U.K. Average Household Spending on Voice, Mobile Drops, Fixed Network Internet Access Spending Increases

There are some concrete ways to illustrate the growing tendency for advanced communications services to be priced at marginal cost.

Digital products tend, over time, to be priced at retail on the basis of the incremental cost to produce the next unit.

For a cloud-based digital app or service, that cost is very close to zero. And though the cost of access infrastructure is quite physical, and quite costly, the product purchased by the customer is, in fact, a digital product.

And it has been true for quite some time that the incremental cost of an additional unit of any app is very close to zero.That explains the prevalence of “freemium” business models, where the base product is literally “free to use.”

That poses a serious problem for any provider who makes the bulk of revenue from selling a digital service--be that voice, messaging or Internet access.

In the United Kingdom, for example, average monthly household spend on communication services has decreased in real terms over the past five years.

That despite prodigious consumption of mobility services and faster Internet access by nearly everyone.

Although stable compared to 2013, average monthly household spend on communication services has decreased in real terms over the past five years (adjusted for inflation) from £122.07 in 2009 to £117.71 in 2014, representing a monthly decrease of £4.36, or £52.32 per year.

Where it comes to core telecom services, average monthly household spending remained relatively stable at £81.30 per month in 2014, as people are buying more units and more products.

But there is a clear trend: spending on fixed and mobile voice and data fell, while spending on fixed Internet access actually grew.

Average spend on fixed voice and mobile voice and data services both fell during the year, while average fixed internet spend continued to increase, up by £1.84 per month (14.3 percent) to £14.74 as a result of increasing fixed broadband take-up and consumers switching to superfast broadband services.

The M Hotel Singapore  |  10-11 September 2015

Business models also are the biggest challenge for Internet access across South Asia. Hear regulators and service providers explain how new business models and platforms will drive Internet adoption across South and Southeast Asia, and how mobility plays the biggest role.  REGISTER NOW

U.K. 4G Users Increase by 10X in One Year

Smartphones--used by 66 percent of mobile users--have overtaken laptops as the most popular device for getting online in the United Kingdom, Ofcom says.

Additionally, over the span of a single year, fourth generation Long Term Evolution subscriptions increased by an order of magnitude.

Ofcom's 2015 Communications Market Report finds that 33 percent of internet users see their smartphone as the most important device for going online, compared to 30 percent who view the laptop as the most important device for using the Internet.

That shift to mobile Internet has been rapid. In 2014, 22 percent of survey respondents said the smartphone was the preferred Internet access device, while 40 percent preferred their laptop.That represents a net swing of 21 percent, in just a year.

A rapid shift to use of faster mobile Internet access likely is driving the change. During 2014, 4G Long Term Evolution subscriptions leapt from 2.7 million to 23.6 million, an order of magnitude increase.

U.K. users now spend almost twice as much time online with their smartphones than on laptops and personal computers.

On average, adult mobile users spent nearly two hours online each day using a smartphone in March 2015 (an hour and 54 minutes), compared to just over an hour on laptops and PCs (an hour and nine minutes).

One clear trend is that faster networks lead to people using the internet more. Smartphone users with 4G are shopping online more than those without 4G (55 percent of 4G users do this compared with 35 percent of non-4G users).

LTE users also conduct more banking more online (55 percent versus 33 percent) and watch more TV and video clips online (57 percent versus 40 percent).

Users with 4G also make more face-to-face and voice calls over the internet (28 percent versus 20 percent) and use more services such as Snapchat to send photos and videos (49 percent versus 36 percent).

And though you might not expect it, 4G users also send more instant messages using services such as WhatsApp (63 percent versus 50 percent).
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Facebook will keynote Spectrum Futures in Singapore, Sept. 10, 2015, featuring Chris Weasler, Facebook and Internet.org global head of spectrum policy & connectivity planning.Facebook and Internet.org.

Other confirmed speakers will discuss spectrum sharing between LTE operators, spectrum sharing between Wi-Fi and LTE, new access platforms and the critical role spectrum plays for coming 5G networks.

At the same time, the intimate relationship between applications (Internet of Things), core networks (SDN. NFV, cloud computing, fog computing) and all access networks will be examined.

In the coming next generation network, clearly separating spectrum and mobile networks from Wi-Fi and fixed network access, core networks and cloud infrastructure, will be nearly impossible.

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Deutsche Telekom Metrics Improve

Deutsche Telekom has been clear for some time about it strategy to maintain leadership in the European communications market, a strategy that has made T-Mobile US an asset to be monetized.

Somewhat ironically, then, T-Mobile US stands out, even within the context of improving metrics for Deutsche Telekom overall. DT noted that T-Mobile US had grown to become the third-biggest U.S. carrier in the quarter, for example.

In the second quarter of 2015, revenue grew by 15.3 percent to EUR 17.4 billion, with organic revenue growth of 5.7 percent.

Adjusted EBITDA improved by 13.5 percent to EUR 5.0 billion, with organic growth of 6.7 percent.

T-Mobile US adjusted EBITDA by 22.8 percent. Adjusted net profit up by almost 70 percent.

Despite subscriber growth, and in part because DT is investing heavily to modernize its networks, net profit was basically flat, year over year. Free cash flow grew 31 percent, while debt grew 18 percent.

Mobile revenue grew 8.8 percent but fixed network revenue declined 2.7 percent.

Sprint Next to Enter the Pan-Americas Mobile Plan Market?

Perhaps AT&T’s move into the Mexican mobile market, allowing AT&T customers to communicate across the United States and Mexico as though they were in one country--or with low rates--now has ignited a wider response across much of the U.S. mobile market.

First T-Mobile US responded with a similar plan, but added Canada to the unified coverage area.

Now Sprint might up the ante again, according to a post on a Sprint-focused website, and a post authored by a Sprint employee.

The rumored new Sprint no-cost roaming plan includes unlimited calling and messaging, plus use of 1 gigabyte of mobile data across Canada, Mexico and 12 South American countries, might be launched this week.

This plan includes unlimited free calling to Canada and Mexico from the United States and then calling to South American countries for five to 20 cents a minute.

For additional data usage beyond the free 1GB, each additional gigabyte costs $30, billed at $0.00002861/KB.

How about if you're in places other than Canada, Mexico or the listed Latin American countries?

The same data rate applies of $30/GB for high speed data, texting is free and calls are 20 cents per minute.

Countries covered initially include:

• Argentina
• Brazil
• Chile
• Columbia
• Costa Rica
• Dominican Republic
• El Salvador
• Guatemala
• Honduras
• Nicaragua
• Panama
• Paraguay

Aside from the observation that no particular innovation by any one leading service provider will go unchallenged for long, most recent innovations involved giving users “more for less.”

That is what we have come to expect in the competitive telecom industry. At a high level, the trend to offer “more for less” also illustrates the long-term tendency of any digital market to drift towards marginal cost pricing.

Most people instinctively would understand or believe that end user prices for any digital product will trend, now or over time, towards the marginal cost of producing the next unit.

Most in the industry will acknowledge that the incremental cost of the next unit of any digital product is very close to zero.

That suggests the long term tendency will be for digital product prices to push relentlessly towards a cost very close to zero. That does not mean literally “zero,” but prices so low the cost is not a barrier to consumption or use.

T-Mobile Has Fastest U.S. LTE Network, Cable Leads Fixed Network Segment

T-Mobile US operates the fastest mobile network, while Comcast operates the fastest fixed Internet access network, according to new measurements by Speedtest.

Note the rankings in the fixed network segment. Only Verizon FiOS is in the top five. That is simple testimony to the effectiveness and relative low cost of upgrading bandwidth on a hybrid fiber coax network.

Fastest US. Internet Access Networks
	ISP	Downlink Mbps	Uplink Mbps
1.	Comcast	104.56	12.71
2.	Time Warner Cable	99.11	19.23
3.	Cox Communications	94.06	21.28
4.	Verizon FiOS	83.39	87.26
5.	Charter Communications	66.31	4.46

Google Keep Direct to Google Docs

Perhaps it is a niche application, but notes (including voice transcribed notes) created in Google Keep can be imported directly into Google Docs. A few of you who have worked as journalists might remember a time when you tape recorded interviews. 

Perhaps some of those chores now can be done using an Android phone, Google Keep and Google Docs. 

Personally, I gave up recording interviews decades ago, but it is a nifty use case, for those who rely on recorded notes. 

Google Fiber for Austin: Biggest Network So Far

Google Fiber is coming to San Antonio, with 1.4 million residents, representing the biggest market Google Fiber has entered, to date. Some might note that the move by Google Fiber suggests Google now is starting to reap experience curve benefits (getting more efficient with experience).

It is an imponderable, but moves such as this, along with the cable TV industry’s dominance of the U.S. fixed network high speed access market, raise questions.

Telcos have been facing erosion of their enterprise, small/medium business and consumer markets for some time. A variety of competitors, ranging from local exchange carriers (especially cable TV companies) to municipal broadband providers, plus over the top apps of all sorts, not to mention product substitution by their own mobile operations, have taken market share, while profit margins have been attacked as well.

Let us reasonably assume that the function of access to high speed Internet, voice, messaging, entertainment and other services remains intact in the future.

How much share can all the competing platforms take? How does the business model for a fixed network telco change? How drastic might the change ultimately be, and how will telcos react?

Some former rural telcos already have provided us with one answer. Both Frontier Communications and Windstream are driving growth by selling service to business customers.

In fact, Windstream approaches the market as does a CLEC, choosing to service business customers with selective networks, and avoiding the consumer market altogether.

Windstream, for example, has expanded its fixed wireless platform to serve Boston, Mass.

The service also is offered in Chicago, New York, northern New Jersey and Milwaukee.

AT&T and Verizon have gotten most of their growth from mobile services. But at least for AT&T, linear video turns out to be a cash flow generator, if not necessarily a “growth” business, as it has become the largest U.S. linear video provider.

Cable TV providers now are the market share leaders in high speed access, however, and remain key players in the consumer market, even as they scale up operations in the SMB and enterprise communications markets. And mobile lurks in the medium term.

The point is that it might not be reasonable to assume the present leaders in any customer segment or application will be the leaders forever. No matter how long the history of leadership in communications markets, everything seems to be changing.

DirecTV had to sell itself. Dish Network will become a mobile provider. CLECs, Google Fiber, municipal networks, cable TV, Wi-Fi-based service providers and eventually others are challenging telco revenue streams, products and market share at every turn.

One bit of business strategy I had imprinted on me  many years ago is that, in a competitive market, the low cost provider wins. Generally speaking, telcos are the high cost provider in every market.

Mobile, cable TV, municipal networks, CLECs, over the top providers and even satellites (for linear video) have lower cost profiles. It isn’t yet clear where Google Fiber ranks, but it is likely Google Fiber also has lower operating costs than telcos tend to have.

If you want to know why network functions virtualization is so important, that is why. NFC helps lower operating and capital costs.

At Least 60% of U.K. SMEs Use Cloud-Based Apps

At least 60 percent of U.K. small and medium-sized enterprises (SMEs) polled already are using cloud-based applications, according to the latest research from BT Business and British Chambers of Commerce (BCC).

In truth, the percentage likely actually is much higher, if one assumes many cloud-based consumer apps are used as business tools.

Of those interviewed, 43 percent believed cloud-based applications cloud-based applications were a critical element of effective flexible working, while 52 percent said  remote access to company data was essential.

U.K. business’ reliance on Internet access was also highlighted by the research, with more than two thirds (68 percent) of respondents believing that their companies couldn’t survive more than a day or two without a connection.

Full 86 percent of businesses have one or more members of staff working from home on a regular basis.

Some 47 percent of respondents say they have staff working away from the office at least once a week, while 28 percent have someone working remotely every day.

About 50 percent of respondents also said Wi-Fi access when out of the office was an important capability.

Sprint Operating Metrics Improve, but T-Mobile US Takes Third Place in U.S. Mobile Market Share Rankings

Sprint reported improved churn performance and improvement in its net account additions, with a small loss for its first quarter of 2015, ending in June 2015.

But some also would note that, for the first time in recent memory, the market share rankings for the top-four U.S. mobile providers actually changed, with T-Mobile US becoming the third-largest U.S. mobile service provider, while Sprint slipped to fourth.

Sprint now has  57 million customers, while  T-Mobile US with 58.9 million. T-Mobile US gained two million net new customers while Sprint added only 675,000.

For the most part, the quarter was a continuing saga of reversing prior operating trends. Sprint platform postpaid churn of 1.56 percent was a record low, with total net additions of 675,000 accounts.

In addition, the company reported net operating revenue of $8 billion, operating income of $501 million and Adjusted EBITDA of $2.1 billion.

Sprint also raised guidance for its fiscal year 2015 Adjusted EBITDA outlook from the previous expectation of $6.5 to $6.9 billion to $7.2 to $7.6 billion, excluding any accounting impacts from potential lease financing.

Postpaid net additions of 310,000 compared to net losses of 181,000 in the prior year quarter, with an improvement of 491,000 year-over-year.

For the first time in nearly two years Sprint recorded monthly postpaid phone net additions in both May and June.

This marked the fifth consecutive quarter of sequential improvement and compared to losses of 620,000 in the prior year quarter.

The 608,000 year-over-year improvement was driven by lower churn and a 13 percent increase in gross additions, including a 47 percent increase in gross additions with prime credit quality, Sprint said.

Sprint also said it was net port positive for the second consecutive quarter, meaning it activated more transferred accounts than it lost to other providers.

On the Sprint branded platform, total net additions of 675,000 compared to net losses of 220,000 in the prior year quarter.

The 895,000 year-over-year improvement was mostly driven by fewer postpaid phone customer losses.

Prepaid net losses of 366,000 compared to net losses of 542,000 in the prior year quarter.

Wholesale net additions of 731,000 compared to 503,000 in the prior year quarter. The year-over-year growth was mostly driven by connected devices.

Still, operating revenues of $8 billion decreased nine percent year-over-year as consolidated adjusted EBITDA of $2.1 billion grew 14 percent from the prior year period.

Operating income of $501 million was relatively flat from $519 million in the year-ago quarter as higher depreciation expenses offset the growth in Adjusted EBITDA.

Net loss of $20 million, or loss per share of $.01, compared to a net income of $23 million, or earnings per share of $.01, in the year-ago period primarily due to higher interest expenses.

Cable Gets Another Hybrid Access Platform: DOCSIS Protocols Over PON

Cable TV operators notably have used the hybrid fiber coax access architecture, not "standard telco" access networks. But the industry is preparing for fiber to home, in a way compatible with the HFC approach.

That doesn't necessarily mean a wholesale switch of access technology, but in a typically hybrid manner, the ability to mix and match new fiber to customer access with the existing HFC networks.

As an example, Broadcom Corporation has announced a DOCSIS-compatible 10G Ethernet Passive Optical Network (EPON) residential gateway reference design.

Broadcom's new platform allows cable Multiple System Operators (MSOs) to provide multi-gigabit speeds over a fiber to home access network, instead of the traditional hybrid fiber coax network.

Broadcom's new 10G EPON residential gateway solution is currently available from multiple manufacturers.

The new gateway platform combines Broadcom's BCM55030, a 10G/10G EPON Optical Network Unit (ONU) system-on-a-chip (SoC), with the widely deployed BCM33843 DOCSIS 3.0 cable gateway device.

Broadcom's 10G EPON gateway adheres to the preliminary CableLabs DPoE 2.0 specification, which allows the PON gateway to look and function like a traditional DOCSIS gateway.

Built-in 10G symmetric EPON WAN technology supports multi-gigabit speeds, allowing multiple FTTH subscribers to achieve 1G symmetric performance simultaneously on a single PON.

"Our new residential gateway design enables cable MSOs to bridge a fiber network into their existing DOCSIS infrastructure without costly network re-design," said Jim McKeon, Senior Director of Product Marketing, Broadcom.

Carriers Believe Their Own Region Will Lead 5G

For good reason, mobile executives surveyed by Heavy Reading about expected 5G developments believe Asia will be in the forefront of 5G deployments. Some 58 executives were surveyed, with support from the Telecommunications Industry Association and Interdigital.

In fact, 71 percent of respondents expect Asia to lead in 5G. Some 52 percent think , to lead North America will lead, while 45 percent of respondents believer Europe will lead.

Heavy Reading analyst Gabriel Brown believes this is consistent with plans by Japan and Korea to deploy early.

DoCoMo says it will launch a first release of 5G at the 2020 Summer Olympics in Tokyo, and in Korea, leading operators, such as SK Telecom plan to demonstrate prototype 5G systems at the 2018 Winter Olympics.

North American operators are very much more likely to think that North America will lead (73 percent of North American operator respondents think so), whereas European and Asian respondents both think Asia will lead.

AT&T Offers First Nationwide "Linear Video Plus Mobile" Service

The first new consumer offer AT&T has made, in the wake of the approved acquisition of DirecTV, is going to draw yawns in some quarters. Sure, the new bundle of DirecTV and AT&T Wireless service could save some new customers money.

Beyond that, critics will say, the package is not that innovative. That might be true, in a sense. Bundling multiple services to increase value and save a buyer money is not new. Bundling video with other services is not new.

Predictably, the touted saving occur during the first-year promotion period. That also is routine.

But there is one element of the new plans that are a first. AT&T has become the first U.S. service provider able to sell linear TV and mobile service nationwide.

The offer for new customers includes HD and DVR service for up to four TV receivers, unlimited talk and text for four wireless lines, and 10 GB of shareable wireless data for $200 a month, an annual savings of $600 or more in the first 12 months, for new subscribers.

As part of this launch on Aug. 10, and for the first time nationwide, new DIRECTV subscribers will have immediate access to programming on their mobile devices, even before the satellite dish is installed.

They can view content on their compatible mobile devices immediately.

Additionally, DIRECTV and U-Verse TV customers who switch to AT&T wireless service from another mobile provider will receive a $300 bill credit when they buy a smartphone on AT&T Next and trade in an eligible smartphone.

AT&T is now the largest linear TV provider in the United States, and, for that matter, globally.

Innovation was never the immediate upside, though. AT&T expects to harvest the cash flow from DirecTV, and also gain the ability to sell linear video, mobile services and high speed access nationwide.

Any future upside in the video entertainment space would necessarily take longer to realize.

So yes, the critics might be right: the latest offer is not terribly innovative. It doesn’t have to be. The new offers only have to increase AT&T’s subscriber base, its average revenue per account and margins, driving incremental cash flow. That’s enough, for the moment.