price." Less common are "free" services. And though it long has seemed impossible to offer high speed Internet access for free, those barriers are permeable. 

Free public Wi-Fi now has spread from hotels to coffee shops to bookstores, restaurants, airports and some parks.

Those are "spot" deployments that do not necessarily challenge the 'home access' or "business access" markets. But at least some wireless ISPs merchandise some connections "for free." A provider might give one tenant free access in return for using a site as a network access point to feed service to other paying customers.

The issue is how many more scenarios might be possible in the future, as additional spectrum and additional potential competitors emerge. We already see potential new national providers such as Dish Network, Globalstar and Lightsquared attempting to monetize new swaths of spectrum. 

White spaces spectrum is expected to be commercialized in the United States and United Kingdom in the coming couple of years. The Federal Communications Commission is looking at spectrum sharing between commercial and government users. 

And additional spectrum from reclaimed analog broadcasters also is expected to be auctioned, at some point. Of course, increased supply should lead to lower costs. 

Beyond physical levels of supply, there is the matter of revenue models. And ad-supported or commerce models might be among the biggest potential avenues of attack.

In fact, the most dangerous new potential competitors would seem to be firms that have huge installed customer bases, alternate revenue models, recognizable brand names and plenty of cash. Apple, Google, Microsoft, Amazon, and possibly Facebook come to mind.

Google and Microsoft are rumored to be actively exploring how to use white spaces spectrum in the United Kingdom market, reportedly to offer free Internet access.

The angles are simple enough. Google might provide free Wi-Fi style access for all devices running Android, while Microsoft might try and do the same for users of its devices. That would create product differentiation for Microsoft or Android devices, while enticing users to use apps more, which will increase potential ad views.


New competitors might also try and attack the operating cost side of the business model. More providers might try to compete with a “data only” and e-commerce approach that minimizes overhead and operating costs to dramatically lower the retail pricing for mobile broadband.

In addition to the "free" approach, some providers will use those advantages to occupy a "lower cost" segment of the market, especially when relying on a "data only" model.

Other models exist as well. Firms such as Google can dramatically change end user expectations about the nature of access products, using a “high value for reasonable cost” approach that upends end user expectations about "typical" product attributes.

When Google sells symmetrical 1-Gbps for about $70 a month, that creates new expectations on the part of consumers about what the “normal” value-price relationship is for fixed high speed access.


Google hopes to force competitors to react, as widespread, ubiquitous, reasonably priced broadband is an underpinning for its advertising revenue model. 

European Mobile Operators Embracing “Over the Top” Faster than North American Ops

Necessity might be the mother of invention where it comes to adoption of carrier-owned over the top applications. Orange (France Telecom) has created and now is supporting “Libon,” an over the top calling and messaging app that operates in a “no incremental charge” “peer to peer” manner when used by people who have downloaded the app.

In joining Telefonica and T-Mobile in sponsoring a branded over the top voice and messaging app, France Telecom has concluded that “joining” the OTT voice app trend is wiser than fighting it. 

That still is not the choice in North America, where firms such as AT&T and Verizon seem to have concluded they are better off not doing so, at least for the moment.

Libon allows users to make free calls and texts to other Libon users around the world, using a “freemium” model, and joining Skype, Viber and WhatsApp, TU Me and Bobsled in embracing an over the top business model for voice and messaging.

The iPhone version is “live” in the Apple iPhone App Store now, with an Android version will  be released early in 2013.

The free version of Libon includes free calls, instant messages and voicemail services, with a premium version costing £1.99 a month through a subscription on iTunes. That includes one hour of international calls to landlines or mobiles in 31 countries, unlimited greetings for voicemails, transcript of voicemails and recordings of voicemails included in notification emails.


For mobile service providers, the fundamental problems with over the top voice and messaging services have to do with the business model, for obvious reasons. Ovum says increased use of social messaging applications had cost mobile operators $13.9 billion (£8.8bn) in lost text messaging revenues in 2011 alone, for example.

But incremental “gains” from OTT voice and messaging, for service providers, might be quite modest. In 2012, global mobile VoIP service revenues might be about $2.5 billion. But mobile voice revenue overall could be in the range of roughly $1 trillion.

In other words, even if they succeed, carrier over the top voice and messaging will not produce all that much revenue.

In fact, mobile VoIP is still worth less than 0.5 percent of overall mobile voice revenues, according to ARCchart.

At some level, the determination is simply that Orange needs to remain relevant as a supplier of communications services, whatever the danger of cannibalizing at least some of its own voice and messaging revenue. T-Mobile and Telefonica taken a similar approach.

U.S. FCC Examining Resiliency of U.S. Mobile Networks

The Federal Communications Commission will convene a series of field hearings in 2013 to examine challenges to the nation’s communications networks in the wake of Superstorm Sandy, and make recommendations to improve network resiliency. 

Issues to be examined include backup power, ways to increase levels of sharing between networks and resources during emergencies, and other ways to increase overall resiliency during emergenices. 

By some estimates, 25 percent of mobile cell sites were knocked out in areas affected by Superstorm Sandy.  Others mobile network resiliency, though. 

White Spaces in U.K. Will Have to Operate as a Managed Network

White spaces networks using former broadcast TV spectrum in the United States and United Kingdom are intended to be used on a non-licensed basis, with a new twist. 

Today's unlicensed spectrum allows devices to register and use the network, but without any admission control, as a private network would do, or frequency coordination, as a mobile network must do. With the Wi-Fi router model, the user can configure some elements of the access. In the U.K. white spaces case, the network will do all of the configuration. 

So in the United Kingdom, it appears mild forms of admission control and frequency coordination will be used, essentially turning the white spaces spectrum into what is effectively a managed network of sorts. A white spaces network therefore will more nearly resemble a cellular network than a local Wi-Fi network. 

U.K. devices operating in white spaces will have to consult with an online database for usable frequencies, and check back regularly to ensure nothing has changed. That makes a white spaces operation more a managed "network" than has been the case in the past for "networks" using unlicensed spectrum. 

The reason is that white spaces networks will have to sense which frequencies are usable in any given location. In some cases, those frequencies could change over time. What isn't so clear yet is whether a data base entity will be able to monitor which frequencies are currently in use by other devices and then adjust device transmission power automatically, a step that would further prevent interference and optimize total network performance. 

Devices which cannot contact a data base administrator immediately on seeking admission to the network can use their "remembered frequencies" list, but have to check back every hour, Ofcom says. 

Device manufacturers will have to pay entities running the data bases, as well. The point is that white spaces networks in the United Kingdom will use non-licensed spectrum, but will operate in ways that are more like a managed network, in a few ways, than a traditional non-licensed Wi-Fi network. 

The networks apparently will operate as "best effort" entities, but the network itself will take some steps, or might be able to take some steps, to manage radio resources in ways that provide better user experience. 

European Parliament Says:Stop the ITU taking over the Internet"

Control of the Internet must be stopped from falling into the hands of the International Telecommunication Union (ITU), the European Parliament has warned.

The resolution calls on the E.U. member states to prevent any changes to the International Telecommunication Regulations that would be harmful to the openness of the Internet, net neutrality and freedom of expression.

European Mobile Industry is Contracting

Globally, telecom revenue is growing. But not in Western Europe, it appears. The mobile industry’s combined revenues from voice, messaging and data services in the EU5 economies (United Kingdom, France, Germany, Spain and Italy) will drop by nearly 20 billion Euros, or four percent a year, in the next five years, and by 30 billion Euros by 2020, according to STL Partners. 

The obvious implication is that mobile service providers in the United Kingdom, France, Germany, Spain and Italy will have to create new revenue streams worth 30 billion Euros, just to stay where they are, by 2020. 

That is roughly in line with a rule of thumb I use that suggests service providers in just about every developed market will need to replace about 50 percent of current revenue in 10 years. 

Mobile Operator VoIP Revenues Remain Paltry

For mobile service providers, the fundamental problems with over the top voice and messaging services have to do with the business model, for obvious reasons. 

Since mobile service providers do not own the over the top apps, they do not participate in the revenue. But if they try and offer their own OTT apps, priced competitively with the over the top providers, they make little money, and potentially disrupt their own more-lucrative voice and messaging services. 

In fact, mobile VoIP is still worth less than 0.5 percent of overall mobile voice revenues, according to ARCchart.

ARCchart sees similar issues for mobile service provider messaging. ARCchart expects that instant messages will exceed text messaging volumes by 2014 and continue growing rapidly, accounting for 65 percent of all message traffic pushed over mobile networks by 2016. 

As with voice, OTT messaging will cannibalize mobile operator services. In 2012, global mobile VoIP service revenues might be about $2.5 billion. But mobile voice revenue overall could be in the range of roughly $1 trillion. 

Mobile Roaming Revenues to exceed $80 Billion by 2017

Mobile roaming, with growth powered especially by use of data services out of region, will grow to more than $80 billion by 2017, compared to $46 billion in 2012. 

Mobile data will provide most of the growth, if not the absolute greatest volume of revenue, generating about $35 billion in revenue by 2017, when data roaming revenues will represent about eight percent of total mobile service provider revenues, says Juniper Research. 

Still, that means voice roaming will account for $45 billion in 2017. Western Europe will continue to be the region where roaming revenue is the most significant revenue contributor. 

Lower roaming fees, often mandated by regulators, actually will help. As any economist might say, lowering the price of any product tends to increase consumption of those products. 

Children Want Their Gadgets

Approximately half of children six to 12 surveyed by Nielsen say they want a full-sized iPad  and 36 percent want an iPad Mini. 

The iPod Touch and iPhone are also coveted devices among these young consumers (36% and 33%, respectively).  

Kids are also likely to ask for dedicated gaming hardware for the Christmas and holiday season, with 39 percent wanting Nintendo’s Wii U. 

About 29 percent say they want a portable DS. About a quarter say they want  Microsoft’s Xbox 360 and a similar percentage want a Sony PlayStation 3.

Among consumers aged 13 and older, tablets and full-sized computers were the top electronics choices, with roughly one in five indicating they want to acquire the iPad, another tablet brand or a computer. 

NTT cuts FTTH Prices: LTE Competition to Blame

Japan's NTT is finding consumers are shifting demand from fixed networks to Long Term Evolution mobile networks, which is a real world test of whether LTE 4G networks really can compete with fixed network high speed Internet access.  

As  a result, NTT has cut fixed network broadband access prices by 34 percent, from JPY5,460 (USD67) to JPY3,600, TeleGeography says. 

So there is now serious evidence that Long Term Evolution is viewed as a suitable replacement for fixed network service, with the greatest danger emerging where you would expect, with younger users. .

NTT East and NTT West’s "fiber to the home" subscriber growth has significantly slowed down.

National FTTH household penetration was about 46 percent in the second quarter of 2012.

Net subscriber additions for the year ending June 2012 falling to 1.2 million, down from 1.7 million in the year to end-June 2011 and from two million in the year to June 2010.

Executives at NTT East and NTT West say the biggest, single reason for the slowdown in FTTH subscriber growth is the fact that many young subscribers now prefer to have their own personal LTE-based high speed broadband service, rather than paying for a FTTH service. 

That also seems especially true when those customers have to pay for a mobile broadband connection anyhow. Some might question the long-term viability of that approach, if users start to watch lots of longer form streaming video. 

As usual, consumers are rational. Users in Japan who have abandoned fiber to the home seem to be watching short form video, but avoiding streaming or downloading long form video that would put pressure on their mobile data plans. 

Once again, we see that consumers are smart, and will alter their behavior and spending plans to gain the optimal value from the range of services available to them, deliberately choosing not to watch long form streaming video if it means saving money. 

Although there were only nine million LTE subscribers worldwide in late 2011 compared to 220 million FTTx subscribers (88 million for FTTH/B and VDSL alone), momentum is rapidly growing in favor of mobile, according to IDATE. 

In 2016, IDATE predicts that the number of LTE subscribers will exceed 900 million, compared to nearly 230 million for fixed ultrafast-broadband (FTTH/B and VDSL).

3 Small Cells for Every Macrocell?

By 2017, Ericsson expects each macro base station in urban areas will be supplemented by about three small cells. 

Today, there are about five million macro base stations deployed worldwide and those in metro areas account for about 15 percent of the total, or about 750,000. That suggests a total of perhaps 2.25 million small cells. 

It always is difficult to predict the deployment of small cells because that category sometimes includes virtually all cell sites smaller than a macrocell, including potentially large numbers of consumer grade units used inside homes or offices, plus larger small cells deployed as part of the public mobile network.

Mobile Subscriber Growth Will be Lead by Asia, 2012-2018

If you want to know where the great volume of new mobile subscribers is coming from between now and 2018, look to Asia, says Ericsson. That especially will be true of China and the rest of Asia aside from India. Elsewhere, new subscribers will be hard to find in Western Europe, North America and Central and Eastern Europe. 

France Telecom Joins T-Mobile, Telefonica in Embracing Carrier-Owned OTT VoIP

Orange is betting on carrier-owned over the top VoIP as a strategy for competing with Skype, WhatsApp and Viber. "Libon" offers free calling between Libon users, but charges for calls to landline and mobile  numbers. 

At some level, the determination is simply that Orange needs to remain relevant as a supplier of communications services, whatever the danger of cannibalizing at least some of its own voice and messaging revenue. T-Mobile has taken a similar approach. 

In principle, supplying its own over the top voice app also means Orange can supply people with communications outside the areas of the world where Orange operates its own facilities. 

The main reason service providers do not like “over the top” services and applications is that they generally represent direct competition. In other words, over the top apps are substitutes for key products service providers sell.

But that is one key to how things will change in the future. If a major reason over the top apps and services are disliked is that they pose a threat to revenue, then a major reason for adopting an over the top approach is if doing so can create new revenue opportunities.

The business decisions are tricky. In some ways, over the top apps always will represent some danger of cannibalizing existing revenues. But service providers already understand and have embraced other ways of building new revenue streams by going “over the top.” They just haven’t used the term.

Instead, it has been more common for service providers to go “out of region,” as when acquisitions are made in areas where a given firm does not already provide service. European telcos buying assets in Africa provide examples. Cable companies buying other firms in different regions is another example.

The point is that buying assets out of region is similar in principle to some forms of over the top service. Incumbent local exchange carriers have created competitive local exchange carrier operations to sell services “out of region,” for example.

Over the top is trickier for the simple reason that customers and non-customers can use the apps or services, so there always is some risk of substitution for existing services a provider sells. But over the top also can represent an “out of territory” growth strategy.

Think of it as a shift of focus from “selling services to current customers, where we have network” to “selling services to non-customers who are out of territory.” That’s a big shift, as traditionally service providers have operated on a territorial basis, with licenses or franchises that specify where they can build networks and provide services.

Over the top changes all that. As Google apps can be used by any person with web browser and broadband access, so too can a telco-owned app be used by anybody with a web browser and broadband access, in territory or outside it.

Sooner or later, service providers will figure out how to do so on a broader scale. Telefonica, T-Mobile, Deutsche Telekom and others have invested in their own over the top apps. In part, that has been a defensive move in markets where use of over the top apps are a major part of consumer behavior.

But over the top also has been viewed as a way of creating new customers out of region or out of territory.

If you think about it, the Verizon and Coinstar joint venture to create a streaming version of Redbox is part of a pattern at Verizon and elsewhere, namely that over the top services increasingly are being viewed as a way to sell services to “non-customers.”

In essence, the new streaming service will reach beyond the footprint of Verizon fixed network customers and appeal to all 30 million Redbox customers who have been renting DVDs from the Redbox kiosks.

According to Verizon Communications CFO Fran Shammo, Verizon was looking to create a streaming service that would extend “outside of just the FiOS footprint, utilizing the content that FiOS has and bringing that into the rest of the United States.”

Some think something similar will happen as Verizon’s agency agreements with Comcast, Cox Communications, Time Warner Cable and Bright House Networks develop, as well. Those efforts so far have had each of the partners co-selling cable TV, fixed network broadband access and fixed network voice, plus wireless service, outside the Verizon fixed network footprint.

In essence, Verizon is using the agency agreements to sell services to “non customers” outside the Verizon fixed network footprint.

Likewise, T-Mobile USA has found much the same results with its “Bobsled” over the top VoIP service.

Since April 2011, more than 10 million calls have been made on the over the top Bobsled application made available by T-Mobile.

Of the millions of Bobsled calls made to phone numbers, 80 percent originate from outside the United States, though messaging seems to be a U.S. phenomenon. Although Bobsled Calling has seen significant international usage, Bobsled Messaging users are predominately U.S. based, with 90 percent of messages sent domestically.

Usage statistics also show one of the key present realities of over the top apps sponsored by communications service providers, namely that usage might often be by "non-customers."

Of the more than one million Bobsled Calling users, 95 percent are not T-Mobile wireless subscribers, T-Mobile says.

That should suggest one key strategic difference between a carrier-offered app or service, and an over the top app, namely that in some cases the OTT apps do not necessarily cannibalize current customer use of carrier services, but essentially are an "out of region" service that gets used by non-customers.

A La Carte Entertainment Video Might Not Work, Though People Want It

Most people these days would probably agree that the ability to buy video a la carte, show by show, series by series or channel by channel, using the Internet or any other distribution method, is a good idea. Some blame the distributors for failing to meet demand. But distributors would say their programming contracts forbid such sales. 

"We should be clear about something: cable companies are at the mercy of content companies on the issue of content rights and use," says Michael Powell, National Cable and Telecommunications Association president. 

The licensing rights dictate most of what distributors can, and cannot do, with that licensed programming. Most consumers probably think, intuitively, that shifting to an a la carte retail regime would lead to lower costs.

Powell points out the flaw: "The a la carte model is deceptively attractive until you do the math."

People generally assume that if ESPN were sold a la carte the price would fall. But if you assume a shift to a la carte could not happen unless such a development were revenue neutral, you have the crux of the problem. With fewer customers, there would be less revenue, but programming and other costs would remain the same. So prices would rise. 

Studies are inconclusive, though. Some show a sort of neutral or slightly positive outcome if a typical consumer purchased about 11 channels. 

A la carte would mean fewer subscribers and fewer advertising dollars. So prices actually would rise. For "ESPN to maintain its current revenue, it would have to cost hundreds of dollars," says Powell.

An economist might say the typical video bundle works because it allows distributors to apply scale and scope economics. The corollary is that most networks, which are advertising supported, want to be part of a "no choice" basic tier for business reasons of their own, namely the ability to better sell the advertising that underpins their business models. 

When multichannel video distributors say a bundled approach creates economics that favor smaller, niche networks to thrive, they are right. An end to bundling would likely decimate most smaller, more-lightly-viewed networks. To the extent that content and program diversity is a desired end user benefit, "choice" in all likelihood would decline in a full a la carte environment, because most people would not buy most channels. 

The possible advent of over-the-top TV viewing worries most in the current ecosystem for one compelling reason: "households view less than one quarter of the networks they are forced to buy in the bundle," the Consumers Union noted in an past analysis assuming a 50-channel offering. Even today, with hundreds of available channels, end user behavior does not seem to have changed much. 

Most people watch a dozen or so channels on a regular basis. 

Cable operators have argued that end-user costs might actually climb in an a la carte environment, for a number of reasons. Higher customer care costs, operating and marketing are likely, cable operators have argued. Part of the argument has been based on the need to supply new decoders to customers who did not previously need them. That is likely not much of an issue these days, as cable operators convert to largely-digital or all-digital services where customers already must be provided set-top boxes.

Operators also have argued that customer care costs would rise, and there is more substance to that argument, at least during the period where customers would be confused about the new way of buying service. The National Cable and Telecommunications Association has estimated that customer care costs increase by more than 75 percent in a pure a la carte scenario, the Consumer Union says. 

Others believe a typical household might wind up paying about the same amount each month. That is likely true more for ulti-person households and for households that watch more television.

Separate studies by the Federal Communications Commission seem to have concluded that unbundling could save money, or wouldn't save money. One of the studies suggested  “consumers that purchase at least nine networks would likely face an increase in their monthly bills" when buying a la carte. 

Likewise, one of the studies suggested bill increases ranging from 14 percent to 30 percent under a la carte, while the other suggests a consumer purchasing 11 cable channels would face a change of bill ranging from a 13 percent decrease to a four percent increase, with a decrease in three out of four cases.

ITU Internet Censorship?

Some 42 countries filter and censor content. In just the last two years, governments have enacted 19 new laws threatening online free expression, Google says.