Are Mobile Networks Now Supplements to Fixed Networks?

For a decade and a half, some observers have argued that Wi-Fi networks could emerge as alternatives or replacements for the mobile network. The speculation seemed to peak in 2002 and 2003, when there was lots of speculation about potential community or metro Wi-Fi networks. These days, Wi-Fi generally is seen as a complement to the mobile network.

Some might argue that the mobile network now is secondary, in some cases, to Wi-Fi networks. Cable operators, among some others, hope that is the case, since it would shift the perception of fixed networks.

Olivier Baujard, Deutsche Telekom's chief technology officer, says that in the Netherlands, “mobile” phones actually are used more as untethered devices. where 45 percent of traffic is from home, 45 percent is from work, and only 10 percent is while "walking, driving a car, taking a bus, or things like that." In other words, the mobile network is the access mechanism only about 10 percent of the time.

The ability to substitute Wi-Fi for mobile connections is less robust in areas of lower density, though. Buit Wi-Fi covers most of the places where people are, most of the time. Some 80 percent of the time, people connect to the mobile Internet from their home, office, or other indoor location—all areas that are addressable by Wi-Fi. Cisco says.

The other angle is that most of the apps people use are not specifically tied to “mobile,” on the go use cases. According to Cisco, about 66 percent of all smart phone application use involves email, web browsing, gaming, productivity tools or video calls that do not intrinsically involve a “mobile” use case.   

In addition, 80 percent of people's data traffic comes from just three cell phone towers--one near home, one near work, and one someplace in between, the Deutsche Telekom executive said.

That is one important reason why end user bandwidth consumption has to be measured across all available networks people use, one might argue. For example, U.K. Android users send and receive 78 percent of all their 3G data over WiFi networks, according to Nielsen.

Globally, 33 percent of total mobile data traffic was offloaded onto the fixed network through Wi-Fi or femtocell in 2012, according to Cisco.  In 2012, without offload, mobile data traffic would have grown 96 percent rather than 70 percent.

But consumption might change as more users switch to the faster fourth generation Long Term Evolution networks. The reason is that faster networks almost always lead to more data consumption.

The implication is that total data consumption cannot be assessed using usage data from any single network.

“Offloading” increases each hour after 5pm, building to a peak between 11pm and midnight, when 90 percent of data transferred uses Wi-Fi.  Conversely, 3G data transfer tends to peak just before the working day starts, again at lunchtime, and finally during the early evening commute when users cannot rely so much on a Wi-Fi connection.
Nielsen Smartphone Analytics.

David Gosen, Nielsen European managing director for digital, said “Wi-Fi is on average three-and-a-half times more dominant than 3G when it comes to delivering mobile internet data services. It peaks around midnight as users gravitate towards social networks."

Samsung Galaxy S III and iPhone 5 Web Usage Finally Equivalent?

The amount of Web traffic generated by Samsung Galaxy S III and iPhone 5 users is a near-50/50 split, with iPhone 5 commanding a slight one percent lead over the Galaxy S III, a new analysis by Chitika suggests. 

This is a change from Chitika's last study in October 2012, where the  iPhone 5 had an eight percentage point lead over the Galaxy S III, Chitika notes. 

That possibly is significant, since earlier studies had suggested that Android users, for whatever reason, used their web browsers less than iOS users. 

Of course, one also has to note that comparing "one retail brand" against all other "competing brands using a specific operating system" is not really an apples to apples comparison. Still, many studies over the last couple of years have shown a big discrepancy between web usage by iPhone and iOS users and people using Android devices. 

Some have argued that Android handsets are somewhat popular within the tech early-adopter market, but that volume adoption is driven by  consumers using low-end, cheaper smart phones.

The implications, some would argue, are that Android represents a less attractive platform for advertising, commerce and other ways of wringing value out of an installed base of smart phone end users.

iPhone users completely dominated Internet-based smart phone activities in a recent study. 

A recent survey of mobile web usage found that 60 percent of mobile web visits came from iOS devices.

A study IBM did of Black Friday online sales showed much the same thing, suggesting that iOS (iPads and iPhones) devices represented 20 percent of Black Friday sales.

Why VoIP is “Disruptive,” iPhone Is Not

In order for a company to disrupt a market, the revenue and cost structure of the incumbents that the company faces must keep them from responding. By that test, VoIP is disruptive, but the Apple iPhone, though a transforming technology, actually is not disruptive, oddly enough. 

Disruption, though sometimes equated with "better products," is more than that. Disruption of a market occurs when an incumbent in the market finds it almost impossible to respond to a disruptive product. 

That can happen because the incumbent's cost structure means the incumbent really cannot serve some customers. In some cases, that means a disrupting company can build a market out of a segment that the market leaders cannot afford to serve.  

People sometimes say a technology is "disruptive." It’s more appropriate to call the business model “disruptive," in that sense. 

Characteristics of disruptive businesses, at least in their initial stages, can include:  lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics, according to Professor Clayton Christensen. 

Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.

Some examples of disruptive could include:

Disruptor	Disruptee
Personal computers	Mainframe and mini computers
Mini mills	Integrated steel mills
Cellular phones	Fixed line telephony
Community colleges	Four-year colleges
Discount retailers	Full-service department stores
Retail medical clinics	Traditional doctor’s offices

Women Have Less Access to Internet, Everywhere

WhatsApp Adoption Nearly 100% in Spain

According to Mobidia Technology, messaging apps get used hundreds of seconds to nearly a thousand seconds a month, in some markets. 

Separately, Mobidia reports, Wi-Fi usage has tended to decline, where Long Term Evolution is available, suggesting that users tend to rely on 4G more than 3G. And, no surprise, where LTE is used, the total amount of data consumed rises. 

Cable Operators Will Have 11% Share of Small Business Communications Market Share by 2017

source: Atlantic-ACM

U.S. Broadband Access Providers Score Well on Peak Hour Performance

There’s good news for most broadband suppliers in the latest Federal Communications Commission study of peak-hour speeds.

In the September 2012 testing period, ISPs on average delivered 97 percent of advertised download speeds during peak periods, statistically equivalent to the last report, which found that the studied ISPs were able to deliver 96 percent of advertised speeds during peak hours of use.

On average, during peak periods DSL-based services delivered download speeds that were 85 percent of advertised speeds, cable-based services delivered 99 percent of advertised speeds, fiber-to-the-home services delivered 115 percent of advertised speeds, and satellite delivered 137 percent of advertised speeds, the FCC says.

This compares to July 2012 results showing largely the same performance levels: 84 percent for DSL, 99 percent for cable, and 117 percent for fiber. These results suggest that many ISPs are meeting established engineering goals for their respective technologies.

                        Average Peak Period and 24-Hour Sustained Download Speeds
                                                    (% of advertised rate)
On average, satellite services delivered 161 percent, fiber-to-the-home and cable-based services delivered 108 percent, and DSL-based services delivered 99 percent of advertised upload speeds. These compare with figures from the July 2012 Report of 110 percent for cable, 106 percent for fiber, and 103 percent for DSL.

As was the case for the prior July 2012 report, “the majority of ISPs continue to closely meet or exceed the speeds they advertise, although some ISPs fell short of delivering speeds that matched their advertised rates,” the FCC says.

The latest study also shows that the average subscribed speed is now 15.6 Mbps, representing an average annualized speed increase of about 20 percent. Note that this represents an increase of 20 percent in service tiers purchased by end users, not speeds offered by suppliers. The ability to purchase a service is important, but arguably less significant than the fact that people actually buy.

For the first time, satellite broadband is included in the analysis. “In our testing, we found that during peak periods 90 percent of ViaSat consumers received 140 percent or better of the advertised speed of 12 Mbps,” the FCC says. “In addition, both peak and non-peak performance was significantly higher than advertised rates.”

Frontier Communications also substantially improved its performance 13 percent from the last reporting period.

Latency was lowest in fiber-to-the-home services, and this finding was true across all fiber-to-the-home speed tiers.

During the September 2012 testing period, fiber-to-the-home services provided 18 ms round-trip latency on average, while cable-based services averaged 26 ms, and DSL-based services averaged 44 ms. This compares to figures from the April 2012 testing period of 18 ms for fiber, 26 ms for cable and 43 ms for DSL.

But there is an interesting bit of data among the test results. Faster speeds do provide better web browsing experience, but only up to about 10 Mbps. Beyond about 10 Mbps speeds, latency and other factors begin to dominate and limit performance, the FCC says.

That is not to say higher speeds are not useful, though. Higher speeds “may provide significant advantages in a multi-user household or where a consumer is using a specific application that may be able to benefit from a higher speed tier,” the FCC says.

The data also suggest the perhaps 80 percent of “fiber to home” or “cable” users consume 100 Gbytes a month, or less. Some 80 percent of DSL users consume 60 Gbytes or less.

In contrast, perhaps 80 percent of satellite users consume 18 Gbytes a month, or less.

                 Cumulative Distribution of User Traffic, by Technology

IP Modernization: Regulate Means or Ends?

At least in part, one of the issues regulators and other policymakers face when trying to craft regulations that promote investment in new communications facilities and also protect consumers is whether to focus on "ends" or "means."

As states such as Kentucky work to deregulate some elements of communications, the hope is that more flexibility about "means" (how services are brought to consumers) will lead to more investment that achieves the desired "ends."

In other words, the Kentucky bill would allow service providers more freedom to use different networks or means of delivery, rather than requiring use of specific network platforms to do so. In most cases, observers believe, that will mean use of Long Term Evolution wireless networks, rather than the fixed network. 

On the other hand, the Kentucky bill also has provisions to protect consumers in rural areas.

Communities with fewer than 5,000 land lines would have to be served by the existing fixed network, unless another provider offered a similar service. Some observers will say that offers virtually no protection, since cable operators undoubtedly offer voice and data in most such markets. 

The point is whether the greatest good, for the greatest number, is provided when service providers have more flexibility, or whether better results are obtained when network choices also are specified. 

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