If There is No More Beachfront, Users Have to Share the Beach: the Argument for Flexible Spectrum Sharing

Spectrum valuable for the same reason beachfront property is valuable: "they aren't making any more of it."

In other words, if mobile and untethered spectrum demand grows by 1,000 times over the next decade, as many assume it will, there is precious little unallocated spectrum that can be put to use.

Indeed, there is growing recognition in the U.S. communications policy community that the big potential gain in useful communications spectrum will have to come from more efficient use of spectrum already allocated, but under used.

Though in principle it might be possible to move existing licensees from their current frequencies to new spectrum, the cost to do so generally is quite high, and the time to make the changes generally long.

So there is new thinking about ways to share existing spectrum, without the need to move existing users. There also is new thinking about how to manage interference in a decentralized and efficient way, without relying on slow, cumbersome, expensive adjudication by FCC rule makings.

“Today’s great spectrum policy challenge is thus to maximize the value that can be derived from bands already in use,” say the authors of Unlocking Spectrum Value through Improved  Allocation, Assignment, and Adjudication of  Spectrum Rights, written by Pierre de Vries, Silicon Flatirons Center senior fellow and co-director of the Spectrum Policy Initiative, and Philip Weiser, University of Colorado Law School dean.

And, as a practical matter, there is no way to do so efficiently is to create a new framework for the decentralized management of spectrum, the authors argue.

The authors suggest “command and control” regulation of communications spectrum be replaced by a system allowing spectrum users to directly negotiate coexistence and spectrum agreements without government regulators having to act as gatekeepers.

New ways to manage potential interference and then adjudicate interference disputes would be part of the framework, largely because “a lack of clarity concerning interference

prevention between neighboring spectrum users and an inadequate system for allowing trades and resolving disputes between users” are primary reasons why spectrum is inefficiently used.

Claims of harmful interference between systems are at the heart of disputes about whether a user’s rights have been violated, or, alternatively, whether a user has lived up to its responsibilities to tolerate reasonable levels of interference, the authors note.

So any decentralized, fast-acting system would require clear methods to identify when harmful interference (not simply some interference) has occurred, and a mechanism for judging whether such claims have merit, and addressing the claims.

The three-part plan would create “harm thresholds” that are clear, allowing devices and users to tolerate some amount of interference, but also specify clear signal level impairments that create the basis for action against an infringing party.

In other words, there would be some mutually agreed upon interference that does not compromise a licensed holders rights and ability to use spectrum. Under that threshold, a license holder would not have sufficient cause for action against another party sharing spectrum.

The rationale there is that not all interference is debilitating, and much time and expense would be removed if all parties knew exactly what the limits were.

But the harm claim thresholds also would specify what in-band and out-of-band interfering signal levels would trigger a claim of harmful interference, and the ability to seek a remedy.

A second requirement is to create a more-liquid market by allowing licensees to negotiate efficiently with holders of neighboring blocks of spectrum. Right now the process of creating operating rights between spectrum neighbors is cumbersome, expensive, politically charged and slow.

A second challenge for spectrum regulation is to overcome the collective action problem that stems from band fragmentation.

At present, it is cumbersome and expensive for licensees to negotiate with spectrum holders in neighboring spectrum bands to deal with potential interference issues. One reason is that the FCC and National Telecommunications and Information Administration are required to handle any such conflicts.

Such disputes would be resolved faster, at less cost, if the parties could efficiently negotiate with each other.

The third element is creation of an adjudication mechanism capable of acting faster than the FCC now can act, without the need to rely on “rule making” processes.

The proposal would allow more-flexible clearing of spectrum for shared use, including both

exclusive, tradable and flexible use licenses assigned by auction (mobile services, typically) and open access or “unlicensed” regimes that allow unlicensed flexible use.

Fiber to Home Momentum has Changed Significantly Last 2 Years, Expert Says

Blair Levin, former Federal Communications Commission chief of staff to Reed Hundt, also was the executive director of the the National Broadband Plan effort, issued about four years ago.

With the caveat that not everybody agrees the drafting of a “national plan,” by any country, necessarily means very much, Levin, an experienced “inside the Beltway” operator well versed with the politics of communication policy, has an interesting take on progress in the U.S. market, after release of the plan.

There are four areas Levin says are important for estimating progress. “One is, are you driving fiber deeper?” Levin says. Also “are you using spectrum more effectively?”

Third, “are you getting everybody on?” Levin says. Finally, “are you using the platforms to deliver public goods more effectively?”

As you might guess, Levin thinks progress has been uneven. “It's mixed on all of them,” Levin said.

But Levin is surprised by the progress in the area of “driving fiber deeper.” As recently as two years ago, Levin says he would not have said progress was not being made in that area.

Now, Levin thinks we are making progress, and that ISPs are driving fiber deeper into their networks. One might credit Google Fiber for much of that progress, simply because it is disrupting the market with symmetrical gigabit network services, sold for a market-destabilizing $70 a month, on the back of its own networks.

That Levin, no casual observer of broadband and communications policy, thinks something has changed for the better in terms of optical fiber deployment, over the last two years, is as clear a testament to Google Fiber’s impact as anything else you might point to, except for the growing number of incumbent ISPs willing to build gigabit networks in multiple markets.

Apple Wants Priority-Assured Video Services Delivery

The fundamental problem with “network neutrality” rules aptly is illustrated by Apple’s talks with Comcast about enabling an Apple set-top box that has assured quality of service on Comcast’s high speed access network. 

 In other words, Apple does not want “best effort access,” which is what network neutrality mandates. Instead, Apple wants a managed service with quality of service controls. 

Some immediately will note that what Apple wants is not "packet prioritization" of the type forbidden by network neutrality rules. 

 But some will say the nomenclature is a bit of a ruse. 

 To wit, Apple does not believe “best effort” is good enough to ensure the quality of its proposed streamed content, and wants to be provided as a managed service over Comcast's access network. 

 To be sure, the Federal Communications Commission specifically exempts such managed services from the network neutrality rules. 

But some will note the irony: an IP app a "managed service" is lawful.  An over the top Internet app cannot use priority delivery mechanisms. 

 If Apple succeeds, you can be sure a wave of new "managed services" will be created, using prioritized access. 

 One immediate question is what is required for a service to be considered a "managed service," not an over the top Internet app. On the face of it, it would seem to be the offering of such a service by an Internet service provider directly, much as telcos, cable companies and satellite providers sell "managed" voice service or linear video entertainment.

In other words, "who owns the service" might well become the clear delineation. 

That also suggests lots of opportunity for future business deals between over the top and ISP partners to create such managed services. In large part, that would render "network neutrality" a bit more hollow. 

 Such "who owns the service" regulation is one reason many have supported “network neutrality;The whole point of such a framework was to prevent ISPs from favoring "their own" apps over similar offerings provided by independent third parties. 

 The potential Apple deal with Comcast would increase the uncertainty about the soundness of the framework long term. 

Few would question, at least at this point, the "right" of a facilities-based access service provider to create its own branded managed services. 

That is what voice service is, after all. Likewise, nobody would question the right of a TV or radio broadcaster, telco, cable company or satellite services provider to create and deliver a service over its own network. 

The big issue has been the framework for over the top, unaffiliated apps and services. 

The Apple proposal gets around that issue because the proposed streaming service essentially would be a service created and "owned" by the access provider (even if Apple is the essential partner). 

There are some trade-offs for the video service supplier. It might mean such a managed service is not available as an Internet app, only as a for-fee service offered by one or more ISPs. 

That will limit potential audience to a certain extent, unless the managed service reaches agreement with most of the ISPs in a market that represent 80 percent to 90 percent of the potential customer base. 

The enduring issue is that quality delivery of paid-for video entertainment is subject to the same congestion issues that cause video stalling as all other apps when access networks are congested. In seeking to become a managed service, Apple wants priority delivery of its video bit, the very sort of thing network neutrality advocates have opposed. 

But that is the fundamental problem with network neutrality, some would argue. Prioritized access, under conditions of congestion, is a surefire way to deliver the bits with higher end user value. 

Consumer welfare, in other words, is increased when consumers get priority delivery of apps that are highly susceptible to degradation when access networks are congested. Apple’s efforts essentially are a rebuke to the notion that network neutrality actually enhances consumer welfare. 

It is one thing to argue that all lawful apps should be accessible to any user of the Internet. Everybody agrees on that point. The Federal Communications Commission, furthermore, already has adopted “no blocking” as a fundamental principle. 

But priority delivery is not blocking. It is a mechanism for providing quality of service when networks are congested. It’s the same principle as all content delivery networks lawfully use. 

Apple wants its video streaming traffic managed, not delivered “best effort,” as is Comcast  Internet traffic; in other words, to have its service offered as a managed service, not an “Internet app,” as Comcast’s linear TV also is treated.  

Precisely how regulators might view any future service of this type is not clear. 

The FCC already exempts “managed” services from the “best effort only” network neutrality principle. 

The important observation is that Apple is pointing out why prioritized access (even when it is called something else) is so important for voice and video apps, and why “best effort only” is not an optimal solution for delivering applications highly dependent on stable and predictable bandwidth.

Why "Cloud" is Strategic for Capacity Providers

“Cloud” is a key business concept and the underpinning of revenue growth strategy for capacity providers, not simply a new computing architecture for app providers. 

Simply, revenue growth hinges largely on serving the needs of content providers and data centers serving content providers. Content demand now drives the places bandwidth has to be supplied, why it has to be supplied, and therefore where transport revenues can be earned.

Instead of networks optimized for moving symmetrical narrowband traffic from one telco point of presence to another telco point of presence, the long-haul networks now mostly move asymmetrical broadband traffic from one data center to other data centers.

That shift to “east-west” (server to server) traffic, from “north-south” (client to server) is shaping demand for capacity, and therefore revenue, with a big role played by end user demand for content, and hence for content delivery networks.

About 51 percent of all Internet traffic will cross content delivery networks in 2017 globally, up from 34 percent in 2012, according to Cisco. And since much of that content is high-bandwidth entertainment video, CDN-related traffic flows now are crucial for transport services providers.

The other big change wrought by cloud-based content apps is dramatic change in the geography of demand.

In fact, Cisco estimates, metro traffic volume will surpass long-haul traffic in 2014, for example, and will account for 58 percent of total IP traffic by 2017.

In fact, metro network traffic will grow nearly twice as fast as long-haul traffic from 2012 to 2017, Cisco argues. And much of that traffic will consist of video.

Globally, IP video traffic will be 73 percent of all IP traffic (both business and consumer) by 2017, up from 60 percent in 2012.

Cloud architecture has other implications for transport providers, namely the way cloud-based apps are “assembled,” rather than simply served up whole to requesting users. That is one reason why east-west traffic is growing.

Transport provider revenue growth increasingly is driven by supporting customers needing to move large amounts of content--especially video--from one data center to another, to assemble full apps or pages served up to end users.

In fact, the bulk of global undersea traffic arguably now consists of video-based Internet applications, hosted from huge data centers. One way of describing such east-west traffic flows is that traffic moves between servers, not between an end user and a server.

Though the actual application the end user uses is a communication north-south (client to server), often much of the “app” gets assembled from multiple servers.

And those are some of the ways “cloud computing” is shaping transport provider revenue opportunities.

Twitter Cutoff in Turkey is What Blocking Really Looks Like

Twitter was blocked in Turkey after Turkish Prime Minister Tayyip Erdoğan objected to tweets critical of his government. That is what app blocking really looks like.

Twitter also has been blocked It was blocked in Egypt in 2011, Pakistan in 2012, and China in 2009.

Network neutrality, by way of comparison, concerns only the preservation of "best effort only" levels of Internet access by consumer customers.

Network interconnection, or Internet domain interconnections, which some want to drag into the network neutrality framework, also is not "blocking" of lawful apps.

E-Commerce is a Winner Take All Market, So Far

Another example of “winner take all” economics in Internet-based content, e-commerce and advertising markets, where a few giant competitors rule the market.

Amazon is larger than the next dozen largest e-tailers combined.  That same sort of effect can be seen in mobile advertising, over the top video entertainment, and is developing in over the top messaging.

source: Jeff Jordan, Internet Retailer

source:TelecomLead

Average U.S. Internet Access Speeds Double in 3 Years

Average U.S. Internet access speeds have doubled in just three years, according to Broadband for America.

IN 2010, the average connection speed in the United States was 4.7 Mbps. In the third quarter of 2013, the average connection speed had more than doubled to 9.8 Mbps. while the average peak connection speed was 37.0 Mbps.

Rapid increases, despite some sense, in some quarters, that change is not rapid enough, have been quite rapid, indeed, in large part because of retail offers from cable companies.

The standard cable broadband speed has increased 900 percent since 1999.

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, and 68.2 percent of households subscribed to broadband service.

In other words, from 2000 to 2012, the typical purchased access connection grew by about two to three orders of magnitude in about a decade.



If that continues, gigabit connections will be common within two decades.

Do French and U.S. Mobile Markets Have Too Many Competitors?

Does the U.S and French mobile business have “too many” or “too few” contestants? And no matter which view is taken, on what basis are informed judgments made?

Consider the rival bids being made by Altice, owner of French cable concern Numericable, and Bouygues, a leading French mobile operator, for the assets of Vivendi’s SFR mobile business.

In the wake of a decision by SFR to negotiate exclusively with Altice, Bouygues had been expected to pursue a merger with Iliad, which owns France's fourth mobile operator, Free Mobile.

Observers say regulatory risk is an important element of SFR thinking. A Bouygues purchase of SFR would reduce the number of national mobile providers from four to three, while French regulators prefer a minimum of four providers.

In that view, a purchase of SFR by a cable company would be preferable to reducing the number of mobile service providers. Of course, some would argue the mobile segment currently has too many contestants for a stable, healthy, longer term market that remains competitive.

In the U.S. market, Sprint has been sounding out regulators about a potential bid by Sprint to acquire T-Mobile US. By all accounts, U.S. Federal Communications Commission and antitrust authorities at the Department of Justice are skeptical about such a potential merger.

The reasons fundamentally are the same as in France: regulators have more confidence in a four-player market than a three-provider market, in terms of maintaining robust competition.

The problem is that there is no way to know, in advance, which position--the market is too concentrated, or the opposite market is not concentrated enough--is correct, in terms of maintaining both robust competition and also incentives for continual investment.

In fact, globally, a “rule of three” already seems manifest. That is to say, in any mature industry, three suppliers dominate the market. Of 40 major markets studied by mobile analyst Chetan Sharma, the top three mobile operators controlled 93 percent of their respective markets.  

In some “hyper-competitive markets” like the United Kingdom and the United States, “which had more than four to five large players” are moving towards the consolidation phase where the top three control more than 80 percent of the market, Sharma has said.

Opponents of a Sprint acquisition of T-Mobile US argue that consumer retail prices likely will rise, in the event of a merger. Indeed, that is one reason why most equity analysts think only such a merger will end the current price war in the U.S. mobile market.

Economists and analysts at the Phoenix Center for Advanced Legal and Economic Policy Studies agree that retail prices likely would rise in the wake of a Sprint acquisition of T-Mobile US, but also argue that isn’t the point. Even higher retail prices do not tell the long-term story about sustainable levels of robust competition and sustainable incentives for continued investment.

Though it sometimes seems counter-intuitive, retail prices that are too low necessarily drive weaker competitors out of the market, leading to more market concentration. Prices that are too low also dissuade contestants from investing aggressively, as there is little to no profit for doing so.

But the issue is whether any regulatory bodies, anywhere, are smart enough to know, in advance, whether consumer welfare outcomes are better with three or four national providers.

Economic theory suggests “excessive competition” can lead to negative profits, and therefore death, of all contestants in a market with too many competitors. Consolidation is the inevitable result.

And, one might well argue,, such consolidation provides a better outcome for consumers.

source: Phoenix Center

Winner Take All Markets Have Clear Business and Regulatory Implications

Winner take all is a description of a type of market where the best performers--and typically only a few firms--are able to capture a very large share of the rewards, and the remaining competitors are left with very little.

Some would point to modern retailing and the rise of Wal-Mart as one example of a winner take all market.

Many would say the music industry, and digital information or content businesses, increasingly take on a “winner take all” character. Some argue that is true in large part because information technology now allows any single firm to reach huge markets, affordably, compared to what was possible in the past.

That means the very best supplier in any industry affected by economies of scale--and that is most industries these days--will do disproportionately well.

Some might argue “winner take all” economics easily can arise in industries where fixed cost is high and marginal costs are low.

If that sounds familiar, it is because that is the structure of the global telecom business as well. “Winner take all” might be expressed as the “rule of three,” describing the typical national telecom market which is dominated by no more than three providers.

One example is the new concentration of revenue in the mobile advertising business.

For observers long accustomed to the relative fragmentation of advertising revenues and market share across television, radio, newspapers and magazines, the extreme concentration of mobile advertising revenue is shocking.

Facebook and Google accounted for about 67 percent of all global mobile ad market revenue in 2013, and it is projected that Facebook and Google will earn nearly 69 percent of all global mobile ad revenue in 2014.

Between them, Google and Facebook earned 75 percent of the $9.2 billion in incremental global mobile ad revenues in 2013 ($6.92 billion), according to eMarketer .

That's one example of a "winner take all" market. Of course, there are implications for regulators responsible for oversight of communications markets. To the extent the theory holds, only a few firms will dominate every telecom market, eventually.

That tendency to "fewness" will be relevant in coming days as much of the global communications business consolidates. The point is that, no matter what, a truly competitive market will eventually consolidate into leadership by just a few companies.

Demography is Why OTT Video Wins, in the End

http://www.parksassociates.com/blog/article/pr-mar2014-ott-webcast

The way younger users consume entertainment video tells you most of what you need to know about the inevitability of over the top, streamed video that competes directly with linear video subscriptions, even if, in an interim period, it might well turn out that linear video subscription providers emerge as key purveyors of such services.

In what linear video service providers might consider an ideal scenario, consumers would be able to stream only the shows and programs they want to watch, on demand, if they also purchase a linear video service that accompanies the over the top access, even if they do not want to watch linear video, or possibly even do not own televisions.

That is the direction major linear video suppliers already are headed, at least for the major television networks, essentially adding “on the go” access to some of the channels and content subscribers already pay for as part of their linear video subscriptions.

How successful such approaches might be in a future market is not so clear, but, in principle, many consumers might accept new packages supporting both on demand streamed access as well as linear TV access, if the retail pricing questions can be addressed.

In other words, many users will refuse to pay $100 or more for linear access, only to get streamed access as part of the package. Whether they might be willing to pay lower amounts, for smaller channel packages, plus streamed access, is not yet clear.

Of course, it never is easy to convince consumers they have to pay one product they don’t want, to get access to another product they do want. Requirements to buy fixed voice service in order to get high speed access provide one recent example of that sort of retail packaging.

Likewise, video service providers typically require consumers to buy basic cable first, in order to buy a premium channel such as HBO.  

Movie services already are well down the path of mass adoption, by way of contrast, as consumers have grown accustomed first to renting videocassette tapes, then DVDs, and now streaming Netflix, Amazon Prime and other content.

Perhaps 45 percent to 50 percent of U.S. broadband households now use paid over-the-top (OTT) video services, either subscription or transactional, according to Parks Associates. That is up slightly over about a year’s time.

Including “free” sources such as YouTube, perhaps 70 percent of Internet users watch at least some over the top video.

Parks Associates also notes that 37 percent of consumers 18 to 24 view online video is their most important video source.

More than 40 percent of U.S. broadband households selected online video as one of the top three important sources of video, topping rental DVDs at 25 percent and 13 percent who said owned Blu-ray discs were among the top three sources.

The key observation is the huge difference in video entertainment preferences between the oldest and the youngest age cohorts, with roughly linear correlations in demand across all age cohorts, namely that the older the user, the less reliance is placed on over the top, streamed sources.

The younger the user, the more reliance is placed on streamed video entertainment. For users 34 or younger, online sources are at least as important as linear video, and among those younger than 24, the most-used delivery mode.

Should those behaviors persist as younger consumers grow older, linear video demand will drop, and content now delivered using linear retail formats will have to shift.

But there is one important observation about the timing of such a change. Though one might argue the transition will be about as linear as the consumption graph indicates, this almost certainly will not be the case.

When the disruption happens, and linear content is made available on a streamed basis, behavior will shift rapidly, in quantum fashion, not linearly. The reason for the prediction is simple: all other popular mass market services have shown a quantum, not linear adoption pattern.

Demography is destiny, one often hears, as a quip. But it is a quip with solid rooting. As Liberty Media CEO John Malone once quipped, in response to an analyst’s question about take rates for cable TV, specifically the fact that some consumers had high resistance to buying the product, Malone quipped that this was true, but “those people are dying.”

For it is a simple fact that generations of people eventually die, and are replaced by successive generations of people. So when researchers see significant generational demand for some products, the habits of the younger age cohorts are strategic, as they represent the future consumption patterns of virtually all age cohorts.