Pre-5G, IMT-2020 Standards are Going to Influence Each Other

One always can get an argument about whether “official standards” shape technology more than “market-dictated standards.” The reason is that most popular communications standards are the result of some combination of end user adoption that creates de facto standards, as well as de jure work by standards bodies.

Something like that will have as fifth generation mobile standards are created. On the “official” side, there are the coming IMT-2020 standards. On the other hand, many “pre-5G” initiatives are in the works.

That means the pre-5G de facto standards will influence the “official” standards to some extent, even as understanding of what might emerge as IMT-2020 will shape pre-5G capabilities.

With the International Telecommunications Union targeting 2020, and major mobile companies, especially in East Asia, targeting pre-5G introductions possibly in 2017, the influences will work both ways.

It might be reasonable to suggest that the core specs largely will be reflected in the pre-5G introductions, or at least the ability to migrate seamlessly.

First Use of O3b for Energy Company in West Africa

Hermes Datacomms has partnered with O3b Networks to deliver communications to a global oil company.

Hermes will deliver critical communications for the company’s operations in West Africa and a connection back to their regional headquarters in Europe.

The deal is the first to use O3b for oil and gas segment communications in West Africa, Hermes said.

Hermes Datacomms also works with O3b to deliver service in the Pacific and Southeast Asia regions.

Bouygues Rejects Altice Acquisition Offer

Bouygues Telecom has rejected a 10 billion euro ($11.3 billion) acquisition bid by Altice, ending, for the moment, both a major consolidation of the French mobile market, a reshuffling of market share leadership, and a decision by regulatory officials to approve or deny the market-reshaping deal.

The latest refusal is the third rebuff of an acquisition big by Bouygues over the last 12 months.

Altice, owner of mobile operator Numericable-SFR, has bought four companies in the past 18 months.

The 10 billion euro price tag valued the telecom business unit as much as the entire Bouygues group before the offer was made public.

Also, Bouygues was offered just 5.5 billion by Orange and Iliad, and eight billion euros by Altice itself.

PLDT Faces Same Structural Issues as Mobile Operators in Europe, North America

Just a few years ago, only service providers in some developed regions were confronting flat to negative revenue growth as high-margin legacy services dwindled. Today, the problem is spreading to a wider range of countries. Consider the situation faced by Philippine Long Distance Telephone Company in the Philippines.

The company operates in a wireless and fixed line segment, and had flat revenue  in the first quarter of 2015, with mobile service (Smart and Sun Cellular) revenues down four percent, while fixed network revenues climbed about one percent.

The good news is that “next generation” services grew. In the fixed network business, broadband revenues already account for 47 percent of total fixed line data revenues.

Fixed network broadband revenues grew by 10 percent during the quarter. Enterprise and other network services, which represent 45 percent of total fixed line data revenues, rose by seven percent.

Data center revenues were up by 23 percent in the quarter.

Also, even legacy fixed line voice revenues grew two percent.

On the other hand, mobile international voice shriveled 22 percent, largely because consumers switched to using services such as Skype. Text messaging revenues also dropped about five percent.

Mobile internet revenue grew 19 percent, quarter over quarter.

So PLDT is in a race, as are service providers in many developed nations. PLDT and other service providers have to grow new revenue sources at least as fast as legacy revenue decay. PLDT does have one advantage, though. It can rely on mobile data revenue, as smartphone adoption in the Philippines is low, only about 15 percent to 20 percent of the population owning a smartphone. In 2014, some 80 percent of Malaysian mobile users and 49 percent of Thai mobile users had smartphones.

Source: PLDT

Will IMT-2020 Support 20 Gbps, Under Some Conditions?

Will the new International Telecommunications Union IMT-2020 standard, likely to be known by consumers as 5G, will be extensible to 20 Gbps?

Maybe, eventually, as a top end capability, not a minimum requirement.

"As of now, I understand the peak data rate of IMT-2020 for enhanced Mobile Broadband is expected to reach 10 Gbps,” said ITU spokesman Sanjay Acharya. “However, under certain conditions and scenarios, IMT-2020 would support up to 20 Gbps peak data rate.”

ITU-R Study Group 5 will meet on July 21, 2015 to approve a recommendation, which will then become available during the Radiocommunication Assembly in October.”

Verizon Completes AOL Buy

Verizon Communications and AOL have successfully concluded the acquisition by Verizon of AOL, making AOL a wholly owned subsidiary of Verizon.

In an expanded role, AOL CEO Tim Armstrong continues to lead AOL operations after the closing, and Bob Toohey, president of Verizon Digital Media Services, will report to Armstrong.

Verizon Digital Media Services uses world-class technology to help companies prepare, deliver and display digital media content including video, web pages, applications, mobile ads and live events on any screen.

Armstrong in turn will report to Marni Walden, Verizon executive vice president and president of Product Innovation and New Businesses.

Regardless of how Verizon handles all of the new assets (some thing assets dispositions could be coming), Verizon has made no secret of its own view that, to the extent a large ISP wants to be in the video entertainment business, it is through streaming, not linear TV.

In that view, AOL is valued for its digital commerce and advertising potential, not the present value of its content-producing assets.

In principle, Verizon could use AOL in several different ways. Verizon might seek to retain and exploit unique content. Others might suggest it is the value of the advertising platform Verizon most sought. Yet others might suggest AOL could play a role in building an eventual Verizon streaming video service.  

Will Altice Be Able to Jump Two Hurdles?

The big by Altice to buy Bouygues Telecom faces two big hurdles. It isn’t clear the Bouygues board will accept the  10 billion euro ($11.3 billion) bid by Altice.

Bouygues already has rejected at least two earlier offers over the last 12 months.

On the other hand, as one magnate once said, at the right price, everything is for sale.

A 10 billion euro price tag would value the telecom business unit as much as the entire Bouygues group before the offer was made public.

Also, Bouygues was offered just 5.5 billion by Orange and Iliad, and eight billion euros by Altice itself.

The other issue is whether French regulators will approve the deal, and there are signs some in the government are opposed to the deal.

Emmanuel Macron, French economy minister, said he could prevent Altice’s Numericable-SFR, the country’s second-biggest mobile operator, from buying Bouygues, the country’s third largest.

But Macron did not definitively say he would block the deal. “We will see,” he said. Earier governments had made clear their support for a consolidation in the French mobile business.

If successful, the deal would create France’s largest mobile operator, and reduce the number of competitors from four to three — a consolidation that could end a three-year price war.

Is Consumer Interest in "Home Automation" Waning Already?

Consumer interest in “home automation”  is “quickly losing steam,” Argus Insights reports. “In fact, year over year slowdown in growth is clear indication that the home automation market is stalling and may be contracting.”

In May 2015 consumer demand for connected home devices such as thermostats, light bulbs, locks, sensors and cameras experienced its first drop in interest, year over year, a sign that consumer interest is stagnating, Argus Insights says.

In May 2015, consumer interest in home automation fell 15 percent, compared to the year ago May readings.

While interest in security cameras consistently generate the most interest, they are also suffering a significant drop in demand compared to 2014.

The Argus Insights’ analysis of over 12,000 consumer reviews of security cameras from February to May 2015 discloses major negative issues such as persistent problems with reliability as well as trouble with connectivity.

In addition, set up was said to be “frustrating and time-consuming.”

“Until things become easier and consumers don’t have to cobble together a total solution, I believe we will continue to see this stagnation continuing for the rest of 2015 unless a new offering addresses these issues and revitalizes the market,” said John Feland, Argus CEO

Consumers are unsure what products they want or need while first adopters have already made their purchases, Feland said.

The Google investments in Nest and Dropcam and Samsung acquisitions in home automation are not growing at the rate expected from such acquisitions, while the  overall connected home device market is shrinking, he argues.

To be sure, it would not be unusual for any important new product category to take as long as a decade or more to establish itself clearly. In fact, adoption cycles can be rather lengthy, from the standpoint of any small company.

In the United States, it took 25 years for the fixed network telephone to reach 10 percent adoption. Electricity required 30 years to reach 10 percent adoption in the United States.

Broadcast television took more than 11 years to reach 10 percent adoption, about the same for the mobile phone.

Perhaps more important, it took 39 more years for telephone service to grow beyond 10-percent adoption and reach 40 percent of U.S. households, 15 additional years for electricity to grow from 10 percent to 40 percent usel.

The personal computer took about 14 years to reach a similar 40 percent penetration.

Similar trends  can be noted for use of bank automated teller machines, for example.

Consider smartphones, which many rightly consider to be among the faster-growing devices of all time. But it took time for even that market to develop.

The IBM Simon, with its rudimentary touch screen, was launched in 1993. It didn’t catch on.

About 2002, personal digital assistants started to have the ability to make and receive phone calls. They aren’t used anymore.

RIM shipped its first BlackBerry about 2002 as well, and RIM has largely failed.

In late 2006 only 715,000 smartphones were sold, though, representing just six percent of U.S. mobile phone sales. Up to that point, the smartphone was spreading not much faster than personal computers had done, according to Technology Review.

The point is  that It took landline telephones about 45 years to get from five percent to 50 percent penetration among U.S. households, and mobile phones took around seven years to reach a similar proportion of consumers.

Smartphones grew from five percent to 40 percent in about four years.

But it likewise took about 11 years for use of mobile phones to reach 10 percent penetration, so it took about 18 years for use of mobile phones to reach about half of people in the United States.

Since it took about eight years for smartphone penetration to reach 10 percent of people, and then another seven years to reach half of users, it took about 13 years for smart phones to reach half of U.S. consumers.

The point: even highly-significant consumer products can take a decade to reach 50 percent adoption. Early sluggishness is not unusual at all.

source: Technology Liberation Front

source: Argus Insights

source: Argus Insights

Verizon Holds Overall Title of "Fastest U.S. LTE Network," AT&T Has Fastest 3G

Mobile Internet access is a highly-contingent matter, and varies as much between individual cell sites as between carriers.

That noted, a new study of mobile Internet access speeds among the largest four U.S. mobile providers found that Verizon has the “fastest 4G network” on an overall national basis, based on its performance in 16 of 30 cities, but all of the suburban and rural areas where tests were conducted.

In various areas another carrier can have the fastest network on 4G or 3G networks. AT&T, for example, has the fastest 3G network, nationally.

T-Mobile US performed best in Northwest and second best at Southwest locations, at least in urban areas.  

Altice Wants to Consolidate and Lead French Mobile Market

Altice, owner of Numericable-SFR, has made a US$11 billion offer to buy Bouygues Telecom, a deal that would combine the second-largest and third-largest French mobile service providers to create a new market leader.  

A successful deal also would reduce the number of leading mobile service providers, a move many believe would be helpful for suppliers, as many believe similar consolidation moves in Austria, Germany and Ireland that reduce the number of leading providers are helpful.

Regulatory clearance is likely to be a key issue. The French government already has said it opposes the deal.

Voice Won't be a Big Deal for 5G

Mobile signal strength, like Wi-Fi signal strength, have become bigger issues as frequencies in use have climbed from the hundreds of megahertz ranges up into the gigabit ranges.

That problem expresses itself both in terms of indoor and outdoor coverage issues, though the indoor issues arguably are the toughest problems to solve.

Some might, in retrospect, bemoan the fact that newer protocols such as Long Term Evolution were not built, from the inception, to gracefully support voice. That is a reasonable criticism, in retrospect.

The defense is that, at the time the standards were developed, the crucial and critical deficiencies of mobile networks were the ability to support higher speed Internet access. As always, there was not unlimited time to create a standard, and get it into commercial deployment.

Though that doubtless will change with 5G (voice and messaging will not be an afterthought),  one surmises from most of the verbiage that voice and messaging, though parts of the standard, are not by any means the key problems to be solved.

Bandwidth, latency, application support and the core network features all seem to be much bigger issues than ensuring that voice and messaging “works.”

Small cells will help. So will bonding to fixed network bandwidth (Wi-Fi). But voice performance still will not be a huge issue for 5G. The function has to be supported, to be sure. But it might not get as much attention as you might previously have thought.

Verizon Might Have Zero Copper Network Revenue in a Decade

Once upon a time, most telcos had similar strategies.

Verizon might have operations spanning 150 countries, but its revenue is highly concentrated in the U.S. mobile business. By 2016, the mobile business is likely to account for 85 percent of Verizon earnings (EBITDA).

In 2014, mobile contributed 70 percent of revenue, so that expectation is not out of line. In the first quarter of 2015, mobility contributed $22.3 billion in revenue and $10 billion in earnings. The fixed segment generated $9.5 billion in revenue and $2.2 billion in earnings (EBITDA).

Most observers might say future growth almost certainly  has to come from mobile services, given Verizon’s present revenue profile and company strategy. The bigger issue is whether international expansion might one day be necessary.

Right now, that might be unappetizing, for a number of reasons, including the need to pay down debt incurred when Verizon Communications acquired the Vodafone stake in Verizon Wireless.

The other issue is the sheer importance of Verizon maintaining or even increasing its market share and profits in the U.S. mobile business (including moves into mobile entertainment video).

In that respect, Verizon’s strategy contrasts with AT&T and CenturyLink, the second and third largest legacy telecom providers. AT&T already has committed to an international growth strategy, while CenturyLink has a U.S. wireline focus.

One might argue there are no strategies without risk. Verizon’s principal risk is that it is focusing on the U.S. mobile market.

The extent to which that affects the performance of the fixed network operations is unclear. The domestic portion of fixed network revenues grew more than 10 percent, but global enterprise dropped six percent and global wholesale dipped nearly four percent.

That might not be out of line with many peers, which also are seeing declining revenues from legacy services.  

In the past, Verizon executives have attributed such declines to slower public segment spending and cost optimization in the private sector. But new services related to cloud computing and IP communications are growing.

Verizon’s strategy is a bit unusual in a broader market that is moving to reliance on a mix of fixed and mobile assets in the consumer segment. When only 15 percent of earnings are derived from all fixed network operations, a reasonable executive will look for ways to build on mobile, especially if the fixed network cost per passing and stranded asset problems continue to grow.

In its key U.S. business, Verizon’s revenue from fixed network operations is declining.

Increases or declines of any quantity at a 10-percent rate are serious matters. If anything grows at 10 percent annually, it doubles in 10 years. If something declines at a 10-percent annual rate, it disappears in 10 years.

It’s something to ponder seriously: Sowmyanarayan Sampath, Verizon Communications SVP of transformation says Verizon’s copper-based revenue is declining eight percent to 10 percent a year.

At that rate, the revenue stream disappears in a decade.

ISPs Cannot Escape "Dumb Pipe"

The constant concern on the part of Internet service providers that they might be relegated to low value, low margin “dumb pipe” status is understandable, but in some ways curious.

For the most part, that separation of applications from access was decided the day Internet Protocol became “the” major protocol for communications globally. As this chart by Telstra illustrates, the “network” (transport and access) is separated from the apps enterprises and consumers want to use.

That is not to say every valuable app is an “Internet” app. Many important managed services continue to be offered, ranging from carrier voice and messaging to video entertainment and other private and specialized networks.

Still, for the most part, modern IP networks necessarily separate apps from access. Functionally, that makes the whole network a dumb pipe. That is how the protocol works.

For that reason, it is virtually impossible for any communications services provider to avoid operating as a dumb pipe, for a goodly portion of its business. In fact, to the extent that an ISP makes money serving consumers, it is, by definition, doing so as a dumb pipe provider.

That is not to say the "only" function is that of a dumb pipe. But it is the fastest-growing portion of the revenue stream. And the "managed services" are receding, in virtually all developed markets.

Virgin Media Launches Commercail 152 Mbps Service in U.K.

Virgin Media launched commercial 152 Mbps Internet access service to 150,000 Manchester homes and businesses in the United Kingdom, after having invested £75 million.

As part of the new construction, Virgin Media coverage of Manchester has increased to  450,000 premises.

Part of “Project Lightning”, Virgin plans to upgrade internet access speeds for four million locations over the next five years.

The upgrade is part of a strategy to maintain absolute leadership, in terms of delivered bandwidth, over all other fixed network providers in the U.K. market, something U.S. cable operators also are doing.

Comcast, the largest U.S. Internet service provider, is upgrading all 21 million of its locations to symmetrical gigabit service, with completion early in 2016.

In addition, Comcast also is prepared to offer 2 Gbps service to about 85 percent of those 21 million locations.

44% of U.S. Homes are Mobile Only: Why That is a Problem for Mobile

About 44 percent of U.S. households now are “mobile only,” meaning the households do not buy fixed network voice services, according to the CTIA. The prior year, about 39 percent of U.S. homes reported not buying fixed network voice services.

You might argue that is a good sign for mobile service providers. But other data points to a troubling sign of market maturation. The number of homes willing to substitute mobile for fixed service is shrinking.

Average revenue per user is declining, and has been dropping since a 2012 peak.

Also, in 2014, for the first time, U.S. mobile revenues dropped.

To be sure, that is something of a statistical artifact, as U.S. service providers are booking more device revenue, and losing recurring service revenues, as part of the shift to device installment plans.

On that basis, revenue in 2014 continued to grow. Of course, that makes a greater proportion of service provider revenue "variable," and dependent on consumer willingness to upgrade devices frequently and buy top of the line devices. 
But service provider revenues are likely to be as subject to long term decline in the U.S. market as in other markets where declines are happening already, or are projected to happen within the next few years.

Some might argue that is a cyclical development. Others might simply point out that as penetration has reached 110 percent, most people who want to use the service already do so.

That five percent increase in the fixed network abandonment rate might be important. At a five-percent annual decline rate, the whole business disappears in about two decades.

Sprint, for example, recently asked the Federal Communications Commission for permission to shut down its long distance voice operations, entirely, by September 2015.

The problem appears to be that the business costs more than it generates in revenues.

Verizon’s revenue from fixed network operations also is declining sharply, for example.

Increases or declines of any quantity at a 10-percent rate are serious matters.

Sowmyanarayan Sampath, Verizon Communications SVP of transformation says Verizon’s copper-based revenue is declining eight percent to 10 percent a year.

At that rate, the revenue stream disappears in a decade. So far, mobile substitution has not advanced at those rates.

It always is possible that service providers will manage to create substitute products that slow the rate of decline. And, at least for a time, substitution rates could decline as the remaining customers should be those for whom the product remains relevant.

But you might argue that where mobile operators at one time might have cheered mobile substitution, they now have bigger problems, namely the maturation of the foundation products for the mobile revenue stream.