A Processor View of "Post PC"

At the processor level, here is one way of looking at the "post PC" trend. Because of a fall in sales of PCs, AMD has fallen from the number-two spot for processors to the fourth position, in terms of market share. 

Qualcomm and Samsung moved up, both on the strength of sales of mobile processors. 

AMD's market share dropped 21 percent, year over year, between 2011 and 2012, while Intel dropped one percent. Samsung, which supplies processors for Apple, among others, grew share 78 percent, while Qualcomm grew share 28 percent.

Twitter Starts to Get Traction

The issue some observers have had about Twitter is that, compared to other social networking sites, it was not used by many people.

The other issue has been that, even if some older users availed themselves of Twitter, teens did not use Twitter. 

That seems to be changing. 

Some 24 percent of online teens now use Twitter, a figure that is up from 16 percent in 2011 and eight percent in 2009.

In fact, say researches at the Pew Research Center's Internet and American Life Project,  teenagers’ use of Twitter now outpaces that of adults.

About 16 percent of online adults are Twitter users, up slightly from the 12 percent who were using Twitter in 2011.

As with some other highly popular Internet apps, Twitter suggests that early adopters can come from other demographic segments that teens or even college age users. YouTube, blogging sites and LinkedIn provide examples. 

Mobile Broadband Changes the Way People Use the Internet

There were about 90 million U.S. fixed broadband accounts in service in June 2012, and 153 million mobile broadband accounts, according to the latest report from the Federal Communications Commission.

The study shows that both mobile and fixed networks are evolving towards faster speeds, but also shows how much more nuanced the subject of broadband access has become.

Where once the issue was fixed connections to places, we now confront a mix of fixed connections to places plus many mobile connections directly to persons.

To be sure, fixed connections tend to feature higher speeds than mobile connections. But the ways people use the Internet arguably has changed, with far greater use of “on the go” Internet usage. For the most part, mobile broadband complements fixed broadband.

But perhaps seven percent of users are “mobile only” for their Internet access requirements.

The Media Behavior Institute found that mobile phone and tablet devices were reducing the the percentage of U.S. Internet users who use a computer in a given week.

The percentage of respondents using a desktop PC slipped by five percentage points between the July 2012 and January 2013.

On average, 43.5 percent of participants got access to the internet using a mobile phone each week during the period ending in January 2013, an eight-percentage-point increase over the period ending in July 2012.

Tablets grew their average weekly reach by four percentage points, used by 17 percent of participants at the end of the study period.

In the first quarter of 2013 Experian Marketing Services found that U.S. mobile Internet users spent the greatest percentage of their mobile web time using email, a 23 percent share of time spent, compared to five percent of time spent on desktop.

Social networking was the second most used app on mobile, representing 15 percent of time spent with any Internet app or service.

Travel also occupied a greater share of time on the mobile Internet (nine percent) compared with the desktop (one percent).

80/20 Rules Apply for Service Provider Capital Investment

For large telcos making capital investments, the "80/20" rule holds, a study suggests. Some 80 percent of the attention goes to decisions that produce less than 20 percent of operating results. 

Conversely, decisions that drive 80 percent to 90 percent of operating results tend to get 10 percent to 20 percent of attention, when capital investment choices are to be made.

Firms that earn more from their capex expenditures typically have proposals justified on the basis of improving performance metrics from existing services or territories, a PwC study has found.

Most of the telecoms executives in the survey distinguish between ‘business-as-usual’ capex and ‘project’ capex (also known as ‘innovation’ or ‘growth’ capex).

But though project capex typically represents just 20 percent to 30 percent of an operator’s total capex, it receives 80 percent to 90 percent of the capex committee’s attention. That is not to say innovation and revenue growth is unimportant. It is to note that capital allocation is failing to pay attention to the 20 percent of decisions that drive at least 80 percent of the financial impact (the “80/20 rule”).

That might seem to run counter to the notion that tier-one telcos must find new revenue sources. It isn’t. It means that the emphasis for capital investment has to be related to actual impact on revenue generation.

The logic is simple enough. A $5 a month swing in revenue has huge impact when the revenue-generating units involved number in the scores of millions, compared to a $5 a month revenue swing on a revenue-generating service involving a hundred thousand units.

In other words, $5 a month incremental revenue on a base of 30 million units generates $150 million a month, or $1.8 billion a year. A $5 a month incremental increase in revenue on a service with 100,000 units generates $500,000 a month, or $6 million a year.

PwC analysed the financial performance of 78 fixed-line, mobile and cable telecoms operators around the world and then surveyed 22 senior telecoms executives from a representative cross-section of companies in terms of size, services, location and financial performance.

“The telecoms industry is at an inflection point ,” a PwC report argues. It’s spending lots

of money on new infrastructure, but it’s not optimizing financial returns. PwC claims “most

telecoms executives admit as much.”

European Mobile Revenue: Structural or Cyclical Problems?

Vodafone is the world’s second-largest mobile service provider or perhaps the seventh largest, as measured by revenue. In its past year ending in March 2013, Vodafone revenue fell 4.2 percent  to £44.4 billion.

The shortfall was caused principally by economic conditions in Europe and new EC rules on wholesale termination revenue, both of which are hitting revenues in European markets.

But there is a broader trend at work. In developed markets, revenue drivers continue to evolve.

Before 2000, global telecom revenue growth was driven by voice revenues. After 2000, as voice declined, total revenue was sustained by growth of mobile service revenues, driven by voice, and then supplemented by text messaging revenue.

So mobile service revenues became the growth driver for the global business, which also expanded to include the formerly separate video entertainment business.

In many markets, though, mobile voice revenue now is flagging, as are text messaging revenues. In the business as a whole, growth rates of mobile revenue have been dropping since 2007, while average mobile revenue per subscriber has been under pressure as well, as first voice usage and now text messaging usage has begun a decline.

The obvious next growth driver is mobile data, which grew about 14 percent. But Vodafone’s revenue issues show that is not an easy or foolproof process. Mobile data revenue is growing, to be sure.  

In 2014, telecommunications companies will make more money from mobile broadband than from fixed broadband for the first time.

But nothing remains the same in the communications business, these days. At some point, as smart phones displace most use of feature or basic phones, and as most consumers therefore start buying mobile data plans, mobile data will itself become a legacy revenue source.

So the big question is “what comes next?” For most service providers, machine-to-machine services are part of the answer. Bigger mobile data plans, generating more revenue, are part of the answer as well. For some, mobile applications will be part of the creation of new revenue sources. Mobile payments, mobile banking and mobile commerce likewise are among the potential new sources of revenue.

The point is that the next big transition for the mobile industry will come rather soon. And that transition will entail the maturation of the mobile data revenue “growth” story and its eventual replacement by a next wave of revenue drivers.

Much will hinge on how fast those new sources can be developed and scale.

1-Gbps LTE? Yes, But You Need 40 MHz of Bandwidth

There is a simple answer to the question of why mobile service providers and would-be providers want more spectrum. As usage continues to climb, and as access speeds continue to climb, there is little chance of boosting access speeds, in the mobile or fixed wireless realms, without adding more spectrum.

For example, it is possible to deliver 1-Gbps mobile Internet access using Long Term Evolution, but that requires a 40-MHz block of spectrum, not the 10 MHz or 20 MHz channels now used by LTE providers.

Numerical superiority: LTE Advanced vs LTE
Source: 3GPP

Dish Network Offers $2 Billion for LightSquared’s Spectrum

Dish Network reportedly has offered to buy LightSquared spectrum, offering $2 billion for LightSquared's 60 MHz of spectrum.

LightSquared apparently has until May 31, 2013 to accept the offer, which was made May 15, 2013, Bloomberg reports.

Dish already has received Federal Communications Commission permission to use former mobile satellite service spectrum to create a terrestrial Long Term Evolution network.

Dish had acquired that spectrum for $3 billion from bankrupt satellite companies DBSD North America Inc. and TerreStar Networks.

As with most initiatives undertaken by Charlie Ergen, Dish Network CEO, there typically are a number of ways to monetize an asset. Ergen always has believed spectrum has value, whether to support an on-going business venture or simply as an asset to be sold. 

But most observers might agree that Dish Network is acting as though it has clear intentions of entering the mobile business, and is not simply "bluffing."

Google Hangouts Video on AT&T Getting Broader Support

Mobile service providers have had a complicated relationship with over the top applications viewed either as displacing existing revenue-generating services (carrier voice services) or imposing high loads on mobile networks (video apps and video conferencing apps).

That is one reason why, at least initially, use of Apple iPhone “FaceTime” was restricted to Wi-Fi access on the AT&T mobile network, for example.

To be sure, there are both public policy issues (can a person use a lawful application) and .  management issues (how do resource intensive apps get access to the network?) In the past, there also have been business model issues (can a mobile service provider support unlimited use of video for a flat rate price?)

Google Hangouts provided the most recent issue. Hangouts unifies Google messaging services, including video chats and conferencing. But AT&T indicated initially that video chats could be used only on Wi-Fi networks.

AT&T seems to have quickly clarified that policy, at least for some users. AT&T originally had allowed mobile use of Hangout video chats on Apple, Samsung and BlackBerry devices used on “Mobile Share” or tiered data plans (3G). Long Term Evolution support will be enabled by mid-June, AT&T says.

In the second half of 2013, AT&T will enable pre-loaded video chat apps that work on the mobile network for all customers, regardless of data plan or device; that work is expected to be complete by year end.

Today, all of its customers can use any mobile video chat app that they download from the Internet, such as Skype, AT&T also says.

Smart Phone Shipments Will Pass Feature Phones in 2013

Global smart phone shipments will surpass shipments of basic and feature phones for the first time in 2013, according to NPD.

Global smart phone shipments are expected to reach 937 million units in 2013, compared to just 889 million units for basic phones and feature phones.

Between 2011 and 2016, smart phone shipments will grow at a compounded annual growth rate of 26 percent, to 1.45 billion units, which will account for 66 percent of the mobile phone market.

Emerging markets are driving most of the smart phone growth, NPD researchers say.  In these markets, entry-level smart phones priced below $200 are important.

China leads in the entry-level smart phone category, comprising 55 percent of shipments. China is also the largest market for smart phones as a whole, and the Asia-Pacific region will account for over 50 percent of smart phone shipments in 2013.

At the high end of the market, LTE-enabled smart phones will reach 23 percent market share in 2013, NPD DisplaySearch says.

Screen sizes are also changing. In 2013, more than half (57 percent) of smart phone displays will range between four and five inches, while screens larger than five inches will grow to 16 percent of the market.

How Big a Revenue Boost from LTE?

Whenever a next-generation mobile network replaces an older network, there typically is room for both product substitution that does not dramatically affect total revenues, and incremental revenue lift, initially from higher prices, and later from new services.

Juniper Research forecasts Long Term Evolution network subscribers will double from an estimated 105 million subscribers in 2013 to nearly 220 million in 2014.

What that means in terms of incremental revenue is less clear, though many service providers are using the LTE rollout as an opportunity to raise data plan prices. In many markets, 4G data plans will simply cannibalize 3G plans, with some incremental revenue lift if operators are able to charge a 4G pricing premium.

That might be more the case in developing markets, where 3G cost premiums over 2G rates were quite significant.

But market conditions might lessen the amount of price premium possible in particular markets. In many markets, 4G tariffs had to be lowered, or usage buckets increased, while price remained constant,  because of market conditions.

And some competitors have simply chosen not to charge a premium for LTE access.

In some cases, consumers think the 4G prices are too high.

That is not to say new applications are unimportant. It might turn out that revenue lift occurs for indirect reasons, such as users consuming more mobile data as appetites for mobile video entertainment consumption continue to grow.

It also is possible more consumers will start using tethering features for their tablets and PCs, which likewise will increase consumption. The point is that, even in the absence of new apps, mobile service providers should see incremental revenue from 4G.

But the “gross revenue” figures we will be seeing will have to be weighed against the cannibalization of 3G data revenues.

“To some extent, 4G may not impact mobile innovation the way 3G did,” observes Dan Hays, PwC US Wireless Advisory Leader. “We may be more likely to see second order effects from 4G rather than new things enabled by the technology itself.”

In other words, there might not be as much application innovation as some believe, nor might the revenue lift revenue lift be as significant as some believe.

“I believe 4G will enable operators to deliver a more consistent experience, more ubiquitously,

at a lower cost and allow them to make money and stay in business,” said Hays. That sounds a bit like the upside from fiber to home networks.

There is some revenue upside, particularly from video entertainment services. But much of the benefit comes from “future proofing” or lower operating and repair costs. Lower costs per bit is one advantage, for example.

Two Orders of Magnitude More Access Speed Within 10 Years? History Says "Yes"

If history is any guide,  gigabit Internet access will not be at all rare in a decade, though how much demand for 1-Gbps might well hinge on retail pricing levels.

In August 2000, only 4.4 percent of U.S. households had a home broadband connection, while  41.5 percent of households had dial-up access. A decade later, dial-up subscribers declined to 2.8 percent of households in 2010, 68.2 percent of households subscribed to broadband service.

If you believe gigabit access is to today’s broadband as broadband was to dial-up access, and you believe the challenge of building gigabit networks roughly corresponds to the creation of broadband capability, a decade might be a reasonable estimate of how long it will take before 70 percent of U.S. homes can buy gigabit access service, and possibly 50 percent do so.

Consider that by June 2012 about 75 percent of U.S. households could buy a service of at least 50 Mbps, while half could buy service at 100 Mbps. So it took about a decade to put into place access at two orders of magnitude higher than the baseline (dial-up speeds).

The key distinction is between “availability” and “take rate.” Even though consumers are starting to buy faster access services, most seem to indicate, by their buying behavior, that 20 Mbps or 25 Mbps is “good enough,” when it is possible to buy 50 Mbps or 100 Mbps service.

In the U.K. market, for example, though service at 30 Mbps is available to at least 60 percent of homes,  buy rates were, in mid-2012, at about seven percent (to say nothing of demand for 100 Mbps).  

The European Union country with the highest penetration of such services was Sweden, at about 15 percent, in mid-2012.

To be sure, retail prices are an issue. With relatively few exceptions, U.S. consumers tend to buy services up to 25 Mbps, and price for a gigabit service is probably the main reason.

That is the reason behind Google Fiber's disruptive pricing for gigabit access at $70 a month. That pricing umbrella implies far lower prices for 100 Mbps service than consumers can buy at the moment.

And that is every bit as important as the headline gigabit speed. If a gigabit connection costs $70 a month, will a 100-Mbps connection cost $35 a month?

Fixed Networks are for "Capacity," Mobile Networks are for "Coverage"

These days, in many markets, people using smart phones are on the fixed networks for Internet access, more than on the mobile network. 

In North America, as much as 82 percent of Internet traffic from smart phones occurs indoors, where users can take advantage of Wi-Fi, instead of the mobile network,

Analysys Mason

suggests.

In Western Europe, as much as 92 percent of Internet usage from smart phones occurs indoors.

So to a large extent, that means the fixed network provides “capacity,” while the mobile network provides “coverage,” a statement that describes the two ways a small cell can provide value for an urban mobile network as well.

For the most part, Wi-Fi offload happens mostly in the office and the home. Some small cells will include Wi-Fi access, but the volume of Internet activity still occurs indoors, not outdoors where small cells will reinforce the mobile macrocell network.

Some tier one carriers have moved to create their own networks of public Wi-Fi hotspots, and many can serve customers from owned fixed networks as well. That makes the fixed network and public Wi-Fi a direct part of the mobile network.

In other cases, carriers simply passively allow their devices to use non-affiliated Wi-Fi networks, as when a mobile service provider allows a user to roam onto a fixed network owned by another service provider. 

That is one more example of the loosely-coupled nature of the Internet ecosystem. A mobile provider can offload traffic to another carrier with which it has no formal business relationship. 

Will TV White Spaces Be Important?

Whether TV white spaces spectrum is going to be a big deal or not might hinge on how much real spectrum is available in given markets, plus manufacturing volume to get retail prices of network elements down to a level where the spectrum has a reasonable business case.

At a high level, it isn’t going to help as much in urban areas, where interference issues are more constraining.

It might prove quite important in some rural areas where is a lot more bandwidth because there are enough people living in a region to create incentives for TV broadcasters. In areas where few people live, there might be lots of bandwidth, just few potential users or customers. Every location is different.

While at least 6 megahertz is available throughout most of the United States, there are a few locations where there is much more spectrum available. Though most of the spectrum cannot be used in most locations, the white spaces band includes 150 MHz of spectrum in total.  

Other sources of lightly-regulated or unlicensed spectrum might be made available in the future. And new technologies such as agile radio and ultra-wideband technologies are available, but regulator action is required to enable use of such technologies.

And though the general rule has been that spectrum is licensed to entities for specific purposes, unlicensed spectrum might be crucial.

"Unlicensed" Spectrum Doesn't Always Mean "You Can Use it" Without Paying

It sometimes is easy to forget that it isn’t as easy to become an ISP in some nations, as in others. Consider the matter of “unlicensed spectrum,” for example.

“Unlicensed” spectrum exists. But use of that spectrum is, in about 66 percent of nations, is not really non-licensed. Based on responses from 75 countries, 33 percent of national regulators require a license to use 2.4, or 5 GHz “unlicensed” spectrum, a study found.

Another 33 percent of national regulators require obtaining an operating license, though not a spectrum license. About 33 percent do not require a license of any type. In a small fraction of cases (two percent) use is forbidden.

"Mix and Match" is one Advantage of Software Defined Networks

If you wanted to rip cost out of any device, app or network, what are some of the things you’d do? You’d remove parts. You’d probably reduce size.

Shoretel, for example, sells docking stations for iPhones and iPads, for example, that allow the iOS devices to act as the CPU, when the docking station providing all the peripheral support.

And that's as good an example as any of how a network designer would try and wring cost out of a network.

You’d rely as much as possible on functionality that could be supplied by other common CPUs. 

You’d pick passive solutions, not active solutions, as often as possible. You’d simplify with an eye to improving manufacturing tasks.

You also would create a “mix and match” capability about specific makes and models of network gear. You’d want to be able to use a variety of network elements, made by many different suppliers, interchangeably.

You’d create a network using common, commodity-priced devices as much as possible.

In other words, you would make devices, networks and apps "as dumb as possible," and as flexible and interchangeable as possible.

If you think about software defined networks, that’s an application of the principle. Not “everything” about SDN is “as dumb as possible;” only the data plane elements.

The corollaries are that such approaches create networks that also are “as flexible as possible” and “as affordable as possible.”

The control plane you would still want to be as “smart as possible,” and you would be able to afford to do so, since the key to much cost reduction is the ability to share a physical resource across a broad number of end users, subtending devices or nodes.

That is why the per-user or per-customer cost of an expensive headend is rather low, as a percentage of the total cost of a network. On the other hand, the total cost of smart CPUs (decoders) used by every end user or customer is so high because there is so little sharing possible: each customer needs one or more decoders.

That was what drove cable operator Cablevision Systems to adopt a “network digital video recorder” strategy. By centralizing the CPU functions, the ability to share the cost of processing infrastructure was vastly improved.

The broader principle is that one proven way to reduce cost, increase flexibility and enhance functionality is to separate and centralize control plane (CPU) functions from the data plane functions that are widely distributed throughout a network.

That’s the whole point of software defined networks.