If You Use the Internet, You Have Access at Home, Surveys Suggest

Just about every U.S. adult that uses the Internet has access to the Internet at home, using fixed network access, mobile access or both, new studies suggest. That suggests that account growth now is dependent largely on new home construction, continued use of the Internet when new households are formed, and a slight shift of dial-up to broadband.

Some 78 percent of U.S. households buy a fixed network broadband access service at home, and broadband now accounts for 94 percent of all Internet access services sold to consumers at home, according to Leichtman Research Group.

In 2004 about 33 percent of U.S. households buying Internet access service were buying broadband rather than dial-up service. That figure grew to 75 percent in 2008 and 92 percent in 2012.

In total, 83 percent of U.S. households buy a fixed network  Internet service for use at home, while 55 percent of adults also buy access to the Internet on a smart phone.

The number of U.S. adults using their smart phones to get access to the Internet has grown 44 percent from 2012 levels.

If about 15 percent of U.S. adults choose not to use the Internet, it is likely that most households using the Internet already are buying service, whether fixed, mobile or both, since 83 percent are buying a fixed access service.

Complicating the broadband adoption picture is growing use of mobile Internet access. Some

64 percent of fixed network broadband subscribers also access the Internet on a smart phone, up from 52 percent last year.

In fact, LRG estimates that 19 percent of homes that do not buy at-home fixed network broadband access use smart phones for Internet access, up from 12 percent in 2012.

The study also suggests that “broadband access cord cutting” is nearly non-existent. About one percent of households paid to subscribe to Internet service at home in the past year, do not currently subscribe, and do not plan to subscribe again in the next six months, LRG says.

Nor is availability of fixed network Internet access much of a problem. Less than one percent of all online households say that broadband is not available in their area. In 2008 that percentage was six percent.

In other words, if people do not buy Internet access at home these days, it mostly is because they do not use the Internet and therefore have no need for an access service.

The LRG findings corroborate a study by the Pew Internet and American Life Project suggesting

that about 15 percent of U.S. adults ages 18 and older do not use the Internet.

Of the non-users, about 34 percent reported that the “Internet is just not relevant to them,” meaning they are not interested, do not want to use it, or claim to have no need for it.

Some 32 percent of non-Internet users claim they do not use the Internet because it is not very easy to use. Such non-users say the Internet is difficult or frustrating to use, or they are physically unable to do so.

In other cases, non-users say they are worried about other security-related issues such as spam, spyware, and hackers.

About 19 percent of non-internet users cite the expense of owning a computer or paying for an internet connection.

In about seven percent of cases, non-users said there was a physical lack of availability issue or some other reason they could not get access to the Internet, the Pew Internet and American Life Project says.

Perhaps the moset surprising finding is that 44 percent of U.S. residents ages 65 and older do not use the Internet. In fact, such older people represent 49 percent of non-Internet users overall.

Earlier Pew  studies had found in 2012 that Internet use among older users was about 53 percent, so the 2013 findings are consistent.

According to Gallup, just about 17 percent of people 65 or older use the Internet every day.

Studies from the United Kingdom likewise have shown a usage gap, where about 30 percent of people 65 or older report using the Internet. Perhaps 14 percent of U.K. residents have never used the Internet, the The UK’s Office for National Statistics reports.

source: http://www.equalitysouthwest.org.uk/blog/view/internet-access

On the other hand, Internet non-users often are “using” the Internet indirectly. Though they themselves do not go online, self-described non-internet users often do so indirectly.

About 44 percent of reported offline adults have asked a friend or family member to look something up or complete a task on the internet for them, for example.

Google's 1998 Look

It hardly seems possible that in 1997 there was no Google. Here's the "look an feel" from 1998, with its minimalist design approach. 

Access Networks Increasingly are All About Video

In North America, real-time entertainment is responsible for over 68 percent of downstream bytes during peak periods, compared to 65 percent six months ago, according to Sandvine. 

Netflix continues to be the traffic leader, accounting for 32.3 percent of downstream traffic during peak periods. YouTube accounted for 17.1 percent of downstream traffic in the first half of 2013.

YouTube is the leading traffic generator on mobile networks, accounting for 27.3 percent of downstream traffic. Video and audio streaming applications will account for over 60 percent of mobile usage by 2018, Sandvine projects. 

Nearly 70 million U.S households will have Smart TVs by 2017

Nearly 70 million U.S households will have smart TVs by 2017, according to Parks Associates.

There also will be 175 million online video users in the United States in 2013, rising to 191 million by 2017. 

Whether you believe that represents a possible tipping point or inflection point is the issue. 

4G Nets Will Carry 66% of All Mobile Traffic by 2018

Users of Long Term Evolution 4G networks consume more data than users of 3G networks. 

In fact, 4G mobile users buy bigger data allowances than 3G users, a study by Mobidia has found. Users on 4G LTE networks also consume 36 percent more data than users on 3G networks, Mobidia says.

source: Mobidia

Even though 4G’s share of mobilke subscriptions was less than three percent at the end of the second quarter of 2013, it is expected to account for slightly more than 20 percent of the total data consumed on mobile networks worldwide in 2013. 

After surpassing 3G networks in 2016, 4G networks will go on to capture 66 percent of data traffic by 2018, according to ABI Research.

In fact, 4G data traffic will grow at a compound annual growth rate of 82.2 percent between 2013 and 2018, ABI Research says.

Fourth Revenue Wave Will be the Toughest

If one accepts the notion that the mobile business was built on customer revenues generated by voice, then messaging, then Internet access, one might also agree that, at some point, as voice and messaging decline, so will the ability of Internet access to sustain the revenue growth model.

If so, then a fourth wave of industry growth is necessary. Precisely what that wave will entail is the question. Most observers think third party apps will play a key role, as mobile service providers move to supply third party business partners with network-based services and features.

Many observers would argue a full flowering of that strategy is impossible so long as “best effort only” access services are lawful, since the most obvious value an access provider can provide to a business partner is assured delivery and quality of service.

There are some obvious implications. Unlike revenue sources in the first three waves, it is highly likely that the discrete revenue opportunities in a fourth wave, if based on revenue earned largely from over the top app providers partnering in some way with access providers, will be highly fragmented.

Unlike the largely undifferentiated voice, text messaging and mobile Internet access revenue streams, the fourth wave might feature lots of discrete markets, none of them remotely as large as the voice, text messaging or Internet access markets.

That will put new pressure on mobile service providers to control or reduce overhead costs, and create many sophisticated new forms of value to sell to potential business partners. The over-used phrase “agile” comes to mind, but the appellation is not far from the mark. Access providers will have to be much more nimble than in the past to support the many new types of business partners.

The danger, of course, is that other providers could enter the market. Some obvious names typically bandied about include Google, Apple, Amazon, Twitter, Microsoft, Facebook, Visa or PayPal.

What Drives Mobile Revenue Growth After M2M or Internet of Things?

One common facet of new technology adoption is that change often comes with a specific pattern, namely a longish period of low adoption, followed by an inflection point leading to rapid adoption.

That leads supporters to overestimate early adoption and vastly underestimate later adoption. Mobile phone adoption, and smart phone adoption, illustrate the process. You might think adoption is a linear process. In fact, it tends to be non-linear.

In developing regions, mobile phone adoption hit an inflection point about 2003, for example. What will happen, relatively shortly, is market saturation. That's also part of the adoption process.

In developed markets, saturation of mobile phone usage has shifted growth to mobile data. Inevitably, growth will saturate even for data, and service providers will make a transition to yet another growth mode.

In large part, that explains high interest in machine to machine or Internet of Things investments by mobile service providers. It is possible that the next wave of revenue growth will have to come from mobile devices not directly used by people.

It also is possible the following wave, after M2M, will involve some sort of shift to third party or over the top apps.

Granted, adoption rates for digital technologies have accelerated. It took 39 years for fixed line telephone adoption to grow from 10 percent to 40 percent. Electricity required 15 years to grow from 10 percent to 40 percent penetration.

In the past, 10 percent adoption of any new technology is an important milestone, as it tends to represent the inflection point, when adoption of some new innovation accelerates. Observers of technology adoption might say that happens because people adopt new technologies when somebody they know has done so.

But it also often is the case that it takes time for people to learn how to use a technology. Some would say a disjuncture between spending on new technology and measurable productivity gains can happen because the value of important new technologies often requires a redesign of business processes, not the automation of older practices.

One might also argue that technology sometimes leads to a change in consumer behavior only when a reasonable substitute product is available, and people have learned how to use the product or process.

Adopting a new technology is similar to  any other kind of investment, economists might argue. As in the case of the investment decision, the adoption of new technology entails uncertainty over future profit streams, irreversibility that creates at least some sunk costs and the opportunity to delay.

In other words, people can make a rational decision to delay adoption until it is clear of the value, and value outweighs the costs of acquiring and using the new technology.

In some ways, that is characteristic of consumer use of online video delivery, and the substitution of online video for traditional subscription TV.

In many ways, we are in a pre-adoption phase, in part because content owners will not support full online delivery of all content currently available as part of a video subscription. But what is happening is that people are learning to use the Internet, their PCs, smart phones and other devices as familiar ways to get and view entertainment video.

Percentage of Portential Video Cord Cutters Less Important than Widespread Adoption of the Behavior

In the past, 10 percent adoption of any new technology is an important milestone, as it tends to represent the inflection point, when adoption of some new innovation accelerates. Observers of technology adoption might say that happens because people adopt new technologies when somebody they know has done so.

But it also often is the case that it takes time for people to learn how to use a technology. Some would say a disjuncture between spending on new technology and measurable productivity gains can happen because the value of important new technologies often requires a redesign of business processes, not the automation of older practices.

One might also argue that technology sometimes leads to a change in consumer behavior only when a reasonable substitute product is available, and people have learned how to use the product or process.

Adopting a new technology is similar to  any other kind of investment, economists might argue. As in the case of the investment decision, the adoption of new technology entails uncertainty over future profit streams, irreversibility that creates at least some sunk costs and the opportunity to delay.

In other words, people can make a rational decision to delay adoption until it is clear of the value, and value outweighs the costs of acquiring and using the new technology.

If adoption of a technology requires complex new skills, and if it is time-consuming or costly to acquire the required level of competence, then adoption might be slow, in other words. 

In the case of online video, one might note that the investment in terminals (smart phones, tablets, PCs) already has happened, or is happening. So is the level of user familiarity with the process of finding and consuming online video.

In some ways, that is characteristic of consumer use of online video delivery, and the substitution of online video for traditional subscription TV.

In many ways, we are in a pre-adoption phase, in part because content owners will not support full online delivery of all content currently available as part of a video subscription. But what is happening is that people are learning to use the Internet, their PCs, smart phones and other devices as familiar ways to get and view entertainment video.

The point is that the habits necessary to underpin a massive change in business model are being created, little by little.

That is why the current, slow shift of some consumers to abandon traditional subscriptions is not the most important trend. What is more important is users gradual habituation to consumption of online video.

To be sure, willingness to consider video “cord cutting” is increasing, according to an analysis by Frank Magid Associates.

Magid says 2.7 percent of subscription TV customers say they are “thinking” about cutting the cord in the next year. That’s up from 2.2 percent a year ago, and 1.9 percent in 2011.

Skeptics will not those are relatively small percentages, and that more people “thinking” about cord cutting is nearly always less than the number of people who will actually do so.

That arguably is less important than the fact that people widely are becoming accustomed to finding and viewing entertainment video on smart phones, tablets and PCs.

More than half of the might-be-cutters say they would do consider video cord cutting because they get enough video to keep them happy via outlets like Netflix, Hulu and Apple’s iTunes, Magid says.

More than half also say they would do so for economic reasons. That further suggests there is latent demand for other ways to consume more-affordable video entertainment.

Either way, there is a growing sense that the value-price relationship is growing unattractive, for more people.

As you might guess, the study suggests 4.4 percent of 18-to-34-year-olds are thinking about cutting the cord, a higher than average finding.

Sports enthusiasts, as you also might guess, are less likely to say they’ would consider abandoning their video subscription.

Other studies also suggest who might guess is the case, namely that users who now have learned to rely on Internet video are more likely to say they would consider cord cutting.

According to a Diffusion Group study, 8.8 percent of adult broadband users with an Internet-connected TV and traditional video service report being highly inclined to cut the cord in the next six months. That compares to 3.5 percent of adult broadband users with video service who don’t use a connected TV.

AT&T "Open" to European Acquisitions

Major bouts of communications industry consolidation tend to occur in waves, often when regulatory and financial conditions are favorable, and when major competitors make major moves that realign market share. 

Some would say European regulators are signaling receptivity to more mergers, financial markets are signaling that money is available, and Verizon and Vodafone have made the first big move.

In the U.S. market, Sprint and T-Mobile US have made significant moves, though AT&T has been denied the chance to make a move of its own in the domestic market. That only makes European or other acquisitions more attractive, as expansion on a major scale among the four leading national mobile suppliers seems unfavorable, on the regulatory front. 

AT&T CEO Randall Stephenson also notes that Verizon's recent ability to sell $49 billion in bonds, to help fund its purchase of the balance of Vodafone's stake in Verizon Wireless that Verizon did not already own, shows there is capital available to fuel acquisitions. 

The bond offering was "eye opening," Stephenson said. "It allows you to think differently about things, different than you might have thought three weeks ago."

Some might look at revenue trends in the European mobile market and see weakness, as revenue seems to decline every year. But AT&T believes it could reverse that trend by investing more in Long Term Evolution 4G networks and thereby raise revenue, as it has seen is possible in the U.S. market. 

Major acquisition windows that rearrange markets do not open very often. When they do open, contestants need to move before the windows close again, as they will.

Separately, Telefonica will boost its stake in Telco, the holding company that controls Telecom Italia, to an initial 65 percent with an option to bring the stake to around 70 percent, according to Reuters.

Telefonica already own 46 percent of Telco, representing in turn about 10 percent of Telecom Italia shares. Telefonica says It will boost its stake in the Telecom Italia to nearly 16 percent.

Telefonica is set to acquire its additional shares from the other Telco shareholders, including Italian banks Mediobanca, Intesa Sanpaolo,  and insurer Generali.

That move might well be viewed as part of a coming merger wave in the European telecom market.

T-Mobile CFO Says Merger with Sprint Could Happen

T-Mobile US Chief Financial Officer Braxton Carter he expects  more consolidation in the U.S. mobile market, and some would say any significant further consolidtion could only mean a merger between T-Mobile US and Sprint.

Many observers would say that is not an immediate or even medium-term prospect, as U.S. antitrust officials believe the U.S. market already is too concentrated, and requires four competitors. 

Since 1991, most countries already have seen consolidation of suppliers in their mobile markets. 

AT&T Believes Economics of Gigabit Access Networks Increasingly "Look Good"

AT&T has said it will build 1-Gbps access networks in Austin, Texas, though some would say the specifics are lacking. That will  not surprise too many observers who follow the ISP business closely. 

No incumbent with a decent business selling access at about $3 to $5 per Mbps would be foollish to prematurely risk dropping those prices in a major way. 

And though many will criticize the language as not serious, AT&T CEO Randall Stephenson now says about gigabit access networks, at least in some cases, that "the cost dynamics look good, the revenue implications look good, the market implications look good, so you're going to see more of this over time and I fully expect you'll see us doing markets like this over the next few years."

Skeptics will say AT&T simply isn't serious. Optimists might be encouraged that revenue and cost implications are being looked at it a serious way, and that AT&T recognizes it has to look seriously at whether upgrades of more networks to gigabit speeds are feasible. 

AT&T Wants to Create Multicast Video Delivery Service

It isn’t clear what applications and revenue models would support any new multicast networks using 6 MHz of spectrum (up to 12 MHz in many markets) using the LTE-Broadcast protocol, but AT&T aims to find out.

By way of reference, 6 MHz is enough bandwidth to multicast one high-definition TV stream, or perhaps four standard-definition video streams, or any number of less data intensive test and image information streams.

What probably won’t work is some sort of video service on the model of cable, satellite or telco TV, as there simply isn’t enough bandwidth available, with one obvious sort of exception: the Super Bowl, streamed live to mobile phones.

Beyond that example--high value, highly-viewed events--the ultimate business model likely would be based on some sort of localized datacasting (to mobile users at a major live event of some sort) or other high-value content of interest to users.

AT&T is not the only firm that has been thinking about use of mobile networks as the foundation for video entertainment delivery.

Many observers might argue that Dish Network’s plans for Long Term Evolution would rely, to some significant extent, on delivery of video entertainment. That could take several forms, giving Dish its own facilities-based way to supply paid-for broadband access (mobile or fixed), and then the ability to create a national video streaming service over the top of the access connection.

The spectrum AT&T plans to use originally was used by Qualcomm to support its now-shuttered MediaFLO service.

60% of U.S. Mobile Phone Users Access Internet from Their Phones

About 60 percent of all U.S. mobile phone users make use of their devices to access the Internet, according to the Pew Internet and American Life Project. 

Fixed Broadband Prices Have Dropped 82% Over 5 Years

Over the past five years, fixed broadband prices as a share of gross national income per capita have dropped by 82 percent, the ITU says.

In 2012, fixed broadband services remained expensive, though, accounting for 30.1 percent of annual monthly incomes in developing countries, compared to just 1.7 percent in developed countries), By the end of 2013, there will be more than three times as many mobile broadband connections as there are conventional fixed broadband subscriptions, according to the  International Telecommunications Union’s State of Broadband Report.

In 2012, the number of developing countries where broadband cost less than five percent of annual income remained the same as in 2011, at a total of 48.

In 22 developing countries, prices ranged up to two percent of average income, while in 26 countries prices were between two percent and five percent.

The point is that people can afford broadband when it costs less than five percent of their annual income. That implies that fixed broadband access is unaffordable for 3.9 billion people, and mobile broadband is unaffordable for over 2.6 billion people around the world.

The number of developing countries where broadband cost between five percent and 10 percent

of average income has increased from 15 in 2011 to 24 in 2012, the ITU says. In 18 developing countries annual cost is between five percent and eight percent of annual income, while in six countries broadband cost is between eight and 10 percent of annual income.

In 49 economies in the world, primarily developed economies, broadband access in 2010 cost less than two percent  of average income.

This compares to 32 economies in the world in 2010 where broadband access cost more than half of average national income.

In 2010, there were 35 developing economies (out of 118) where broadband access cost less than five percent of average monthly income, up from 21 two years earlier.

Current ITU development goals include a target of entry-level broadband services, available at less than five percent of average monthly income, in developing countries by 2015.

By the end of 2013, the number of broadband subscriptions in the developing parts of the world will exceed the number of broadband subscriptions in the developed regions of the planet for the first time, the ITU also notes.

Licensed spectrum has underpinned the growth of the mobile industry and remains essential, unlicensed spectrum (Wi-Fi, primarily) has become an important part of the way people get access to the Internet.

Other forms of spectrum sharing also are starting to get attention.

Mobile broadband also is the fastest growing technology in human history, according to the ITU.

By the end of 2013, the ITU predicts there will be 2.1 billion mobile broadband subscriptions in use, equivalent to one third of the total number of mobile cellular subscriptions in service globally. In 2011, mobile broadband was used by 20 percent of mobile customers.

Morgan Stanley estimates that the number of unique smart phone users is around 1.5

billion in 2013, with smart phone subscriptions estimated to exceed four billion by 2018. Mobile broadband is projected to reach seven billion subscriptions in 2018.

Mobile broadband subscriptions, which allow users access to the Internet from their smart phones, tablets and WiFi-connected laptops, are growing at a rate of 30 percent  per year, the ITU says.

Telefonica to Own Most of Telecom Italia

Telefonica will boost its stake in Telco, the holding company that controls Telecom Italia, to an initial 65 percent with an option to bring the stake to around 70 percent, according to Reuters.

Telefonica already own 46 percent of Telco, representing in turn about 10 percent of Telecom Italia shares. Telefonica says It will boost its stake in the Telecom Italia to nearly 16 percent.

Telefonica is set to acquire its additional shares from the other Telco shareholders, including Italian banks Mediobanca, Intesa Sanpaolo,  and insurer Generali.

The move might well be viewed as part of a coming merger wave in the European telecom market.