TRAI Weighs Call Drop Penalties

Most consumers likely assume some of their mobile device calls will be terminated unexpectedly. That is why people have developed an unwritten protocol for dealing with such events: call back.

In India, the designed performance for mobile network dropped calls is two percent, or less, in any given monthly period.

It appears to some observers that this limit is rather often violated. Tests conducted by the Telecommunications Regulatory Authority of India found call drop rates as high as 17 percent, and often in the dour percent to five percent range.

So TRAI is looking at possible new penalties on mobile service providers whose networks routinely violate the quality of service rules.

Most people likely assume the service provider is at fault for excessive or bothersome call drops, and that is true: the network operator controls design of the network. So more investment, one way or the other, is going to happen.

No network ever is designed to handle any conceivable amount of traffic. Instead, networks are built statistically, to handle what we used to call demand “at the peak minute of the peak hour of the peak day.”

Demand in excess of that designed capacity will result in inability to use the network, temporarily.

But apps and devices, and demand from other users at peak hours also can cause call drops.

Still, mobile network dropped calls are mostly the result of network issues, ranging from radio coverage to radio interference between neighboring cells, capacity constraints, antenna issues or spectrum shortages.

Most of those issues are in turn can be remedied by installing more cell sites. The problem with that is the opposition to installation to cell towers, a common problem everywhere.

TRAI argues that since network infrastructure rose by 4.6 percent in 2013 to 2014, while  minutes of usage grew by 6.8 percent, that “investment has not kept pace with the usage.”

“Thus, prima facie, it appears that lack of investment in network infrastructure by the wireless access providers may be one of the main reasons for the problem of call drops,” TRAI argues.

So TRAI is considering new rules that compensate consumers for dropped calls, including credits of airtime or money.

One suggestion is that customers not be charged for calls that disconnect within five seconds, and not for the last increments of calls that drop after a session has been initiated (not charging for the last minute of a call, for consumer on per-minute billing, for example).  

Some "Digital Inclusion" Policies Will Fail

“Digital inclusion” has some elements that service providers and governments can affect. But there are many parts of the “digital inclusion gap” that are the result of rational end user choices (even if we disagree with the choices).

The other notable caveat is that reluctance to buy fixed network high speed access often is a choice made because other more satisfying or relevant choices are seen as available.

As some consumers choose not to buy fixed network voice because they can use mobile, or do not buy linear video services because they can buy Netflix or watch YouTube, so some consumers choose not to buy fixed network high speed access.

That is important because such “choices” are just that, and not evidence of some failure on the part of governments or service providers.

Since those are consumer choices, no amount of effort to stimulate usage--education campaigns, marketing or the like--is going to move consumers to act. They do not wish to buy.

In the United Kingdom, for example, 15 percent of adults did not have household access to the internet in the first quarter of 2015.

About 44 percent off the adults without home broadband did not think they needed it, while 22 percent said they did not want to own a computer.

About 21 percent found the retail cost too high. Another 20 percent of non-adopters said that they were “too old” to use the internet. About  17 percent did not believe that they had the knowledge or skills to use it.

That said, most households--85 percent--do buy fixed network broadband. About 12 percent of homes rather firmly do not wish to buy. Over half of non-users do not think there any advantages to their being online.

source: Ofcom

LInear TV Continues to Slowly Erode

LInear TV subscribers continue to drift slowly away, with the big current problem being potential new subscribers forming new households. In other words, current subscribers slowly are abandoning the service, while significant numbers of potential new customers are choosing not to buy at all.

Some 83 percent of all households nationwide subscribe to some form of linear TV service, according to Leichtman Research Group (LRG).

The percentage of households that subscribe to linear TV services is down from 87 percent in 2010, though up from 81 percent in 2005, LRG says. That suggests adoption has climbed.

Were the number of U.S. households stable, that would be the case. But households have grown by more than 4.5 million units. So the percentage of households buying service has dropped.

The declines come principally from two trends. Current subscribers are dropping service, while new households being formed by younger consumers are refusing to buy the product.

Just about every metric suggests weaker demand from current buyers, and much lower demand from potential new buyers.

Among TV households that do not currently subscribe to a pay-TV service, 17 percent paid for a service in the past year, while 70 percent of non-subscribers last subscribed over three years ago, or never subscribed to a pay-TV service.

Overall, about 2.5 percent of TV households paid to subscribe to a service in the past year, but currently do not, compared to 1.5 percent in 2010, and 2.3 percent in 2005.

In households using a TV, 12 percent of homeowners do not subscribe to a linear subscription TV service, compared to 23 percent of renters.

Some 21 percent  of those who moved in the past year do not currently subscribe to a linear video service, compared to 12 percent in 2010.

Fully 63 percent of non-subscribers buy a subscription video on-demand service.

Some five percent of all households are linear service  non-subscribers, with both an SVOD service and an over-the-air  antenna.

Some four percent of all households are linear TV non-subscribers, but do buy a Netflix style service and do not use an over-the-air antenna.

"Historically, consumers have gone in and out of the pay-TV category, primarily for economic reasons,” said Leichtman. “While the rate of those leaving is actually similar to a decade ago, those who are entering or reentering the market has decreased over time, and the industry is not keeping pace with rental housing growth."

Some Casual Observers Miss the Amount of Stress in Fixed Network Business

Some observers seem unclear about how the fixed network business model has changed over the past few decades.

During the 11-year period between 2002 and 2013, U.S. fixed network provider gross revenue and net revenue both had fallen by more than 50 percent compared to 2002.

Growth of the mobile business replaced those lost revenues, as did growth by acquisition for the largest providers.

Still, the fact remains: U.S. fixed networks have lost half their former revenue, and the ability to generate new revenues from the asset are difficult. In product lifecycle terms, the legacy fixed network voice product that has driven nearly all revenue is past maturity, and declining.

New services such as high speed Internet and video entertainment help, but telcos continue to badly lag cable TV providers in adding new customers.

"Over the past year, cable has accounted for 95 percent of the approximately 3,000,000 broadband additions," said Bruce Leichtman, president and principal analyst for Leichtman Research Group.

Telcos continue to gain market share in linear video, but the market also is shrinking.

The point is that glib analysis based on a “rich, monopolistic carrier” image sometimes interferes with analytical rigor.

The fixed network business model not only is challenged, it might eventually--in some cases--be challenged to the point of death. So far, one is hard pressed to note an instance of outright failure. But many firms, including some incumbents have had to declare bankruptcy, and some already have been reduced to being wholesale infrastructure providers, while other retailers reap the growth.

So some of us would say it is no surprise that firms such as Verizon Communications and AT&T are divesting rural fixed network assets, where it is possible to do so. Both firms might be willing shed even more assets, but the issue is buyer ability to finance such transactions.

The biggest former independent rural telcos--CenturyLink, Windstream and Frontier Communications--are themselves focusing on business customers for growth, and all three already have taken on huge debt to buy assets.

In the most-recent deal,  Frontier Communications is buying  Verizon’s local wireline operations in the three states.

These operations serve 3.7 million voice customers, 1.2 million video customers and 2.2 million broadband connections. Half of the network runs on high-quality fiber-to-the-home (FTTH) technology.

However, the company is yet to get an approval from the Texas Public Utilities Commission and the Public Utilities Commission of California.  The deal is likely to be closed in the first half of 2016.

The bottom line is that the fixed network business is challenged. Asset dispositions, sharp revenue declines and loss of market share all show that.

Add to that growing pressure on the high speed access (new lower cost competitors) and linear video fronts (shrinking market), and one would be on firm ground in suggesting that the fixed network business needs help, not hindrance.

To the extent that revenue has grown, revenue has shifted to mobile services and cable TV operators.

U.K. Small Business Internet Access Speed Requirement Will be 8.1 Mbps in 2015

There is a reason many tier one service providers consider the “small business” customer segment to be indistinguishable from the “consumer” segment: a huge percentage of small business accounts are, in fact, virtually indistinguishable from consumer accounts.

The Broadband Stakeholder Group (BSG), the U.K. government’s leading advisory group on broadband, recently predicted that median downstream demand for small business premises will rise from 5 Mbps  in 2015 to 8.1 Mbps in 2025.

In fact, as often is the case, consumer demand will vastly exceed “business” requirements.

The largest five percent of “small business” sites will see demand grow from 12.9 Mbps to 41.1 Mbps.

In fact, 79 percent of small businesses are single-person or one-employee entities. Only nine percent of firms have between five and 49 employees.

That has direct implications for the amount of bandwidth each buying location requires, as well as for sales and support by Internet service providers. Basically, sales to the 70 percent of small businesses that are sole proprietors has to be done using mass market channels, the same as for consumers.

The other issue is that requirements are not distinct from requirements for selling services to most consumers.

A good percentage of the expected bandwith consumption increase, in a few verticals, is driven by amenity Wi-Fi provided to customers, not internal use by employees.

More than 90 percent of firms have between zero and four employees, putting the 5 Mbps estimate in line with industry rules of thumb of under 1 Mbps per employee.

The largest one percent of 49-employee premises require 189 Mbps or more, for example.

Which industrial sector a company is in is also an important factor in driving bandwidth demands.

The typical business premise in the postal and couriers sector will need around 11 Mbps in 2025, while the typical location in the food and beverage industry will require 57 Mbps.

The majority of food and beverage location demand is driven by customer use of Wi-Fi rather than employees using the connection themselves.

The median upstream demand is 1.3 Mbps today and will grow to 2.7 Mbps.

This contrasts with demand at the largest five percent of firms with upstream demand of 7.2 Mbps in 2015, growing to 36 Mbps by 2025.

Some 67 percent of firms that are sole proprietorships  use fixed broadband, rising to 94 percent of businesses with 20 to 49 employees.

Half of the single employee businesses without fixed access report that they use mobile broadband instead.  

Overall,  65 percent  of small businesses use smartphones.

Verizon's AOL Acquiring Millennial Media

Verizon-owned AOL is acquiring Millennial Media, the mobile advertising platform. The move reinforces Verizon’s commitment to mobile advertising business, and also is among the relatively few Verizon operations that operates outside the United States, as well as within the United States.

SingTel is among other mobile firms with significant stakes in the mobile ad network and advertising services business.

The deal will give AOL a much bigger footprint in mobile advertising, with Millennial’s network covering some 65,000 apps and one billion active users globally in markets like the U.S. but also Singapore, Japan, UK, France and Germany.

Salisbury, NC Becomes "America's First 10 Gbps City"

Small relatively unregulated companies often can do things large more regulated companies cannot, just as small compact city-states often can move with a speed that continent-sized countries cannot match.

So it is that the Salisbury, N.C.  municipal Internet service provider Fibrant has launched 10 Gbps service throughout the city, to both businesses and residents.

Fibrant has been offering gigabit service for $105 a month, and 50 Mbps service for $45 a month, since about 2011. Fibrant also sells phone and linear video entertainment services.

Billing itself as the first 10-gigabit city, Fibrant believes the market for 10 Gbps really is the business customer, which will pay about $400 a month for the 10-Gbps service.

"To be honest with you, we're not anticipating residents taking 10Gbps service," Fibrant Director of Broadband and Infrastructure Kent Winrich says.

The first 10 Gbps customer is Catawba College, which wants the bandwidth for computer labs and other school buildings. High-definition videoconferencing figures into the college’s heavy bandwidth plans.

Fibrant has 3,300 home and business customers, about 25 percent of households in the community.

One might ask why Fibrant does not have 100 percent market share, and the reason likely is that even with bundles that do not match Fibrant in terms of Internet access speed, Salisbury cable and telco providers still are able to retain much of their original market share by offering enough value, often at lower prices than Fibrant, to anchor in place perhaps 75 percent of the potential market.

AT&T U-verse is sold in Salisbury, and the cable operator is Time Warner Cable.

23% of U.S. TV Now is Viewed Online

source: GlobalWebIndex

About 23 percent of daily U.S. TV consumption now happens online, according to GlobalWebIndex.

The issue now is likely which of the expected revenue sources will drive most of the revenue. Advertising and subscription fees are the obvious drivers of most of the revenue, but much remains to be decided, in particular the role of advertising.

Traditionally, consumers have tolerated advertising because it defrayed the cost of viewing. But some important formats--HBO, Netflix and Amazon Prime--have eschewed advertising to concentrate solely on subscription fees.

There likely is room for both models, but strategies around the amount of tolerable irritation is likely to grow. The perhaps obvious example is what is happening on many linear TV services, where the amount of time devoted to advertising has grown significantly.

To the extent that advertising is “irritation,” distributors are irritating their customers more. And since so many people now use Netflix, Amazon Prime and other services without commercial interruptions, the contrast literally is easy to see.

That is one reason YouTube plans to launch a commercial-free service.

One indication that commercial-free products might have appeal is that the next version of Apple’s IoS will allow its device users to block ads, though that will not be the default setting.

For Apple, which makes its money from devices, ads are seen as content elements that degrade end user experience.

For Google, Facebook and many content providers, ads are a primary or important revenue source. The estimated loss of global revenue due to blocked advertising during the first half of 2015 was $21.8 billion, according to Pagefair.

Ad block usage in the United States resulted in an estimated $5.8 billion in blocked revenue during 2014. It is expected to cost $10.7 billion in 2015 and $20.3 billion in 2016.

Globally, ad blocking is expected to result in a loss of $41.4 billion in potential ad revenue by 2016.

Use of ad blocking software is increasing. Globally, the number of people using ad blocking software grew by 41 percent between 2013 and 2014, according to Pagefair.

Ad block usage in the United States grew 48 percent in 2014,  increasing to 45 million monthly active users (MAUs) during the second quarter of 2015.

Ad block usage in Europe grew by 35 percent in 2014, increasing to 77 million monthly active users during the second quarter of 2015.

Mobile Infrastructure Market Will Grow at 8% Annually Through 2019

The global macrocell mobile infrastructure market grew two percent in the second quarter of 2015 over the first quarter, and also grew two percent year-over-year, according to IHS Infonetics, reaching $11.4 billion.

LTE revenue was essentially flat (up one percent) sequentially, but grew 10 percent year over year.

IHS believes LTE spending by mobile operators will peak at $23 billion in 2015 and then start to decline as service providers complete their builds.

Some 422 commercial LTE networks have been launched as of July 2015, 363 of which are of the FDD (frequency division duplex) variety.

Ericsson and Huawei share the LTE infrastructure market share lead, each claiming a bit more than 20 percent market share.

Mobile infrastructure software is forecast by IHS to grow at a 5-year (2014-2019) compound annual growth rate of eight percent.

But 3G investments also matter.

"Substantial 3G deployments took place in Brazil, India, the Middle East, Myanmar, Thailand and Vietnam," said Stéphane Téral, IHS research director for mobile infrastructure and carrier economics. "Brazil kicked off a massive 2G GSM to 3G W-CDMA migration, and Thailand has ordered mobile operators to shut down their GSM network to re-use the spectrum for LTE."

U.S. Mobile Internet Access Consumer Satisfaction Grows

U.S. smartphone owners seem increasingly satisfied with mobile Internet performance--even as their expectations rachet higher--according to a survey sponsored by Vasona Network.

Users expecting "good mobile data performance all of the time, with no temporary hiccups or outages" remains high at 73 percent, up one percent from 2014 levels.

The importance of mobile Internet performance when choosing a service provider rose again from 32 percent in 2014 to 35 percent in 2015.

The survey suggests U.S. mobile service providers are doing well, in that regard. Some 35 percent of respondents believe that their provider offers the best mobile broadband performance available, up from 31 percent in 2014.

Nearly half (46 percent)  would recommend switching to their provider, up from 42 percent in 2014.

Fewer respondents think they can get better performance from a new provider. Some 28 percent now think that they can get better performance by switching, down from 32 percent in 2014.

Some 32 percent say that the mobile broadband experience offered by their provider has gotten better during the past year, while only 15 percent think that it has gotten worse.

As you might also expect, users are upgrading their mobile data plans. Some 32 percent of smartphone owners surveyed upgraded their mobile data plans during the past year, with an additional 10 percent planning to do so within the next year.

Smartphone Markets in U.S., Western Europe are About Device Replacement

No market ever “grows to the sky,” and that is evident for smartphones. For the most part, smartphone markets in Western Europe and the United States are replacement markets.

“The maturity of the European market is evident when looking at the declining number of first time smartphone buyers,” said Dominic Sunnebo, business unit director at Kantar Worldpanel ComTech Europe. “In the three months ending July 2015, only 25 percent of smartphones sold went to first-time buyers versus 29 percent for the same period in 2014.”

Replacement markets also mean that market share is grown mostly by taking share from another provider.

“This type of market maturity increases the impact of churn on overall performance as we have seen with Android this time around,” he said. “Of smartphone buyers across Europe left Android for iOS versus nine percent in the US.”

”The latest smartphone sales data from Kantar Worldpanel ComTech for the three months ending July 2015 shows continued market share losses for the Android OS across Europe’s five largest markets, while Android’s share remained positive in the U.S.,” he said.

Reliance Communications, Jasper to Launch IoT Platform in India

Reliance Communications Ltd. (RCoM) has entered into a partnership with U.S.-based Jasper, a global Internet of Things (IoT) platform provider, to offer enterprises and individuals in India the capability to launch and manage IoT business operations.

Reliance is Jasper’s sole telecom partner in India, and functionally will operate as a “platform as a service” offering from Reliance’s 11 data center facilities and its Global Cloud Exchange “Cloud X” platform.

Reliance Group companies will be the anchor clients for the IoT rollout in India, but discussions are also underway with multiple clients and state governments across India for the deployment of this platform. That method--using other Reliance businesses as anchor customers--has been used before by Reliance Communications.

A dedicated technical team from Reliance and Jasper will manage the phased roll-out of Internet of Things services across the country.

Telkom South Africa Launches Carrier Billing for Google Play

Bango and Telkom South Africa, have partnered to launch carrier billing in Google Play, a first for Africa. Telkom SA is using the Bango payment platform to provide the service to its Android customers, giving them access to a universal payment method to fully enjoy the app store experience.

Carrier billing is not new, but many view carrier billing as a convenient and efficient way to enable mobile content purchases.

Google Play carrier billing, on the Verizon Wireless network, for example. allows customers to purchase up to $100 in digital goods (virtual online games, music, e-books) from the Google Play store, using an Android device.

The purchases are charged to a customer’s Verizon Wireless bill. It is touted as an easy, convenient, secure method for purchasing digital goods on a device without having to provide an online merchant with credit card information.

There is a big potential market, as Google’s Android platform currently represents 89 percent of the smartphone market in Africa, according to IDC).

Telkom customers using Android smartphones and tablets can now purchase their apps, games, music and other digital content using one-click carrier billing, charging the cost to their phone bill or deducting the charge from airtime, without the need for a credit card or to register personal details.

Customers with limited or no access to other payment methods now can use carrier billing to buy from the Google Play store, Bango says.

Where carrier billing is introduced to fast-growing emerging markets such as in Africa, Bango routinely sees increases in digital content sales of 300 percent to 400 percent.

Where consumers are only presented with a “credit or debit card only” payment option, conversion rates can be as low as 0.5 percent  in developing markets, and rarely exceed 40 percent  even in developed markets where card penetration is high.

The average conversion rate for carrier billing in app stores using the Bango payment platform during 2014 was 82.4 percent, Bango says.

Traditionally, carrier billing has been a business issue for would-be merchants, as the carriers kept 25 percent to 40 percent of the gross revenues.

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That obviously is changing, as it is hard to see a business model for most app providers if an app store claims 25 percent of gross, and then a carrier takes another 25 percent of gross revenue.

That is one reason why micropayments generally are unrealistic using carrier billing. With revenue sharing rates so high, purchase amounts generally are in dollars, not cents. In the U.S. market, that tends to imply $10 to $20 purchase prices.

Of course, there are precedents. Linear video content providers generally are paid about 40 percent of retail gross revenue when a distributor sells a subscription.

But high prices are a deterrent to consumption in any market. So it is likely carriers are being more flexible these days.

In the past, consumer protection issues also have been a concern, where carrier billing is available.