International Wholesale Voice Business is Fragile, Some Might Say

The wholesale international voice market is finely balanced at the moment. Some might say it therefore is fragile and prone to unanticipated changes either in volume growth or pricing levels.

And even volume growth is a complicated matter, given the growing percentage of international voice that is shifting to over the top applications that drive volume, but not revenue. 

Little of that is obvious when looking only at overall volume growth. 

In fact, you can’t understand the  international voice business just by looking at the global and overall statistics. TeleGeography estimates that global traffic grew five percent in 2012, to 490 billion
minutes.

Total international voice traffic grew nine percent in 2011, to 467 billion minutes, TeleGeography says. Traditional time division multiplexed (TDM) international traffic grew three percent, to 317 billion minutes, while traffic carried as Voice over IP (VoIP) grew 25 percent, to 150 billion minutes.

In fact, you’d be hard pressed to find a single year when global voice usage or revenue has not grown, since statistics have been kept. The exceptions might be the period after the 1929 Great Depression, or the period around 2001, with the collapse of the Internet Bubble. But those temporary dips are about all you’d find, in terms of years when voice revenue did not grow.

There are challenges. Average wholesale prices have fallen at a compounded rate of approximately eight percentannually since 2002, and though wholesale traffic grew rapidly enough to offset these steady price declines until 2008, that is no longer the case.

While wholesale traffic has grown 30 percent since, wholesale revenues have remained flat, ending with $13.2 billion of revenue in 2011, TeleGeography says.

In large part, that is because average wholesale prices have fallen at a compounded rate of approximately eight percent annually since 2002. Until about 2008, wholesale suppliers made up the difference in higher volume, but volume increases now are falling short of making up for lower unit prices.

Global retail revenue increased six percent between 2010 and 2011, from $90.3 billion to $95.4
billion, TeleGeography says, driven largely by his was spurred by a nine percent uptick in traffic growth, offset by price declines of 3.3 percent.

Despite growth in emerging markets, voice markets are declining in developed markets.

But that isn’t the only big change. Since at least 2004, mobile calls have been gradually taking more share of total voice calling globally.

These days, more calls are originated or terminated on mobiles than on fixed network devices. The number of mobile phones in service overtook the number of fixed lines in 2002.

By 2011, mobiles accounted for 83 percent of total global phone lines, 43 percent of originated
international call traffic, and 58 percent of terminated international traffic.

In 2011, mobile terminated calls accounted for 62 percent of wholesale traffic, and 82 percent of wholesale carrier revenues. In other words, the international wholesale voice business is almost totally a mobile market.

Mobiles account for a disproportionately large share of wholesale revenues because mobile network interconnection rates (the per-minute fees carriers pay to destination network operators to terminate calls on their networks) are often several times higher than fixed network termination rates.

There are other changes, as well, where it comes to the wholesale voice market: it is becoming concentrated in a few regions.

Traffic terminated by wholesale carriers grew 11 percent in 2011, to 293 billion minutes, or 63 percent of total international call traffic, according to TeleGeography.

But wholesale traffic and revenues  are not distributed evenly around the world.  For example, 82 percent of traffic to Sub-Saharan Africa and South America, and 77 percent of traffic to Central Asia, was routed using wholesale carriers.

Calls terminated in Africa accounted for just nine percent of global wholesale traffic in 2011, but 27 percent of revenues.

Conversely, calls to Asia generated 41 percent of wholesale traffic but only 31 percent of revenues, due to very low termination costs to large destinations such as China and India.

Conversely, only 43 percent of traffic to western Europe—and just 33 percent of traffic to fixed lines in western Europe—was terminated by wholesale carriers.

But it would be fair to say that the international wholesale voice market is very finely balanced. Revenue growth is positive, but only barely so. To keep it that way, suppliers will have to hope for steady volume growth and predictable, moderate price declines.

Smart Phone Sales in 2012 4Q: All Android and Apple

Android and Apple devices accounted for 91 percent of smart phone sales, globally, in the fourth quarter of 2012. 

Comcast Boosting Speeds, Google Fiber or Not

Google Fiber is intended by Google to be a prod to other ISPs to upgrade access speeds. Oddly enough, major ISPs might need little encouragement. 

By some reports, Comcast will upgrade speeds in the the March to May time frame for many customers nationwide. The "Blast" tier reportedly will be upgraded from 25/4 Mbps to 50/10 Mbps.

Comcast's "Extreme" tier will be increased from 50/10 Mbps to 105/20, while the "Performance" tier will be boosted from 12/2 Mbps to 25/4 Mbps (May 2013). 

Does 4G LTE Really Change the Mobile Business?

Whether fourth generation mobile networks using Long Term Evolution will transform the mobile business remains to be seen. Supporters of third generation technology believed 3G would transform the mobile business as well, but some would say that didn't happen to the extent some believed possible.

European mobile phone companies spent $129 billion around 2000 to buy licenses for "third-generation" networks that were supposed to give people the freedom to virtually live from their cellphones, reading e-mail, browsing the Internet, placing video calls, enjoying music and movies, buying products and services, making reservations, monitoring health - all from the beach, the bus, the dentist's waiting room, wherever they were.

But behavior did not change, at least not by 2006, leading some to talk about a 3G winner's curse. 

The more recent Indian 3G auction likewise was pricey for mobile service providers, and some question whether new applications beyond voice and texting will be adopted at high rates.

Some now say 4G LTE will transform the mobile business. Among the reasons are sheer speed. Some note that LTE is 10 times times faster than 3G. That leads some to argue that video and other apps requiring low latency or high bandwidth could be key for 4G networks in a way that was not true of 3G. 

Some also would argue that immersive mobile apps will create new advertising opportunities. 

We will see. 

Is Google Fiber Nudging ISP Speeds Upward?

It ultimately will be difficult to say precisely how much impact Google Fiber has had in encouraging other ISPs to boost their access speeds, simply because that process (speed increases) had been underway since before Google Fiber was launched in Kansas City, Kan. and Kansas City, Mo. 

Since 1994, median advertised speeds have risen steadily, at about a 20 percent compound annual rate.


In fact, by some estimates, U.S. access speeds were set to climb up to about 100 Mbps by 2020, in any case. 

It probably is not a coincidence that Time Warner Cable, which competes directly with Google Fiber in Kansas City, recently boosted its speeds, across the board, however, in that market. 

Speeds there were boosted at least 50 percent, and in some cases by 500 percent. 

Lite Internet — from 1Mbps to 5Mbps
Basic Internet — 3Mbps to 10Mbps
Standard Internet — 10Mbps to 15Mbps
Turbo Pass Internet — 15Mbps to 20Mbps (No word on upgrades for customers already getting 20Mbps Turbo service)
Extreme Internet — 30Mbps to 50Mbps
Ultimate Internet — 50Mbps to 100Mbps

Upload speeds remain unchanged at 5 Mbps for premium tiers.

LTE Speed: Devices Matter

Long Term Evolution speeds are affected by population density, bandwidth available to create channels and even device performance, so all measurements of LTE "speed" must be qualified. 

The countries where OpenSignal has recorded the fastest average LTE speeds tend to be ones where the population is heavily concentrated in a small number of urban centers. 

Countries with a population that is more evenly spread seem to perform slightly worse, perhaps due to the difficulty of rolling-out LTE over a larger geographic area, OpenSignal says.

"Our methodology measures how the network is experienced and therefore is considerably affected by device variance," OpenSignal says. 

Sweden has the fastest LTE network at 22.1 Mbps, while Japan has the slowest LTE network at 7.1 Mbps, a recent analysis indicates. 

The average LTE speed globally is 10.4 Mbps, OpenSignal says.


Download speed in Mbps by country and network

Does OTT Steal Revenue or Destroy Markets?

What is the real threat Skype and other over the top apps pose to voice revenues? In similar manner, what is the threat WhatsApp poses to text messaging? The immediate response might be that the OTT alternatives shift revenue from carriers to third party apps.

That is a logical response. But one might argue that It isn’t so much that the OTT providers cannibalize or shift so much legacy revenue, in a direct sense, as that they “destroy” the legacy market and revenue stream .

Analysts point out that companies like WhatsApp will generate 35 percent of the total messaging traffic in 2016, but only eight percent of the revenues, for example.

Likewise, Skype in 2008 generated huge call volumes, but relatively little revenue. Skype more arguably does displace minutes of use. While international traffic growth is slowing, traffic from over the top applications and services is growing fast. TeleGeography estimates that cross-border Skype-to-Skype voice and video traffic grew 44 percent in 2012, to 167 billion minutes, for example.


The point, it might be argued, is that OTT apps do not so much “take revenue” from carriers as earn a bit of revenue while essentially turning a significant revenue generating business into a feature.

TeleGeography data does show that international telephone traffic grew five percent in 2012, to 490 billion minutes. In part, that is a result of more people on the planet using mobile phones.

Whether revenue actually is growing is the bigger issue, some might say. Surprisingly, it is very hard to answer the question of whether international long distance revenue, as opposed to call volume, is growing, remaining the same, or declining.

Most likely, international long distance revenues are flat, with higher call volumes helping to compensate for declining average revenue per unit.

International Telephone and Skype Traffic, 2005-2012

Source: TeleGeography

Could Apple Turn iTunes into a "Bank?"

Could Apple use iTunes to create some sort of banking or payment or lending service? Some think Apple could do so. 

Apple has filed a patent for an "ad hoc cash dispensing network" that allows users to exchange 

The user of a client terminal (an iOS device, presumably) sends a request for cash to the cash-dispensing server. 

Based on location, the cash-dispensing server locates one or more other users that are close to the requesting user and verifies that at least one of these proximate users is willing and able to provide the requested amount of cash. 

Following the transfer of cash between the parties, the requesting user's account is charged for the service while the providing user's account (iTunes, presumably) is credited for the service.

Apple presumably would charge a service fee that’s shared with the lender. 

That actually does not make as much sense to me as if the system became way to refresh or recharge a person's credit or debit card, on a peer to peer basis, especially for moderate amounts of money. 

That way, no actual cash changes hands. The lender gets a credit in his or her iTunes account, plus part of a service fee. The "borrower" gets additional borrowing capability on a credit or debit card. 

Does the U.S. Have a Broadband Problem?

Is U.S. high speed access “a problem” or not? Observers still cannot agree. A new study by the
Information Technology and  Innovation Foundation suggests there isn’t much of a problem, though some will disagree.

Much depends on one’s point of view. When looking only at nominal prices, or typical access speeds, one will tend to think the U.S. situation is not so good, as the United States never ranks among the top countries on such scales.

But the situation looks different when looking at access prices as a percentage of typical household income, as a percentage of disposable income, or some other metrics, such as mobile broadband speeds, or “entry level” pricing, rather than “highest speed” pricing, or pricing within triple-play bundles, or percentage of users with the fastest speeds.

But  “neutral” observers have for some time been pointing out that, in the U.S. market, broadband availability no longer is the key barrier to adoption. Instead, people can buy, but significant numbers of people choose not to buy.

In other words, these days adoption “barriers” are generally encountered because people do not want to buy broadband. That is a different “problem” than broadband access literally being unavailable.

Some would argue the “broadband has value” gap is a problem that naturally resolves itself, much as the “problem” of people not using mobile phones or text messaging likewise resolved itself, once people figured out the value proposition.

Still, some might argue that “quality” or “price” remain big issues. Others might argue that, as a percentage of typical household or personal income, U.S. broadband access prices are among the lowest in the world.

Also, consumers are fully capable of exercising choice, and a significant percentage of consumers seem to prefer mobile broadband as their primary way of using the Internet, not “fixed network” access.

In fact, higher percentages of some U.S. groups prefer mobile access to fixed access. It is a choice, in other words. Such consumers might depress demand for fixed broadband. But that preference for mobile access is not a problem, but a choice.

Apple's Next Big Thing

Apple will definitely try and disrupt another big business soon. That is fair to say. It has been three years since the iPad introduction, and five and a half years since the iPhone launch. 

So one has to expect something. The issue is what market Apple can create or reshape that is big enough to matter. 

"That's how Apple has done it," said Charlie Wolf, a vice president with research firm Needham and Company who has followed Apple since 1985. "But I can't identify any market that Apple can easily enter and disrupt right now -- that's with Steve Jobs, or without Steve Jobs."

Speculation the past few years has been about televisions. But some of us don't see that. Not that Apple wouldn't try. It's just hard to see how changing the interface, or integrating online with broadcast TV, will add enough value to drive Apple success on the level of the iPad or iPhone. 

Wrist computers might seem to be in the same category. But smart phones already have functionally disrupted the camera, clock, radio and navigation device categories. Tablets are disrupting the e-book reader market and the broader content consumption device area (iPods did it to music players earlier). 

It isn't that it it would be fun (necessary for Apple) to see Apple revolutionize something else we aren't thinking about. It's just hard to imagine what that might be. 

41% of "Lifeline" Mobile Service Did Not, Could Not, Prove Eligibility

A review of "Lifeline"mobile service conducted by the Federal Communications Commission showed that 41 percent of their more than six million subscribers either couldn't demonstrate their eligibility or didn't respond to requests for certification.

Intel’s Web TV Service Won't Lower Your Bills

Intel hopes it can create a successful, and sizable new business selling video entertainment delivered "over the top." But don't count on that service saving you money, or "disrupting" the video subscription business. It won't.

As planned, the new service requires that a customer first buy a video subscription service, then pay for the Intel offerings, and use an Intel decoder box as well.  Intel’s web TV service will not offer 
la carte access to channels and networks, either. 

Disruptive? Not really.

Why Tablet, Smart Phone Owners Buy More of Everything

It isn't hard to find a survey "finding" that tablet owners or smart phone owners buy more of some product than non-tablet owners, or non-smart phone users. The reason is not complicated, and probably has nothing to do with tablet or smart phone owners being more "social," more engaged, more aware or more "something else" than the typical person.

Tablet owners and smart phone owners simply have more money to spend, on average, than people who don't own tablets or smart phones. In other words, they are richer. 

To be sure, one might argue that tablet or smart phone owners also have different behavioral patterns and what not. But they spend more because they have more money to spend. 

Amazon, Apple, Google are Among Top-5 Firms with "Best Reputations"

Amazon, Apple and Google are among the top-five firms with the best reputations, according to a new analysis by Harris Interactive. 

The Harris 2013 reputation study also has Disney and Johnson & Johnson among the top five firms with the best reputations among U.S. consumers. 

Amazon Beats Out Apple For The Best Reputation Among U.S. Consumers, Says Harris; Google Comes Fourth | TechCrunch

Spectrum Always Matters

The Intelligent Transportation Society of America doesn’t want the Federal Communications Commission to free up spectrum in the 5.85 GHz to 5.925 GHz range, as part of its wider effort to clear 195 megahertz of 5 gigahertz spectrum band. The ITSA wants those frequencies reserved for in-vehcile communications.

If the ITSA gets its way, those portions of spectrum proposed for Unlicensed-National Information Infrastructure (U-NII) devices would be unavailable for other non-licensed applications.

That ITSA opposes spectrum sharing in the 5.85 GHz to 5.925 GHz band is not unusual. Spectrum access is the foundation for any business model using wireless communications. And spectrum exclusivity, when it can be obtained, also enhances the equity value of such businesses.

The ITSA language, though, is rather “soft,” suggesting ITSA would prefer exclusivity, but is not sure it can prevail, nor does it believe it cannot live with spectrum sharing.

Separately, Dish Network continues to say it will sell its Long Term Evolution spectrum if it does not win control of Clearwire (a prospect many believe is very close to impossible) or if it cannot find a partner to help it build a new national LTE network.

Both developments illustrate the key role regulators play in enabling communications business models and the potential profit from starting such businesses.