Internet Access in Africa is Going to Grow Very Fast

In 2000, one might still have looked at tele-density figures for Africa and south Asia and still have concluded that not much was happening, in terms of adoption. 

But that changed, sometime around 2004, when a growth inflection point was reached, both in terms of income and use of mobile phones. 

 That change in growth means traditional barriers to Internet use, on the demand side, will fall rapidly over the next couple of decades. 

Though rural areas will progress at a slower rate than urban areas, change will be rapid, especially against the background of how much change happened over the last 100 years. 

Currently not even half of Africa’s countries are what the World Bank calls “middle income” (defined as at least $1,000 per person a year), by 2025 the bank expects most African countries to have reached that stage. 

That’s important. Statistics showing wide disparities in use of the Internet around the world are snapshots in time. 

What is equally important is the pace of change. One might have argued, based on statistics from 1990 or 2000, that many in developing regions, nothing much was happening. 

But an inflection point occurred, in India for example, around 2004. Much the same happened in Africa. 

Over the past ten years real income per person in Africa has increased by more than 30 percent. In the prior two decades real income per person shrank by nearly 10 percent. 

 Africa is the world’s fastest-growing continent now. 

Over the next decade its gross domestic product is expected to rise by an average of six percent a year. Foreign investment is helping. 

Africa has three mobile phones for every four people, the same as India. By 2017 nearly 30 percent of households are expected to have a television set, an almost 500-percent increase over ten years. 

In sub-Saharan Africa, secondary-school enrollment grew by 48 percent between 2000 and 2008. 

Over the past decade, malaria deaths in some of the worst-affected countries have declined by 30 percent and HIV infections by up to 74 percent. 

The point is that the Internet access gap is going to close, and relatively quickly, even in the regions and areas where the gaps are largest. The large mobile service providers likely will be providing most of the supply. But it is not unreasonable to predict that many independent ISPs also will emerge. 

Time Warner Cable Now Finds Voice is a Legacy Product

Business customer services and high-speed Internet access drove growth at Time Warner Cable in the first quarter of 2013. But video and now voice have started shrinking. 

As telcos have faced for years, users are dropping VoIP lines as they have been dropping other fixed network voice connections, and shifting to use of mobiles instead. That doesn't mean every cable operator faces the problem to the same degree. 

But some cable operators no longer are taking voice share from telcos, because the big trend now is abandonment of fixed voice. 

What remains to be seen is how far service providers are willing to go in creating triple or quad play bundles that provide incentives for users to buy voice services even if they do not plan to use them. 

Residential high-speed data revenue growth was the result of an increase in average revenue per subscriber, primarily due to an increase in equipment rental charges and a greater percentage of subscribers purchasing higher-priced tiers of service, as well as growth in high-speed data subscribers. 

As has been the trend for some time, residential video revenue decreased, driven by declines in video subscribers and premium network and video-on-demand revenue, partially offset by price increases and a greater percentage of subscribers purchasing higher-priced tiers of service.

Time Warner Cable residential voice revenue decreased due to a decrease in average revenue per subscriber, the company says. 

Add Events to Google Calendar from Gmail

Gmail apparently is rolling out an update to Gmail that allows message recipients to create events directly from inside their Gmail messges. 

The update to Gmail is available to the first users May 2, 2013.  Dates and times within emails will appear as lightly underlined. When they are clicked a user's calendar (presumably the calendar associated with the same Gmail address, users will be able to preview their schedules and change the title, date or time of the event. 

Clicking “Add to Calendar” will do exactly that , the Official Gmail Blog says. The calendar event will include a link back to the original email. 

Those of you who have multiple Gmail accounts probably will find you cannot create an entry on the other account or accounts using the feature, though. I'd tell you, but I haven't gotten the update just yet. 

The other issue I am wondering about is the "different time zone" issue. I can't tell immediately whether it is possible to schedule an event, by time, using a discrete time zone other than the zone your PC is set to use. 

Still, I assume lots of us are used to manually setting different time zones. And of course, those of us using more than one Gmail account might prefer to be able to create events on both calendars, or all calendars. I'll have to wait to find out. 

Don't Wait for Federal Government to "Do Something" About Broadband, Gig.U Says

Blair Levin, executive director of the University Community Next Generation Innovation Project (Gig.U) believes the key to U.S, efforts to dramatically boost broadband speeds is not to rely on federal leadership but instead emphasize local leadership.

Working in partnership with companies willing to invest ahead of the current market is the way to make huge leaps, Levin argues. The point is that investment is needed. 

In many cases, the suggestion is that partnerships might try and leverage existing optical fiber networks already in place on the backbone level, in some form of public-private partnership, something that European broadband advocates also support. 

 That always is helpful, but broadband still hinges on access cost and clear-headed assessment of risk and reward. 

Do Spectrum Set-Asides Work?

Reserving spectrum for new competitors is a relatively common tactic regulators take when trying to encourage competition when new blocks of communications spectrum are to be licensed.

The U.S. Department of Justice has suggested Sprint and T-Mobile USA be allowed to acquire spectrum on a preferred basis, when auctions are held for upcoming blocks of spectrum at frequencies below 1 GHz, essentially.

Austria in 2013 will be holding an auction of 28 blocks of spectrum in the 800MHz, 900MHz and 1.8GHz bands, for launching Long Term Evolution networks.

Two of the 800-MHz blocks will be set aside for a new mobile firm not already in the market. The minimum reserve price for this spectrum will be €45.6 million.

Some think such spectrum set asides are not economically effective, essentially denying use of spectrum to the providers who can put resources to work most efficiently.

Nor is it clear that spectrum set asides actually wind up changing market structures long term. One might argue Illiad’s Free Mobile is shaking up France’s mobile market, but the full story is not to be told, yet.

One might argue the auction of personal communications service spectrum did enable firms such as Sprint to enter the U.S. market, and Sprint remains the number three provider, in terms of market share.

But it also is possible to argue that Sprint’s final story also is yet to be written. On the other hand, Sprint’s market entry was not enabled by a set aside, either. Typically, set asides do not allow a new contestant to amass enough total spectrum to really challenge market leaders.

The financial backers of a “set aside” firm do stand to profit.  But whether markets actually are changed, long term, when set-asides are used, is far from clear.

Belgian Content Companies Want 3.4% of ISP Revenue

Every new ecosystem of sufficient size, especially when that new ecosystem upsets legacy revenue models, faces challenge from legacy stakeholders. Telco executives complain about app providers "using our pipes for free." Physical retailers joust with Internet retailers. Google Drive competes with Microsoft Office. Newspapers want revenue sharing from Google. 

Now copyright owners in Belgium want Internet service providers to pay them 3.4 percent of access revenue. The thinking is that the Internet enables some amount of piracy, so copyright owners need to be compensated for such piracy by the ISPs that enable some users to steal content. 

The lawsuit has been brought by the Belgian Society of Authors, Composers, and Publishers, known as Sabam. 

It isn't the first, nor will it be the last effort to shift revenue flows within the Internet ecosystem. 

“Disruption” is a huge concept in the Internet and communications ecosystems precisely because, from time to time, a contestant tries to disrupt the structure of the business, and sometimes succeeds.

Nor, contrary to conventional wisdom, is it always young upstarts and start-ups that make the attempts. Apple was no small firm when it recreated the mobile phone business. Softbank was not an unknown little company when it reshaped the Japanese mobile service provider business.

Nor does disruption happen “overnight.” Huawei has disrupted the global telecom equipment business, but over a decade.

Fon has been trying, with some success of late, to create a new way for people and now even service providers to provide “access” to the Internet. Republic Wireless and FreedomPop are other entities attempting to disrupt the mobile or Internet access businesses.

For incumbents who are the target of the attempted disruptive attacks, the major issues include shrinking gross revenue, declining profit margins, fixed costs and the need to create new business models and revenue streams.

Mobile executives said they want “a more equitable share of the spoils” from mobile ecosystem value, says Emeka Obiodu, Ovum telco strategy analyst, Ovum. That isn’t a new refrain, nor unusual in a business where value and revenue are being created in new ways.

As usual, the separation of access and apps lies at the heart of the concern. The “problem” is that networks are seen as providing foundation for application businesses that service providers do not own or control. To put the matter in other terms, over the top app providers and businesses are viewed by telco executives as “riding the pipes for free.”

“This challenge needs to be overcome,” AT&T CEO Randall Stephenson noted.  Other executives tended to agree.

To be sure, precisely how modern networks can be built and upgraded is an issue.  There is universal agreement that most of the legacy revenue that historically has funded such networks is at risk of disappearing, in large part from competitive apps that displace communication services, or because consumers simply have changing preferences.

But some might note that a large part of the problem is simply that telco cost structures are out of line with current or future revenues. Other competitors offer similar services using networks and business models with different cost structures.

Are BT's Broadband Access Rates Too Low?

TalkTalk Group in the United Kingdom has complained to Ofcom, the U.K. communications regulator, about prices BT charges for its broadband access products.

Specifically, TalkTalk Group thinks BT Infinity retail prices are too low. Yes, too low. The problem, as TalkTalk sees matters, is that very low BT Infinity prices are so low that TalkTalk has little room to buy wholesale capacity from Openreach and sell at retail against the BT pricing umbrella.

In other words, BT is engaging in predatory pricing intended to damage its competitors, TalkTalk alleges. 

Ofcom has opned a proceeding to consider the charges. A 2010 comparison of "superfast" services in a number of countries (it always is difficult to compare prices in terms of local purchasing power, or percentage of household income, across nations) might not suggest U.K. prices are so low. 

The issue is that BT cannot price in a predatory manner, as a dominant provider in the U.K. market. 

   Broadband Service Speed and Price (High Tier)

Country	Downstream	Upstream	Price
Canada[3]	25	7	$67
Denmark[4]	40	2	$72
Finland[5]	24	1	$67
Hong Kong[6]	100	Unlisted	$38
Japan[7]	200	100	$60
South Korea[8]	100	Unlisted	$29
Sweden[9]	100	100	$46
Taiwan[10]	100	5	$37
U.K.[11]	50	Unlisted	$57
United States[12]	50	20	$145

You Will Be Supplying Your Own Smart Phone at Half of Enterprises by 2017, Gartner Says

By 2017, possibly 50 percent of enterprises will require employees to provide their own computing or communications tools, especially smart phones, Gartner now predicts. 

Some 38 percent of companies expect to stop providing devices to workers by 2016, according to a global survey of CIOs by Gartner. 

Those forecasts, if borne out, indicate that an inflection point in enterprise computing already has happened.

"BYOD strategies are the most radical change to the economics and the culture of client computing in business in decades," said David Willis, vice president and distinguished analyst at Gartner.

The changes come for a myriad of reasons, including the power of consumer devices, the preference for consumer devices, the growing prevalence of cloud computing, the ubiquity of high-speed access, the ability to offload mobile traffic to the fixed network and the advantages to enterprises of changing information technology costs.

Gartner defines a BYOD strategy as an alternative strategy that allows employees, business partners and other users to use a personally selected and purchased client device to execute enterprise applications and access data. It typically spans smart phones and tablets, but the strategy may also be used for PCs. It may or may not include a subsidy.

Though enabled by cloud computing, the switch to user-supplied devices also will further drive cloud app adoption, since that is one way enterprises can enforce policies and allow access without the traditional support labor.

While BYOD is occurring in companies and governments of all sizes, it is most prevalent in midsize and large organizations ($500 million to $5 billion in revenue, with 2,500 to 5,000 employees). BYOD also permits smaller companies to go mobile without a huge device and service investment.

Adoption varies widely across the globe. Companies in the United States are twice as likely to allow BYOD as those in Europe, where BYOD has the lowest adoption of all the regions.

In contrast, employees in India, China and Brazil are most likely to be using a personal device, typically a standard mobile phone, at work.

Today, roughly half of BYOD programs provide a partial reimbursement, and full reimbursement for all costs will become rare.

Gartner believes that coupling the effect of mass market adoption with the steady declines in carrier fees, employers will gradually reduce their subsidies and as the number of workers using mobile devices expands, those who receive no subsidy whatsoever will grow.

As you might well expect, the BYOD change will affect enterprise spending on all manner of computing devices. The impact on enterprise IT spending also should be positive for enterprises but negative for existing suppliers of enterprise premises systems and gear.

Apple and Samsung Lead Tablet Market in First Quarter 2013

Global tablet shipments shipments grew 142.4 percent, year over year, in the first quarter of 2013, according to International Data Corporation. And as has been true for the smart phone market, the market is lead by Apple and Samsung.

But Samsung's share is growing, while Apple's share is falling. Tablet shipments totaled 49.2 million units in the quarter.

iCharts

How Much “Dumb Pipe” Revenue Does Comcast Have?

Comcast’s first quarter 2013 earnings report sheds some light on the value of “dumb pipe” revenues earned by Comcast's cable segment. In its cable segment, Comcast booked revenue of $10.22 billion.

Assume that voice, video entertainment, advertising and all other revenue is a “service,” not dumb pipe Internet access.  

Of the amount, some $5.1 billion came from video entertainment. Comcast earned $900 million from consumer voice. Comcast also earned $940 million in advertising and other revenue.

Comcast earned about $2.5 billion in consumer Internet access revenue.

Comcast earned $741 million from business services, presumably a mix of high speed access and voice services. For the sake of argument, assume half of that revenue is high speed access, half hosted voice. So assume Comcast can attribute $370 million in the quarter as Internet access revenue.

That implies about $7.3 billion in smart pipe or service or application revenue. That also implies

“dumb pipe” revenue of about $2.9 billion. So dumb pipe directly represents 28 percent of revenue.

Google, Like AT&T or Comcast, Needs Big New Markets

Google has gotten so big — it booked $50 billion in annual revenue in 2012 — that it needs to find new markets in the billions of dollars to continue moving the sales needle. Small markets just won't do.

AT&T, Verizon, Cisco Systems and Comcast have the same problem. As big as they are, new markets and revenue streams smaller than $1 billion annually just aren't worth pursuing. 

If you want to know why specialty providers often thrive in most big markets, that is the reason. There is a threshold below which it simply makes no sense for a large supplier to compete, and those markets are left for other suppliers. 

Of course, there often comes a time when a former specialty market becomes so lucrative that the big fish have to jump in. Those are key transition points, as the former specialty players typically cannot compete, or simply are bought out. 

20 Mbps for Everybody, for $20 a Month, by 2020?

One should understandably be skeptical about much of what gets said by government officials, for the obvious reason that much of what gets said is for some political purpose, and is not necessarily reflected in real-world policy.

But there probably are reasons to believe that multiple pronouncements by government and non-governmental group officials will actually correspond to a high degree with actual supply of broadband services by private suppliers. First, the pronouncements.

The Secretary-General of the International Telecommunication Union, Dr Hamadoun Touré, is in favor of setting a United Nations goal of ensuring that everybody in the world can access broadband Internet access at speeds of 20 Mbps, selling for $20 a month (£13.25) by 2020.

More to the point, are the corollaries also true? If consumers can buy 20 Mbps access for $20 a month, will they also be able to buy 10 Mbps for $10 a month, or 5 Mbps for $5 a month, or 2.5 Mbps for $2.50 a month?

One way of estimating demand is to note that in many markets, once households reach income of about $10 a day ($300 a month), the possibility of those households falling back into poverty decrease dramatically. And financial stability is conducive to discretionary purchases. At $300 a month income, a household might reasonably expect to afford Internet access costing $9 a month.

The key is more a matter of economics than anything else. How fast will substantial numbers of users in the developing world reach monthly incomes of $100 a month? At that level of income, it is reasonable to expect users to pay $2.50 to $3 a month for broadband.

If one assumes that in 2005 the middle class population of China was about eight percent, by 2030 it will be as high as 72 percent. In India, where the percentage of middle class people in 2005 was perhaps in the low single digits, by 2030 some 41 percent of India’s people will be middle class, defined as households with annual disposal income between 200,000 rupees up to one million rupees ($3,606 to $18,031 in annual disposable income).

Over the last decade, there has been a 50 percent jump in the number of people in the “middle class in Latin America and the Caribbean, The World Bank reports. Roughly speaking, about 30 percent of people in the Latin American and Caribbean region were middle class in 2009, using a definition of income between $10 a day and $50 a day.

A report on the Latin American middle class  found that the middle class in the region grew to an estimated 152 million in 2009, compared to 103 million in 2003, an increase of 50 percent. Even if one assumes a slowing rate of growth, there comes a point where the ability to pay $2.50 to $3 for broadband is predictable.

Even more predictable is the ability of more households to buy access packages providing higher speeds.

The other important development is that ISPs are finding ways to slash costs. Between 2008 and 2009, 125 countries saw reductions in access prices Internet access prices 

, some by as much as 80 percent, the ITU says.  

Between 2009 and 2011, for example, prices for fixed broadband have dropped by 52.2 percent on average and mobile broadband prices by 22 percent, globally.

Affordable broadband programs are starting to emerge in countries such as Sri Lanka and India, with service providers offering connectivity solutions starting as low as US$2 per month.

At present the United Nations (UN) global digital development targets for internet access are focused on ensuring that “all countries should have a national broadband plan or strategy or include broadband in their Universal Access / Service Definitions” by 2015.

The existing goal also includes affordable broadband. By 2015, entry-level broadband services should be made affordable in developing countries, quantified as a monthly price that is less than five percent of average monthly income.

By 2015, 40 percent of households in developing countries should have Internet access.

By 2015, Internet user penetration should reach 60 percent worldwide, 50 percent in developing countries and 15 percent in the Least Developed Countries, the U.N. already says.

Europe’s Digital Agenda expects 100 percent of EU households to have access to service speeds of at least 30 Mbps by 2020, while the United Kingdom is aiming for 90 percent of people to have access to speeds of 25 Mbps  by 2015.

The point is that we have reasons to be quite optimistic about such goals.

How Disruptive Will Online Video Be, for Satellite, Telco, Cable?

Online video distribution will be disruptive for video service providers. But the degree of disruption will be highly disparate. Comcast or Verizon and AT&T might suffer some financial distress, but far less so than the satellite and broadcast TV providers.

In fact, in a strategic sense, on-demand online delivery improves the strategic position of cable and telco networks, and is a major disadvantage for the other networks, which simply will not be able to adjust. The reasons have to do with the network topologies.

Telephone networks always have been designed for one-to-one communications. Most other content delivery networks (broadcast TV, satellite TV, cable TV, over the air radio) were optimal for multicast content. As the market slowly moves to more unicast delivery, topology is going matter quite a lot.

What a multicast network cannot do is support much unicast traffic. So as video content delivery slowly moves to unicast, on-demand modes, the providers with the biggest point-to-point networks, with the most bandwidth, will have advantages. Conversely, multicast networks will be stuck with linear, multicast delivery.

If you want to know why Dish Network is so intent on getting into the mobile business, that is why. Whether he says it directly or not, Dish Network CEO Charlie Ergen realizes the limitations of a satellite video network in an on-demand market.

The conventional wisdom (which isn’t always wrong) suggests new Internet-based providers such as Netflix will gain, while traditional incumbents lose customers, revenue and market share. That is a reasonable view, but is not so simple as some seem to think.

For one thing, the existing video distributors undoubtedly will also have the right to offer online programming, on similar terms and conditions, as Netflix, Amazon Prime or any other online services. In some cases, that will mean less revenue than now is earned. In other cases, the shift might well be revenue neutral.

Nor will online distributors have an especially easier time getting unique or even standard content rights. The studios and networks wil decide what their content is worth, and distributors will have to pay.

Nor will online competitors have an especially easy relationship with content owners. As Netflix faces growing resistance from its suppliers, Netflix will have to pay more for content rights, or lose content deals, for example.

Some content owners will try to “go direct” to end users. But one might be skeptical of prospects for single-studio streaming sites, such as the Warner Archive streaming service, as volume will matter, as will ease of use. And it just won’t be convenient for end users to buy multiple discrete services from lots of suppliers. The largest catalog, “with all the good stuff,” will win.

But the fact remains that Netflix and other online services will face significantly higher programming costs, going forward, as they emphase original content.

Also, cable and telco providers will have strategic advantages. Where now both contestants face the two big satellite providers, in the on-demand business they mostly will not have to compete with them.

Oddly enough, cable and telco will face far less competition in an online market than in the current linear video market.

Also, the magnitude of the revenue change might be less than expected, in net terms, as it also is logical to expect telco and cable ISP revenues to grow as demand shifts to online-delivered video.

Telcos and cable companies might be selling higher-priced broadband access services (though the Google Fiber pricing umbrella is a huge problem), even as they face erosion in video revenues. But telcos and cable companies also stand to gain back market share from satellite providers.

Also, telco and cable revenue drivers already are changing. For cable and telcos, the importance of voice, business services and video services are mirror images.

For cable, video is a legacy service that is dwindling because telcos are taking market share. For telcos, share of business services will shrink as cable takes customers, as already has happened in the voice area.

Overall, both voice and video entertainment revenues will be under pressure, mitigated mostly by bundling that provides incentives for consumers to buy services they might not want, to obtain lower overall prices on a basket of services. But satellite and broadcast TV distributors will face bigger problems: unicast destroys much of the value of their networks.

It isn’t completely clear that broadband access revenues will compensate for declining video entertainment revenues. Especially if Google Fiber succeeds in creating a new value-price expectation for gigabit access ($70 for a symmetrical gigabit), there might not be that much upside for broadband access prices.

According to industry researcher Strategy Analytics, the margins on cable broadband services are 70 percent to 110 percent higher than those on video services (depending on whether or not advertising revenues are included in the calculation). What is not so clear is what margins will be possible for online services.

By 2017, 50% of Enterprises Will Require Employees to Supply Their Own Computing, Communications Devices

By 2017, possibly 50 percent of enterprises will require employees to provide their own computing or communications tools, Gartner now predicts.

Some 38 percent of companies expect to stop providing devices to workers by 2016, according to a global survey of CIOs by Gartner.

Those forecasts, if borne out, indicate that an inflection point in enterprise computing already has happened.

"BYOD strategies are the most radical change to the economics and the culture of client computing in business in decades," said David Willis, vice president and distinguished analyst at Gartner.

The changes come for a myriad of reasons, including the power of consumer devices, the preference for consumer devices, the growing prevalence of cloud computing, the ubiquity of high-speed access, the ability to offload mobile traffic to the fixed network and the advantages to enterprises of changing information technology costs.

Gartner defines a BYOD strategy as an alternative strategy that allows employees, business partners and other users to use a personally selected and purchased client device to execute enterprise applications and access data. It typically spans smart phones and tablets, but the strategy may also be used for PCs. It may or may not include a subsidy.

Though enabled by cloud computing, the switch to user-supplied devices also will further drive cloud app adoption, since that is one way enterprises can enforce policies and allow access without the traditional support labor.

While BYOD is occurring in companies and governments of all sizes, it is most prevalent in midsize and large organizations ($500 million to $5 billion in revenue, with 2,500 to 5,000 employees). BYOD also permits smaller companies to go mobile without a huge device and service investment.

Adoption varies widely across the globe. Companies in the United States are twice as likely to allow BYOD as those in Europe, where BYOD has the lowest adoption of all the regions.

In contrast, employees in India, China and Brazil are most likely to be using a personal device, typically a standard mobile phone, at work.

Today, roughly half of BYOD programs provide a partial reimbursement, and full reimbursement for all costs will become rare. Gartner believes that coupling the effect of mass market adoption with the steady declines in carrier fees, employers will gradually reduce their subsidies and as the number of workers using mobile devices expands, those who receive no subsidy whatsoever will grow.

As you might well expect, the BYOD change will affect enterprise spending on all manner of computing devices. The impact on enterprise IT spending also should be positive for enterprises but negative for existing suppliers of enterprise premises systems and gear.

CenturyLink to Launch Omaha Gigabit Network "Pilot"

Google Fiber seems to be succeeding in changing ISP behavior about access bandwidth. Count CenturyLink as the latest big ISP to launch a gigabit network project. CenturyLink is going to build a gigabit network reaching 48,000 homes and businesses in part of Omaha, Neb. 


CenturyLink's service apparently will be available at first for 9,800 potential customers in west Omaha neighborhood that was a test bed for Qwest Communications "Choice TV," meaning meaning much of the physical infrastructure already is in place. 

The new service, called Lightspeed Broadband, will be available to all of the 48,000 households and businesses in that territory by October 2013.

The CenturyLink residential service will sell for $79.95 a month when bundled with other CenturyLink services, or for $149.95 a month a la carte. 

On a stand-alone basis, the CenturyLink service will sell for more than double what Google Fiber charges, though CenturyLink clearly would prefer customers buy a bundle.