Gigabit Access Improves User Experience, But Only So Much

The growing embrace of faster Internet access in the U.S. market, and the growing supply of faster connections, despite all criticisms, has many drivers--on both the demand and supply side. But it is changes on the supply side that arguably are most important.

In the past, Internet service providers rightly have suggested there was not much demand for faster access (50 Mbps, 100 Mbps, 300 Mbps or gigabit Internet access), but that was in large part primarily because of retail prices.

It would have been more accurate to say there was, in the past, not much demand for Internet access costing $100 to $300 a month, when “good enough” services could be purchased for $40 to $60 a month.

All that is changing. When Google Fiber launched Google Fiber, offering a symmetrical access service for $70 a month, the key innovation might arguably have been the price.

True, Google Fiber offers very-fast access (two orders of magnitude faster than typical offers, and an order of magnitude faster than 300-Mbps services that had been available in some communities.

But the key innovation arguably was the price. A gigabit for $70 a month is not such a leap from the $50 a month level of “standard” Internet access.

Also, $70 a month is a huge change from the $300-a-month price of prior 300 Mbps offers, or $350 monthly prices for a few gigabit services that had been available.

So major changes on the supply side--dramatically lower prices and dramatically faster speeds--are spurring demand.  

In part, that is because the underlying technology is getting better.

“I joined AT&T in 2008 and I remember around 2012 looking at some charts and the cost of speed hadn’t really had a breakthrough, because 80 percent of your deployment in broadband is labor based,” said John Donovan, AT&T senior executive vice president for architecture, technology and operations.

“And then all of a sudden you have vectoring in small form factor stuff and all of a sudden a little bit of an investment by our supply chain a few standard things and we start to take a 25 meg on a copper pair and then we move it to 45 and then 75 and then 100 which is on the drawing board,” said Donovan.

The point is that the underlying technology used by cable TV operators and telcos has been continually improved, providing better performance at prices useful for commercial deployment.

Operating practices also are becoming more efficient. Google Fiber has been able to work with local governments to streamline permitting processes and other make-ready work in ways that can lower costs to activate a new Internet access network using fixed media.

Google Fiber also pioneered a new way of building networks, getting users to indicate interest before construction starts, and building neighborhood by neighborhood, instead of everywhere in a local area.

That changes gigabit network economics. As has been true for nearly a couple of decades in the U.S. market, for example, competitive suppliers have been able to “cherry pick” operations, building only enough network to reach willing customers, without the need to invest capital in networks and elements that “reach everyone.”

That makes a big difference in business models. A network upgrade that might not have made sense if applied across a whole metro network might well make sense in some parts of a city, where there is demand.

Also, every new supplier of Internet access goes through a learning curve, generally operating inefficiently at first, but improving as experience is accumulated.

“And then we are getting better at the deployment side of the business as well,” said Donovan. “So our average technicians and our best technicians are converging.”

But there is an important related issue. Customers who get gigabit service often cannot perceive a difference in experience as great as they might have expected.

“When we do the installs, we often have to stay and show them on a speed test is getting a gig,” said Donovan. That illustrates a problem we are going to be seeing more often, namely that gigabit access can only improve end user experience so much.

Access speed only improves experience so much because it is only part of the combined ecosystem, and only can affect a part of user experience. Remove the local access bottleneck on one end and all the other elements become visible.

Bragging rights and therefore marketing advantages are believed to accrue to Internet service providers with the highest perceived Internet access speeds.

Some--if not most--of that marketing hype apparently is misplaced, a new study by Ofcom, the U.K. communications regulator, might suggest.

The study found that “access speed” matters substantially at downstream speeds of 5 Mbps and lower. In other words, “speed matters” for user experience when overall access speed is low.

For downstream speeds of 5 Mbps to 10 Mbps, the downstream speed matters somewhat.

But at 10 Mbps or faster speeds, the actual downstream speed has negligible to no impact on

end user experience. Since the average downstream speed in the United Kingdom now is about 23 Mbps, higher speeds--whatever the perceived marketing advantages--have scant impact on end user application experience. Some 85 percent of U.K. fixed network Internet access customers have service at 10 Mbps or faster.

Investing too much in high speed access is, as a business issue as investing too little. The important insight is that it is perception that now matters most in the United Kingdom and United States, not the actual threshold required to provide reasonable end user experience of Internet applications such as web browsing and streaming video.

Average access speeds in the United States are 10 Mbps, according to Akamai. Average speeds are 32 Mbps, according to Ookla. Another study shows that average Internet access speeds in the United Kingdom and United States are equivalent, in fact.  

The quality of the upstream path and in-home network have some impact, at all speed ranges, but at a dramatically lower level as speeds climb above 10 Mbps.  

One finding was surprising. The Ofcom tests of end-to-end user experience suggest that web browsing is significantly affected by upstream and downstream access speeds, the home network and the Internet service provider’s network interconnection policies.

Both the upstream and downstream speeds affect user experience of streaming video, while voice experience is, relatively speaking, barely affected.

Those are important findings. The quality of the broadband experience is not solely dependent on

access speed. In-home wiring (including Wi-Fi performance) and peering arrangements etween internet service providers can also be important.

“Indeed, for connections with a download speed greater than 10 Mbps, access speed appears to become less significant than these other factors,” Ofcom says.

At connection speeds above the range of 5 Mbps to 10 Mbps, though, the relationship breaks down and broadband connection speed is no longer an important determinant of performance, Ofcom says.

The important observation is that elements of the end-to-end value chain--other than access speed--now are becoming greater bottlenecks.

BT Acquisition of O2 Seen as Imminent

BT is expected to buy O2, getting back into the mobile business in a big way, “before the end of 2014,” U.K. financial site “This is Money” reports. That would give BT 24 million mobile customers, create the ability to provide a quadruple pay bundle, and likely trigger a reshuffling of assets in the U.K. communications market as well.

“Virtually all operators today believe that their future lies in a quad play, a supposedly new buying behavior expected to consolidate in future: In the operators’ view, customers will buy their fixed telephony, broadband, mobile, and TV services all from the same company and stay with the same provider for longer,” says Dario Talmesio, Ovum analyst.

“Mobile businesses are looking to move into broadband because their revenues are in decline,” many would note. “While revenues for the broadband industry have grown by four percent to five percent a year over the last two years, mobile revenue continues to decline by three percent a year,  according to media consultancy Enders Analysis.

Still, a successful acquisition of O2 by BT would put BT into contention near the top of the U.K. mobile market.

EE, the joint venture between Orange and Deutsche Telekom, has 33 percent share of mobile revenues in the U.K. market.

O2 has 26 percent market share in the U.K. market, as does Vodafone, with 26 percent market share by reported service revenue in the United Kingdom.

Hutchison Whampoa’s Three has 12 percent market share and and Virgin Mobile has three percent market share.

Growing interest in quadruple play retail offers is driven, fundamentally, by the contraction of mobile revenue, the shrinking of fixed network voice revenue and the degree of competition in the U.K. market.

Simply stated, contestants look to sell more products to a perhaps-smaller number of customers, boosting gross revenue and slicing customer churn by selling four products instead of one or two. ee

It isn’t rocket science.

Despite Gigabit Hype, Internet Access Speed is Not the U.K. or U.S. Experience Bottleneck

Bragging rights and therefore marketing advantages are believed to accrue to Internet service providers with the highest perceived Internet access speeds.

Some--if not most--of that marketing hype apparently is misplaced, a new study by Ofcom, the U.K. communications regulator, might suggest.

The study found that “access speed” matters substantially at downstream speeds of 5 Mbps and lower. In other words, “speed matters” for user experience when overall access speed is low.

For downstream speeds of 5 Mbps to 10 Mbps, the downstream speed matters somewhat.

But at 10 Mbps or faster speeds, the actual downstream speed has negligible to no impact on

end user experience. Since the average downstream speed in the United Kingdom now is about 23 Mbps, higher speeds--whatever the perceived marketing advantages--have scant impact on end user application experience. Some 85 percent of U.K. fixed network Internet access customers have service at 10 Mbps or faster.

Investing too much in high speed access is, as a business issue as investing too little. The important insight is that it is perception that now matters most in the United Kingdom and United States, not the actual threshold required to provide reasonable end user experience of Internet applications such as web browsing and streaming video.

Average access speeds in the United States are 10 Mbps, according to Akamai. Average speeds are 32 Mbps, according to Ookla. Another study shows that average Internet access speeds in the United Kingdom and United States are equivalent, in fact.  

The quality of the upstream path and in-home network have some impact, at all speed ranges, but at a dramatically lower level as speeds climb above 10 Mbps.  

One finding was surprising. The Ofcom tests of end-to-end user experience suggest that web browsing is significantly affected by upstream and downstream access speeds, the home network and the Internet service provider’s network interconnection policies.

Both the upstream and downstream speeds affect user experience of streaming video, while voice experience is, relatively speaking, barely affected.

Those are important findings. The quality of the broadband experience is not solely dependent on

access speed. In-home wiring (including Wi-Fi performance) and peering arrangements etween internet service providers can also be important.

“Indeed, for connections with a download speed greater than 10Mbps, access speed appears to become less significant than these other factors,” Ofcom says.

At connection speeds above the range of 5 Mbps to 10Mbps, though, the relationship breaks down and broadband connection speed is no longer an important determinant of performance, Ofcom says.

The important observation is that elements of the end-to-end value chain--other than access speed--now are becoming greater bottlenecks.

AT&T and Verizon both Expect Higher Mobile Churn in 4th Quarter 2014

AT&T now says it expects to report higher churn rates in the fourth quarter of 2014, the result of the marketing war which now has ensnared even Verizon Communications, which has said it would remain above the fray.

Verizon Communications announced “strong momentum for wireless customer growth in the fourth-quarter 2014” and “very strong customer demand” for 4G smartphones and tablets on its “More Everything” shared data plans for the fourth quarter of 2014, at the same time it is warning that the company expects pressure on earnings and profit margins.

“The fourth-quarter impacts of its promotional offers, together with the strong customer volumes this quarter, will put short-term pressure on its wireless segment EBITDA and EBITDA service margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) as well as its consolidated EBITDA margin (non-GAAP) and earnings per share,” Verizon said.

Such is the competitive environment that Verizon expects that financial pressure even as it expects higher retail postpaid gross additions, both sequentially and year over year.

About 75 percent of Verizon’s quarterly upgrades were “strategic or high-quality,” meaning they represented upgrades from a basic phone, a 3G smartphone or represented an upgrade by a high-value customer.

The percentage of customers choosing the “Verizon Edge” equipment-installment plan option in the fourth quarter of 2014 currently is 24 percent, double the rate of third-quarter 2014, when 12 percent of total phone activations. used the equipment installment plan.

“Total retail postpaid disconnects are trending higher both sequentially and year over year in this highly competitive and promotion-filled fourth quarter,” Verizon said.

One day later, AT&T says its churn also will be higher in the fourth quarter.

Verizon Expects Strong LTE Upgrades, Strong Net New Subscriber Growth, and a Hit to Earnings and Profit Margins

When is strong net new mobile subscriber growth, high take rates for Long Term Evolution fourth generation service and high conversion rates of the best existing customers to 4G service  a problem?

When a highly-competitive environment means there is lots of promotional activity, even by a firm that eschews promotions.

So it is that Verizon Communications announced “strong momentum for wireless customer growth in the fourth-quarter 2014” and “very strong customer demand” for 4G smartphones and tablets on its “More Everything” shared data plans for the fourth quarter of 2014, at the same time it is warning that the company expects pressure on earnings and profit margins.

“The fourth-quarter impacts of its promotional offers, together with the strong customer volumes this quarter, will put short-term pressure on its wireless segment EBITDA and EBITDA service margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) as well as its consolidated EBITDA margin (non-GAAP) and earnings per share,” Verizon said.

Such is the competitive environment that Verizon expects that financial pressure even as it expects higher retail postpaid gross additions, both sequentially and year over year.

About 75 percent of Verizon’s quarterly upgrades were “strategic or high-quality,” meaning they represented upgrades from a basic phone, a 3G smartphone or represented an upgrade by a high-value customer.

The percentage of customers choosing the “Verizon Edge” equipment-installment plan option in the fourth quarter of 2014 currently is 24 percent, double the rate of third-quarter 2014, when 12 percent of total phone activations. used the equipment installment plan.

“Total retail postpaid disconnects are trending higher both sequentially and year over year in this highly competitive and promotion-filled fourth quarter,” Verizon said.

40% of Enterprises Will Go "Wi-Fi First" by 2020

Ethernet cabling remains the mainstay for enterprise data connections, but Wi-Fi is becoming a “first choice” of employees, for a number of reasons.

By 2018, 40 percent of enterprises will specify Wi-Fi as the default connection for non-mobile devices, such as desktops, desk phones, projectors, conference room, Gartner analysts now predict.

User reliance on mobility is key. In the emerging economies, users are adopting smartphones as their exclusive mobile devices while in developed economies, multi-device households are becoming the norm, with tablets growing at the fastest rate of any computing device, Gartner says.

Gartner predicts that, by 2018, more than 50 percent of users will go to a tablet or smartphone first for all online activities.

“The use pattern that has emerged for nearly all consumers, based on device accessibility, is the smartphone first as a device that is carried when mobile, followed by the tablet that is used for longer sessions, with the PC increasingly reserved for more-complex tasks,” said Van Baker, research vice president.

Given that consumer shift to untethered and mobile devices, Wi-Fi makes more sense.

“Ethernet cabling has been the mainstay of the business workspace connectivity since the beginning of networking. However, as smartphones, laptops, tablets and other consumer devices have multiplied, the consumer space has largely converted to a wireless-first world," said Ken Dulaney, vice president and distinguished analyst at Gartner. “we expect many organizations to shift to a wireless-by-default and a wired-by-exception model.”

Globally, the “mobile first” trend will be fueled by the ability to buy a smartphone for less than US$100, by about 2020.

By 2018, 78 percent of global smartphone sales will come from developing economies, as well.

By 2018, Gartner expects a $78 average selling price for a “basic phone” to be $78, while a simpler “utility phone” costs $25.

Some low-cost smartphones are expected to reach approximately $35 (unsubsidized) by the end of  2014, compared with the $50 entry-level smartphones seen in 2013.

Implications of "Pervasive" High Speed Access

Though some might focus on findings related to typical high speed access speeds, use of smartphones, cost per delivered megabyte or investment in next generation networks, some might say the key strategic point raised in a new study of G7 high speed access is the movement to “pervasive” access.

And that point is that high speed access evolves over time to a stage where “most end-user connections are wireless, at speeds produced only by wired systems in earlier stages,” the study argues.

Note the prediction: untethered access speeds eventually approach wired network speeds. That has potential implications for the ability to substitute mobile or untethered access for fixed access, as well as for the strategic value of all fixed networks.

Obviously, the speed match will be highest for optical-to-Wi-Fi connections than for optical-to-mobile connections, partly because of distance effects, partly because of spectrum constraints and partly because for reasons of network architecture.

Basically, bandwidth and speed are inversely related, so short Wi-Fi links will supply faster access than mobile macrocells spanning distances of miles. Additionally, local Wi-Fi has access to more spectrum than any single mobile service provider.

Also, mobile networks reuse spectrum in ways that mean all the available spectrum cannot be used at any single location. Wi-Fi networks can use all available spectrum, at every location, subject to interference issues.

The shift to “pervasive” networking also is significant because it points to the future evolution of the high speed access business: from fixed to mobile and untethered, with a key role played by the fixed infrastructure as a way of extending core network access close to network edges, allowing a high degree of untethered access.

Prior high speed access networks featured a high-performance wide area network optical core, a regional distribution network and then a mid-speed copper access network extending core network transport for distances of perhaps 3.5 miles, in suburban areas.

Increasingly, the optical network core extends deep into the metro-area distribution network, and in the case of optical fiber access networks, to a neighborhood or single location, with copper or radio distribution on a local basis.

That is the case for “fiber to neighborhood” networks that use optical media to an area of a score, or perhaps several hundred homes, with copper media for a kilometer to perhaps a mile, and then local distribution typically using Wi-Fi within a location.

Mobile networks have been built with optical cores connecting to microwave, fiber or copper distribution, and then radio access for towers reaching a few to several miles. More heterogeneous networks now are appearing in dense urban areas, in some cases using small localized cells that cover small areas.

Fiber to home networks extend optical media to actual end user locations, with local distribution typically using Wi-Fi rather than the older Ethernet cable interfaces.  

The study argues that high speed access develops in three distinct phases. At the “basic” stage  

wired telephone, cellular telephone, and cable TV networks are coupled with broadband electronics to provide a basic level of connectivity 10 to 100 times greater than voice networks.

At an “advanced” stage, after more optical fiber deployment, better modulation techniques, more sensitive radios, better signal compression and signal processing, as well as additional spectrum allocation for untethered and mobile use, speed improves another 10 to

100 times.

At the “pervasive” stage, most user connections are mobile or untethered and access speeds better approach fixed network speeds.

Beyond the matter of access speed for untethered and mobile devices, the "pervasive" access also points to expected changes in "fifth generation" mobile networks and application development. When access is pervasive, mobile devices will increasingly represent the way people use the Internet and applications.

And that suggests app development increasingly will revolve around "mobile" interfaces, form factors and input-output methods. Also, as increasingly is the case, apps will shift in the direction of location-specific, activity-aware and sensor-assisted app features.

Thai Telcos Face Higher Costs, Less Revenue

The Thai telecommunications market, which arguably has been unstable over the past decade, looks to get another remake.

A possible merger of state-owned Telecom of Thailand (TOT) and CAT Telecom, a talked-about option since at least 2006, might actually happen, if the Thai government gets its way.

The Thai government proposes to create a new wholesale company providing wide area optical transport services, and also owning the existing mobile tower networks.

Revenue issues for the two state-owned firms arguably have been made tougher by the decision to create a national backbone and tower services firm.

That should negatively affect TOT and CAT, which today are the suppliers of all wholesale communications facilities in Thailand. In effect, the new national backbone network will remove revenue-generating assets. In some cases, where TOT or CAT need those assets to support their own businesses, new costs are added, at the same time.

The current system, where “concessions” rather than “licenses” are the patten, means that 30 percent of retail service provider revenue is owed to the state. Now CAT and TOT might find themselves payers rather than payees for some services.

The potential merger of TOT and CAT, along with the new national backbone network, occur against a  backdrop of an arguably inconsistent and unstable regulatory framework in Thailand.

For mobile services market leader AIS, that means a concession fee for each prepaid customer of 25 percent, and a fee for each postpaid customer of 30 percent.

Most users of voice communications in Thailand have for some time relied on mobile rather than fixed network service provided by private operators, though CAT’s mobile service, majority owned by Hutchison Whampoa, is among the larger firms in the Thai market.

The new backbone network presumably means some of the concession fee will flow to the national backbone company, not CAT or TOT.

That, of course, will have negative repercussions for cost structure at TOT and CAT.

Already, the Thai government appears to have asked both CAT and TOT to rapidly reduce costs by 10 percent. That, combined with a loss of some revenue to the new national backbone network, is one reason a merger between the two firms might be necessary.

Common Carrier Regulation of Fixed High Speed Access Would Raise Taxes $90 a Year

Title II common carrier regulation of consumer Internet access--whatever else happens to pricing and investment in next generation networks--also will raise taxes for U.S. consumers.

The Progressive Policy Institute calculated that the average annual increase in state and local fees levied on U.S. fixed network users will be $67 each year, while mobile broadband taxes would grow $72 per line, per year.

The annual increase in federal fees per household will be roughly $17. That implies a potential higher cost of about $84 to $89 a year.

“When you add it all up, reclassification could add a whopping $15 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program,” the Progressive Policy Institute notes.

The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.

Those charges would occur because once Internet service providers are labeled “telecommunications providers” under Title II, their services become subject to both federal and state fees that apply to those services. The two main federal charges are an excise tax and a fee for “universal service.”

The bottom line is that annual residential fixed network high speed access costs would likely go up by $8 in Delaware to almost $148 in certain parts of Alaska, on an annual basis.  

The average fee for fixed network high speed access users would range from $51 to $83 per year.

Mobile phone bills would likely increase by at least that amount, as well.

The additional spending per household for fixed high speed access alone, attributable to the federal universal service program would amount to $2.014 billion (equal to $1.38 per month increase x 12 months x 121.7 million households).

U.S. Linear TV Viewing Drops 4.4% in a Year

Digital video viewing is up by double digits across key adult demographics, while viewing via a traditional TV screen is dropping, according to Nielsen’s new “Total Audience Report.”

The average U.S. adult spent four hours and 32 minutes watching live TV in the third quarter of 2014, down 4.4 percent from four hours and 44 minutes in 2013.

The amount of time spent on time-shifted viewing using a digital video recorder rose to 30 minutes, from 28 minutes in the third quarter of  2013.

Time spent using the Internet on a computer climbed to one hour and 6 minutes, up from one hour, the report noted.

Time spent watching video using a smartphone spiked to one hour and 33 minutes, from one hour and 10 minutes a year ago.

Digital-video usage overall rose 60 percent year over year, from six hours and 41 minutes in the third quarter of  2013 to 10 hours and 42 minutes in the third quarter of 2014.

Time spent watching Internet video was up 53 percent among adults 18 to 49 quarter over quarter, Nielsen reported.

Linear TV viewing for viewers 18 to 49 dropped three percent.

Among adults 25 to 54, viewership of digital content grew 62 percent,  while linear TV declined two percent.

Among adults 55 and older, digital viewing rose 55 percent while linear viewing was flat year-over-year.

Declining Demand a Problem for Growing Range of Telecom Products

The biggest problem arguably faced by the linear video subscription business is declining demand for the product, a trend that already has affected fixed network voice and mobile network text messaging.

New data from Bernstein Research shows TV audiences have continued to decline. And though one should not give too much credence to any one-week change, aggregate cable television audiences dropped eight percent Nov. 17 through 23 of 2014, while broadcast TV viewing dropped nine percent, according to Bernstein Research.

Aggregate audiences are also down over the third quarter of 2014, a possibly more-significant trend. Both cable TV and broadcast TV viewing dropped nine percent.

Children's programming fared even worse, with audiences falling 12 percent in a week, and 15 percent during the quarter, according to Bernstein.

The slipping viewership among young audiences may be because children's programming is particularly vulnerable to competition from streaming services like Netflix and Hulu, some argue.   

Nickelodeon viewership fell 25 percent and Disney Channel viewership fell 24 percent.

Thailand Proposes New Wholesale-Based Telecom Framework

source: ASEANBriefing

The Thai government now hopes to create a different wholesale infrastructure entity to support fixed and mobile telecommunications services in Thailand.

To be sure, wholesale infrastructure already is wholly-owned by the government.

Two firms--TOT and CAT--own facilities and issue concessions to private operators to use the assets.

In that framework, all retail providers compete without benefit or detriment of network asset ownership. 

Some might argue the new national network will allow faster investment in new facilities in some areas by increasing the expected financial return from investing in new assets.

But the change might be unsettling for TOT and CAT, the two Thai state-owned firms that formerly owned infrastructure. So far, it appears the new wholesale entity will control the wide area optical backbone and tower networks.

That might mean the existing fixed local access network might remain the province of TOT. Likewise, it is not yet clear whether CAT's gateway and international traffic functions will remain with CAT.

Much depends on which assets are transferred to the new wholesale entity, and how the terms, conditions and price of wholesale access are set. In what might be termed a "worse case" scenario, CAT and TOT both largely become retail operators rather than wholesale providers.

And, if so, how well might they handle the challenge? To the extent that new primarily retail function develops. do the firms possess the right mix of human and other assets to compete effectively as "virtual operators?"

The proposed “national backbone holding company” could inherit the 150,000 kilometers of optical fiber owned by state-owned operators TOT and CAT.

The new wholesale company might also incorporate about 50,000 km of optical fiber owned by private players and the Electricity Generating Authority of Thailand.

The holding company would have separate telecom tower and fiber optic network operations, and would presumably result in all retail providers in Thailand renting transport and access from the wholesale company.

Internet access in Thailand is about 29 percent, and an estimated 30,000 villages have no access to the Internet at all.

Sprint Gambles on Price Attack

T-Mobile US has proven one thing: an aggressive price attack can grow market share, add subscribers, gross revenue and cash flow. What has not yet happened is a longer term shift to actual operating profits.

Sprint seems to be gearing up for a similar strategy test, attempting to wrest price leadership away from T-Mobile US as it gambles on a pricing attack. Whether the strategy "works" in the short term is the issue, to say nothing of the longer-term merits.

Sprint reported a quarterly loss in the third quarter of 2014 of $765 million, compared to net income of $23 million in the second quarter of 2014 and net income of $383 million in the third quarter of 2013.

Now the issue what happens as Sprint has launched an aggressive price attack, offering new customers a permanent discount of half the monthly rates they now pay to Verizon Wireless or AT&T Mobility customers who switch to Sprint beginning Dec. 5, 2014.

The “Cut Your Bill in Half” offer provides unlimited talk and text to anywhere in the United States while customers are on the Sprint network, and the same mobile data allowance new customers now have at AT&T or Verizon, while permanently charging 50 percent of what new customers now are paying to AT&T or Verizon for mobile data service.

At this point, it seems impossible to figure out whether Sprint’s operating cash flow get worse, stabilizes or even improves, in the near term as a result of the new promotion, and other actions Sprint is taking, or might take.

Sprint obviously is banking on something similar to T-Mobile US experience after it launched its price attack. After bleeding customers for years, T-Mobile US began growing fast after it began its “Uncarrier” price war.

In its own third quarter 2014 earnings report, T-Mobile US reported a net gain of 1.2 million branded postpaid phone accounts, and mobile broadband net additions of 200,000. T-Mobile US also added wholesale and prepaid customers, for a total 2.3 million net adds for the quarter.

So gross revenue grew.  Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA, or cash flow), declined to $1.35 billion, down 7.2 percent sequentially and flat, year over year. And there lies the potential problem for both T-Mobile US  and Sprint: revenue, cash flow and subscriber gains at the expense of profit.

If Sprint can, over the next quarter, start to replicate that performance, it is conceivable revenue and cash flow grows, although profit margins could worsen, and Sprint could lose money.

Some might call that a race to the bottom. We will find out soon enough whether Sprint can emulate T-Mobile US and start adding customers, instead of losing them. The longer term issue--whether either firm can eventually shift to profitability--remains the bigger issue.

Customer Retention Drives Mobile Operator Interest in Carrier Wi-Fi

Customer retention likely is more important than traffic offload as a motivation for deploying carrier-owned Wi-Fi hotspots, a survey sponsored by the  Wireless Broadband Alliance, and conducted by Maravedis-Rethink has found.

Fully 70 percent of respondents said a key motivation for deploying carrier Wi-Fi was to improve customer experience, seen in turn as a way to increase subscriber retention.

Some 41 percent of respondents said improved customer experience was the single most important driver to invest in next generation hotspots, ahead of the value of offload.

In both 2013 and 2014, large venues such as stadiums and shopping malls were among the biggest drivers of traffic growth said over 50 percent of respondents, followed by travel hubs such as airports (cited by 48 percent) and connectivity on board transportation (41 percent).

The survey also found that Wi-Fi roaming will continue to be an important way to extend coverage, especially internationally.

In the 2013 survey, 30 percent of the hotspot operators also had roaming deals to supplement their networks, while in 2014, that percentage has risen to just over 50 percent.

Among those surveyed, there was a total base of over 2.8 million directly owned and managed hotspots, and an average of 42,000 locations. When roaming was included, the carriers could provide a total of 8.85 million locations between them, or an average of 193,000 each.

With regards to “next generation hotspot” (the WBA program for seamless authentication between Wi-Fi and carrier networks) deployments, about 44 percent of respondents expected to have deployed at least parts of the platform by the end of 2015.

By the end of 2016, another 31 percent of those with active plans for NGH expect to have NGH deployed.

Some 35 percent of respondents are charging for roaming access, or providing tools and platforms to enable such roaming.

The study included 210 respondents, or which 45 percent were mobile service providers.

The majority of the responses came from North America (39 percent) and Europe (26 percent), followed by Asia-Pacific (19 percent).