Comcast Stream, Otter Media Illustrate Tensions Over Linear Video

It is not unusual to note management issues when large enterprises and smaller firms partner or when larger firms acquire smaller firms.

Nor is it unusual to understand strategic issues and conflicts whenever a joint venture aims to create a big replacement business important to an enterprise, as any enterprise logically tries to maximize the value of its present business, even if it understands that business is shrinking and will be replaced in time.

Comcast’s new Stream service, for example, is available only to Comcast high speed access subscribers, although it importantly does not require buying Comcast linear video service.

The service features access to about a dozen major networks (four TV broadcasters, PBS, CW, and Spanish-language channels, HBO and a cloud DVR feature, that can be viewed on Web browsers, tablets and mobiles.

You see the hybrid approach: buyers must previously have chosen to buy, and keep buying, the Comcast high speed access product. The service offers a limited menu and works only on non-TV devices. But there is no requirement to buy the Comcast linear video service.

Those features make Stream a complement, not a substitute product. Critics might argue the limited channel line-up prevents Stream from becoming, in any substantial way, a substitute for the core linear video product.

That is the point.

The same dynamic might be at work with a CEO resignation at Otter Media, the streaming media joint venture between AT&T and the Chernin Group.

In principle, both firms might hope for serious market success that might be defined as creating a credible competitor to Netflix.

On the other hand, too much success might jeopardize the cash flow AT&T hopes to wring from its acquisition of DirecTV, a business that everyone agrees is imperiled by the rise of streaming alternatives.

Ultimately, one might argue, efforts to foster growth of a substitute new product, by a leader in that market, are difficult--and often impossible--to finesse.

The problem includes, but is not limited to the inherent tension between the legacy and replacement revenue units. Too much success by the innovation unit, too fast, directly reduces legacy business unit revenue.

So interests are in direct conflict. That rarely is a recipe for rapid progress. Indeed, one might argue precisely the opposite will happen: the innovator unit will be constrained to protect the legacy unit.

The problem is more than “bureaucracy.”

Any large enterprise, in any industry, will operate more “bureaucratically,” which is to say, with many more rules and structured processes.

Many would say such firms must do so, to maintain the organizational equivalent of rule of law.

As frustrating as working in a rules-driven organization might be, the alternative likely is worse: the danger of whimsical, conflicting, unsteady decision making.

Stresses arguably are even greater when a joint venture tries to navigate a complex and dangerous juncture between fundamental business models and technology platforms, and when one of the parties aims to be a disruptor, while the other is a leader in the legacy business.

That, in a nutshell, might well be the problem faced by Otter Media. Verizon Wireless might be taking the opposite approach, essentially harvesting its legacy business faster by building and promoting replacement services at a faster rate.

You might explain that attitude by structural realities. AT&T will be the biggest provider of linear video in the U.S. market if its acquisition of DirecTV is approved. Verizon is among the smaller providers. In other words, AT&T has far more revenue to lose.

As much as managers might want to be leaders in an emerging big new business, they also want to harvest and protect their existing business.

That forces innovation efforts to avoid actions that are viewed as negatively and directly reducing the magnitude of revenue streams from the legacy business.

It is a serious and perpetual problem, and more relevant for Comcast and AT&T, which are leaders in linear video, compared to Verizon, which has concluded it is not worth the effort to grab a bigger position in linear video.

IoT Value Clear for Insurance Industry

It is hoped--perhaps expected--that application and service providers will have a far easier time convincing potential buyers of the business value of Internet of Things features, compared to some other innovations of recent decades.

Unlike some earlier value propositions, which generally revolved around automation, and the cost side of any business, IoT value tends to come from the revenue and margin side of the business.

That tends to get a better reception from decision makers.

On the other hand, the Internet of Things should also blur industry boundaries, allowing new competitors--especially those not traditionally in the insurance industry--to create services that take market share.

Such porous industry boundaries typically happen when important new technology gets deployed, and virtually always when markets get deregulated.

source: AT Kearney

Consider the benefits for insurers. IoT devices that monitor actual user behavior will allow better predictive models, which in turn will allow insurers to better manage risk.

The IoT will change every part of the insurance value chain, including product design, pricing, underwriting, service and claims.

The value for policyholders is reduced premiums. For insurers, the value is reduced loss and lower overall costs.

Over time, insurance premiums will decrease proportionately to decreases in losses.

Auto insurers and health insurers provide clear examples. Simply, trucks equipped with monitoring capability have fewer accidents than trucks without monitoring.

Property insurance companies are increasingly using drones to assess damages after an incident has occurred. Consulting firm Cognizant estimates that drones will make insurance adjusters' work flow 40 percent to 50 percent more efficient.

Healthcare insurers are giving customers free fitness trackers and offering lower premiums or other benefits for meeting daily exercise goals, which in turn contribute to greater health and lower health intervention outlays.

Home insurance companies are incentivizing customers to install connected devices that warn of potential danger to properties. With the average claim for a residential fire

at more than $35,000, the opportunity for claims reduction can be significant.

IoT-based analytics can be used to predict future events, such as major weather patterns. This can help insurers better price policies and prepare customers for upcoming incidents, which should help reduce damages.

When Will HFC Reach Exhaust?

Though it likely was not so fully understood at the time, cable operators have been arguing for decades that the hybrid fiber coax network is more flexible than fiber to the home platforms, and can be upgraded at less cost.

We might be approaching a period where the statement starts to be qualified, though. Comcast, which is upgrading all of its locations to gigabit speeds using a modem upgrade (DOCSIS 3.0 to DOCSIS 3.1), also is switching to a fiber to home design for customers who want symmetrical 2 Gbps service.

To be sure, there is no immediate need for a full platform change. But eventually, it might happen that the HFC platform is scrapped for a fiber to home network.

That would represent a “final”  realization of the “technology hybrid” approach the U.S. cable TV industry has relied upon for several decades.

That strategy includes an understanding of how to manage a business when fundamental technology changes occur. The notion of a hybrid approach suggests industries often adopt a “use both” approach when in the midst of a technology change.

Doing so allows entities to take advantage of experience curves for the older technology, while gradually introducing the replacement technology.

Often, the next generation of technology might not have the full capability set, at production prices, to support immediate and complete replacement of the legacy approach.

Will there be yet another technology transition? Undoubtedly. The issue is what the shift will entail. Some might bet on untethered or mobile.

First Suddenlink Gigabit Markets Launched

Suddenlink says the first areas to receive its up to 1 gigabit per second Internet service are Bryan-College Station, Texas; Nixa, Mo.; and Greenville and Rocky Mount, N.C.

Suddenlink also announced that residential high-speed Internet customers in markets on two other speed tiers will get a free speed boost.

Customers buying those on the 75 Mbps service will now get 100 Mbps, while 100-Mbps customers will be upped to 200 Mbps.

That raises a packaging issue. Where four speeds are available (1 Gbps, 200 Mbps, 100 Mbps and 50 Mbps), Suddenlink will have to convince consumers that pricing across the tiers are commensurate and fair.

That can be an issue if the top speed (1 Gbps) offers so much more value, compared to its price, that the lower offers start to look unfair. That is, if any actual number of customers actually pay the posted stand-alone rates.

CenturyLink executives, facing a similar situation, say the availability of gigabit offers actually spurs adoption of new 20 Mbps and 40 Mbps services. So gigabit service availability drives upgrades and new accounts, but for lower-speed services, perhaps primarily.

With discounts available through new customer promotional offers, Internet access prices now range from $35 to around $100 per month. It just depends.

Over time, the pressure to normalize pricing across tiers, in terms of price per bit, will be significant. If one assumes prices are hard to adjust upwards, in light of gigabit service pricing, it will be necessary to limit price increases for the lower-speed tiers.

The launch of the new Gigabit service is part of Operation GigaSpeed, the company-wide plan announced last August 2014.  In contrast to companies like Google and AT&T, which are generally offering a Gigabit service only to a few neighborhoods in primarily urban markets, Suddenlink is making its service available to all households passed by the Suddenlink network.

Amazon Web Services Added 516 Major New Features and Services in 2014; on Pace to Beat in 2015

Amazon Web Services launched 516 major new features and services in 2014, said Amazon Web Services Chief Technology Officer Werner Vogels.

Nobody would be surprised if Amazon adds even more features and services than that in 2015, extending a lead it holds in public cloud computing.

A RightScale survey of cloud computing professionals found 30 percent of respondents using only public cloud, while five percent use only private cloud. Some 58 percent use a hybrid approach.

source: RightScale

The RightScale survey also found 57 percent run applications on AWS, up from 54 percent a year earlier.

Microsoft Azure’s cloud platform and infrastructure posted a combined score 19 percent.

Google’s App Engine was used by eight percent of survey respondents. An additional five percent use Google’s infrastructure products.

source: Geekwire

Microsoft is seeing significantly better traction in large enterprises. About 19 percent of enterprise users aid that they used Azure’s infrastructure products.

Some 15 percent of enterprise cloud users said that they used Azure’s platform as a service products. 50 percent of enterprise users say that they have applications running on AWS, up from 49 percent in 2014.

Smaller businesses tend to prefer AWS, though. Fully 61 percent of respondents who work at companies with fewer than 1,000 employees said that they have applications running on AWS, compared to nine percent who have workloads running on Azure’s “infrastructure as a service” products.

Long term, that might benefit AWS as startups grow bigger and continue to use AWS.

It might be easy enough to argue that Amazon innovates rapidly to maintain its lead. It might be equally fair to say that Amazon innovates fast because that is among the fundamental requirements of modern computing.

Amazon identifies, and says it responds to, six key trends in computing.

Major Computing Trends, Amazon Response
move quickly	spin up, spin down services
focus on core competence	provide infrastructure
rent rather than own servers	event-driven services
security	multiple certifications
mobile support	host back end services
make data work	machine learning

source: PC magazine

source: Business Insider

China Android Users Switching to iPhone?

A significant percentage of China’s Android users are switching to Apple iPhones, a survey by Asian investment banking firm CLSA has found.

The survey of 854 middle-class consumers in China, including 594 in tier one or tier two cities and 260 in smaller cities found that 53 percent of survey respondents who own an iPhone switched from Android.

On the other hand, only four percent of Android phone owners in the survey switched from the iPhone to Android.

The average age of these respondents was 35.  

Some 32 percent of Android users surveyed who plan to buy a new phone in the next 12 months indicate they will switch to the iPhone.

Also, some 54 percent of all survey respondents who plan to buy a new phone in the next 12 months will choose the iPhone. Samsung, however, ranks a close second as the device respondents believe they will buy next.

Of all the people CLSA surveyed, only 36 percent currently own an iPhone.

CSLR' CRR Apple China Survey

FANTASTIC-5G Air Interface Group Launched with 8 Million Euros in EC Funding

You just can’t keep up with all the new entities developing standards for fifth generation mobile networks.

A group of 16 firms are collaborating on a new air interface below 6 GHz for 5G networks.

The “FANTASTIC-5G” (Flexible Air iNTerfAce for Scalable service delivery wiThin wIreless Communication networks of the 5th Generation) project will focus on capacity, flexibility and energy efficiency of the next generation of mobile networks.

Future mobile networks need to become even more flexible and efficient than 4G, 3G and 2G networks, proponents argue.

The group aims to create a new multi-service air interface that operates below 6 GHz frequency for 5G networks, and is:

·       Highly flexible, to support different types of data traffic.

·       Scalable, to support an ever-growing number of networked devices.

·       Versatile, to support diverse device types and traffic/transmission characteristics.

·       Energy- and resource-efficient, to better use the available spectrum.

·       Future-proofed, enabling easy upgrades to future software releases.

FANTASTIC-5G is funded by eight million Euros provided by the European Commission under the EU´s “Horizon 2020” initiative aiming to advance digital Europe.

The members of FANTASTIC-5G include service providers (Orange, Telecom Italia), component and infrastructure vendors (Alcatel-Lucent, Huawei, Intel, Nokia, Samsung, Sequans Communications, Wings ICT Solutions), universities (Aalborg University, Politecnico di Bari, Institut Mines-Telecom/Telecom Bretagne, University of Bremen) and research institutes (Centre Tecnològic de Telecomunicacions de Catalunya (CTTC), Commissariat à l’Energie Atomique et aux Energies Alternatives - Laboratoire d’électronique et de technologie de l’information (CEA-Leti), Fraunhofer Heinrich Hertz Institut (HHI)) from Europe.

If You Have to Jump a Big Ditch, Best to do so in a Single Leap

One good rule, when any firm is searching for revenue growth in new markets, is to pick a potentially big market, rather than a small one, and to choose a fast-growing market, not a slow-growing market.

In that regard, it is hard to fault the logic of focusing growth initiatives in enterprise areas such as cloud computing.

Cloud computing revenues are growing at rates between 20 percent and 40 percent, including security at perhaps 46 percent, analytics at 38 percent, storage at 36 percent.

Pyramid Research expects enterprise cloud service revenue in Latin America to expand from US$6.5 billion in 2014 to US$21.5 billion in 2019, growing ten times faster than telecommunication services, for example.  

     

Together, Brazil and Mexico accounted for 58 percent of the total enterprise cloud services revenue in LATAM in 2014, followed by the combined revenue of Argentina, Chile, Colombia and Peru at 24 percent.

That does not mean cloud is irrelevant for micro-businesses and small to medium-sized businesses (SMBs), which make up 99 percent of all businesses in Latin America.

Those segments might drive as much as 54 percent of overall enterprise cloud services revenue by the end of 2019.

Cloud services are about apps and content more than “voice,” services aimed at PCs, tablets or smartphones than “phones.”

Microsoft Writes Off Nokia Acquisition

Nothing is more perilous than making a prediction about the future. Consider this forecast of mobile device operating system market share, made in 2011.

By now, four years later, Windows Phone was supposed to have caught or surpassed Android.

Instead, in January 2015 Windows Phone had 2.26 percent of the installed base globally.

Android was still number one with a share of 59.78 percent.

And now Microsoft has announced the reduction of up to 7,800 positions, primarily in the phone business.

Microsoft also will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business in addition to a restructuring charge of approximately $750 million to $850 million.

In other words, Microsoft is completely writing off its acquisition of the Nokia

devices business.

Precisely how Microsoft views mobile devices is open to some interpretation. But one view is that Microsoft will henceforth not be a major contestant either in devices or mobile operating systems.

source: Global Nerdy

IP Communications Suppliers Need to Bundle Additional Value: Customers Want It

Creating new lines of business to replace lost legacy revenues is a key problem for all communications service providers. The good news is that the small and medium business market seems to welcome “one stop shop” suppliers rather than doing all the extra work a “best of breed” approach requires.

That has clear implications for providers of communication services to SMBs. “If you can get the offer right, you’ll win business,” said John Macario, Edgewater Networks VP.

That likely means bundling the most-wanted features, with simple and fair pricing, and being a service provider the customer trusts to provide support.

You might argue those are no-brainer issues, but the tough adoption curve over the past 15 years or so suggests suppliers haven’t gotten everything right, so far.

And, to be fair, it isn’t clear the value proposition has been so clear, either.

The key point is that the market opportunities in the SMB IP communications business are not limited to unified communications or IP voice.

Even in the most-difficult scenarios--small organizations with four or fewer employees--no less than 20 percent of respondents are willing to purchase additional managed services from their “telecom” provider.

In the more-than-20 employee market segments 40 percent to 47 percent of respondents are willing to buy additional managed services from their telecom providers.

And there is strong preference in all segments to buy from a single vendor, whenever possible, instead of using a “best in breed” approach.

That means service providers should look for logical additional managed services to provide. Storage and backup seems clearly the next service with the highest demand.

Paradoxically, Low Adoption Means High Opportunity

Paradoxically, even if small and medium business adoption of hosted IP communications is relatively low, considering the amount of time such services have been sold, potential therefore is quite large.

In other words, most of the potential buyers remain to be gotten.

Although IP adoption rates have increased over the last decade, the new survey sponsored by Edgewater Networks and Metaswitch Networks clearly shows that a large percentage of the small and medium business (SMB) market in the United States, “perhaps more than expected,” still uses TDM systems and services.

While adoption rates are higher in larger organizations, as high as 36 percent for organizations with 500 or more employees, adoption for smaller SMBs (less than 100 employees) is less than 25 percent.

Put another way, 66 percent of the medium-sized organization IP communications business is yet to be gained, while 75 percent of the small business opportunity likewise remains outstanding.

The low adoption rates mean that the market for IP services is “extremely large, the study reports. “We estimate that the U.S. market alone is worth over $26 billion annually,” said John Macario, Edgewater Networks VP.

That is a larger forecast than many have offered, but is based on simple extrapolation from a number of other data points, including U.S. Census Bureau data on the number of U.S. businesses in various categories, the number of employees and some basic assumptions about lines needed per employee.

That generates an estimate of potential seats for hosted IP communications, and based on recurring revenue, the potential market size, and

Perhaps the greatest sensitivity in that model is the assumption that each employee requires an account, and that the market potential is defined by the number of employees still using legacy phone services and systems.

Both assumptions build on the notion that every employee requires unified communications. You might note that those are very different assumptions from past legacy system principles, which generally assumed that the key input was the ratio of trunk lines to people or “numbers.”

Requirements arguably are quite different when messaging is a core requirement and expectation. It might be quite rational to expect that every employee requires email and messaging tools, irrespective of the number of circuits or trunks required to support “voice.”

In other words, what we used to call the concentration ratio, or trunk lines required based on the number of employees, assuming some sharing, is an inaccurate way to describe demand for messaging and unified communications.

In fact, as we see in the case of mobile communications, messaging is the preferred medium, voice a secondary medium. So old rules about concentration ratios (trunk lines to support multiple users) do not hold.

That is to say nothing of the physical reality that IP communications does not build on “trunks” or “circuits.”

It can be argued that the mobile revolution, and advent of messaging, is driving much of the interest in unified communications. Firms that have adopted unified communications report using mobile and desktop clients that unify access to voice and instant messaging apps; transfer calls between mobiles and desk phones and provide a single voicemail.

IP and TDM users both place a high degree of value on unified communications and mobility features and are requiring them when looking to upgrade from their current environment.

Across the SMB market, decision makers said that having an offer with the right economics from a service provider they trust are the key purchase drivers.

The point is that the reputation of the supplier really does matter, and that especially is true for small businesses. Medium-sized organizations tend to care more about product attributes, says Macario.

Also important are access to phone system features from mobile devices.

The study was conducted In March 2015 of decision makers from 1,250 SMB entities.