Will Video Drive Fixed Network Adoption Towards 95% Levels?

Some might yet wonder what it will take to get adoption of high speed Internet access in the U.S. and other markets up to 90 percent or higher. The traditional answer has been “TV.” Eventually, consumers will shift to over the top TV and away from linear, making a high-capacity home Internet connection essential.

In other words, “use of computers” will not be the activity that drives the incremental adoption.

And substitution of smartphones for PCs or laptops might not change matters.

In fact, mobile phone ownership might now be cannibalizing some need to own a PC. Some 92 percent of U.S. residents own a mobile phone, 68 percent a smartphone and 73 percent a desktop PC or notebook PC.

The effect on demand for home Internet connections is clear. If perhaps seven to 10 percent of consumers say they rely exclusively on mobile for Internet access, then mobile access is a substitute for fixed network Internet access.

But it still is the case that video will drive incremental adoption of fixed network Internet access. The reason is that as entertainment video shifts to over the top delivery, a fixed network Internet access connection becomes a prerequisite.

At the same time, the fixed network allows offload of mobile data consumption to Wi-Fi.

The point is that video--one way or the other--will underpin incremental fixed network Internet access demand, even if primary demand is driven by Internet access itself.

At the same time, increasing ability to seamlessly switch access between mobile and fixed networks will complicate the matter.

Internet access already includes a mix of fixed and mobile access modes, but changes in video delivery might complicate usage patterns and therefore our sense of the extent of Internet access adoption and use.

In 2013, fixed network Internet access was purchased by about 74 percent of U.S. households.

In 2015, use of the Internet was higher than 86 percent, but that is not identical with the number of homes buying Internet access. If 92.5 million U.S. homes bought fixed Internet access, and if one assumes there are roughly 120 million occupied homes,  fixed Internet adoption might be 77 percent.

Some might argue that adoption already is at about the 90 percent level, but that an increasing percentage of consumers use mobile Internet access, and may not buy fixed access products.

About 10 percent of consumers say they rely exclusively on smartphones for Internet access.

The point is that use of television, not use of computers, might eventually drive fixed network Internet access adoption towards levels we used to expect of voice services, and more recently cable TV services (85 percent to 95 percent adoption).

The other possibility is that fixed access adoption never actually reaches those levels, since mobile-only is proving to be a viable form of Internet access for an arguably-growing number of consumers.

Whether that remains the case when a major shift to over the top video, and away from linear video, is the question.

Given the higher cost per bit of mobile Internet access, compared to fixed access, it would be difficult for mobile operators to supply, or consumers to afford, enough capacity to support a full shift of most TV consumption to mobile networks and devices.

At present retail tariffs and linear video consumption patterns, a full shift to consumption of TV on an on-demand, mobile basis would not be possible, one might argue.  

The networks could not handle the load, nor would consumers be willing to pay.

But it is hard to say how supply will change in the future. If one assumes a robust and seamless ability to offload heavy video consumption to Wi-Fi, a larger percentage of consumers might well conclude they can live without a fixed Internet connection, if they are willing to work around it.

The big issue is that the greatest volume of video consumption happens at home, the location where a fixed access service is essential for Wi-Fi access.

And that suggests incremental demand for fixed Internet access will grow, despite mobile consumption.  

Windstream Offers 100 Mbps to 1 Million Consumers

Windstream now offers consumers and small businesses in 600 markets across 12 states faster Internet speeds of up to 100 Mbps.

Altogether, nearly one million households and small businesses now have access to premium speeds up to 100 Mbps in Windstream communities.

Those moves are in large part enabled by the sale of Windstream’s data center business.

In the third quarter of 2015, Windstream earned nearly 62 percent of total revenue from business customers, however.

Total revenue was $1.5 billion in the third quarter, up $80 million sequentially due to organic growth of $7 million and incremental “Connect America Fund” (universal service) revenue of $73 million.  

Consumer service revenue was up on a sequential basis with continued growth in high-speed Internet bundled revenue, Windstream said.

ILEC small business revenues were $107 million in the third quarter; carrier service revenues were $169 million; enterprise service revenues were $501 million and out of region small business service revenues were $146 million.

Telco Data Center Strategies Diverge

One example of the growing variety of business strategies embraced by tier-one telcos is the matter of data center “colocation” assets. 

One argument, and one strategy, is that ownership of such facilities creates an access and transport opportunity for the carriers, irrespective of direct revenues earned by supplying real estate and services.

The other argument is that transport and access revenue can be earned without the necessity of owning data centers.

And growing pressure on operating margins can tip the balance, even if data center ownership is generally thought to be a positive. That appears to the case for Cincinnati Bell, which is selling ownership shares of its CyrusOne data center business, raising cash to reduce debt.

CenturyLink appears to be thinking along the same lines regarding its own colocation business. CenturyLink appeared to believe colocation center hosting would provide a boost several years ago when it bought Savvis.

While it plans to continue offering colocation services, CenturyLink says it is looking for alternatives to owning nearly 60 data centers around the world that support colocation, managed hosting, and cloud services.

As in the case of Cincinnati Bell, CenturyLink might now be more concerned about debt reduction than revenue upside from owning the data center business.

CenturyLink business segment revenues might be “driven principally by increased market penetration of our network, hosting, cloud, and IT solution service offerings,” as CEO Glen Post said.

But capital might be better deployed elsewhere, CenturyLink suggests. “We expect colocation services will continue to be a service our customers will look for us for, but we do not necessarily believe we have to own the data center assets to be effective in delivery of those services,” said Post.

CenturyLink’s revenue for the cloud and hosting  business is about $600 million annually, and the company says it seeks to sell or otherwise restructure the data center operations, not the cloud and hosting businesses that use data center real estate.

In fact, most of CenturyLink’s cloud and hosting operations are run out of leased data center space, at the moment.

And CenturyLink executives are not willing to commit the new capital they estimate is required to grow the business. They also believe cash generated by an asset sale would earn a higher return in other lines of business.

Windstream is selling its data center business as well. As often is the case, it appears specialists are better positioned in the data center and colocation business than some telcos might be.

On the other hand, other telcos seem to believe they must take a bigger position in data center business. Reliance Communications is among those firms increasing investment in the data center business.

Orange Spain Fiber to Home Network to Cover 14 Million Homes by 2020

Orange’s fiber access network  in Spain reaches 5.2 million households and will reach 10 million in 2016 and 14 million by the end of 2020, the company says.

Orange’s fiber-to-home network will by 2020 cover more than 80 percent of all Spanish cities with more than 20,000 inhabitants, allowing Orange to claim the title of “Europe’s leading alternative operator” providing fiber to premises coverage.

Orange also says it will invest is 1.5 billion euro in its Spain 4G network, reaching 95 percent of the Spanish population in 2017.

Orange aims to reach four million additional fiber-to-home households by the end of 2020, on top of the 10 million households that the company has already announced for the end of 2016.

Colorado Towns and Counties Win Right to Build Their Own Broadband Networks

It is too early to know what might come next, but voters in at least seven Colorado communities--and some say as many as 43 cities or counties--on Nov. 3, 2015 opted out of state rules preventing municipalities from creating their own telecommunications networks.

That might lead some to consider building Wi-Fi access facilities, optical backbones or even considering other more direct challenges to telco and cable TV high speed access.

At the very least, the new freedoms will provide continual pressure on CenturyLink, Comcast and other firms to continue significant bandwidth investments.

Comcast, for example, already has committed to upgrade all its networks to 1 Gbps speeds in 2016, with 2-Gbps access available in perhaps 85 percent of locations.

CenturyLink already is rolling out gigabit service in a number of neighborhoods in its metro Colorado locations.

But the local governments now have the right to build and operate their own facilities, if they choose to do so.  

Useful Wisdom from "Dr. Seuss"

In the Dr. Seuss book Horton Hears a Who, Horton the elephant, splashing in a pool, hears a small speck of dust talking to him. The speck is a tiny planet, home to a community called Whoville. "A person's a person, no matter how small," the mayor of Whovillle says. Yes, indeed!

Will VoLTE Revenue Be Net "Zero"?

What are the revenue implications for service providers if two billion VoLTE (Voice over LTE) connections are in service by 2020? One possible explanation is that VoLTE will represent $100 billion in annual service revenue.

But that is hard to parse, since VoLTE in one genuine sense only represents the ability to sell mobile voice service over a fourth generation network, with native support by the 4G network. For the most part, VoLTE therefore only represents voice revenue that already had been provided using 2G or 3G platforms.

In other words, net revenue might not be much more than "zero."

“Direct revenues from VoLTE will be limited at first,” argue analysts at Juniper Research. Mobile operators initially will focus on experience and quality of service, rather than monetization.

You might say the same is true for Wi-Fi calling (VoWi-Fi). “Operators are launching the service to add value for the customers with little investment, where VoLTE is focused on operator network efficiency,” Juniper Research said.

Whether high definition voice provides a better revenue opportunity might also be questionable. The problem is that HD voice might wind up being mostly a way to compete with over the top voice apps.

If so, then is is unlikely a premium of any sort can be charged for the HD quality.

Facebook Messenger, for example, recently launched free high definition VoIP calling over mobile and Wi-Fi networks. It is tough to compete with “free,” so carrier HD voice is unlikely to represent a chance to hike prices.

In most cases, VoLTE, VoWi-Fi and HD voice are likely to be features, rather than revenue drivers.

Cloud Traffic Drives 83% of Data Center Traffic in 2019

Some trends in communications--such as the relationship between computing and communications-- are drop-dead simple. Information technology and communications have been increasingly intertwined for decades, as computing architectures have grown more distributed.

Globally, of every dollar spent on enterprise information technology spending technology, 43 cents are expended for communications services.

That also is true of consumer computing. By 2019, 55 percent of the residential Internet population will use personal cloud storage (up from 42 percent in 2014), in addition to most apps also reliant on cloud computing, according to Cisco.

To state the obvious but important fact, cloud computing requires communications. As cloud computing grows, so does demand for communications.

Annual global data center IP traffic is projected to reach 10.4 ZB by the end of 2019, up from 3.4 ZB per year in 2014. But that is not the key figure. 

Cloud traffic is key, since cloud traffic necessarily requires outside the building communications. Data center traffic often moves within a building, server to server.

Annual global cloud traffic is projected to quadruple, reaching 8.6 ZB (719 EB per month) by the end of 2019, up from 2.1 ZB per year (176 EB per month) in 2014, and is expected to account for more than 83 percent of total data center traffic by 2019.

Overall data center workloads will more than double from 2014 to 2019. Cloud workloads will more than triple over the same period, Cisco predicts.

Cloud traffic, a subset of data center traffic, is generated by cloud services accessible through the Internet from scalable, virtualized cloud data centers.

Total data center traffic includes all traffic traversing within and between data centers as well as to end users.

Some suggestions of consumer services reliance can be gleaned from the prediction that software as a service (SaaS) will be the most popular and adopted service model for public and private cloud workloads, respectively, by 2019. Those workloads are the other side of a consumer’s use of mobile and Internet applications.

By 2019, 59 percent of the total cloud workloads will be Software-as-a-Service (SaaS) workloads, up from 45 percent in 2014.

As an example, the Cisco forecast estimates that by 2017, global smartphone traffic (201 EB per year) will exceed the amount of data stored (179 EB per year) on those devices – necessitating the need for greater storage capabilities using the cloud.

Worldwide IT Spending Forecast by Sector (Billions of U.S. Dollars)
	2014	2014	2015	2015
	Spending	Growth (%)	Spending	Growth (%)
Devices	693	2.4	654	-5.7
Data Center Systems	142	1.8	136	-3.8
Enterprise Software	314	5.7	310	-1.2
IT Services	955	1.9	914	-4.3
Communications Services	1,607	0.2	1,492	-7.2
Overall IT	3,711	1.6	3,507	-5.5
Source: Gartner (June 2015)

Orange Business Services Intros Faster Business Cloud Access

A new global business-grade Internet service from Orange Business Services--Business VPN Internet Accelerate--provides access to cloud applications up to ten times faster (based on a test of the Paris-to-Singapore route).

Based on Akamai Cloud Networking, the business-grade Internet service is built on the Akamai Intelligent Platform, which includes nearly 200,000 servers across more than 110 countries and advanced optimization technologies.

Sometimes, such content delivery networks improve response time because they cache content closer to a user’s location.

source: wpmudev

Project Loon for India?

The Indian government is considering a test of Google’s Project Loon. The pilot project might also involve use of BSNL 2.6 Ghz spectrum for downlink.

Three leading mobile service providers in Indonesia, plus authorities in Sri Lanka, also are testing Project Loon as a backhaul platform.

Can mobile service providers across South Asia, Southeast Asia and Oceania get Long Term Evolution coverage at an order of magnitude lower costs by partnering with Google’s Project Loon?

Project Loon supporters believe that is possible.

In tests, Project Loon has partnered with mobile service providers with in-place LTE towers to provide backhaul to Project Loon balloons, along the 40th parallel.

At the 30th parallel, winds are easterly. Near the equator the winds are westerly. Presumably the same techniques would work at other latitudes.

By definition, some LTE tower infrastructure is required, as those towers provide uplink to the balloons.

But the balloons then provide LTE coverage directly to LTE-capable handsets. At this point, it likely makes sense for mobile service providers to source wholesale retail capacity on the balloons, which essentially substitute for fixed mobile cell sites.

The mobile service provider networks and towers, on the other hand, will provide Project Loon with backhaul.

Google says it can now deliver data at 5 Mbps to mobile phones, or 22 Mbps to fixed antennas.

Unlicensed Spectrum Sustainability Model Still Will Be an Issue in a "Shared" Environment

Use of license-exempt spectrum always has posed--and continues to represent--business model challenges. Initially, Wi-Fi mostly had an indirect business model in the consumer segment of the business.

Access to public Wi-Fi hotspots was an amenity gained from using a specific high speed access provider.

These days, public Wi-Fi plays a role on the capital investment side of the infrastructure business. Mobile service providers offload half or more of their customers usage from the core networks, slowing the rate at which core network upgrades are required.

In a coming iteration, public Wi-Fi will play a role supporting upstart mobile service providers.

Some firms have created direct revenue models by using public and amenity Wi-Fi to support enterprise and business customers.

But most services using unlicensed spectrum tend to face key business model challenges. Shared access to 3.5-GHz spectrum in the U.S market will not be exempt.

As envisioned, a formal tripartite model would be applied. Licensees would continue to be protected for the purposes the spectrum originally was intended to support.

But where surplus exists, commercial users would be allowed to have subsidiary rights to use spectrum, and likely would pay for the privilege. Where even the primary and secondary users are accommodated, opportunistic access would be allowed (on the model of Wi-Fi spectrum use, with license-exempt access, but without guarantees of quality or availability).

One might argue there is no fundamental business model issue with either primary licensed access or secondary usage. Primary licensees already have a sustainable model of some sort.

Commercial users would have to create a sustainable model. But some potential users, including cable TV companies, mobile service providers or possibly some app providers, have existing models that benefit--indirectly or indirectly--to an existing revenue model.

The traditional issue has been the sustainability of business models based strictly on opportunistic access, though. As anybody familiar with the fixed wireless business understands, lenders have been cautious about any business models founded on use of license-exempt spectrum, because there is a not a defensible “moat.”

In other words, there is no enforceable scarcity that keeps competitors out. That does not mean there are no “moats.” Geography sometimes creates potential barriers to entry. Large sports stadiums and airliners provide examples, says Armand Musey, Summit Ridge Group founder.

The other obvious potential model is a wholesale infrastructure model, which U.S. cable TV companies have suggested is a possibility for them, at least as a business model for their access facilities, which might become an attractive backhaul platform for small cell deployments, for example.

The point is that shared spectrum, as such, does not pose major unknown issues, as far as business model, for some commercial entities, especially when spectrum is used as on sub-licensed basis.

On the other hand, some traditional issues faced by small wireless Internet service providers and amenity Wi-Fi providers will remain, when opportunistic access is the platform.

Some things do seem to change. 

India Enterprise Communications Spending $28.3 Billion in 2016

Communication services will continue to account for the largest share of information technology spending in India and will account for 39.2 percent of revenue in 2016, or about $28.3 billion, according to analysts at Gartner.

Communications arguably represents a smaller percentage of total enterprise IT spending in India, compared to many other countries. Globally, communications represents about 43 percent of enterprise IT spending.

That factoid illustrates the intimate relationship between information technology and communications services.

Communications revenue will grow about 2.1 percent in 2016, Gartner also predicts.

Total India IT spending is forecast to reach $72.3 billion in 2016, a 7.2 percent increase from 2015 levels.

“India will continue to be the fastest growing IT market for the second year in succession and will continue growing to total $87.67 billion by the end of 2019,” said Aman Munglani, research director at Gartner. “India is currently the third largest IT market in Asia/Pacific, and by 2019 India will become the second-largest IT market within the Asia/Pacific region, following China.”

Devices, which include mobile phones, PC’s and tablets, will account for almost 33 percent of the overall IT spend in India, and the devices  segment will grow 9.4 percent in 2016.

Mobile phones will continue to be the single largest technology sub segment in India and the third fastest-growing through 2019.

“Data center systems will grow 3.9 percent in 2016, with most of this growth coming from enterprise network equipment and servers that will grow at 5.9 percent and 5.3 percent, respectively.

IT services, which accounts for 18.1 percent of overall IT spend in India, will be the fastest growing segment in India in 2016 with 13.8 percent growth year on year. Within these segments, business IT services will grow 15.2 percent over 2015 figures,” said Munglani.

Software, which accounts for nearly seven percent of IT revenue in India, will grow 12.7 percent as a segment, but within this segment, enterprise application software will be the fastest growing sub segment in 2016, with revenue forecast to grow 16.2 percent over 2015.