Suddenlink Illustrates Trends for MId-Sized Independent Telcos, Cable Companies

Suddenlink’s second quarter results illustrate several trends in the U.S. largely-rural fixed network service provider market. Revenue growth is lead by high speed access services, not legacy services.

The core product now is a bundle. Bundled residential customers represented 66 percent of total residential customer relationships at June 30, 2014, an increase from 65 percent at June 30, 2013.

Though representing 28 percent of total residential customer relationships at June 30, 2014, versus 26 percent at June 30, 2013, the triple play package of video entertainment, high speed access and voice represents the growth trajectory at Suddenlink.

In a saturated and competitive market, Suddenlink is unlikely to add too many customers based on organic growth. Instead, it largely will have to increase the number of services purchased by each customer.

Second quarter revenues of $579.9 million grew six percent compared to the second quarter of the prior year, highlighted by high speed Internet revenue growth of 15 percent.

High-speed Internet service revenues rose 15 percent, while telephone service revenues grew one percent. And the business context has changed. With the advent of 1-Gbps services, Suddenlink believes it has to compete.

Suddenlink Chairman and CEO Jerry Kent said Suddenlink “will enable one-gigabit speeds” to  “retain our competitive advantage in Internet services."

Total residential customer relationships were 1,403,500 at June 30, 2014, an increase of 29,600, or 2.2 percent, from June 30, 2013.

Including commercial services, primary service units (one sale of a high speed access, voice or video service)  were 2,903,600, an increase of 110,500, or four percent, over the prior year.  

Including commercial services, revenue generating units were 3,785,100, an increase of 145,000, or four percent, from June 30, 2013.

Total average monthly revenue per basic video customer for the second quarter was $163.92, an increase of nine percent compared to the second quarter of the prior year. And that tells the story: revenue per account is growing faster than the number of new accounts.

As is the case for a few of the larger rural telcos or cable companies, commercial revenue (sales to business customers) is an important new revenue source. Commercial revenue grew 11 percent compared to the second quarter 2013, including 18 percent year-over-year growth in commercial high-speed data, telephone and on-net carrier revenue.

Commercial revenue totaled $81.8 million, or 14 percent of total revenue, in the second quarter 2014, representing growth of 11 percent compared to the second quarter 2013.

At June 30, 2014, Suddenlink served approximately 1.4 million residential customers, and Suddenlink`s RGUs were comprised of 1,168,800 basic video, 881,500 digital video, (about two million video units) 1,103,300 residential high-speed Internet, and 534,600 residential telephone customers.

The video business, in terms of units sold, is twice as big as high speed Internet, which in turn is twice as big as the voice business. That is a different profile from the largest U.S. cable companies, where high speed access, in terms of revenue, is as big as the video business.

Approximately 66 percent of Suddenlink`s residential customers subscribe to bundled services, compared to 65 percent a year ago.

Approximately 391,400 of Suddenlink`s residential customers receive video, high-speed Internet, and telephone services as part of a triple play bundle, representing 28 percent of Suddenlink`s total residential customer relationships.

Non-video residential customers of approximately 319,900 at June 30, 2014, represent 23 percent of total residential customer relationships, and grew 20 percent.

Suddenlink`s average revenue per user for the second quarter 2014 was $163.92, an increase of nine percent compared to the second quarter 2013.

Basic video customers decreased by approximately 18,700 customers during the second quarter of 2014, an improvement compared to a loss of 23,100 basic video customers in the second quarter of 2013.  

Digital video customers decreased by approximately 6,500 customers during the second quarter of 2014, an improvement compared to a loss of 8,200 digital video customers in the second quarter of 2013.

Residential high-speed Internet customers increased by approximately 200 during the second quarter 2014, an improvement compared to a loss of 8,700 residential high-speed Internet customers in the second quarter of 2013.  

At June 30, 2014, estimated residential high-speed Internet penetration was 36 percent of high-speed Internet capable homes passed.  

During the second quarter of 2014, commercial high-speed data customers increased by approximately 1,500. These commercial customers are not included in total RGU counts.

Including these commercial customers, high-speed Internet customers increased 83,800, or eight percent, over the prior year.

Residential telephone customers grew by approximately 7,100 during the second quarter 2014, and 46,900, or 10 percent, during the trailing twelve months.

At June 30, 2014, estimated residential telephone penetration was 21 percent  of telephone capable homes passed. During the second quarter of 2014, commercial telephone customers increased by approximately 2,200 customers, and increased by approximately 8,100 over the trailing twelve months, or 29 percent.

These commercial customers purchase 2.8 lines on average and are not included in total RGU counts. Including these commercial customers, our telephone customers increased 55,000, or 11 percent, over the prior year.

Suddenlink operates primarily in rural markets, and is the seventh largest cable operator in the United States.

That makes the company somewhat  analogous to Windstream and Frontier Communications, in terms of high speed access markets and customers, or Mediacom and Charter Communications, in terms or video customers and markets.

Suddenlink’s networks pass 3.1 million homes in the United States as of June 30, 2014. Suddenlink serves approximately 1.4 million customers as of June 30, 2014.

The Company's customer base is clustered geographically with approximately 96 percent of its customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio, with 91 percent of customers located within the top 20 primary systems.

Virtual SIMs Could Rapidly Increase Mobile Usage

Movirtu "Virtual SIM" platform enables multiple phone numbers to be active on a single standard subscriber information module, allowing multiple users to use one physical device without the need to manually change the SIM card.  

The obvious upside is that using a virtual SIM could allow many more people to use mobile phone service, more affordably. 

To use a virtual SIM, a subscriber borrows a phone and enters a short code that tells the network that the phone is now using another number. 

The subscriber then can make and receive calls from his own number(at his own expense) on the borrowed phone. 

All that’s changed is an entry in the mobile network’s visitor location register. 

To return the phone, the subscriber must enter the code again, and all is back to normal, a process akin to logging onto your own email account on a friend's computer.

Likewise, CloudPhone allows non-phone devices to be used as mobile network connected devices. Movirtu CloudPhone allows mobile operators to extend the reach of mobile services to non-SIM devices such as tablets that might have Wi-Fi-only connections. 

Tata Docomo Offers Sponsored WhatsApp Access in Mumbai

Tata Docomo in India now offers unlimited and sponsored usage of WhatsApp on some postpaid plans offered to customers in Mumbai.

Separately, Tata Docomo also offers separate plans with access to YouTube at discounted rates. Data plans for the “YouTube Recharge” cost half that of regular data access.

Both types of packages are examples of sponsored access, where an Internet service provider makes available one particular app at no incremental charge, or prices mobile Internet access in ways that offer huge discounts for use of a particular application.

Those examples, one might well argue, show the downside of efforts to constrain the ways ISPs enable Internet access for customers. “Equal treatment of apps,” the way network neutrality supporters now describe efforts to restrict consumer Internet access to “best effort only” modes, also prevents ISPs from providing value to potential users.

The sponsored data approach makes a few highly-popular apps available, either at no incremental cost or for highly-discounted prices, to encourage use of mobile Internet access.

In many countries, network neutrality therefore is an anti-consumer move that limits widespread access to the most-popular apps, and therefore also slows wider adoption of the Internet overall, as people who can see the value of one app likely will come to see the value of other apps.

Myanmar Mobile Usage Grows Order of Magnitude, Prices Drop 10X in 5 Years

JIn 2008, mobile phone penetration in Myanmar stood at about one percent. Then government officials decided to spur competition by granting new licenses to new operators. 



By 2013, adoption had grown to 13 percent, an order of magnitude increase in five years. 



The dramatic surge in mobile usage meanwhile was matched by a 10-fold reduction in price.

The price of a subscriber infomation module dropped from $3,000 to about $260. Qatar’s Ooredoo now sells SIM cards for 1,500 kyat ($1.50). 

Cable Companies Now are ISPs First, AT&T Might Soon be a Video Provider First

Leichtman Research Group (LRG) says the largest U.S. cable TV operators now have more high speed access customers than they do video customers, according to  Bruce Leichtman, LRG president and principal analyst.

And, sometime in 2015, it is possible AT&T will have more fixed network video subscribers than high speed access or voice customers, if its acquisition of DirecTV is approved.

Those two potential facts speak volumes about the new shape of U.S. fixed network communications markets.

The largest U.S. cable TV companies now arguably are Internet service providers with substantial video and voice operations, while AT&T’s fixed networks segment might become a business driven by video entertainment, while it continues to have significant high speed access and voice operations.

In the second quarter of 2014, 17 of the largest cable and telephone providers in the United States, representing about 93 percent of customers in the whole market, acquired nearly 385,000 net additional high-speed Internet subscribers.

Significantly, the top cable companies accounted for 99 percent of the net broadband additions for the quarter, compared to the top telephone companies.

These top broadband providers now account for over 85.9 million subscribers -- with top cable companies having nearly 50.7 million broadband subscribers, and top telephone companies having over 35.2 million subscribers.

For the top cable providers (not including overbuilder WOW), the number of broadband subscribers exceeded the number of cable TV subscribers for the first time ever.

The top cable TV providers had  49,915,000 broadband subscribers at the end of the second quarter of  2014, compared to about 49,910,000 cable TV subscribers.

The top telephone companies added only about 2,000 net broadband subscribers in the second quarter of 2014. In large part, that is because Verizon and AT&T are losing digital subscriber line customers about as fast as they are adding U-verse or FiOS fiber access customers.

AT&T and Verizon added 627,000 FiOS or U-verse subscribers in the second quarter of 2014, with a net loss of 636,000 DSL subscribers,

Broadband Internet	Subscribers at End of 2Q 2014	Net Adds in 2Q 2014
Cable Companies
Comcast	21,271,000	203,000
Time Warner*	11,965,000	86,000
Charter	4,850,000	62,000
Cablevision	2,779,000	(9,000)
Suddenlink	1,103,300	200
Mediacom	987,000	3,000
WOW (WideOpenWest)**	769,600	12,900
Cable ONE	482,725	(1,443)
Other Major Private Cable Companies***	6,475,000	25,000
Total Top Cable	50,682,625	381,657
Telephone Companies
AT&T	16,448,000	(55,000)
Verizon	9,077,000	46,000
CenturyLink	6,055,000	(2,000)
Frontier^	1,900,500	27,500
Windstream	1,153,800	(16,600)
FairPoint	333,421	1,883
Cincinnati Bell	270,300	300
Total Top Telephone Companies	35,238,021	2,083
Total Broadband	85,920,646	383,740

Sources: The Companies and Leichtman Research Group, Inc.

Syracuse Explores Municipal Broadband Network

Syracuse, N.Y. Mayor Stephanie Miner said she is researching the possibility of building a city-owned fiber-optic network to improve access to high-speed Internet service in Syracuse. 



Miner said a public network may be the best way to ensure that Syracuse has affordable, high-speed service.



The economics of such a municipal broadband network will be interesting, as it will matter whether Verizon Communications or Time Warner Cable, the current telco and cable TV providers, decide to upgrade their networks beyond 100 Mbps, or possibly up to 1 Gbps, over time. 



Assuming Syracuse were to proceed, one might anticipate a reaction by both the other providers. 



As always is the case for high speed access markets where there are three leading providers, each of the contestants might reasonably expect to get only about 33 percent take rates, over the long term. 



Unless the Syracuse high speed access network contemplates also becoming a linear video subscription provider, that will pose tough payback challenges, as the whole cost of the network will have to be earned back from one service.

LTE Customers Consume More Data, Still Rely Primarily on Wi-Fi

Observers generally expect that mobile users of Internet access will consume more data on a 4G Long Term Evolution network, compared to a 3G network, and that appears to be the case.

A 2014 Mobidia study found that LTE subscribers consume more data than do customers on 3G networks, but also that Wi-Fi continues to be the primary way most LTE users consume Internet data.

LTE subscribers in Hong Kong, for example, averaged almost 100 percent more data consumption than 3G subscribers in the first four months of 2014.

Other findings from the study are that LTE subscribers in Japan, South Korea and the United States lead the major markets in monthly data usage per subscriber. Subscribers in Japan averaged close to 3GB per month of usage in 2014.

Subscribers in South Korea, meanwhile, averaged over 12GB of mobile data consumed per month when accounting for both cellular and WiFi usage. Subscribers in Japan and Russia averaged slightly less than 10GB of data consumption.

The Mobidia study of Android smartphone and tablet users during the first four months of 2014 in  Brazil, Canada, Germany, Hong Kong, Korea, Japan, Russia, South Africa, United Kingdom and the United States  

The other issue of interest to mobile service providers is whether LTE access habits also change the way customers use Wi-Fi hotspots, compared to mobile access.

Up to this point, Wi-Fi has been the connectivity of choice among LTE subscribers. According to an earlier study by Mobidia, Wi-Fi accounted for 75 percent to 90 percent of all mobile data consumed in “leading LTE markets” including Canada, Germany, Japan, South Korea, the United Kingdom and the United States.

Across the six markets, average monthly Wi-Fi traffic jumped 36 percent in the eight months between August and March 2013, compared with a one percent increase for mobile access. On average, across the six markets, Wi-Fi accounted for 73 percent of total traffic on Android smartphones in April 2013, up from 67 percent in August 2012.

There is some evidence that faster Long Term Evolution network speeds do convince some users to rely less on Wi-Fi.

Although Wi-Fi accounts for the majority of traffic on both 3G and 4G networks, in August 2012 Wi-Fi took a significantly greater share of traffic on 3G devices than it did on 4G devices, accounting for 69 percent of usage on 3G networks and 60 percent of total traffic on 4G networks.

Mobidia’s findings, on the other hand, contradict findings of survey conducted by EE last year, which suggested LTE availability actually leads users to reduce reliance on Wi-Fi access. The UK’s largest mobile operator said 43 percent of its LTE subscribers are using fewer or no public Wi-Fi hotspots since adopting 4G. EE also found that more and more LTE users were cutting their Wi-Fi usage.

No Surprise: Amazon Fire Binds Users to Amazon Ecosystem

If you use a Kindle, you'll get the app environment the Amazon Fire represents. The Fire is heavily integrated with Amazon Prime, Apps and Kindle. That's an advantage if that is what you want. But it means the Amazon Fire will not be as useful if what you want is an unbundled experience. 



Amazon Fire was designed to make it easy to spend money with Amazon. For example Firefly, an onboard app, scans objects or listens to songs, then finds them in Amazon’s immense retail and digital content so you can buy them. 



The Fire’s biggest drawback, at least for Android fans is lack of access to Google app store products. 



All that is by design. 

TV Always Has been Disruptive to Media Economics

It has been commonplace to note that "a bit is a bit" when thinking about why Internet Protocol has value for end users and app providers, and why IP turns all single-purpose networks into general purpose networks.

In terms of the protocol, it largely is true that a "bit is a bit," allowing any sort of content or communications to use a single network. For users, a bit is never a bit, however.

People don't really buy "bits," they buy function and value. They want to talk, send a text-based message, watch a video, create a document or share a song, video or article.

And there is an expectation about what each of those things "should" cost. People expect to use email without incremental cost. They might expect to pay a little to send and receive text messages or make and receive phone calls.

They have similar expectations about the cost of using a linear video subscription, over the air TV or radio.

And that is where the business model runs into the physics of media. Some high value apps require relatively little in the way of incremental network resources, once the network is built.

Texting, email and voice are prime examples.

Video entertainment is qualitatively different in its impact on networks than voice or messaging, while the price per bit expectations also are qualitatively different.

Simply, revenue per bit for messaging and voice can be as much as two or more orders of magnitude higher than for full-motion video or Internet apps.

Assume a fixed network ISP sells a triple-play package for a $130 a month retail price, where each component--voice, Internet access and entertainment video--is priced equally (an implied price of $43 for each component).

By some estimates, where voice might earn 35 cents per megabyte, revenue per Internet app might generate a few cents per megabyte.

A Netflix subscription generates no direct revenue for an Internet access provider, but could represent network consumption of a few gigabytes or more, depending on image quality.

Revenue arguably is zero dollars per gigabyte.

And that’s the problem with video: much of it does not actually represent revenue for the ISP. But even if it does, what is the revenue and cost per gigabyte?

Even if one assume use of one hour of standard definition video, and that product is owned by the ISP, revenue might be $1 to $2 per gigabyte, or small fractions of a penny per megabyte.

“The truth is all bits are not created equal,” says Nicholas Negroponte of the Massichusetts Institute of Technology Media Lab. “And people don’t appreciate that (the cost ot download) a book, a normal novel, is about a megabyte.”

By way of comparison, “a second of video is more than a megabyte.” Beyond that, there is the value of any app or device, such as a heart pacemaker, consuming only small amounts of data.

The value of those bits, and a consumer’s willingness to pay for the value represented by those bits, is highly disparate. “And so to argue that they’re all equal is crazy,” Negroponte says.

That is why video entertainment that shifts from point-to-multipoint networks (broadcast TV, broadcast radio, satellite TV, cable TV or telco TV) to unicast point-to-point is so disruptive, in a business sense.

There is only so much any consumer is willing to pay to watch video. There likewise is a sense of value, compared to price, for making phone calls or sending text messages or web surfing.

The point is that use of IP networks to deliver entertainment video is highly disruptive of media economics. That applies to content owners as well as network service providers.

AT&T GigaPower Now Live in Dallas, Fort Worth and Surrounding Cities

AT&T has launched gigabit service in the Dallas area, for residents and small businesses in Highland Park and University Park neighborhoods.



Speeds up to 100 Mbps are available in parts of Dallas, Fort Worth and surrounding cities – Allen, Arlington, Euless, Fairview, Granbury, Irving, McKinney, North Richland Hills, Weatherford and Willow Park. 



Customers in these areas will be able to upgrade to speeds up to 1 Gbps by the end of 2014, AT&T says. 



The 100 Mbps service costs $90 per month, while the 1 Gbps services costs $120 per month, for residential customers, when customers allow AT&T to track user web browsing, for the purpose of personalizing ads.

Sprint Aims to End Confused Retail Message

Marketing messages tend to fail when they are not in harmony with a product's perceived values and weaknesses, or when the messages are ambiguous. 



So it was likely the case that many observers were confused about Sprint's recent "Newest Network" retail message. What the heck is that supposed to mean?



"Fastest network" people would understand. Likewise, "best network" or "most affordable network" or "best coverage" or "most reliable network."



Those who follow networks would know why Sprint did not try any of those. 



Now new Sprint CEO Marcelo Claure appears ready to ditch the confusing message with one that makes sense. 



Claure says  "very disruptive" rate plans are coming very soon. And the new positioning will at least make sense.



"When you have a great network, you don’t have to compete on price," Claure said. "When your network is behind, unfortunately you have to compete on value and price." 



That at least would be congruent with what many consumers actually think about Sprint. Sprint doesn't have to claim it has the best network. It only has to tout its fundamental proposition: value.