Broadband Growth Should Shift Beyond BRICS

IDC predicts that emerging markets will contribute for 53 percent of 2012’s global information and communications technology growth. And a poll of 675 global IT and business professionals suggests Indonesia, Vietnam, Qatar and Myanmar are the countries to lead that growth.

But Israel, Iraq, Uganda and Cambodia were other countries also viewed as countries where growth could occur.

Notably, just five percent of respondents chose Brazil, Russia, India, China or South Africa as among the nations having the strongest growth, though the so-called BRICS nations have been at the top of global growth lists for some years.

Regionally, Asia-Pacific (exclusive of China and India) was cited by compared to 61 percent of survey respondents as the region most likely to lead revenue growth.

Even the Middle East seems a more promising market, with 15 percent of respondents
choosing it as the next boom region.

In part, the shift of growth expectations is a logical consequence of rapid development in the BRICS nations over the last decade. The International Monetary Fund has cut its 2012 and 2013 growth expectations for China, India and Brazil, for example. Those countries have made large
investments in their technology and telecom infrastructure. Though not yet at a saturation
point, those countries are fast approaching saturation, at least for mobile and computing infrastructure.

In Indonesia, for example, there are around 55 million internet users. But that’s just a tiny fraction (22 percent) of its 245 million population. But growth is going to be rapid. The number of internet users grew 29 percent in the most recent year.

Predictions point to 76 million users by 2015. Perhaps ironically, the majority of Internet users are accessing the web while on the go, and not from a desk. While mobile penetration is at 54 percent, PC penetration is just five percent.

But PC sales are grew 36 percent in the most recent year.

In Vietnam, 2012 information technology spending will have increased by 19 percent, IDC says. The total number of smart phones in Vietnam is expected to rise by five percent in 2012 to 21 percent.

The number of people using mobile phone services is expected to reach 90 percent of its population by 2015 and 95 percent by 2020.

By 2015, about 45 percent of the population will be using the Internet by 2015, up from about 30 percent in 2012.
Tablet penetration currently stands at two percent, but it’s expected to rise 92 percent by the end of 2012.

IDC is expects 15 percent year-over-year growth of information technology and communications spending in Myanmar in 2012. Internet usage is quite low, probably in low single digits, while mobile penetration rates likely are similar.

Around 80 percent of the Myanmar population of about 60 million people live in rural areas, pointing out the challenges of getting Internet service to most people.

Qatar’s state-backed Qatar National Broadband Network Company plans to build a fiber to home network reaching 95 percent from the current five percent, reaching 30,000 homes by the
end of 2012 and 300,000 by 2015.

In most emerging markets, wireless will be the preferred access method.  For example, in a recent project that Analysys Mason undertook involving nine countries in the Middle East and North Africa, Analysys Mason found that in Algeria it would be commercially viable to roll out fiber to the home to around 12 percent of the population and wireless technologies to around 70 percent of the population.

                                    Economic Viability of Various Access Technologies

Retail cost of service remains a key business issue, though. A study by Ovum found that South Africa had the most expensive broadband tariffs of 19 studies countries. Entry-level services in South Africa cost as much as $1,443 per year, with the prices of high-end services up to $6,000 per year.
Ovum found that lower end entry-level services cost as much as $1,211 per year in Nigeria.

In the countries that Ovum looked at, broadband services using HSPA (mobile 3G) technology were the cheapest option for entry-level users, with an average price of $223 per year.

Still, since broadband penetration in the developing world is only about  six percent , there is lots of room for growth. 

Google Cannot Afford to Become a National Fixed Access Provider

Google’s Kansas City, Kan. and Kansas City, Mo. 1-Gbps access network naturally tends to
encourage speculation about what else Google might have in mind, including the notion that Google might try something on a wider scale.

It isn’t a completely wild notion, given earlier Google investments in municipal Wi-Fi, Clearwire and even a commitment to make a minimum bid on 700-MHz spectrum. Add in Google’s production of its own Nexus smart phones and tablets, as well as tests of a mobile virtual network operator network in Spain (albeit only as a closed test using Google employees), and one can understand the speculation.

Also, new European Union rules might encourage new providers to think about becoming specialized providers of service that is “roaming only.”

An analysis by Goldman Sachs should reassure potential “victims” that Google would not actually undertake an expansion of Google Fiber on a major scale in the U.S. market. The simple reason is excessive cost.

The analysis suggests that if Google really wanted to build out a new national 1-Gbps networks in most major U.S. cities, it would cost more than $140 billion. Most experienced telecom or cable executives would say it could easily cost that much, and take many years.

A more modest goal, of becoming a service provider for 50 million households, less than half of all U.S. homes, would cost perhaps $70 billion.

Ignore for the moment the likelihood that Google has lots of other users for its cash. Assume Google wanted to do so, and was willing to proceed by using internal funds, rather than borrowing money.

Goldman Sachs Telco analyst Jason Armstrong noted that if Google devoted 25 percent of its $4.5 billion annual capital investment,  it could build network out to about 830,000 homes each year, or 0.7 percent of U.S. households.

Armstrong estimates Verizon has spent roughly $15 billion building out its FiOS fiber network covering an area of approximately 17 million homes, by way of comparison.

At such a pace, Google would find it had to replace its first networks long before it even finished the first round of construction on the initial 25 million sites.

Also, if Google really wanted to do something about the economics of broadband access, you might argue the timetable and cost would be more amenable if Google spent money on mobile or at least wireless infrastructure instead.

Some estimate it will cost T-Mobile USA about $9 billion to build a national LTE network, for example.

The point is that 1-Gbps networks are expensive and time-consuming to create. Google’s primary interest likely is creating new market pressures for all other providers to match its own services in Kansas City.

The only issue is whether Google can do so by building in one city only, or would have to threaten building in other key cities as well.

But in all likelihood, Google would never want to waste capital by building a national network of fixed access networks. It is simply too expensive, and too limited, in terms of return from other investments it could make with that capital.

On the other hand, it is clear why speed matters to Google: speed matters for users and consumers.

Some 64 percent of consumers surveyed by Brand Perfect say slow loading was among the top two irritations when shopping online. Fast loading improves end user satisfaction, and also allows more ad inventory to be displayed.

PT Telkom to Deploy 100,000 Wi-Fi Access Points in Indonesia

Time has a way of settling old debates. 

So it is that PT Telekomunikasi Indonesia Tbk (PT Telkom), Indonesia's largest communications service provider, is deploying 100,000 Wi-Fi hotspots across Indonesia, to help PT Telekomunikasi Indonesia cope with rapidly-growing mobile data demand.

No more do service providers "worry" about whether Wi-Fi competes with, or complements, mobile data access.

Cisco says the new network of access points will create the largest Wi-Fi network operated by a single service provider in Asia.

PT Telkom expects mobile data traffic to double each year through at least 2016. The Cisco Visual Networking Index also predicts that mobile data traffic in Indonesia is expected to grow 32 times from 2011 to 2016, with an average per user consumption at 716 megabytes of mobile data traffic per month in 2016, a staggering 2,387 per cent increase from 30 megabytes per month in 2011.

Indonesian mobile data traffic will grow four times faster than Indonesian fixed IP traffic from 2011 to 2016.

And though Indonesia's mobile data traffic was two percent of total IP traffic in 2011, mobile data will represent 17 percent of total Indonesian IP traffic in 2016.

Tablets Have Rapidly Hit an Inflection Point

Within a two-year period, almost 20 percent of U.S. homes have become tablet owners, according to Nielsen Wire. That's fast. It is not uncommon for a consumer innovation to take as long as seven years to reach just 10 percent penetration.

Nielsen data still shows that entertainment video is the overwhelming choice of a screen used to consume video. Between 77 percent and 86 percent of all video consumed uses a standard TV screen. 

But tablets and smart phones both are heavily used while people are watching TV screens.

Is TV Becoming "Irrelevant?"

Perceptions of "irrelevance" are not helpful to any would-be supplier of a product. But at least for some segments of the U.K. population, TV is becoming irrelevant.

Some 17 percent of U.K. teens would miss television if they did not have it, but 53 percent of female respondents would miss their mobile phones if they did not have them, according to Ofcom.

There are potentially significant implications for the video entertainment ecosystem, if those behaviors on the part of teens become adult habits.

Conversely, TV is among the most-favored media used by older adults. When asked what media would be missed the most, people over 75 are far more likely to miss their TVs the most (65 per cent), followed by radio (15 per cent) and newspapers/magazines (eight per cent).

The picture is very different for young adults aged 16 to 24 who would most miss their mobile phone (28 per cent), followed by the internet (26 per cent) and TV (23 per cent). 

Kids spent 17 hours each week accessing the Internet, about the same amount of time they spend watching TV. Nearly all (90 percent) of 12 - 15 year olds in the U.K. access the Internet every day, and weekly Internet usage continues to rise steadily. 

The point, obviously, is that television, as a product, already is less popular among younger consumers than among older consumers. Internet and mobile seem to be essential. 

So television marketers have a big problem: how to change the product to create more relevance for some consumer segments who, at present, don't find they want the product.

Packaging and pricing won't matter if it is the basic product some consumers find irrelevant. 

Order of Magnitude More Small Cells in Metro Areas by 2015

The number of cells required to meet the capacity demands of just one square kilometer of a busy city center will increase to more than 40 by 2015, according to Actix, a supplier of analytics. Today, that same area often is served by five to seven macrocells. 

See infographic format here. 

By 2015, a new micro and pico small cell layer will need to be added to existing inner city networks, which today typically comprise five to seven 3G macro cells serving one square kilometer. 

For a typical central business district this could see the number of cells rising from 20 to more than 160, Actix says. 

“In the next three years, mobile data is projected to grow by at least ten times, which is equal to 3,000 GB per square kilometer per day," says Bill McHale, Actix CEO. 

What is the Best Way for AT&T or Verizon to Generate Billions of New Revenue?

What is the best way for a tier-one carrier to generate an extra $1 billion in annual revenue?

Long term, you might argue carriers will need to explore a range of potential new businesses. That’s why you hear all the movement around home security, mobile payments, mobile wallet, machine-to-machine applications, health care applications, content delivery networks, over the top apps and so forth.

In the near term, Verizon Wireless and AT&T might wring even greater returns simply by reducing original equipment manufacturer device subsidies, without taking what some might say are the “drastic” steps T-Mobile USA is undertaking to end all retail device subsidies.

Oppenheimer analysts think that AT&T and Verizon Wireless, for example, will be able to cut payments to device manufacturers by significant amounts.

AT&T’s subsidies could drop from 15 percent per phone to five percent over time, Oppenheimer predicts.

With more than 100 million phones being sold every year, Oppenheimer thinks the carriers could save up to as much as $100 per phone, or $10 billion dollars in annual savings. That’s a lot more new revenue than AT&T or Verizon Wireless are likely to generate from the other new initiatives.

Beyond that, Oppenheimer analysts even think there is a chance AT&T and Verizon Wireless could recapture some of the influence they used to have before the advent of loosely-coupled networks.

There is at least a possibility that carriers could host, invest in and own applications provided in a carrier context, with the greater importance both of mobility and cloud computing. Some might find that thesis a bit optimistic.

But there is little question AT&T and Verizon Wireless are in a different strategic position than their counterparts in other regions such as Western Europe.

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.

T-Mobile USA to End Device Subsidies

T-Mobile USA says it plans to end all device subsidies in 2013, after finding that perhaps 80 percent of its customers choose a "bring your own device" or "buy your own phone" plan anyway.

To ease the "sticker shock," T-Mobile USA probably will offer installment plans that involve an upfront $100 payment and then monthly payments for as long as 20 months. 

T-Mobile USA also apparently will get the right to sell unspecified "Apple" devices in 2013. To be sure, the "value" approach fits T-Mobile USA's approach to the market. But there is risk.

In Spain, mobile service providers have had very mixed experience with ending device subsidies. But Vodafone Spain and Telefonica lost customers after they stopped subsidizing devices. 

In fact, Vodafone Spain lost a half million subscribers in a single quarter. Vodafone Spain later reversed course and restored the subsidies. T-Mobile USA will find out soon enough if different results can be obtained in the U.S. market. 

Taxes and Billing Issues Kept Google From Offering Voice in Kansas City

Google considered offering voice as part of its 1-Gbps service in Kansas City, Kan. and Kansas City, Mo., but the cost and challenge of billing for taxes was enough of a hassle to cause Google to drop those plans. 

Milo Medin, vice president of Google Access Services says the actual operating costs would have been trivial. Billing for taxes would not have been so easy.

“The cost of actually delivering telephone services is almost nothing,” Medin said. “However, in the United States, there are all of these special rules that apply.” Google would not be the first company to encounter the complexities of billing, and how that can affect a business case.

Retailers engaged in e-commerce, either throughout the United States or globally, know exactly what Medin means. 

People Spending Twice As Much Time with Apps as Web

Between December 2011 and December 2012, the average time spent inside mobile apps by a U.S. consumer grew 35 percent, from 94 minutes to 127 minutes, according to Flurry. 

By comparison, the average time spent on the web declined 2.4%, from 72 minutes to 70 minutes.  By our measurement, U.S. consumers are spending 1.8 times more time in apps than on the web.  

The study does not indicate that people are substituting interaction with mobile apps as a substitute for either web browsing or watching TV, since engagement with thoses activities seem to be stable. 

But end user time is finite. When users spend more time with mobile apps, while reported time watching TV and using the Web remain level, that time must either come from some other pursuit, or users are multitasking, most likely using more apps while doing something else. 

Why 1 Gbps Isn't Presently a Big Deal

You've probably read at least one story about Google Fiber, the 1-Gbps symmetrical fiber to the home network in Kansas City, Mo. and Kansas City, Kan.

I have not been recently in Kansas City, but have had a chance to work on a 1-Gbps connection. It did not change my life. It did not even seem to materially affect my normal use of the Web. As always is true, your local connection is but one element of end-to-end application performance.

What happens in between you and a remote server, and the set-up of the remote server's local connection, obviously controls the amount of data that actually can flow between two communicating computing devices.

Until most of the rest of all servers you interact with can match a local 1-Gbps connection on your end, one doesn't really see much difference, on a local gigabit per second connection, compared to using a much lower speed connection.

Granted, I wasn't uploading or downloading large files, using BitTorrent or watching YouTube. But you get the point. Had I not been told, I wouldn't have noticed anything special about the connection.

Google "Will Discuss" Owning a Mobile Network

From time to time, speculation arises about whether any of the four leading "Internet" firms in the U.S. market (Apple, Google, Facebook, Amazon) would seriously examine ownership of a branded mobile network. Half of those firms already are in the smart phone business, three are in the tablet business and Facebook, off and on, is rumored to be considering producing its own smart phone.

So is Google, for example, looking at owning a wireless network? "I'm sure we will discuss this," says Google Chairman Eric Schmidt. That doesn't necessarily mean Google will act.

But Google appears to believe that abundant spectrum could become a reality. If that happens, the barriers to a branded Google mobile service would seem less formidable.

"The current spectrum shortage [currently facing the mobile industry] is real, but it's an artifact of a licensing and regulatory error," said Schmidt. "New technology allows there to be lots of spectrum, far more than you could use."

NFC Pessimism Grows, and Might be a Good Thing

Juniper Research has revised its forecasts for the global near field communications market, significantly scaling back its growth estimates for the North American and Western European markets. In some ways, that might be considered a "good" thing, to the extent that it follows a common pattern of technology adoption.

What is "good" about deflated hopes is that such periods seem "always" to happen, and are just a milestone on the way to eventual adoption on a fairly wide scale. So the argument is that dashed initial hopes mean the market is moving in the way one should expect: high hopes, disillusionment, and finally adoption.
The most significant change to the Juniper Research forecast is the amount of transaction activity NFC devices will drive, as the new forecast reduced the number of NFC devices in use only slightly.

By 2017, global NFC retail transaction values are now expected to reach $110 billion in 2017, significantly below the $180 billion previously forecast. 

Such revisions are not unusual in the predictions business, especially not for a brand new market that depends on many changes in the ecosystem.

Apple’s decision to omit an NFC chipset from the iPhone 5 has reduced retailer and brand confidence in the technology, leading to reduced point of sale) rollouts, for example.
This in turn will lead to lower NFC visibility amongst consumers and fewer opportunities to make payments, threatening a cycle of “NFC indifference” in the short term, Juniper Research believes.

“While many vendors have introduced NFC-enabled smartphones, Apple’s decision is a significant blow for the technology, particularly given its previous successes in educating the wider public about new mobile services” says Dr. Windsor Holden, author of the study.

The report found that Apple’s move would impact most dramatically on markets in North America and Western Europe, where transaction values would exhibit a “two year lag” on previous forecasts as retailers delay POS investments.

Conversely, retail transactions in NFC’s heartland in Japan and Korea are likely to experience little or no impact from the Apple decision.

None of that is terribly surprising. Though the 2011 KPMG Mobile Payments Outlook, based on a survey of nearly 1,000 executives primarily in the financial services, technology, telecommunications, and retail industries globally found that 83 percent of the respondents believe that mobile payments will be mainstream by 2015, even the moset astute industry observers tend to overestimate early adoption of a major new technology, while underestimating long term impact. 



Analysts at Gartner, for example, use a model of how expectations for significant new technologies running in a predictable cycle. What the cycle suggests is that expectations nearly always (always, according to the model) run ahead of marketplace acceptance.

What the Gartner hype cycle suggests is that expectations for mobile payments using near field communications are at a point where we can expect five to 10 years to elapse until NFC actually begins to make serious inroads as an adopted mainstream technology. The emphasis probably is important to note: “begins.”

In fact, Gartner's Hype Cycle now expects it will take five to 10 years before NFC is in widespread and mainstream use. Gartner's latest expectation likewise is that cloud computing and machine-to-machine applications will not be mainstream for another five to 10 years as well.

But new technologies historically take some time to reach 10 percent, then 50 percent, then virtually ubiquitous adoption. To be sure, there has been a tendency for new technologies based on digital and electronic technology to be adopted faster. But a decade period to reach perhaps 10 to 20 percent adoption is hardly unusual.

That is not much of an issue for point solutions like computers that can be used without lots of additional change in infrastructure. That is not true for highly-complex ecosystems such as payments, though.

ATM card adoption provides one example, where "decades" is a reasonable way of describing adoption of some new technologies, even those that arguably are quite useful.

Debit cards provide another example. It can take two decades for adoption to reach half of U.S. households, for example.

If Gartner analysts are right about the near field communications "hype cycle," we should continue to see "disillusionment" expressed about near term prospects for NFC. The reason is that Gartner now sees NFC at the "top" of its hype cycle, the point at which overly-optimistic projections face the reality of an extended period of development, before something "useful" actually emerges.

Internet TV, NFC payment and private cloud computing all are at what Garner calls the "Peak of Inflated Expectations," which is always followed by a period where the hype is viewed as outrunning the actual market. That suggests NFC soon will enter a phase where expectations are more measured.

You Can’t Easily Sell “Unified Communications” to Small Business

Service providers arguably aren’t terribly good at selling “unified communications” to small business owners, but probably not because, as UC retailers, they are especially ineffective communicators.

No, the problem is that UC is tough to explain, tough to comprehend, tough to envision, quite often.

It’s a little bit like the old adage: people don’t buy drills, they buy holes.” Some of you are veterans of the IP telephony business, and can remember what it was lke trying to sell a “hosted PBX” service to small business prospects. Most will probably say, if they are honest, that most potential buyers didn’t immediately “get it.”

There is a reason most tier-one service providers split sales into “enterprise” and “mass markets” efforts. Small businesses are more like consumers than enterprises in terms of how they buy technology products. Try explaining “hosted PBX” to a consumer who is not in the technology business. Small businesses might not be too different.

That might still be true about some of the newer features and value propositions. Datavo, a competitive local exchange carrier operating in Southern California, is the first announced user of the Metaswitch Networks “Accession Communicator” platform, which turns a hosted PBX solution into a mobile solution.

The way Datavo sells the new capabilities illustrates quite a lot about how small business customers understand value, and how little they understand industry jargon.

Really, they don’t get “unified communications.” They don’t really get “hosted.”

“The concept really is not easy to convey in a brochure,” says Rhaphael Tarpley, Datavo’s chief operating officer, in large part because customers really do not understand “unified communications,” even if “that is what they actually want and need,” says Tarpley.

“They don’t get ‘hosted solution,’ but they do understand ‘cloud’ or ‘Internet,’ and that’s the way Accession features can be sold, Tarpley says.

Perhaps oddly, the metaphors tend to be “consumer” like references. People relate to their devices and their apps. And, perhaps oddly, the idea that invoking business office features from their office phones is something made possible by a downloaded Google Play or Apple iTunes app just makes sense to people.

Prospects understand the notion that the features are enabled by a free app downloaded from iTunes or Google Play, Tarpley says. That seems familiar and tangible.

They don’t necessarily “get” the notion of invoking features from a web portal. They seem better able to understand a Google Play or iTunes app download.

The point is that it is hard to sell “unified communications.” hosted IP telephony or mobile UC to prospects who struggle to understand it. It just isn’t intuitive. But they seem to grab the "Internet" and mobile app metaphors much more easily. So don't sell "UC."

Tell prospects they can download a free app from iTunes or Google Play that allows their mobile phones to use the features of their business phone service, plus video calling, plus starting a call on the mobile and finishing on the business phone, or vice versa. Later you can tell then how you do it.

There's a Long Tail (Pareto Distribution) for App Store Developers

A small number of developers, almost entirely game companies, continue to generate the majority of revenue at the leading app stores - Apple’s App Store (iPhone only) and Google Play, according to an analysis by Canalys.

Canalys estimates that just 25 developers accounted for 50 percent of app revenue in the United States in the Google Play and Apple iTunes stores during the first 20 days of November 2012. Between them, they made $60 million from paid-for downloads and in-app purchases over this period.

That is a classic Pareto distribution, sometimes called a "Long Tail" or the "80/20" rule. The idea is that, in any market, or any natural world distribution, a small number of instances account for a highly disproportionate share of the total cases. 

In business, that might be also called the law or rule of three. It's the same idea: a small number of actors, instances, companies or objects have a disproportionate share of total instances. 

Also, Of the top 25 grossing developers, all bar one (popular music service Pandora with its Pandora Radio app) are game developers.