Mobile is the Only Way to Create an Integrated National Quadruple Play in U.S. Market

We sometimes hear talk of mobile-fixed convergence, or “quadruple play bundles” more often in context of Western European strategy than U.S. service provider strategy. There are good structural reasons for that divergence.

In Western Europe, it often is possible to assemble assets that provide mobile and fixed network coverage of nearly a whole country.

In the United States, the Federal Communications Commission and Justice Department historically have prohibited any single provider of mobile or fixed service from gaining more than about 30 percent market share.

For a fixed services operator, that means a key geographic limitation. A fixed network service provider cannot operate networks that pass or serve more than about 30 percent of potential customers.

Mobile operators, on the other hand, are free to build national networks, but cannot get more than about 30-percent market share.

That makes impossible the task of selling a quadruple play package (voice, entertainment video, Internet access, mobile) on a national basis.

One reason AT&T’s DirecTV acquisition helps, in that regard, is that it allows AT&T to create a functional quadruple play, with a national footprint linear delivery and then national ability to sell mobile services with voice, Internet access and mobility. In essence, AT&T is the first supplier to be able to sell a national quadruple play of sorts.

And other issues aside, that is why U-verse video marketing will remain limited to only some parts of the country. U-verse cannot, by definition, be a nationwide service.

For other service providers, creating and selling a true quadruple play, on a national basis, is not possible. “Integrated” quadruple play offers cannot be sold everywhere, but only to a fraction of potential buyers.

Only mobility and satellite TV are possible fully-owned, facilities-based “national footprint” services in the U.S. market. All other fixed network footprints, for legal or financial reasons, will be local or regional.

The only other provider potentially poised to replicate that footprint is Dish Network, which owns both nationwide mobile spectrum and the last independent satellite TV operation with national scale.

In that regard, you might regard “Binge On,” the T-Mobile US service that allows customers to stream video from 24 services without incurring data plan charges, as an attempt to create a functional quadruple play service.

That is why there also has been some interest in LTE-Broadcast, which although not a full-fledged way of replicating linear video services, offers support for point-to-multipoint “broadcast” video or content.

In the U.S. market, at least, mobile is strategically important for a number of reasons, including its status as the sole nationwide platform able to support all media types, if not yet every business model.

As entertainment video breaks from the traditional “broadcast” model, and becomes an on-demand medium, mobile service providers will be able to attempt becoming full functional substitutes for fixed network entertainment video.

"Binge On" is a Harbinger of Things to Come

Nobody yet knows whether the T-Mobile US “Binge On” feature, allowing customers to stream entertainment video without incurring usage on their mobile data plans, is going to crash the T-Mobile US network, or not. T-Mobile obviously believes it can handle the traffic.

But the move, in some ways, only presages an inevitable evolution of the mobile business and networks. Recall that the reason Dish Network has assembled a mobile spectrum portfolio is that it wants to be a player in the mobile business, specifically wit competence in entertainment video.

Verizon is spending so much effort on mobile streaming (Go90 service, purchase of AOL) because it also believes the future of entertainment video is mobile.

T-Mobile might be early. T-Mobile might encounter network congestion issues. But T-Mobile likely is not at all wrong about the direction of mobile revenue growth, and the services that drive it.

If there is anything like a “killer app” for smartphones and Long Term Evolution, it is video. That is not to downplay the importance of carrier messaging and voice, instant messaging, music, games, email  or Internet access in general.

It is simply to say LTE was the first generation of networks to have the ability to support lots of consumer video streaming, in terms of quality of experience.

So far, mobile has become a substitute for fixed voice and Internet access. What comes next is the ability to substitute mobile for entertainment video access, a product that fixed networks continue to excel at providing.

The cost of mobile bandwidth (dollars per gigabyte) has been a major barrier to fuller substitution of mobile for fixed service consumption. “Binge On” is an early step towards erasing a goodly part of the fixed network advantage.

To the extent that Internet access drives the immediate next phase of revenue growth for fixed and mobile networks, Binge On is a concrete step by a mobile operator to operationalize mobile video as a fuller competitor to fixed network linear video.

And T-Mobile US is not alone in believing this is where the market is headed. Broadband services--especially video and Internet access--now drive revenue growth across mobile and fixed networks.

So the key longer term issue posed by Binge On is how successful the offer will be in leveling the playing field with fixed network entertainment video providers. It remains early, and few would yet say Binge On is a head-on challenge to fixed network linear video.

But it clearly is the biggest challenge, yet.

Legacy Revenues Ultimately are "Toast"

Legacy communications will continue to shrink, analysts at Ovum maintain, even as content, advertising, video services, devices, Internet access and enterprise services continue to grow, globally.

Enterprise technology spending will claim 32 percent of the total “digital enablement” market in 2025, almost doubling to more than $1.5trillion by 2025, according to analysts at Ovum. That might not mean quite as much as the forecasts for discrete segments.

Notably, revenue for “traditional communications” is forecast to shrink eight percent by 2025. Virtually every other category grows revenue.

The other salient angle, one might argue,  is “where” growth will occur. Most analysts continue to forecast growing revenue in Asia, Africa and elsewhere, for example, with revenue declines in Western Europe and possibly the developed nations of Northeast Asia as well as North America.

You might simply say the divide is between growth in emerging economies and decline in the developed nations. Over the near to intermediate term, the other certainty is continued disruption of the voice revenue stream, everywhere, not just in developed countries, as hard as that will be to accept in many markets where voice continues to drive 80 percent of total revenue.

The reason for pointing to such trends is merely to emphasize the absolute centrality of efforts to discover or create brand-new revenue sources with enough scale to displace the loss of legacy services.

The other important implication is that it is crucial to make continued progress on fixed and operating costs. The reason is brutally simple: in a highly-competitive and low-margin business, the low-cost competitor wins. 

Think grocery stores, where profit margins routinely are one percent to two percent of sales. That is not to predict communications service provider profit margins necessarily are headed to that level; just to point out that lower costs really are going to matter as the amount of uncertainty and competitiion in communications continues to grind higher.

Source: Ovum

source: makethenetwork.eu

source: Telco 2.0

Few Urban Sites in Delhi, Mumbai Cause Most of the Call Drops

A new report on call drops in India, published by the Telecom Regulatory Authority of India, suggests that some mobile operator sites have no particular call drop issues, while others have significant problems, based on TRAI drive tests as well as analysis of performance records regularly submitted to TRAI by mobile operators.

Those findings mirror what one would expect, in terms of general problems caused by networking loading and congestion in any urban area: one or two percent of cell sites cause most of the problems.

TRAI’s study of call detail records from mobile operators in Delhi showed problems at six out of 8604 sites operated by one supplier;  10 out of 15850 for a second operator and 504 out of 16117 sites for a third operator.

In other words, the towers where call drop standards exceed TRAI standards (two percent or fewer dropped calls) are very few in number, compared to the total number of sites examined by TRAI.

Specifically, though for one operator about three percent of sites were problematic, two other mobile operators had problems with quality at just 0.06 percent or 0.07 percent of sites.

Weak signal strength, though not the only cause of call drops, is a big factor. Radio link failure also was found to be a big issue.

Mobile Operator Cell Sites with Call Drop Problems in Delhi, Based on Call Detail Records
Operator	Problem Sites	Total Sites	% of Total Sites
1	6	8604	0.07
2	10	15,850	0.06
3	504	16,117	3.13
source: based on TRAI data

A different analysis based on cells with three percent call drop rates at any hour of the day showed one operator with 108 out of 8604 sites affected; a second operator with 106 out of 15850 sites exceeding the three-percent threshold; while a third operator had call drop issues of three percent or more at 335 sites out of 16117 locations.

In other words, cell locations that exceeded three percent call drops at any hour of a typical day represent less than one percent to a maximum of two percent of sites.

Sites Exceeding 3% Call Drops at Any Hour of a Day
Operator	Problem Sites	Total Sites	% of Total Sites
1	108	8604	1.3
2	106	15,850	0.7
3	335	16,117	2.0
source: based on TRAI data

In a statement that mobile operators and TRAI can agree on, the report says “there is an urgent need to increase the number of the towers.” The full report also shows that blocked calls are an issue, not simply dropped calls.

Private Cloud Eventually Will Dominate, Verizon Argues

A narrowing of the price difference between public and private cloud is changing the value equation for private cloud computing, Verizon argues.

In the past, the approach taken by many companies roughly followed a similar model: public for non-sensitive workloads; private cloud for more sensitive stuff; and traditional on-premises for difficult-to-move and highly sensitive workloads.

Because the cost of private cloud is falling, it now makes sense for many companies to move more of their workloads to private cloud.

“There will always be a place for public cloud, especially for workloads that need lots of elasticity but perhaps not so much in the way of risk management and governance,” Verizon argues. Many websites (but not e-commerce) and testing projects would fall into this category.

But with the cost difference falling, Verizon argues, companies will reduce use of public cloud and increase private cloud usage.

Verizon argues “that in the future it will only be used for a narrow set of workloads.”

At the moment, about half of enterprises have a hybrid approach, using both public and private cloud computing, Verizon says.

source: Technology Business Research

Cloud, Mobile, IoT "Most Important" Technologies Next 3-5 Years, CxOs Say

Irrespective of role, C-level executives surveyed by the IBM Institute for Business Value see cloud computing and mobile solutions, plus Internet of Things, as the most-important  technologies they must deal with over the next three to five years.

source: IBM Institute for Business Value

Competition From "Outside" Now Matters More than Competition from "Inside"

Since 2013, more top executives have been worried about competition from “outside” the domain than from competitors already in the domain, IBM studies have found.

While 29 percent of C-level executives surveyed by IBM expected “more competition” from contestants “within the same industry,” fully 54 percent expected the greatest danger from competitors “in other industries.

Uber--with a completely different business model--is an example of the sort of disruptive outsider threats C-level executives now worry about.

Telecom service providers already are in the second decade of competition from the likes of Skype and Google, which first were concerns because new services from those sort of firms hollowed out the telecom business model, shifting value to itself and away from legacy managed services, essentially turning telcos into providers of simple connectivity.

Over time, Google Fiber has emerged as a direct competitor in the U.S. Internet access business and somewhat less directly or significantly in the form of Google-sponsored municipal Wi-Fi.

Globally, the pattern might be different. When executives from Google and Facebook talk about Google’s Project Loon and Facebook’s unmanned aerial vehicles, the emphasis always is on a wholesale or backhaul role, with retail Internet access supplied by mobile or other Internet service provider partners.

In other domains, “channel conflict” has been an issue as well. Microsoft competes directly with other suppliers of gaming systems and tablets. Amazon markets its own tablets and e-readers, and briefly marketed its own smartphone.

Google has marketed its own Nexus tablets and smartphones for a time. And now there is speculation that Nexus has essentially delivered most of the value Google originally hoped to achieve with a “showcase” device featuring native Android capabilities.

There are rumors that Google is pondering another round of innovation that could be ignited by a branded, manufactured and significantly marketed smartphone.

The concern about competition from “outside” traditional industry boundaries is well placed. Such new forms of competition are a hallmark of development in formerly-monopolized industries that become deregulated.

It now appears technology-driven attacks are an even bigger development. The boundaries of competition are becoming ambiguous,” said Yong Eum Ban, CFO, JoongAng Media Network, South Korea.

Two years ago, executives thought new rivals were as likely to come from their own industry as from others. Today, they’re more worried about outsiders invading their core markets.

The concern is well placed. Though telcos and cable TV firms might face off against each other in many of their core markets, both industries face more long-term threats from “outsiders.”

Skype and Google Fiber were just the start.

T-Mobile US Doubles LTE Data Buckets

T-Mobile US has made what it calls “the biggest update ever to the company’s wildly popular Simple Choice plan.”

T-Mobile US is doubling usage allotments for Simple Choice plans.

Simple Choice customers still start with one line at just $50 a month for unlimited data, talk and text on T-Mobile’s nationwide 4G LTE network. Now users get 2 GB of 4G LTE data, twice the previous amount, on each line.

As before, customers can still add a second line for $30 a month.  Additional lines up to 12 are still only $10 per month, but each now comes with 2 GB of 4G LTE data.

T-Mobile’s new “Family Match” plan allows users on the plans to add an extra 4 GB of 4G LTE data, including mobile hotspot data, for just $10 more a month on each line, up to a total of 10GB per line.

For families that would rather customize their data by line, extra data is just $15 a month for each 4 GB, down from $20 a month for 4GB.

"Binge On:" 24 Streaming Services Available on T-Mobile US Plans With No Hit to Usage Buckets

“Binge On” is the new mobile video streaming plan from T-Mobile US that allows customers to stream Netflix, HBO and other services without deducting usage from their data plans.

Beginning Nov. 15, 2015, video streams free at T-Mobile US subscribers of HBO, Hulu, Netflix, SHOWTIME, Sling TV, STARZ, WatchESPN; 24 streaming services in total.

The feature is available to all current and new Simple Choice customers on qualifying plans at no extra cost.

Binge On works, in part, by coding and delivering video at “DVD quality.” Crackle, Encore, ESPN, Fox Sports, Fox Sports Go, HBO Now, HBO Go, Hulu, MLB, Movieplex, NBC Sports, Netflix, Sling TV, Sling Box, SHOWTIME, STARZ, T-Mobile TV, Univision Deportes, Ustream, Vessel, Vevo, VUDU presently are part of the service.

T-Mobile is also including Verizon’s Go90 and AT&T’s DirecTV streaming services in Binge On.

Perhaps it is worth noting that the plan does not "treat all bits equally." Content providers have to meet T-Mobile US technical rules. But as often is the case, unequal treatment has a clear consumer benefit.

Will OTT Video Churn be Higher, the Same or Lower than Linear Video?

Will churn rates for over the top video services be higher, lower or equivalent to churn rates for linear video?

New surveys by Parks Associates might suggest OTT churn is quite low, at least for the largest providers.

Over a year’s time, just three percent of U.K. broadband households cancelled a subscription to an OTT video service.

In the United States, perhaps nine percent of U.S. broadband households cancelled, apparently over a year’s time. Other studies by Parks Associates have found annual churn rates of perhaps four percent annually.

Those are very low churn rates for any consumer service. Mobile service providers tend to experience between 12 percent and 18 percent annual churn, for example.

Linear video churn varies by provider. DirecTV churn might be less than 1.5 percent per month, or about 18 percent annually.

Granted, churn rates for OTT providers vary dramatically. Netflix seems to have low churn. Smaller providers seem to have much-higher churn rates.

source: nscreenmedia

Some might suspect that over the top video streaming churn is likely to be higher than churn for linear video services.

That would not be an illogical assumption. Churn rates tend to be higher for new products that consumers have not used before, in new markets where newer products get launched or changed fairly frequently.

Linear video is a well-understood product; OTT video not so much.

Ease of switching likewise might encourage users to switch between services. Some in the content community also note that the way content is released might even encourage such switching behavior. When a popular new series is released “all at once,” that can provide incentives for users to buy the service, watch the episodes and then churn back off.

Long-term trends are tough to assess at the moment, as the market remains nascent, in many respects. But there is at least some reason to believe that OTT linear video churn, long term, might not differ too much from linear video trends. Near term, churn might be fairly high, for services other than Netflix.

AT&T GigaPower Expands to 23 New Cities

AT&T has launched its GigaPower 1 Gbps Internet access services in the Atlanta, :Chicago,  Nashville, Miami and Orlando metropolitan markets, representing 23 cities, at prices of $70 a month or $110 a month.

Internet of Things = Growth for Mobile Operators

In a word, the Internet of Things is strategic for the mobile industry because it represents “growth.”

Once every human being who wants to use a mobile phone is doing so, after every phone is equipped for Internet access, after nearly every customer uses the Internet, after usage-driven charges have grown, what could possibly drive the next big wave of revenue growth?

Emphasize the word “big.” In a business where revenue is measured in hundreds of billions of dollars, modest new markets do not move the needle. Only revenue sources driven by big new markets will have the scale to matter.

Assuming such concerns are correct, IoT is big enough to move the needle.

Mor than 50 billion IoT devices are expected to be connected with as much as US$8.9 trillion in annual revenue by the year 2020.

According to GSMA studies and forecasts, mobile  IoT communications are predicted to account for over 10 percent of the global market by 2020. That should represent about $45 billion in service revenue annually.

source: GSMA

source: GSMA

U.S. Linear Video Subscribers Shrink in 3Q 2015

The second quarter tends to be seasonally difficult for providers of linear video entertainment services. That tended to be the case in 2015 as well. In the third quarter, the notable third quarter developments are that Verizon was the sole provider to add subscribers across both periods.

In the third quarter, aside from Verizon, only DirecTV and Charter added net new accounts. Dish Network and AT&T’s U-verse were the biggest losers.

With the caveat that any single provider can, at any time, deliberately undertake actions that will reduce or increase subscriber volume, the industry lost about 375,000 net accounts in the third quarter.

source: Wall Street Journal