Gigabit Networks Will Destabilize the ISP Market

There are times in the global communications business when stability is the main trend. The first 125 years of telecom history were such times of fundamental stability.

But there are other times when instability and change are the main trends. That might have been said to be the case when global privatization and deregulation happened in the 1980s and 1990s. And instability now is growing with the maturation of voice and the rise of Internet access and mobility as anchor services.

Some might argue growing instability is what we will see over the next decade. Consider only the impact of symmetrical gigabit Internet access service. Quantitative change is not the only issue. Qualitative competitive implications will exist for contestants using different network topologies and access media.

Consider cable operator frequency plans and use of hybrid fiber coax, for example. Executives typically argue that HFC can be upgraded incrementally to support future bandwidths of that sort.

To support gigabit networks, it is argued, fiber is simply extended deeper in the access network, decreasing serving area size by about an order of magnitude, creating the same sorts of advantages mobile operators gain by using a fixed amount of spectrum in a cellular configuration.

Though the least disruptive, such an upgrade might feature per-user peak bandwidth of 100 Mbps, still an order of magnitude slower than Google Fiber’s 1 Gbps, symmetrical. Some say only the high-split and new top-split frequency plans, all featuring more fiber, will support gigabit speeds.

But some might suggest it would be easier to overlay some sort of fiber to home capability than to dramatically change frequency plans now commonly used by U.S. cable operators to support symmetrical gigabit Internet access services. At least so far, most cable executives deem that too expensive an approach.

Though three different frequency plans (low split, mid-split, high split) have been available for decades, virtually all cable operators use the low split plan. Basically, that means frequencies up to 54 MHz are reserved for return signals, while all the rest of the bandwidth up to about 850 MHz is used to support downstream communications and services.

But even traditional “mid-split or high-split networks are not symmetrical. The mid-split frequency plan increases return bandwidth up to about 85 MegaHertz. The high-split network increases return bandwidth to about 200 MHz. The new top-split network offers support for gigabit speeds gigabit speeds.

For cable operators, as for others using radio frequency networks,  the challenge symmetrical gigabit services pose is not simply quantitative (more) but qualitative (equal split networks are needed).

Wi-Fi as Substitute for Mobile Networks: Internet Access is the Difference

Wireless networking is at an inflection point where it can completely replace wired networking everywhere but the data center," said Robert J. Pera, Ubiquiti Networks CEO. 

Allowing for a bit of hyperbole, we are probably once again at a point where observers are going to speculate about whether Wi-Fi networks can compete with or displace mobile networks. That debate is not as robust as it once was. 

It might not be too early to suggest that such displacement does not make as much sense for voice networking or messaging as for Internet access, where use of fixed access by mobile devices primarily for Internet access is a rather common occurrence. 

In fact, Cisco has speculated about the growing relevance of Wi-Fi for several years, in particular because the ways people use the Internet on mobile devices makes Wi-Fi a preferred and normal access method, something that is not quite so true for voice and messaging communications. 


Cisco has predicted that Wi-Fi IP traffic will represent 46 percent of all IP traffic in 2015, while mobile IP (using the mobile network) will account for about eight percent of total traffic.


As early as 2010, more than 55 percent of all global public Wi-Fi hotspots offered free access to users. 

Also, mobile service providers are starting to embrace Wi-Fi as a meaningful part of their overall network access plans, shifting traffic to Wi-Fi to protect bandwidth needed for fully mobile activities. 

In fact, Cisco estimates only 16 percent to 20 percent of mobile device Internet access operations actually happen when people are "on the go" or "out and about." Fully 80 percent of the time, mobile devices are used in the home, in the office or some other indoor location where Wi-Fi will suffice for Internet operations. 



Perhaps oddly, mobile remains the foundation for "always connected" voice, messaging and apps, while Wi-Fi increasingly supports extended Internet sessions and media consumption. 

Mobile's value remains its "always connected" feature, but Wi-Fi access increasingly handles most of the place-based "mostly connected" Internet requirements. 

One feature of Ubiquiti's UniFi 3.0 software is "Zero Hand-Off Roaming." As the name implies, the feature allows users on UniFi networks to roam seamlessly from access point to access point, as is a key feature of mobile networks. 

But some ISPs in the future might give much more attention to whether an Internet-access-optimized network is viable and sustainable, compared to full mobile networks. As mobile service providers provide their own Wi-Fi networks, or contract to use other big Wi-Fi networks, might the reverse happen?

Might big Wi-Fi network operators buy roaming on mobile networks, for the times when Wi-Fi users really want fully mobile Internet access? And, if so, does that make Wi-Fi a full substitute for "mobile networks?"

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 using Wi-Fi as a substitute for mobile access. 

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.

Vermont Telephone Sells $35-A-Month Gigabit Internet Access

Though the offer does not have many implications for other Internet service providers not able to get $5371 per home in free money, Vermont Telephone has begun selling 1-Gbps Internet access for $35 a month.

Vermont Telephone serves 17,500 homes, and has gotten $94 million in "broadband stimulus" funds (about $5371 per home) to upgrade its network. It's interesting, but not an example of sustainable nationwide gigabit access precisely because it is built on huge subsidies. 

The really important developments are any new ways ISPs can build networks delivering gigabit speeds, without subsidies, with clear and sustainable revenue models. 

Will LTE Reset Consumer Price Expectations?

The cost of mobile phone service in Europe has fallen by 15 percent since 2007, even as they have risen by 25 percent in the United States, at least as measured by “average” monthly phone bills. That is one reason why service providers in Europe hope Long Term Evolution will provide a chance to reset pricing expectations.

European users now spend an average of just 24 euros a month on their mobile phones, according to Sanford Bernstein. Americans spend about two thirds more. Some attribute the difference to the higher phone subsidies in the U.S. market, but at least some of the reason for lower European phone bills is greater erosion of voice revenues.

Voice represented more than 80 percent of revenue in 2007 and now accounts for 62.6 percent of revenue for European firms, according to  Informa. And gross revenue is only part of the problem.

Profit margins on that earned revenue also is falling, in most markets, for most providers in Europe, North America and Japan. To be sure, one advantage of LTE is that it is more spectrally efficient, and should allow mobile service providers to offer service at lower costs per bit.

In fact, some might argue that is the primary advantage of LTE, not necessarily the platform for new services. Others would argue that vastly lower latency and much higher speeds so represent an application platform with huge advantages, compared to 3G networks.

The key early test will be whether LTE actually allows mobile service providers to reset consumer expectations about tariffs.

Does Bandwidth Once Again "Want to be Free?"

What is the key implication of Google Fiber selling 1-Gbps symmetrical access for $70 a month? Granted, such offers pose destabilizing and disruptive challenges to any ISPs competing in the markets where Google Fiber exists, or could exist. At the very least, Google Fiber will push other major ISPs to speed up the volume and tempo of their bandwidth upgrades.

But Google Fiber raises, in a new way, an older argument about the impact of Internet technology in a broad sense.

About a decade ago, Bill Gates irritated executives in the communications ecosystem by arguing that “bandwidth wants to be free? ” Others at the time quipped about whether “computing wants to be free?” Others might argue that data wants to be free. And some have been arguing that content wants to be free.

To be sure, Gates meant that bandwidth would not be a constraint to creating new services and apps, as computing cycles and storage had ceased to be a fundamental problem in the software business.

Nor, as it turns out, is it true that computing or information or content always “wants to be free.” But it still is worth considering “what would my business look like?” if communications, bandwidth, computing, storage or information were so available and low cost that those ceased to be constraints to a revenue model.

Such assumptions have immediate consequences for suppliers of those goods, of course. If communications, computing, storage or information wind up being so low in cost that they no longer constrain what can be done, what changes?

Google, Netflix, Amazon, Apple, Facebook, Square and many other examples illustrate what is possible when computing, communications, devices, transactions and information suddenly cease to be barriers.

But Gates was substantially correct. How many these days would argue against the notion that most public Wi-Fi access is substantially free?

“You can’t use today’s technology constraints to predict tomorrow’s developments,” says Amadeus Consulting CTO John Basso. That fundamental insight, based in large part on Moore’s Law, might once again be more important than often is believed.

You could argue whole businesses now are built on the assumption that technology (especially hardware) constraints disappear over time. All cloud-based apps are built on such assumptions.

In 2004, Gates argued that “10 years out, in terms of actual hardware costs you can almost think of hardware as being free — I’m not saying it will be absolutely free — but in terms of the power of the servers, the power of the network will not be a limiting factor,” Gates has argued.

You might argue that is a position Gates adopted recently. Others would argue that has been foundational in his thinking since Micro-soft was a tiny company based in Albuquerque, New Mexico in 1975.

Young Bill Gates reportedly asked himself what his business would look like if hardware were free, an astounding assumption at the time. In inflation-adjusted terms, an Apple II computer of 1977 would have cost $5,174, for example.

Though there are lots of entrepreneurs advocating or working on new ways to make bandwidth available to end users, both in consumer and business settings, Google Fiber arguably has the potential to radically remake expectations in the Internet access space, in part because of its high profile and assets. It sometimes might take a very well-heeled entity (such as Apple) to change or disrupt an industry, and Google is such a firm.

In the same way that Gates has argued that hardware will not be a limiting factor for what can be done with computing, you might argue that Google Fiber once again raises the same question for communications. Granted, $70 a month is not free. But $70 for a symmetrical gigabit access service, in a decade, might be the equivalent of “so affordable that access no longer is a constraint.”

That is what Google wants, and that is what Google Fiber seems to be encouraging, in a serious new way.

12% of Internet, App Activities Occur on Mobiles

The amount of time people spent using mobile devices for activities such as Internet and app use, gaming, music and others has more than doubled in the past two years, according to eMarketer.

As a result, 12 percent of total time spend consuming media, using apps and the Internet now happens on mobiles. 

In 2012, the amount of time U.S. consumers spent using mobile devices excluding talk time, grew 52 percent to an average of 82 minutes per day, up from just 34 minutes in 2010, eMarketer says. 

Time spent with "online" (non-mobile) apps and activities grew 3.6 percent to an average 173 minutes per day, compared to 7.7 percent growth in 2011 to 167 minutes per day.

Mobile will have the higher growth rates, in part because mobile usage starts from a low installed base, and in part because more mobile devices are being used for Internet and mobile app activities.

U.K. to Test White Spaces in Third Quarter of 2013

Ofcom, the U.K. communications regulator, plans to test “white spaces” technology in the United Kingdom in the fall of 2013.

White spaces are frequencies otherwise used for digital terrestrial TV broadcasting and wireless microphones, but which for reasons of frequency planning are not actually used in particular areas. Think of the way a cellular network is built, reusing frequencies by spatially dividing them.

The actual amount of available spectrum will be available in rural areas, if U.S. experience holds. In urban markets, it is possible that only a few 6-MHz channels will be available. Perhaps perversely, it also is possible that tens to scores of 6-MHz channels will be available in isolated or rural areas.

But progress probably will be relatively slow, as a full ecosystems of end user devices and infrastructure has to be built, meaning relatively high prices for devices and infrastructure in the near term.

White spaces takes advantage of similar interference protection schemes where the same frequencies are not used in adjacent areas.

Among expected applications for white spaces are broadband access for rural communities, Wi-Fi  services or new “machine-to-machine” networks.

Ofcom anticipates that the technology could be fully rolled out during 2014.

Ofcom separately is planning to free up more spectrum in the future for fifth generation mobile networks (5G).

AT&T Digital Life Launches in 15 Cities

AT&T Digital Life puts AT&T into the home security and energy and water management businesses in a big way, launching in 15 U.S. cities, with a plan to serve 50 cities by the end of 2013. 

Presumably the service will work anywhere AT&T's wireless network reaches, and also uses any broadband connection as well. 

It's a big test of market demand for machine-to-machine services, especially with Comcast and Time Warner Cable offerings slated for commercial launch as well. 

8% of Canadian Households Have Cut Video Cord

About eight percent of Canadian households no longer watch either over the air TV or buy a video subscription, according to Media Technology Monitor. The percentage of homes without a TV subscription service or off-air TV rose one additional percentage point in 2012 to eight percent, after doubling in 2011 to seven percent, apparently as a result of the transition to digital TV formats. 

As other analysts have noted, perhaps the bigger problem is people and households that simply never sign up for a video service when they set up their households. Such households might not own a TV. But even some households that own a TV do not use it, Nielsen estimates. 

In fact, perhaps 75 percent of homes that no longer watch over the air or video subscription services actually own at least one TV. 

Global Smart Phone Sales Top Feature Phones for First Time

In the first quarter of 2013, global sales of smart phones outpaced feature phones for the first time, according to International Data Corp.

In the worldwide smart phone market, suppliers shipped 216.2 million units in the first quarter of 2013, representing 51.6 percent of the total phone shipments the quarter.

In fact, some might say smart phones now are simply a device that should be tracked with other computing devices. "Phone users want computers in their pockets,” said Kevin Restivo, IDC senior research analyst.

The days where phones are used primarily to make phone calls and send text messages are quickly fading away," he said. "As a result, the balance of smart phone power has shifted to phone makers that are most dependent on smart phones."

Top Five Total Mobile Phone Vendors, Shipments, and Market Share, 2013 Q1 (Units in Millions)

Vendor	Shipments	Market Share	1Q12 Shipments	1Q12 Share	Change
Samsung	115.0	27.5%	93.6	23.3%	22.9%
Nokia	61.9	14.8%	82.7	20.6%	-25.1%
Apple	37.4	8.9%	35.1	8.7%	6.6%
LG	15.4	3.7%	13.7	3.4%	12.4%
ZTE	13.5	3.2%	16.2	4.0%	-16.5%
Others	175.4	41.9%	161.1	40.0%	8.9%
Total	418.6	100.0%	402.4	100.0%	4.0%

T-Mobile USA "No Contract" Plans are Deceptive, T-Mobile USA Agrees

T-Mobile USA’s “no contract” plans really aren’t, the Washington Attorney General's Office has found. As a result of an agreement between T-Mobile USA and the AG’s office, T-Mobile USA will modify its advertising nationwide.

T-Mobile USA recently launched new wireless service plans claiming to offer “no restrictions,” “no annual contract” and no requirement that the consumer “serve a two-year sentence.”  

The Attorney General argued, and T-Mobile USA agreed, that the claims are deceptive. Customers who purchase a phone using the 24-month payment plan must carry a wireless service agreement with T-Mobile USA for the entire 24 months or pay the full balance owed on phone if they cancel earlier.

So the plan really isn’t a “no contract” offer.

Logitech Revenue Dips 12%: Can You Say "Post PC?"

Logitech International fourth quarter results, for the period ending March 2013, fell 12 percent, year over year.

Sales for the latest quarter were $469 million, down 12 percent from $532 million for the same quarter of the prior year. "Turnaround" is the phrase the company now uses to describe its path forward. 

A "narrowed our strategic focus," job cuts and prioritized effort on products for tablets are examples of what Logitech is doing. 

It's just one more example of what is happening in the "post-PC" computing business. 

Time Warner Cable Offers its Customers "Free" Public WiFi

Google Fiber has gotten AT&T to say it will build a gigabit network in Austin. Time Warner Cable says it will give its Internet access customers "free" access to the Time Warner Cable public Wi-Fi network in Austin, Texas. 

"TWC WiFi" is a citywide WiFi Hotspot network free to Time Warner Cable customers with "standard Internet" plans or above, as well as "business class" subscribers. 

Prepaid access starting at $2.95 an hour will be available as well. 

So far, you'd have to deem Google Fiber a success, as far as spurring ISPs to upgrade Internet access. One would suspect the impact has only begun. 

OTT Messaging Represents 4% of Total Messaging Revenue

Over the top messaging apps are perhaps an apt metaphor for the ways the Internet has reshaped the communications business, most of us would likely agree. At various points in the recent past, there has been debate about whether the next generation telecom network would be the Internet.

That isn't true, precisely. There are private IP networks as there is a public Internet. There are Internet apps and carrier services. But to a degree that is discomforting, much of what people want to do these days can be done using the Internet, rather than any carrier-provided service.

Over the top messaging illustrates those changes as well as anything. But the OTT impact is not so much that it cannibalizes carrier messaging revenue. In fact, OTT probably represents something on the order of four percent of messaging revenues.

As often is the case, OTT does not so much replace existing revenue as destroy the business. Skype, for example, earns a modest amount of money in global telecom terms. But that is not what Skype represents. 

Instead of shifting revenue from one provider to another, Skype mostly kills the carrier voice business. Executives in the video entertainment business encapsulate that insight by talking by "trading analog dollars for digital dimes."

That pretty much gets it right. Internet alternatives only partly "take market share and revenue." Mostly, they destroy existing markets. T

Will AT&T Try to Buy Vodafone?

A recent rumor that Verizon Communications and AT&T were making a huge joint bid for Vodafone was denied. Some think that only means Vodafone rejected the offer out of hand, but the deal of as much as $245 billion might yet see the light of day, in a new form.

Assume Verizon Communications is serious about now pursuing a long-rumored effort to buy  from Vodafone  the portion of Verizon Wireless it does not already own. Assume the deal proceeds and is finalized.

Would that put Vodafone back into play, with AT&T making a new bid?

Vodafone is the second-largest global mobile communications company, with approximately 403 million customers in its controlled and jointly controlled markets.

Vodafone currently has equity interests in over 30 countries across five continents and more than 50 partner networks worldwide.

AT&T would stand to expand in a major way as a global carrier, and find a way to overcome sluggish growth of its U.S. business.  

Such a bid would be ironic in some ways. In 2004, Vodafone made a bid for the entirety of AT&T Wireless when that company was for sale.

Had that bid been successful, Vodafone presumably would have sold its stake in Verizon Wireless, and then rebranded the former AT&T Wireless business as Vodafone.

Cingular Wireless, at the time a joint venture of SBC Communications and BellSouth ultimately outbid Vodafone and took control of AT&T Wireless, which now is known as AT&T Mobility.  

So in an odd turn of events, Vodafone, which tried to buy AT&T Wireless, would then be acquired by its former target.

Make no mistake, the rumored or potential deals would offer the two U.S. mobile service providers a pathway to growth. For Verizon Communications, owning all of its mobile business would immediately boost earnings. For AT&T, the Vodafone deal would catapult AT&T into the global market in a new way.

Strategically, the AT&T interest in Vodafone’s global assets is a clear sign that AT&T sees future growth in the U.S. market as problematic. Verizon first has to consolidate its U.S. business before it can consider looking overseas for future growth.