2016 Might be the Year Half of U.S. Households are "Mobile Only"

Some trends--such as abandonment of fixed network voice connections--has happened in slow motion, which has a useful thing for service providers coping with the negative trends.

More than 47 percent of U.S. homes were “mobile only” for voice service in the first half of 2015, up 3.4 percentage points since the first half of 2014, according to the U.S. National Center for Health Statistics.

At current growth rates, it is conceivable that half of U.S. homes will have "cut the cord" by the end of 2016.

Fully 71 percent of  adults aged 25 to 29, and 68 percent of adults 30 to 34 were mobile mobile only.

In the 18 to 24 bracket, 59 percent are mobile only, while in the 35 to 44 age bracket, 57 percent were mobile only.

In the 45 to 64 age cohort, 41 percent were mobile only and even in the 65 or older cohort some 19 percent were mobile only.

Perhaps the only unanswered question is whether such behaviors will change as younger cohorts age. Once upon a time, some observers argued that younger consumers who did not buy cable TV subscriptions would do so as they got older and had children.

There is less certainty about that change, anymore. So it is unclear whether present habits will change as younger consumers get older.

Also, fully 85 percent of adults living only with unrelated adult roommates were mobile only. And 67 percent of renters were mobile only. Some 37 percent of homeowners also were mobile only.

As you might also guess, 59 percent of adults living in poverty and 54 percent of adults living in near poverty were mobile only. But even 46 percent of higher income adults were mobile only.

One might argue that, were it not for triple play packages, fixed network voice adoption would be even lower than it is.

The good news is that the steady and long-standing declining trend has occurred so predictably slowly that service providers have had time to create replacement revenue streams, an effort that continues as the remaining “legacy services (entertainment video and high speed access) remain under pressure.

The former suffers from declining demand, the latter from higher levels of competition, despite a slow upward trend in revenues primarily driven by a shift of demand to higher-speed services.

Even When They Don't Know Their Internet Access Speed, They Know When the Experience Requires More Bandwidth

Some nine percent of U.S. broadband households switched service providers in the past 12 months, according to Parks Associates. 

The nine-percent churn rate is significantly less than one percent a month, a low churn rate for a consumer service, one might argue, suggesting that consumers have not been massively unhappy with their current providers and the value-price relationship.

The reasons for the churn behavior tend to boil down to a switch driven by buyer perceptions of a better price-value relationships. 

About 35 percent of the changes were to get a faster service. Some 18 percent of the switchers switched providers to get the same speed at a lower price.

The study suggests that more than 25 percent of U.S. broadband households believe that their present broadband speed is faster than needed, while 10 percent plan to upgrade to a more expensive but faster service.

The study suggests 43 percent of subscribers do not know their current broadband speed. What they do seem to understand is the experience that they have online, particularly as it relates to use of digital media.

As you might guess, multi-person households sharing a connection, especially those where respondents own multiple connected entertainment devices are more likely than others to plan to upgrade their broadband service, Parks Associates says.

Survey Finds 39% of Respondents Have Never Bought Linear Video

You might not be too surprised if a survey finds 19 percent of respondents to a survey on video entertainment usage say they cut linear video service within the last year. You might be more surprised to learn that nearly 39 percent have never purchased a linear video service.

That suggests the long term problem linear video providers face: there is dwindling demand for the current product, as well as the near term problem, namely churn and abandonment.

The survey of 3150 consumers on behalf of Digitalsmiths in the United States and Canada, sponsored by Digitalsmiths, also found churn behavior increasing. In the third quarter of 2015, eight percent of respondents said they had switched service providers in the last three months, about a 2.7 percent monthly rate, and higher than most major triple play providers have been reporting.

Asked what they might do over the next six months, 46.5 percent of respondents said they would either cut linear service altogether (4.8 percent), change to another linear provider (7.2 percent), switch to an online app or rental service (2.7 percent). Some 32 percent said they “might” change services.

The survey found 82.5 percent of respondents watch between one and 10 channels, an increase of 2.1 percent year over year and 2.3 percent over two years. That is generally consistent with historical findings, but shows a slight increase over time as more channels have been added to channel lineups.

Respondents who watch 11 or more channels decreased 2.1 percent year over year and decreased 2.3 percent over two years.

Fully 56.3 percent of respondents have over-the-top subscription services, an increase of 3.6 percent, year over year, and 8.1 percent over two years.

Of those respondents who are cord-cutters or cord-nevers, 74.5 percent buy  a monthly subscription service, compared to 55.1 percent of linear TV subscribers. Netflix and Hulu are the top OTT services used by respondents who do not subscribe to linear TV.

Some 36.1 percent of respondents use pay-per-rental services such as Redbox Kiosks, iTunes, Amazon Prime Instant Video or similar services.

While there was a slight 2.2 percent decrease in usage quarter over quarter, these services did experience increases of 7.1 percent year over year.

Some 41 percent of respondents spend between $3 and $11 a month on pay-per-rental services.

However, across the board overall spend on these services decreased 2.5 percent quarter over quarter and , 5.3 percent year over year.

Perhaps nobody is much surprised by any of those trends, though some might disagree with the magnitude of the reported behavior.

source: Digitalsmiths

Supporters Hope Carrier Wi-Fi Will Create New Business Models

In the near term, hotspot network business models will be driven by existing business models--faster access, advertising, location and venue services, according to Maravedis. For the most part, business models rely on indirect value--such as churn reduction or data offload--rather than direct subscription revenue or advertising, for example.

The search for new business models, at the moment, centers on the ability to create seamless carrier quality connections, to support voice subscription revenue or enterprise services.

The installed base of carrier-grade hotspots will rise at a compound annual rate of growth between four percent and 14 percent,  depending on the region.

Asia-Pacific will still account for 66 percent of the total world base in 2020, despite the expansion in other regions.

On average, each country  has over 200,000 hotspots (excluding homespots) deployed under its direct control and one million available to its subscribers by roaming or wholesale deals. The figurs are skewed by a few larger telcos.

source: Maravedis

Vodafone Expands Gigabit Networks in Ireland, Portugal

Vodafone Group has begun deploying gigabit Internet access services in Ireland as part of its initiative to connect small towns (4,000 homes or more) to fiber-to-home networks by the end of 2018.

Carrigaline in Country Cork is the first of 51 Irish towns to receive access.

Ireland is the first country in Europe to use electricity infrastructure to deploy end-to-end fiber directly to the premises on a nationwide basis.

Vodafone Group also announced a €125 million expansion of its FTTH network in Portugal, offering speeds of up to 1 gigabit per second to 2.75 million homes and businesses across the country by the end of 2016.

To date, Vodafone has connected 2.2 million Portuguese homes and businesses to FTTH networks,

Vodafone is also building a new gigabit FTTH network in Spain serving more than two million homes and businesses, and is in discussions with Italian electricity company Enel which has announced plans to create a new infrastructure company to build a national FTTH network open to all operators across Italy.

What Must be Done Next to Stimulate Faster Internet Adoption Across South Asia?

Spectrum Futures has posted a new white paper: Increasing Internet Access Availability Across South Asia: What to Do Next. 

In many cases, the answers start with an understanding of where and how Internet access will be used. 

By 2020, for example, 54 percent of South Asia mobile customers will be using smartphones, according to GSMA estimates.  Those choices by consumers necessarily drive demand for more bandwidth.

Between 2015 and 2021, data consumption per smartphone will grow nine times in Western Europe, five times in Central and Eastern Europe, nearly six times in the Middle East and Africa, nearly seven times in Asia Pacific, nearly six times in North American and five times in South America.

In much of Asia, as in some other regions, the smartphone is the gateway to use of the Internet. In India, for example, about 57 percent of the time, the smartphone is the access device of choice, according to the Google Consumer Barometer.

In the Philippines, about 39 percent of the time, the smartphone is the preferred or more-used access device.

Smartphone adoption therefore will be a key driver of bandwidth demand, since mobile Internet consumption on smartphones is growing at a compound annual growth rate of 50 percent.

It also goes without saying that attractive applications and services are the reasons people want to use smartphones and the Internet, which is why many believe programs such as "Free Basics" make sense. 

Many who do not yet use the Internet across South Asia say they do not have a need, or do not know why they would want to use the Internet. So allowing people to sample the Internet is a proven way to boost demand by allowing people to discover the value of Internet apps.

And though it will not be the only platform for Internet access, there can be no denying mobile's huge role. 

There will be 2.51 billion mobile phone users in the Asia-Pacific region in 2015, a figure equal to 62.5 percent of the population, rising to 69.4 percent by 2019, according to eMarketer.

Also, Asia will account for 39 percent of global data consumption by 2019, as a result, according to Cisco. And India will represent a huge part of the growth.

India is on track to surpass half a billion mobile subscribers by the end of the year, according to a new GSMA Intelligence study. By 2020, India will account for almost half of all the subscriber growth expected in the Asia Pacific region.

The Mobile Economy: India 2015 notes that 13 percent of the world’s mobile subscribers reside in India. At the  end of 2014, India’s mobile subscriber penetration rate was about 36 percent of the population, compared to a 50 percent global average.

But that is going to change, fast.

The subscriber penetration rate in India is forecast to reach 54 per cent by 2020 as many millions more are connected by mobile.

India had 453 million unique mobile subscribers at the end of 2014, but is forecast to surpass 500 million by the end of 2015 and add a further 250 million subscribers by 2020 to reach 734 million.  

ISDN Used to be the "Next Generation Network"

Some of us can remember when ISDN was the "next generation network." Then we shifted to broadband ISDN (Asynchronous Transfer Mode). Then the Internet hit. Now the next generation network is built on Internet Protocol. 

That wasn't the way network architects in the telecom world expected matters to unfold. 

Calling Service Ringo Gets Blocked in India

Calling service Ringo, which has been offering international calling and recently launched domestic calling service in India, says domestic calling on the service has been blocked, apparently by its own wholesale service provider. Ringo says it is “a fully legal, compliant service, and follows all aspects of the DoT and TRAI regulations.”

Ringo uses wholesale minutes purchased from an underlying carrier, and is not an over the top service, so the reason for the blocking of domestic calling on Nov. 30, 2015,  is unclear.

“Until we manage to get an intervention from relevant regulatory authorities to unblock our service, none of our domestic calls are going through,” Ringo said.

The blocking is curious. Ringo buys minutes in bulk from carriers, offering local calls for as low as 19 paise/min (less than a cent). To put that in comparison, Airtel charges around ₹1.40 (20 cents) per minute, and if you're on a reduced tariff plan, that comes down to 40paise per minute (six cents).

That existing mobile service providers would not be happy about the additional competition is  understandable. Why an apparently lawful service is being blocked, however, is not clear.

The Ringo app allows users to call any landline or mobile in the country at a flat rate of 19paise per minute (less than half a cent), without any additional charges.

Unlike other VOIP apps, Ringo uses carrier networks instead of phone data or the Internet for a phone calls.

Using Big Data to Slice Cost of Assessing Creditworthiness for Microloans

By some estimates,  4.5 billion people do not have any kind of formal credit score that could help them qualify for loans, but up to 90 percent of the world’s population does have access to mobile phones.

As it turns out, mobile phone behavior can establish a  “financial identity” that provides many of the advantages of a credit score, when entities want to make loans, typically microloans. By reducing risk of non-payment, such measures could enable loans made with smaller lending fees.

That, obviously, would help borrowers as well as lenders. Firms such as Branch (a nod to its mission of serving as a branchless bank) use phone data to assess borrower likelihood to repay on loans of $25 or less in Kenya, and mobile phones as the means to send money and receive repayments.

The app, available on Google Play, can make a loan determination and deliver a result to the mobile phone in five minutes.

Branch collects data from the potential borrower’s phone, including information about the device, text message logs, call logs, and contact lists. Branch then uses the  information to assess creditworthiness.

In some cases, the value comes from use of the phone to record spending and saving data entered manually.

In other cases, non-financial behavior can be used to create a proxy for a credit score. Kreditech says it can use 20,000 measures based on phone behavior to make an assessment. Traditional banks might use 300 measures.

In addition to new commercial microlending apps and efforts, the original impetus might have been non-profit microlending by outfits such as Kiva, which works with dozens of commercial partners.

The use of algorithms to assess risk obviously will help to cut the costs of screening, which in turn arguably contributes to the high interest rates microloans tend to feature.

source: Wall Street Journal

Will Service Provider Costs Have to Decrease 40% by 2020?

There are several reasons why services delivered over fixed networks are going to face tougher competition from mobile services, ranging from orders of magnitude more mobile bandwidth to lower mobile network sunk costs to higher network utilization rates to changing end user demand.

Simply put, demand for consumer-focused mobile services now vastly outstrips demand for fixed network services.

According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons, globally. That abandonment of fixed network voice is occurring at the same time that mobile subscriptions have reached 98.6 percent.

To be sure, demand for fixed network Internet access grew, but slowly, in 2014. Fixed network Internet access subscriptions grew from 10.3 percent to 10.8 percent.

Also, relatively speaking, it is going to be easier to wring cost out of mobile platforms, compared to fixed platforms, in most markets.

Mobile networks cost less than fixed networks, and can be deployed and upgraded faster.

Though the pattern is by no means uniform globally, the cost of a mobile network, including spectrum purchases, is less than that of a comparable fixed network.

But mobile markets typically feature multiple mobile operators (three to five, for example) operating with their own facilities, while many fixed network markets feature only a single network operator, or possibly two, in some markets.

In addition, mobile network infrastructure costs are described in terms of costs to serve “people,” while fixed network costs are “per location.”

That makes direct comparisons somewhat more difficult. But a study of U.S infrastructure costs showed mobile or wireless networks were less costly than fixed networks when loop length requirements  were 12,000 feet, for example, when the comparison was a single new mobile network and a single new fixed network.

Total investment might differ if multiple mobile networks overbuild a single fixed network. In some cases, the total cost of all the mobile networks could be higher than that of a single fixed network.

Operating costs often also are lower for mobile than fixed networks, sometimes because the fixed networks have cost structures typical of former-monopoly providers, while mobile service providers often start with lower cost structures.

Also, as customers abandon the fixed network, more of the assets are stranded, and unable to generate a financial return. Rare is the cell tower that does not serve paying customers, or enough paying customers to earn an actual profit.  

And ability to reduce costs is going to be essential, if one believes, as does the International Telecommunications Union, that retail consumer communications service prices are going to drop by 40 percent by 2020.

To be sure, prices might not drop by 40 percent for every service, offered by every provider, in every market. Prices for fixed services might even rise, as consumers opt to buy more-expensive services running at higher speeds up to a gigabit per second in some markets, but easily to hundreds of megabits in more markets.

The analogy there is smartphone prices, which are higher than what consumers used to pay for feature phones.

Still, stranded assets and shifting demand are going to create increasing pressures for fixed network service providers. Mobile operators will not be exempt from the pricing pressures, either.

Some might already argue that many fixed network providers, and even some leading mobile providers, have business models that are going “upside down.”

U.S. Fixed Network Broadband is "Among Most Affordable" in the World, says ITU

From time to time, observers complain about the high price of fixed network Internet access, especially when prices climb. A typical line of argument is the retail price, expressed in dollars, compared to prices in other countries, also expressed in dollars.

Analysts who work across regions and nations globally know there are issues with such comparisons. To normalize “prices,” analysts often use purchasing power parity or measures that index communications spending to household income, for example.

Those methods often provide a more-realistic way of comparing prices, since they are expressed in terms that are normalized for purchasing power differences.

In that regard, an International Telecommunications Union report shows that U.S. fixed network broadband prices are exceedingly low, expressed as a percentage of gross national income per person. That is not the only way to compare prices across countries, but is instructive.

Using the per-capita GNI method, fixed network high speed access costs less than one percent of per-person GNI, making U.S. fixed network broadband services among the “most affordable” in the world.

source: ITU

In developed countries, the fixed-broadband basket has been relatively affordable for a number of years, but prices are no longer falling.

Between 2008 and 2013, the price of the fixed-broadband basket as a percentage of GNI per person fell from 2.3 percent to 1.4 percent. That figure remained unchanged in 2014.

While prices for fixed-broadband services are comparable in absolute U.S. dollar  terms across developed and developing countries, they remain much higher in terms of purchasing power parity values.

In 2014, fixed-broadband services in developed countries cost PPP$27, compared to PPP$65 in developing countries. This is not the case for fixed telephone and mobile prices, as prices expressed in purchasing power parity are almost the same in developed and developing regions.

source: ITU

No Network is "Always Best," But Mobile Comes Close, in Consumer Market

As a rule, no single access platform is “best” for every deployment scenario, even if mobile networks globally have proven to be the most-affordable for most people, most places.

Still, the relevance of satellite delivery, fixed wireless, specialized business networks and potentially new platforms (low earth orbit satellite constellations, balloons and drones) cannot be denied, even if it is likely most of those new solutions might wind up providing backhaul for mobile networks.

Sometimes the advantage of “specialized” networks comes from customer demand, at other times from the characteristics of the access platform.

Optical networks serving enterprises or satellite TV networks serving consumers in rural areas are examples of specialized demand or cost-optimized delivery.

Still, it is hard to discount the growing “primary” reliance on mobile networks for most consumer purposes. Since 2003, mobile network rural coverage had grown from a bit over 20 percent in 2003, in Africa, to as much as 84 percent by 2012.  

In other regions, such as Asia, rural coverage grew from 60 percent to 87 percent in Asia and from about 64 percent in North America to 96 percent. In Europe, rural coverage grew from about 90 percent to 97 percent.

In 2015, 73 percent of the world’s population is covered by 3G networks, one way of measuring potential Internet access coverage. The GSM Association estimates that 3G coverage will grow to 80 percent by 2020.

By 2020, some 60 percent of people will have 4G coverage.

Such forecasts are the reasons why some access or transport platforms can exist, even when mobile coverage becomes nearly ubiquitous. Mobile will not be the “best” network for all purposes, and will not be available in some geographies.

source: ITU

source: ITU

Mobile Data Services Now Drive Global Mobile Operator Revenue Growth

At least one global trend--adoption of mobile Internet access services--has sharpened over the last couple of years. On a global basis, adoption of mobile services has reached maturity, though growth lies ahead in some regions, especially Africa.

Other trends continue unabated. According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons. That abandonment of fixed network voice and growth of mobile  while mobile subscriptions have reached 98.6 percent.

Fixed network high speed access has grown slightly, from 10.3 to 10.8 per 100 inhabitants.

Growth in the penetration of active mobile-broadband subscriptions has, however, been very sharp, rising from 37.2 to an estimated 47.2 per 100 persons over the last twelve months alone.

Mobile broadband services, falling prices and the rapidly growing use of smartphones and tablets are driving that trend, the ITU says.  

Individual use of Internet and household access to it have continued their steady rates of growth, from 40.6 and 43.4 per cent, respectively, to 43.9 and 46.4 per cent at the global level.

One trend seems clear enough: “mobile broadband” is the way most people now are getting access to the Internet, globally.

source: ITU

Free Basics to be Offered by Airtel in 17 Countries in Africa

Facebook is partnering with India's Bharti Airtel to bring new services to 17 African countries as part of its “Free Basics” program. 

"In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate," said Mark Zuckerberg, Facebook CEO. "Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa." 

Free Basics will be offered to Airtel customers in Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.

Zuckerberg also noted that Facebook had partnered to launch a satellite to provide Internet coverage to remote areas of Sub-Saharan Africa starting in 2016.

It's a big day for connecting Africa. In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate.Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa.These new Internet.org launches will bring free services to Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.We also recently partnered to launch a satellite to provide internet coverage to remote areas of Sub-Saharan Africa starting in 2016. We've also partnered with the Praekelt Foundation to give developers the tools they need to build free basic services to reach people just coming online. Girl Effect is one of these services and in this video Elisha is using it as part of Free Basics in Kenya to access information to help empower girls to become leaders. Connecting people across the African continent is critical to our mission. We’re going to keep pushing forward to develop new ways to bring people online until the whole world is connected.
Posted by Mark Zuckerberg on Tuesday, November 17, 2015