Is Value of Mobile Broadband Destined to Decline?

The hands-down value of a mobile network, compared to a fixed network, is mobility. And given the dramatic surge of mobile adoption over the last four years, at least some fixed network executives naturally will be worried about the long term value of any fixed broadband network.

As recently as 2008, some estimates had fixed broadband connections outnumbering mobile broadband by about a four to one margin.

By 2010, just two years later, the number of mobile broadband subscribers around the world surpassed that of fixed broadband.  By 2012 mobile broadband subscriptions outnumbered fixed subscriptions about three to one.

By 2015, it is anticipated that there will be 3.1 billion mobile broadband subscribers compared to 848 million fixed broadband subscribers, meaning mobile will outnumber fixed about five to one.

One might argue that change has happened so fast that most people have not yet had a chance to figure out what it means. For one thing, mobile now has become the dominant way people access the Internet globally. On the other hand, mobile access also has meant that access speeds are relatively slow, compared to fixed access.

But there is a line of thinking that widespread 4G could change value propositions and market shares even more. 4G Americas reports that 150 operators worldwide have now launched commercial LTE services in 67 countries, 50 of which were launched in the past five months.

"4G Americas expects more than 100 LTE network launches in 2013, the group 4G Americas says. The group expects  63 million LTE connections at the end of 2012, with subscriptions doubling in 2013 to 134 million LTE connections.

With 4G access speeds now replicating, in many cases, digital subscriber line speeds, some service provider executives will be seriously looking at ways to use LTE as a primary access network, displacing the fixed network.

Up to this point, raw speed and price per bit have been major advantages for fixed networks. But 4G could be disruptive, encouraging more service providers to substitute LTE for fixed network access.

Oddly enough, the use case, if not the value proposition represented by a mobile network, might be changing, and in an unexpected way. At the same time LTE threatens to open a new front in the mobile substitution process (as mobile voice has displaced a significant amount of fixed network voice), the ways people behave might arguably be strengthening the value proposition for fixed access.

Oddly enough, the changes enhance the role of the fixed network role, compared to the role of the mobile network.

Ironically, as valuable as fully mobile access is, people often do not use the mobile feature as much as one might suppose.

In fact, as early as 2010, hugely significant percentages of total device access used the fixed network (Wi-Fi) rather than the mobile network,  Analysys Mason has argued.

Proportion of mobile network traffic that is generated indoors, by region

Ironically, just as 4G is starting to narrow the gap between mobile broadband and fixed broadband, users-perhaps reacting to the higher cost of mobile broadband-have been shifting their smart phone usage to the fixed networks. That works because most “mobile device” Internet access happens at home, with a significant percentage at other locations where it is possible to default ot Wi-Fi access.

That is not to say people would behave in just the same way if prices per bit were the same, on both fixed and mobile networks, and if usage allowances could be shared as easily on mobile networks as on fixed networks. All other things being equal, people probably would not care which network was used, if the cost of fixed data usage, and mobile data usage, were roughly equivalent.

The point is that, given the current circumstances, people are shifting most of their smart phone Internet access activities to the fixed networks, and appear to be doing the same with their tablets. One easily can argue that mobile service provider shared data plans are precisely an attempt by mobile service providers to narrow the value-price gap with fixed services.

At the same time, one might argue that fixed networks now account for half to 80 percent of all mobile device access, in addition to supporting all the other devices people traditionally have used on their fixed network services.

If, in a few years, as much as 90 percent of mobile Internet access uses a fixed network connection, one might also argue that most of the value of mobile broadband is devalued.  

One might argue that could, or must, lead to lower per-bit prices for LTE access, and higher per-bit prices for fixed services, since it is the fixed services that supply 90 percent or more of the value of all Internet access.

In that sense, saying that the value of the wired networks is backhaul, whether for for small cells, macrocells or Wi-Fi, does not devalue the fixed network, but highlights its new role.

In a large sense, the access network always has been about backhaul, if “access” to network resources can be described as backhaul. Also, in a large sense, all access methods, no matter what the final “tail” circuit might be, have simply been ways to connect an end user device to the resources of the core network.

In an odd way, that could be more true than ever in a world where most devices are either mobile or untethered, and even in a world where mobile broadband is reasonably fast, even compared to many other terrestrial alternatives.

Wouldn't it be ironic if faster mobile access both allowed mobile networks to compete with fixed networks, and, at the same time, value shifted to the fixed networks?

Users Now Create Their Own Access

In the latest sign that the distinction between public and private networks has blurred, the Federal Communications Commission now has decided private use of consumer signal boosters requires service provider approval for operation.

Signal boosters are used indoors, typically, to boost indoor mobile phone signal strength. Sometimes they are used in cars for this purpose, as well.

But the FCC now has decided that the signal boosters can interfere with wireless networks and cause interference to a range of calls, including emergency and 911 calls. So the FCC now has adopted new rules stipulating that use of such devices is contingent on non-interference to licensed mobile service provider signals.

Under the FCC’s new rules, users will need to register their booster with the customer’s wireless provider. Unless the mobile service provider agrees, the booster cannot be used.

Though aimed at preventing signal interference, the new rule illustrates the changing nature of access. Increasingly, users are weaving together a mix of access networks and techniques to create their own services, combining public and private access methods.

Wi-Fi networks are the best example, but the signal booster issue also is part of the same trend. What that might mean, or should mean, for other efforts, such as municipal broadband , will be hotly debated.

But there is no doubt that, in a genuine sense, end users now stitch together their own access networks and services, blurring and blending the lines between public and private. It is likely to get murkier over time, not clearer, what the precise mix of methods might wind up being. 

Widespread use of Wi-Fi is a prominent example. But potentially new allocations of spectrum for use on a non-licensed basis could be a big factor as well. New proposals for 5 GHz Wi-Fi  provide one example.

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.

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.

Is 100-G About to Drive a New Wave of Core Network Spending?

"After ending 2012 on a flat note, things are looking up for the optical market in 2013," says Andrew Schmitt, Infonetics Research principal analyst for optical at Infonetics Research. "Our conversations with equipment providers continue to trend positive, particularly in North America where 100 Gbps spending is about to ramp. The general consensus remains that an optical cycle for equipment in the core is emerging, what we call the 'optical reboot.'"

"Meanwhile, there are positive rumbles in the EMEA region, where 2012 ended with a spending flourish and carriers are cutting dividends to plow capital into general capex," Schmitt says.

The preliminary indication for China is that 2013 also will be a huge year for 100G as well. China is about half of the global 40 Gbps wave division multiplexing equipment market, and 2013 will be the peak year for 40G worldwide, Schmitt says.

The global optical network hardware market grew two percent in the fourth quarter of 2012, quater over quarter, but was down 13 percent year over year.

For the full year 2012, total optical equipment spending was down 10 percent worldwide

The SONET/SDH optical segment fared much worse, falling 30 percent in 2012.

Google to Sell Touchscreen Devices Using Chrome in 2013

Touchscreen notebooks based on Chrome and presumably built by a third party will be sold by Google sometime in 2013. 

Some may wonder why Google does not move immediately to unify Android and Chrome environments, instead of supporting two environments, one for PCs and the other for smart phones and tablets. 

In fact, Google executives have said in the past that Android and Chrome will, at some point, be unified. Obviously Google continues to believe, or at least, the supporters of the two operating system approach within Google continue to believe, that two operating systems are the best solution for now.

That line of reasoning might be that even if the two operating systems eventually are merged, that does not mean such a unification is best attempted now. Perhaps the better approach is to optimize each for the distinct roles of PCs and smart phones and tablets, for the moment.

Cost, simplicity, minimal overhead and speed all could be valid reasons for doing so, at least for the moment. As smart phones morph into larger screen tablets, and PCs morph into smaller screen netbooks, there might come a time when a new sort of device logically is the place to create one single operating system. 

But, for the moment, Google might be betting it is better off to optimize the smart phone and notebook environments for the use cases and interfaces people tend to expect in each domain, and then only gradually unify the approaches as users begin to change their interface preferences, if in fact that happens. 

Some of us would continue to argue that the user interface for a content creation and work task is quite distinct from a content consumption application. As a rational engineer would not simply duplicate unneeded functionality across different device families, neither would a rational engineer try to stretch the multi-function, multi-device approach too far, too fast. That tends to lead to devices that aren't the best in either domain. 

Myanmar's Telecom "Big Bang" is Coming

Myanmar says it has gotten statements of interest from 91 companies interested in one of two initial new communications licenses to be issued by Myanmar.

The new national licenses do not appear to specify which network technologies can be used to build the new networks. But most observers would tend to agree that mobile will be the only logical way to build new networks from scratch, and that Long Term Evolution 4G mobile networks will be the logical choice.

It appears that a total of four licenses will ultimately be issued, two to domestic firms and two to foreign firms.

Myanmar, where nine percent of the population has a mobile phone, wants to boost telecom communication availablitiy to as much as 80 percent of the country by 2016.

Myanmar is among the countries in Asia with the least availability of communications services. Cambodia has a services penetration rate of 70 percent, Laos 87 percent and Thailand more than 100 percent.

U.K. LTE Auction: Disruptive or Not?

The U.K. Long Term Evolution spectrum auction is over, and the results might surprise some observers. Some had thought there would only be enough spectrum for three winners of the 800 MHz spectrum, a result that would have put one of the leading four U.K. service providers at a disadvantage.

Instead, not only did all four leading providers win 800 MHz spectrum, but BT is getting back into the mobile business as a spectrum-owning, facilities-based provider, using the 2.6 GHz band. 

As it turns out, the auctions will not potentially disrupt the existing market in the sense that one of the leading four mobile service providers would have been shut out of 4G spectrum ownership. Instead, all four leading providers will have their own LTE spectrum. 

But BT is getting back into the mobile business on a facilities-based basis. And that could shake up market dynamics. In that sense, the auctions are potentially disruptive.
Also, the winners bid in a rational way, as shown by the total sums the contestants bid to win their licenses. Though some had feared overbidding by the contestants, the auction actually raised less money than the U.K. government had expected, based on the earlier Netherlands auction.

The auction raised £2.34 billion ($3.61 billion) for the government, but some had forecast the auction would raise £3.5 billion.

Though arguably not as good for the government, the license fees will be helpful for the contestants themselves, who did not “overbid” for licenses, as was the case with 3G auctions.

After more than 50 rounds of bidding, Everything Everywhere Ltd, Hutchison 3G UK Ltd, Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc), Telefónica UK Ltd and Vodafone Ltd have all won new Long Term Evolution spectrum in the United Kingdom.

Of those four service providers, only one--Telefónica UK Ltd.--has a “universal service obligation related to its use of coveted 800-MHz spectrum. .

Telefónica U.K. Ltd. must provide a mobile broadband service for indoor reception to at least 98 percent of the U.K. population (expected to cover at least 99 percent when outdoors) and at least 95 percent of the population of each of the U.K. nations – England, Northern Ireland, Scotland and Wales – by the end of 2017 at the latest.

A total of 250 MHz of spectrum was auctioned in two separate bands – 800 MHz and 2.6 GHz. This is equivalent to two-thirds of the radio frequencies currently used by wireless devices such as tablets, smartphones and laptops.

The lower-frequency 800 MHz band is better for widespread mobile coverage, while the 2.6 GHz band offers higher capacity.

Spectrum Results

Winning bidder	Spectrum won	Base price
Everything Everywhere Ltd	2 x 5 MHz of 800 MHz and 2 x 35 MHz of 2.6 GHz	£588,876,000
Hutchison 3G UK Ltd	2 x 5 MHz of 800 MHz	£225,000,000
Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc)	2 x 15 MHz of 2.6 GHz and 1 x 20 MHz of 2.6 GHz (unpaired)	£186,476,000
Telefónica UK Ltd	2 x 10 MHz of 800 MHz (coverage obligation lot)	£550,000,000
Vodafone Ltd	2 x 10 MHz of 800 MHz, 2 x 20 MHz of 2.6 GHz and 1 x 25 MHz of 2.6 GHz (unpaired)	£790,761,000
Total		£2,341,113,000

Mobile and Fixed Broadband Switch Roles, Fast

Something interesting has happened in the broadband access business, namely a huge reversal of market share in just several years. Consider that as recently as 2008, some estimates had fixed broadband connections outnumbering mobile broadband by about a four to one margin.

In 2012, the ratio was reversed, and there were four mobile broadband connections in use for every fixed connection. That sort of change--that fast--does not happen in the communications business very often.

The number of mobile broadband subscribers around the world surpassed that of fixed broadband at the end of 2010, in appears. So mobile broadband went from a 20 percent of market state to a 50 percent of market state in just two years, by some estimates.

After about another three years, mobile broadband grew to represent 80 percent of all broadband connections, by some measures. That is a breathtaking change, in terms of the speed of the change.

By 2015, it is anticipated that there will be 3.1 billion mobile broadband subscribers compared to 848 million fixed broadband subscribers.

Global fixed broadband subscriptions reached around 550 million in 2011, mainly boosted by strong growth of DSL in China.

China is the largest single country in terms of fixed broadband subscriptions with around 140 million, followed by the United States and Japan. DSL represents more than 60 percent of all fixed broadband subscriptions followed by cable and Fiber-To-The-Home/Building (FTTH/B). 

The high growth rate of mobile broadband means that mobile broadband, if it has not already grown to represent 80 percent of total broadband subscriptions, will have done so by 2015 or so.

In emerging markets, mobile broadband is expected to increase from 37 to 79 percent of all broadband subscriptions between 2010 and 2015.

The growth of mobile broadband is not news. But what might be more shocking is the growth rate and the size of the installed base. Rarely does mobile substitution for fixed services happen so fast.

Mobile Payments Might Take a While....

Technology adoption, though we sometimes believe otherwise, can take quite a long time, even for innovations that wind up being quite useful and ubiquitous. Indeed, many popular innovations were adopted relatively quickly, and there is a trend for newer digital products to be adopted very rapidly.

Telephone and electricity took decades to reach significant penetration. The PC, the Internet (Web, at least) and mobile phones were adopted much faster.

Given the current interest in mobile payments, mobile banking and mobile wallets, it might be worth remembering that innovations related to payments and money often take decades to reach significant penetration.

The point is that it would not be unusual for a decade to pass before we even get to the inflection point for adoption, often said to be 10 percent of households. The point is that there is plenty of time for any number of approaches, and competitors, to disappear before we reach 10 percent adoption of households. 

But a corollary might also be true. No contestant not already in the market when the inflection point is reached, likely will be among the leaders when the market reaches 50 percent.

China Now Has More Tablets And Smartphones Than The US

By the end of February 2013, China will have 246 million devices compared to 230 million in the United States,” says mobile analytics company Flurry.

In January, the US and China were within one million devices of one another. Flurry is measuring what it calls “active” devices, which means phones and tablets that are actually connecting to the internet, and not simply devices sold.

NTT DOCOMO’s LTE Subscribers Top 10 Million

NTT DOCOMO says subscribers to "Xi" (pronounced “crossy”), the company’s Long Term Evolution mobile service, surpassed ten million subscribers on February 18, 2012. 

Subscribers reached one million in December 2011 and then topped five million in August 2012. 

DOCOMO also is boosting speeds, adding a 112.5 Mbps downlink, available in 22 cities by March 2013 and more than 50 cities by June 2013. 

LTE base stations offering a 75 Mbps downlink, double the current speed in many locations, will amount to 4,000 by March 2013 and then jump to 10,000 by June 2013. 

DOCOMO also plans to introduce a 150 Mbps downlink service before March 2014.

Vodafone Mobile Charger Could Save Up to $10 Billion Annually in Travel Costs

Perhaps 500 million to 600 million mobile phone users globally have no ready access to electricity sources to recharge their mobile phones and other devices. Another 750 million "struggle" to find ready electrical sources. 

Those users spend perhaps $10 billion annually traveling to places that do have electricity so they can recharge their devices. But Vodafone now is supplying portable chargers across Tanzania, to help solve that problem. 

The chargers can be powered by a bicycle dynamo or a solar panel. In a trial program conducted last year, mobile phone users with the Ready Setcharger spent an average of 14 percent more time on their phone. Vodafone will be selling the chargers at the places uses typically recharge their phones. 

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