Sprint Moves Toward Phone Leasing, Not Sale

Sprint seems to be moving in device strategy direction that is different from all three of the of the other largest mobile service providers in the U.S. market. Sprint unveiled a new device program for iPhone customers that dispenses entirely with the “ownership” model and instead substitutes a “lease your phone” approach.

The “iPhone Forever” program offers new and upgrade eligible Sprint customers the lease of an iPhone for $22 per month.

Any customer on the plan can return their current model iPhone and get the latest model.  

“They bring their iPhone, upgrade on the spot and away they go,” Sprint says. The iPhone Forever plan presently offers a 16GB iPhone 6 model at Sprint branded retail stores, Sprint.com, 1-800-Sprint-1, Best Buy and Target.

T-Mobile US had abandoned contracts two years ago. AT&T has kept the option, though AT&T is encouraging customers to move to its installment plans.

Verizon Wireless, meanwhile, has decided to get out of the contract business as well, replacing contracts with the ability to buy a phone on an installment plan .

Through Dec. 31, 2015, customers on any other carrier or existing Sprint customers who are upgrade eligible and turn-in any smartphone will get a promotional rate of just $15 per month on a new iPhone. When they upgrade to the latest iPhone after Dec. 31, their monthly lease rate returns to current lease pricing, $22 per month.

The point, though, is that Sprint might further shift in the direction of leasing phones, not selling them.

Optus Pioneers 3X Carrier Aggregation for LTE, Delivering Speeds up to 317 Mbps

Australian mobile operator Optus has become the first telecommunications provider in the world to aggregate three different frequency bands, using both frequency division and time division multiplexing to support its fourth generation Long Term Evolution services.

The Optus “3x Carrier Aggregation” (3x CA) system combines 1x FDD and 2x TDD1 formats to supply the Newcastle NSW suburbs of Lambton, Mayfield and Mayfield West.

The move means Optus customers with the latest LTE category 9 smartphones, such as the Samsung Galaxy S6 edge+ and Samsung Galaxy Note 5, will experience speeds as high as 317 Mbps.

“We plan to switch on 3x CA technology in the Melbourne CBD in early September and roll out to the Sydney CBD early next year, followed by the Brisbane and Adelaide CBDs from mid-2016,” said Dennis Wong, Acting Managing Director Optus Networks.

TV White Spaces Inches Closer, In India and United States

Global technology giant Microsoft will be working with the Andhra Pradesh government on a TV white spaces pilot project providing four schools in Srikakulam with Internet access.

As a part of the project, the Z.P. High School will act as the base station, while three other campuses would be receivers and will be located at a distance of 10 km or more from the base station.

Wi-Fi has a range of only about 100 meters, whereas the 200-300 MHz spectrum band available in the white space can reach up to 10 kms, making TV white spaces a new way to provide Internet access, without using licensed spectrum.

TV white spaces also moved a bit closer to reality in the United States as the Federal Communications Commission issued new rules on the upcoming 600-MHz spectrum auctions that will enable TV white spaces nationwide, creating technical rules for use of the duplex gap, guard bands, 600 MHz service band and channel 37.

As always, where it comes to license-exempt spectrum, concern about interference issues is a reason for concern. It also is fair to note that such expressed concerns also represent contestant business issues.

Where entities that benefit from use of licensed spectrum will express concerns about interference from additional license-exempt services, so entities that benefit from license-exempt spectrum will raise issues about potential interference from licensed entities.

Precisely how much TV white spaces spectrum will be available in any specific market will vary. But TV white spaces potentially can be used in channels 14 to 20. In principle, that means more than 50 MHz of new spectrum could be made available for TV white spaces.

LTE Devices Were 58% of Global Smartphone Sales in 2Q 2015

Fourth generation Long Term Evolution network smartphones represented 58 percent of global smartphone sales in the second quarter of 2015, up from 26 percent in the second quarter of 2014, according to research firm GfK.

LTE-based smartphone unit growth was 129 percent year over year.

"India is expected to be the largest contributor of absolute smartphone unit growth globally this year,” said Kevin Walsh, GfL director of trends and forecasting.

In the second quarter of 2015, smartphone sales value grew eight percent over last year while unit sales grew by six percent.

In China, high-end device demand increased 49 percent year over year in the second quarter of  2015, though overall LTE device sales fell 10 percent.

Unified Wi-Fi, Mobile, Satellite Backhual Using Millimeter Waves?

It increasingly is clear that 5G and low earth satellite technologies are intimately related, as are core networks based on network functions virtualization and access-agnostic edge networks, fixed and mobile networks generally.

As a new paper by Samsung Electronics suggests, mobile 5G and LEOs might both take advantage of millimeter wave frequencies, with the LEOS serving as backhaul for mobile transmitters or direct enterprise backhaul links.

If a unified millimeter wave set of networks (satellite, mobile, Wi-Fi) can be created, small cell networks would be essential. But that might be easier than at present, since Wi-Fi nodes directly served by LEO constellations would be possible.

Think of the present village kiosk, served by a geostationary satellite and then distributing signal using Wi-Fi, and you'll get the concept.

If, in fact, bandwidth increases by an order of magnitude (10 times) about every five years, LEO constellations might be among the few viable backhaul mechanisms able to supply that amount of new capacity, at low cost, in developing regions.

No Surprise: Study Finds Churn is Related to Device Customer Service

You likely would not be surprised to learn there is a link between customer churn and user experience with their devices, as well as a link between perceived poor customer or repair service.

A 2015 Ovum study found that poor customer experience around phone problems can increase churn when customers blame phone problems or poor repair service on the operator or retailer, according to Stas Wolk, Cellebrite VP.

According to the study, which surveyed 4,000 smartphone users across four countries, 14 percent of respondents said that they would look into purchasing their next handsets through different providers, based on their malfunction experience.

This number increased to 18 percent among customers who sought help for issues with decreasing software speed, Wolk says. And nearly 70 percent of smartphone users report having experienced device issues in the past year.  

Of those users who plan to switch providers following dissatisfaction with operators’ repair services, 25 percent cited customer service as a top three reason for churn.

Unreported problems can be an equally big problem, over time. When asked who they first turned to for help after discovering a smartphone problem, 28 percent of consumer respondents said they turned to no one and continued to use the phone as it was.

Some 33 percent of respondents, who encountered problems after the warranty on the device expired, reported they did not report the issues to their carrier.

The service provider, more than any other single contributor in the ecosystem, is going to take most of the direct impact of service activity related to use of the devices, whether that is “fair” or not.

A revamped customer service experience could capture those 14 percent  to 18 percent of customers at risk of switching to a different provider, while bolstering loyalty among the rest of an operator’s existing customer base.

Consumers prefer the convenience and immediate results of easy and effective self-serve solutions.

Of all possible repair channels, 79 percent of customer respondents said they would “definitely” or “likely” use a self-service solution to solve their smartphone malfunction woes. In comparison, 68 percent responded that they would likely resort to in-store service, and 67 percent would opt for online service.

Is 5G a Breakthrough in Combating "Dumb Pipe" Problem?

The “access” network traditionally has been--and remains--a way for users to get access to communication features provided by the core network. That feature of access networks does not change with the advent of fifth generation networks.

What might be quite new--if anticipated new applications are enabled as many believe--is that the 5G network will be the first access network whose value, features and business models are shaped and determined by the core networks in a new way.

For service providers concerned about “dumb pipe” and “low value commodity services,” 5G could be a breakthrough.

It is more than a breakthrough in mobile access network speeds that make mobile access a full substitute for fixed access, for the first time. Access speeds between a gigabit per second and 10 Gbps represent the biggest breakthrough in mobile access network capacity, ever.

That might not be the most-important change, though. Traditional core networks provided differentiated services for business customers. But 5G might be the first network to enable differentiated services for consumers, appliances and sensor networks.

In fact, it might be feasible to build custom networks--tuned or optimized for particular applications, using a single, unified network, not an overlay--at prices the end users and networks can afford to buy.

You might say the access network features become a richer part of the core network. That has potentially significant implications for the threat of “dumb network” status.

To be sure, access networks traditionally have been “dumb pipes” giving users connections to value provided by the core networks.

That will continue to be true for 5G and future network generations. What is new is the degree to which the access network will be recreated as a platform for differentiated services.

If regulators do not get in the way, that is a big deal.

Telecom Services are Digital Products, With "Digital" Economics

There it is, again: marginal cost pricing. “Carriers have already sunk a lot of expense into 4G LTE network upgrades (including purchasing spectrum licenses), and now the biggest portions of these costs have been paid,” argues Glenn Fleishman, Macworld senior contributor.

There is room for debate about about the financial truth of that notion.

Capital has been invested. The networks are built out and operating, and there are scores of millions of customers loaded onto those networks.

Whether the mobile carriers have yet recouped all of the invested capital might be a subject of some debate.

But it certainly is true that the cash spent to build out the networks is generating recurring service fee revenue. And, as Fleishman notes, “ their network infrastructures have been largely built out, and their current costs won’t increase much with additional customers or data usage.”

So what will service providers do to take customers from other providers? To the extent possible, they will price not at full “recovery of capital” levels, but on the incremental cost of serving the next customer.

Such marginal cost pricing happens in markets for digital products. And communication services are digital products, subject to all the economies any other digital application experiences.

So pricing will trend, over time, towards marginal cost. And what is the marginal cost of the next message, the next phone call, the next megabyte of usage? A number so small it is hard to measure. Or, as I call it, “near zero” pricing levels.

As always is the case, “price” and “cost” are different things! So the retail price might not actually reflect “cost” so closely. But the actual marginal cost of the next unit is quite literally “near zero.”

So something more than “mere competition” is at work here. The structural reality is that a digital product’s retail price trends towards zero.

That is the long-term structural reality of telecom service pricing.

Netflix Shuts Down Last Data Center

Content companies are prime candidates for cloud computing, and Netflix provides a good example.

Netflix is shutting down its last owned data center, making it a leader among large enterprises relying fully on public cloud computing.

Netflix has been 100 percent cloud-based for customer facing systems for some time.

About 12 percent of companies run information technology operations entirely in the cloud, according to a recent survey of 1,500 IT professionals by BetterCloud.

In five years almost 50% of our respondents said they will be moving their IT entirely to the cloud; in 10 years, that number will climb to nearly 70 percent.

Nearly all of those companies are small or medium-sized businesses. By 2022, just slightly more than 20 percent of large enterprise companies are expected to operate entirely in the cloud.

source: BetterCloud

Mobile Operators Looking at How to Monetize Wi-Fi

Where it comes to Wi-Fi networks, the revenue model always has been an issue. 



For most mobile operators, fixed telephone networks and cable TV operators, public hotspot Wi-Fi originally was an amenity, a useful feature for buyers of either mobile or fixed Internet access service. That has meant there was very little direct revenue. 



The upside came from better marketing platforms and lower churn rates. 



In-home Wi-Fi was a feature that made wiring chores to support in-home signal distribution easier and less costly. That arguably had operating cost and some capital cost savings, but did not directly create a clear revenue stream.



Also, Wi-Fi access for mobile and other devices has been a means of providing better signal coverage and access speed. Valuable, to be sure, but not a direct revenue contributor. 



More recently, Wi-Fi has been a means of offloading traffic from mobile to fixed networks, improving user experience, slowing the rate at which mobile network capacity upgrades were required, and boosting subscriber satisfaction by reducing the hit to mobile Internet usage buckets.



It remains to be seen whether mobile network ability to use Wi-Fi can be directly monetized, but it appears some mobile operators will try to do so.

New AT&T Mobile Value Share Plans Cut Cost per Gigabyte

AT&T is launching new Mobile Value Share plans Aug. 15, 2015 featuring bigger Internet data allotments. More notably, prices per GB are lower.

The changes to the Mobile Share Value plans include the elimination of the current one gigabyte plan for $25, 3 GB plan for $40 and 6 GB plan for $70. Under that pricing scheme, price per GB started at $25 and dropped to $12 per GB.

Replacing those plans are a 2 GB plan for $30 and a 5 GB plan for $50. Those plans have a device attachment cost of $25 a month. Under the new plans, price per GB starts at $15 and drops to about $7 per GB.

The new 15 GB plan costs $100 per month and the 20 GB plan costs $140 per month. Both plans also now include unlimited voice calling and text messaging from the U.S. to Mexico and Canada as well as the $15 charge per smartphone.

AT&T Value Share Plan Mobility Cost Per Gigabyte
Legacy cost	$25	40	70
Legacy plan data	1	3	6
$/GB	$25	$13	$12
New plan data	2	5	15	20
New plan cost	$30	$50	$100	$140
$/GB	$15	$10	$7	$7

“Tomorrow, we roll out new plans for everyone, including a plan that gives 50 percent more data than on our most popular plan,” said David Christopher, chief marketing officer, AT&T Mobility.

Customers on a new 15GB plan or higher will also receive unlimited talk and text to Mexico and Canada.

Monthly Plan Charge	Data	Monthly Device Access Charge3	Unlimited Talk/Text to Mexico and Canada
$20	300MB	+$25/Line with AT&T Next
$30	2GB
$50	5GB
$100	15GB	+$15/Line with AT&T Next	included
$140	20GB

New Delhi Plans Free Public Wi-Fi

Officials in New Delhi are formulating plans for public Wi-Fi, offering residents up to 1 GB per month of free Wi-Fi access, at a minimum speed of 1 Mbps, supplied by private operators.

In the first phase, expected to be completed in a year, public Wi-Fi would be deployed in government and private colleges, according to the Times of India.

Ashish Khetan, vice-chairman of Delhi Dialogue Commission, said that in a second phase, public Wi-Fi will be provided in rural areas, followed by some urban areas.

There are roughly 275 rural and urban villages which don't have Internet access.

The business model is not clear, but it seems as if the Delhi government will pay a fee of some sort to the providers, based on end user consumption.

New Delhi Plans Free Public Wi-Fi

Officials in New Delhi are formulating plans for public Wi-Fi, offering residents up to 1 GB per month of free Wi-Fi access, at a minimum speed of 1 Mbps, supplied by private operators.

In the first phase, expected to be completed in a year, public Wi-Fi would be deployed in government and private colleges, according to the Times of India.

Ashish Khetan, vice-chairman of Delhi Dialogue Commission, said that in a second phase, public Wi-Fi will be provided in rural areas, followed by some urban areas.

There are roughly 275 rural and urban villages which don't have Internet access.

The business model is not clear, but it seems as if the Delhi government will pay a fee of some sort to the providers, based on end user consumption.

Which Way for Sprint?

Was SoftBank’s acquisition of Sprint a mistake? Some, possibly even including SoftBank CEO Masayoshi Son, might agree with that assessment. The growing view is that SoftBank believed it could swiftly merge Sprint with T-Mobile US, creating a more-hefty competitor in the U.S. mobile market.

Perhaps that, more than any ability to replicate in the U.S. market what SoftBank had done in the Japanese market, was key to the strategy.

If so, a misreading of U.S. telecom policy doomed the initial strategy. Some believe, based on Son’s own statements, that SoftBank would have sold Sprint, if were there any bidders. It appears there have not been any such potential buyers.

Some believe Sprint might get another shot at a merger with T-Mobile US after the U.S. presidential elections. Others believe a buyer or partner could yet emerge. But many think the size of Sprint’s debt and it’s on-going financial losses will be a big barrier.

Sprint recently has generated some $8 billion in quarterly revenue, but lost $2 billion on those sales. It has cumulative losses of $50 billion since about 2007.

What will Sprint (or SoftBank) do next, in its effort to regain financial value? Options appear to be more limited than when Sprint first was acquired by SoftBank.

Sprint cannot grow through acquisition, and likely cannot be sold, at the moment. That leaves mostly the difficult task of turning the business around, on an operating basis. As has been the case for years, reversing Sprint’s sales subscriber growth and profit picture is a fundamental requirement for any other positive outcome: acquisition, sale, merger or organic growth as an independent company.

Rival T-Mobile US, in fact, points the way. Having achieved robust organic growth, T-Mobile US arguably has become a more attractive acquisition.

At this point, a merger between Sprint and T-Mobile US, as logical as that might seem to many, is a less likely outcome than the acquisition of both firms by other entities. Dish Network and Comcast are the names most often raised in that regard.

Most of Dish Network's value now resides in its spectrum licenses, not its operating business. And Dish will forfeit that value if it does not somehow create an operating network using those frequencies, or sell them.

Comcast, for its part, will move deliberately. It is unlikely to buy a troubled asset, and even less likely to want to enter the mobile business without some clear sense of differentiation.

For the  moment, that likely means Sprint will have to work on organically reshaping its business, for any eventual sale. .