What is the Global Value of Wi-Fi? How Much More Would be Added by Additional Spectrum?

Each household globally already using Wi-Fi may derive a yearly benefit from Wi-Fi of $118 to $225 resulting in a total economic gain for all households of around $52 billion to $99 billion annually, a study commissioned by Microsoft suggests. 

In the absence of Wi-Fi, mobile operators would be forced to invest large sums in their 
networks or strictly curtail their users’ usage. 

Worldwide, approximately 150,000 to 450,000 new radio base stations would be needed to cope with world smartphone traffic in the absence of Wi-Fi. 

That suggests a savings of about $30 billion to $93 billion in a single year, given current rates of tower construction. 

A 40% yearly growth of data traffic to 2016 will require mobile operators to deploy an 
additional 115,000 extra sites, an increase of around 4% from today’s numbers. However, in 
the absence of Wi-Fi an additional 1.4 million macrocell sites, or 43% of the current total 
would be required. The difference in costs between the two scenarios is extremely large, 
$250 billion (NPV) – comparable to around one third of the total annual revenue of the 
telecommunications industry. Even the least expensive solutions involving femtocells or 

picocells would require an investment of $45 - $60 billion. 

Perhaps that is one way of illustrating the potential value of more extensive use of unlicensed spectrum. 

Many would argue that more spectrum--often licensed spectrum, but perhaps more crucially additional non-licensed spectrum--is needed to spur additional competition in the broadband access market (though some would argue competition in not everywhere the key problem at the moment).

In the case of smartphones and tablets, Wi-Fi carries 69 percent of total traffic. For 
traditional PCs and laptops, Wi-Fi is responsible for carrying 57 percent of total traffic, greater 
than the share of Ethernet connections and 3G data combined. 

Some 439 million households – 25 percent of all households worldwide – have home Wi-Fi networks. 

Without Wi-Fi the value of fixed broadband would be lower and would result in the disconnection of perhaps 50 to 114 million fixed broadband connections around the world. 

More Spectrum, and More Non-Licensed Spectrum is Needed

Many would argue that more spectrum--often licensed spectrum, but perhaps more crucially additional non-licensed non-licensed spectrum--is needed to spur additional competition in the broadband access market (though some would argue competition in not everywhere the key problem at the moment).

As always, perspectives hinge on any number of considerations including the ways such policies affect incumbents of all sorts, including the ability to secure capital to exploit available non-licensed spectrum, and the impact of licensing costs and access on the potential range of business models.

Investment has become a more important issue for many regulators given the growing uncertainty about traditional communications business models, combined with growing competition from network-based and over the top rivals.

On the other hand, even supporters of non-licensed spectrum approaches will note that unlicensed bands are less flexible if future needs change.

But some of us might argue that the value of the unlicensed approach is that it promotes experimentation and makes possible market entry into communications by providers that do not and cannot invest gobs of capital into their businesses.

In other words, most would agree that licensed approaches favor bigger companies, while unlicensed spectrum favors smaller companies, who can get into markets without investing in spectrum assets.

Some might also argue that unlicensed spectrum approaches traditionally have not gotten the serious attention of policymakers and regulators in many parts of the world where entrpreneurs might well leap into the ISP business if they were not required to pay for spectrum and comply with licensing requirements geared to tier one communications service providers.

80% Broadband Penetration in Western Europe

Almost 80 percent of homes in the EU-7 (France, Germany, Italy, Netherlands, Spain, Sweden, and UK) buy broadband access services in 2013, Forrester Research says. 

U.S. broadband penetration is about 83 percent, according to a new report by the Center for the Digital Future. 

The main issue now is how long it will take for Internet penetration, virtually synonymous with broadband access, to reach comparable levels everywhere on the planet. It will.

Telefonica Denies Talk of a AT&T Takeover Bid

Telefónica says that it has not received "any approach, nor any indication of interest, neither verbal nor in written form, from any party."

The reported $93 billion (70 billion euros) acquisition effort by AT&T was said by one report to have been blocked by Spanish legislators.

Reports such as that of an AT&T bid for Telefónica can happen for all sorts of reasons, sometimes essentially as trial balloons by would-be dealmakers, sometimes only because firms engage in "what if" exercises.

Still, the rumors come as a merger wave is thought to be coming, in the European Union. 

More Consolidation, for Cable and Everybody Else

The "name of the game in the cable business is scale," Liberty Media Chairman John Malone says, referring to the need for yet another wave of consolidation in the U.S. cable business. 

Until August 2009, the Federal Communications Commission had enforced a rule that no single U.S. cable company could serve  more than 30 percent of U.S. households. 

That limit mostly was an issue for Comcast, but Comcast decided to expand by getting into the programming side of the  business, rather than getting bigger "horizontally," by acquiring more cable TV systems. 

But growing competition in the business now puts a new premium on additional scale, Liberty Media apparently believes. 

In part, the problem is that markets are more competitive, with other providers taking market share, and with more pressure on profit margins. 

As with any other market where margins are dropping, suppliers can compensate by increasing the volume of sales, which means more customer scale. 

In principle, the same dynamics are at work in other parts of the communications business as well, ranging from mobile services to rural telecommunications to competitive local exchange carrier and incumbent local exchange carrier markets. 

Apple and Samsung, for example, dominate profits in the smart phone industry, some would say because they also dominate market share. 

That relationship between market share and profits is one reason consolidation in the cable and other parts of the communications and video entertainment business will continue. 

Chart courtesy of Stifel.

Incumbent ISPs will have to Disrupt Themselves

Disrupting the normal economics of providing Internet access might require disruptive ways of building networks. The perhaps typical thinking is that only “attackers” and non-traditional ISPs have a vested interest in disruption.

But it might now be the case that all ISPs will have to disrupt their own ways of supplying access, to continue to maintain a positive revenue model, on both the high end (fixed fiber optic networks in the United States and elsewhere) as well as the low end (perhaps a ire people who do not at present have access).

The reason is that the economics of Internet access are growing more challenging at both the high and low ends of the access business. At the high end, the example of 1 Gbps, symmetrical, for $70 a month is going to disrupt all other pricing expectations. At the low end, the issue is how to affordably and quickly provide basic access to up to a billion new users.

Google’s “moon shot” testing of balloon based Internet access might be the best example of an attempt at widespread disruption of the traditional costs of providing Internet access at the low end, the bookend to Google Fiber, the effort to disrupt the market for high-end Internet access.

And it is hard to say which is the tougher challenge: getting 1 Gbps fiber ot home costs way down, or supplying wIreless Internet access to a billion users in the global south.

Up to 80 percent of the total broadband investment cost is related to civil infrastructure works, the European Commission says. Another way of putting matters is to say that as much of 80 percent of the cost of building fiber-to-customer networks is not affected in a positive way by Moore's Law.

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But that's only part of the problem. The other issue is that the financial return from any FTTH project is becoming more challenging in a competitive environment

In part, that is because multiple competitors in any market reduce the number of customers any of the competitors can hope to get. At the same time, revenue available from voice, Internet access or video entertainment faces growing pressure.

So ISPs face both more limited addressable markets and also potential or current threats to average revenue per service and therefore potentially lower average revenue per account.

The fundamental contradiction is that continued investment in fixed-line networks, which is necessary over time, occurs in a context of essentially zero growth.

Atlantic-ACM, for example, now forecasts that U.S. wireline network revenue, overall, between now and 2015, will be flat at best. Compound annual growth rates, in fact, are forecast to be slightly negative, at about 0.3 percent. Where total industry revenue was about $345 billion in 2009. By 2015, revenue will be $337 billion, Atlantic-ACM predicts.

That is not to argue against replacement of aging networks; in fact that is a necessary and normal part of any network deployment. The issue is the declining amount of revenue any such network can generate.

In the global south, there is a different problem, namely that the underlying cost of any current network is too high to rapidly add up to a billion new users.

Google's "Project Loon," for example, is testing prototype balloons as transmitting platforms, using unlicensed spectrum. But that should also be a spur for others to continue exploring ways to supply Internet access in the global south by other methods.

In many cases, unlicensed spectrum and radios (wireless) will be the only viable way to do so. All that can happen only if regulators are willing to unlock more unlicensed spectrum.

Google Tests Communications Balloons for Internet Access

 Disrupting the normal economics of providing Internet access might require disruptive ways of building networks.

And that might apply both to the high end 1 Gbps end of the access business as well as the other end, where "just a little Internet access" could be really important."

Google's "Project Loon," for example, is testing prototype balloons as transmitting platforms, using unlicensed spectrum. 



In the New Zealand tests, balloons float about 20 kilometers in the atmosphere, covering an area of about 40 kilometers on the surface. 
The radios on the balloons use the 2.4 GHz and 5 GHz radio spectrum, which are generally unlicensed globally.< It appears that inter-balloon communications are being tested, not just uplinks and downlinks from discrete balloons.

One of the architectural principles is that the balloons will float with the prevailing high-altitude winds, requiring quite a lot of balloons to provide coverage that is stable over time. 
That is a "flaky" way to build a network, by conventional thinking. Transmitter locations essentially cannot be "controlled" in the traditional sense.
They are not anchored or steered (except within small altitude limits). But the balloons should be able to traverse east-west and west-east by catching prevailing winds, to some extent.
The idea is to create a "latitude-specific" fleet of balloons that essentially would orbit west to east in the southern hemisphere. Part of the reason is that most of the Internet unconnected live in the southern hemisphere. 

Project Loon undoubtedly will trigger the expected sniggers of derision (“loons”), but it is the sort of “moon shot” that could radically change the availability of Internet access for millions to a billion people.


That is not to disparage the efforts of the ISPs who now supply most of the Internet access. But all providers will likely be forced to explore ways to supply vastly more bandwidth, while chopping operating and capital costs.


That is especially true in the global south, where the cost of an Internet connection is more than a month’s income.


That “requires looking at the problem of access from new angles,” Project Loon organizers say.


“We believe that it might actually be possible to build a ring of balloons ring of balloons , flying around the globe on the stratospheric winds, that provides Internet access to the earth below,” says Mike Cassidy, project lead.


Cassidy says access speeds “similar to today’s 3G networks or faster” have been obtained so far.

Building a usable network out of fleets of free floating balloons requires “complex algorithms and lots of computing power,” says Cassidy. But think about it: that’s what Google excels at.
Tracking and uplinks have to be somewhat dynamic. There may be a need for inter-balloon communications.

But the use of unlicensed spectrum and balloons two of the more-significant approaches to building Internet access networks. One of those key inputs is a matter of government intention and decision.

As proved to be true when the Wi-Fi spectrum was opened up for unlicensed use, sparking a huge wave of innovation, some of us would argue that opening up additional significant blocks of non-licensed spectrum likewise will enable new waves of disruptive innovation.

To be sure, that is why such calls will meet with opposition. The issue is whether at least some governments, some places around the world, must consider the creation of more unlicensed blocks of spectrum suitable for "access" to the Internet. 

The Google experiments furthermore indicate the value of globally unlicensed bands that are harmonized to some extent.

Frequency-agile radios will help handle the different frequencies in discrete regions. 

EU Votes to End All Roaming Charges Within European Comnmunity

European Union roaming rates will drop to zero, but it isn’t clear precisely when that will happen. The move could come as early as July 1, 2014, but some do not believe the EU could move that fast, making a 2015 change more likely.

The end of mobile roaming rates within the EU is expected to hit mobile service provider revenues about two percent, though saving EU mobile users substantial money.

An end to roaming fees for voice calls, texts and internet access will effectively be completely scrapped under the proposals, which are part of a broader effort to create a single European telecom market.

 

The EU already has been lowering rates  at both the wholesale and retail levels. But the group of 27 European Commissioners reportedly has voted to make the changes before European elections in May 2014.

Some might argue the EC cannot move that fast, or would want to give European Union service providers an extra year to get ready for the revenue hits.

In large part, the move to create a single telecom market also is intended to create a better climate for industry consolidation.

And that might be the key implication. Ignoring the revenue impact of lost roaming revenues for service providers, the big outcome is expected to be a major wave of industry consolidation in the EU.

One New Way to Raise Customer Satisfaction: Lose Your Most Unhappy Customers

Sometimes “customer satisfaction scores” have to be evaluated carefully, as it is not clear what predictive value such scores actually have. There are often multiple reasons.

Though customer satisfaction logically is related in some way to customer retention and churn, the relationship is complicated.

Even “satisfied” or “very satisfied” customers will churn, because the other providers are perceived to provide equally-good experiences, and might from time to time also offer better prices or features.

But there are other instances where even rising satisfaction scores are perhaps not what they seen. Consider the example of a declining business, such as fixed network voice services, which might shed about half its subscribers over a decade.

As consumers bleed away from fixed network service providers, satisfaction scores are rising, because the unhappy customers are leaving. Those who remain are more satisfied than the customers who have left, according to the American Customer Satisfaction Index (ACSI).

The fixed-line industry’s ACSI score got better nearly six percentage points, reaching 74, with gains for individual companies ranging from four percent to eight percent, ACSI reports. Those are big gains indeed, for the ACSI index.

Verizon improved six percent while Cox gained four percent,  to tie for the lead at 74. AT&T follows closely at 73 while Charter scored 72.

CenturyLink’s score improved eight percent, and Comcast got better by six percent, both reaching a score of 71. Time Warner Cable scored 68.

To be sure, it is possible all the fixed network service providers are doing much better than they have in the past. But ACSI also cautions that the reason satisfaction is growing is that unhappy customers are deserting the service.

That might not be such a great way to earn higher customer satisfaction scores.

ISPs were ranked for the first time in the latest ACSI study, and scored the lowest of any industry studied by ACSI.

Internet service providers were rated for the first time, with an average score of 65, the lowest score among all 43  industries tracked by ACSI, which ACSI attributes to high prices, service reliability, speeds and video-streaming quality.

Only Verizon’s FiOS and the aggregate of all other smaller ISPs break out of the 60s with identical ACSI scores of 71.

Cox beats the average at 68, followed by AT&T U-verse and Charter at 65. The low end belongs to CenturyLink at 64, Time Warner Cable at 63 and Comcast at 62.

Video subscription services offered by cable operators, fixed line voice services and even mobile services traditionally have not scored all that high for customer satisfaction, it might also be noted.

Mobile Will Account for 50% of All Broadband Connections in Asia by 2017

Rational observers have been saying for some time that the smart phone will be the device used to access the Internet, and that mobile networks will be providing the connections. A new estimate by the GSM Association puts some numbers on those assumptions.

By 2017, perhaps half of all broadband connections in Asia will be supplied by mobile operators.

Have LTE Operators Already Found Their First Significant New Revenue Source?

Mobile connections for tablets might be developing as the first new revenue-generating "new app" of any significance for Long Term Evolution networks. In fact, the magnitude of those new revenue streams seems to be occurring faster than has been operator experience with third generation networks.

Mobile service providers, since at least the advent of third generation networks, have hoped for and touted the development of new revenue-generating applications, every time a next generation network is introduced.

That sometimes can take a while to develop. In fact, that has lead some observers to say there is no "killer app" for fourth-generation mobile networks, in the sense of some huge new revenue-generating application or feature.

In fact, in the near term, it might be logical to assume that “faster speed” is the closest thing to a new “killer app” that drives incremental revenue.

But one potentially new trend already might be developing for fourth generation Long Term Evolution networks, namely the additional connections to support tablet devices, and not necessarily new apps for smart phone users.

According to a survey sponsored by the GSM Association, about 33 percent of dongles, tablets or hotspots are 4G-enabled. That doesn’t mean all or even most of those devices are actively using 4G connections, but many do connect to the 4G network.

So some would argue that the first new 4G revenue source is network connections for tablets, which appear to offer a greater prospect for 4G growth than other data devices such as the traditional dongles.

On average, 4G operators surveyed by GSMA offered seven tablets in their data devices portfolio. Operators such as A1 Telekom (Austria), Polkomtel (Poland), MTS (Russia), STC (Saudi Arabia) and Telenor (Sweden) offered twice the number of tablets they were a year ago.

Australia’s Telstra, which launched its first 4G networks in the third quarter of 2011, recently noted a “really big swing in terms of tablet technology”. But tablets represented 24 percent of the operators’ mobile broadband customer base in the second half of 2012.

The introduction of shared data plans in developed markets, which allow, s users to attach several devices to a single plan and data allowance, is accelerating adoption of data devices.

Verizon Wireless CFO Francis Shammo says new customers often buy low end service plans, but then over a period of six months almost double the amount of devices that they put onto shared access plans.

Those additional shared data plans are boosting revenue per account. Even though many tablet users rely on WiFi as their main Internet connection, 4G LTE adn shared data plans will boost growth in broadband tablet data subscriptions, says Strategy Analytics.

Strategy Analytics forecasts global mobile broadband subscriptions on tablets will grow 800 percent from 2012 to 2017, as more than 165 million new tablets get connected to mobile networks.

But it would be odd, perhaps almost unprecedented, for 4G mobile networks to succeed wildly, which is what virtually everybody expects, without the emergence of some new qualitatively different experience or value driver.

It might be more important to say that "nobody knows" what such qualitatively-new experiences will emerge. But some might say it is unlikely 4G will remain "3G but faster."

About a decade ago, when the first commercial 3G networks were introduced, there was much talk about innovation and new applications the networks would enable, and the list looked remarkably similar to what people claim will happen with 4G.   

E-commerce apps, for example, were thought to be an important 3G innovation. That is claimed for 4G as well, with more conviction, perhaps. “The availability of 3G services is going to have a profound effect on electronic commerce,” it was said.

That also is said of 4G. It was said that “3G works better” than 2G, and that was true. It also is said of 4G, and also is true.

3G wireless was sometimes characterized as a wireless version of the Internet, encompassing Web browsing, e-mail and media downloads. That sounds like 4G as well.

Over time, though, a distinctive lead application does tend to develop, though it might take some time. Voice and texting were the lead apps for 2G, while Internet access and email have emerged as the "killer app" for 3G, it can be argued.

For 3G networks, smart phones finally drove significant consumer uptake for broadband data. But it took quite some time for that new driver to be discovered and popularized.

To be sure, there is a line of thinking that the value of 4G might initially accrue in large part from significantly-lower the cost per-bit costs to provide mobile broadband. Verizon Wireless, for example, believes the cost to deliver a megabyte of data on 4G with LTE will be half to a third of the costs of a 3G network.

It now appears that tablets could be the device, and mobile network access the application, that first drives incremental new revenue for LTE networks.

Device type prevalence % in selected LTE operators' data device portfolios (Feb 2013)

Source: Wireless Intelligence

TV Everywhere Hits Snags Related to Rights Deals, Ratings and Advertising | Adweek

Faced with competition from Netflix and Hulu, cable companies have touted TV Everywhere features as a key feature that would blunt demand for streaming services offered by competitors. But, as always in a content business, content availability is a key problem. 

The top 10 ad-supported, paid TV networks offer mobile viewing to only 4 in 10 subscribers, according to the Diffusion Group.

Since most shows that are available on mobile devices are only available inside the home using the at-home Wi-Fi connection. TV Everywhere winds up being only "TV Almost Nowhere" except where it already can be viewed. 

According to a TV Everywhere study from October by GfK, paying TV customers are more aware of the services from networks like HBO than they are of the TV Everywhere services offered by cable providers such as Comcast or Time Warner.

Usage is moderate, as well. About 37 percent of customers used TV Everywhere services of networks such as HBO, and only 30 percent used the cable operator services, according to eMarketer.

But the value is unclear, even to networks or distributors. Supposedly, TV Everywhere adds value to a video subscription. But how much value, when viewing is so restricted, is questionable.

Wi-Fi, Small Cells Will Handle Half of all Mobile Traffic in 2013

Juniper Research forecasts that almost 50 percent of data traffic generated by mobile phones, tablets and other 3G or 4G connected devices will be offloaded to Wi-Fi and small cell networks in 2013. 

Whether those estimates are reasonable is the issue, at least in part because not all smart phone or tablet traffic that uses Wi-Fi was actually "offloaded" from a mobile network. 

In some markets, though, close to that amount of traffic could conceivably be handled by small cells or Wi-Fi.