Is Asymmetric Regulation "Unfair?"

Asymmetric regulation of like services, provided by competing industries or segments,  tends to cause problems, sooner or later, as different rules applied to different providers is “unfair.”

Think only of the arguments some make about “network neutrality” and you get the picture: “all bits and apps and providers should be treated the same.”

Leaving aside for the moment the issue of whether that makes sense, or is possible or desirable, the principle of “like treatment” for apps, services and providers is, at some important level, a “desirable” principle, in terms of fairness.

The problem is that industries with entirely-different regulatory frameworks now find themselves competing head to head, and some industries are far less regulated than others.

At least in the U.S. market, the traditional frameworks have varied from “no regulation” (magazines and newspapers) to “some regulation” (TV and radio broadcasting), “a bit more regulation than broadcast” (cable TV) and common carrier regulation (telcos). In addition, “dominant” telco providers have obligations small providers do not.

The situation screams for “harmonization,” some would argue. That always is more difficult than might be thought to be the case, as participants often will fiercely resist reclassification and new rules, especially when the new rules are deemed harmful to the basic business model.

Beyond that, policymakers face another fundamental choice: ease regulations on the more-regulated industry, or tighten regulations on the less-regulated industry. Recently, the U.S. Federal Communications Commission has chosen the latter path.

Others might argue the better path is to lessen regulations on the more-regulated industry, especially if “dominance” has eroded, and competing industries have grown both more powerful and influential, while “value” shifts away from the regulated industries and towards the unregulated industries.

To make the basic argument, value and profitability have shifted towards app providers and cable TV companies, and away from telcos. That can be seen in the dramatic changes in market share for high speed Internet access, arguably now the foundation service for any fixed network.

In 2015, for example, cable TV companies not only continued to add more net accounts than telcos, in several quarters cable TV had more than 100 percent of net additions.

source: American Consumer Institute

Also, from 2009 to 2015, telco share of high speed access lines has steadily dropped from more than 90 percent share to less than 40 percent share.

source: American Consumer Institute

One might argue "equal treatment of like services and providers," which is supposed to be a good thing where it comes to apps, might also be thought to be a good thing were it comes to access providers that most certainly are treated unequally.

U.S. Mobile Payment Suppliers Shift Focus

In one sense, “mobile payment” always was about using mobile devices as a substitute for credit and debit cards. But after several years of experimentation, at least in the U.S. market, it seems as though much of the adoption has shifted to “online” payment using mobile devices.

The size of the opportunity explains why that is happening.

The number of consumers who have used Apple Pay, Google Wallet or Samsung Pay remains relatively small.

Android Pay has been more focused on enabling e-commerce than retail checkout.

Even PayPal, long a leader in online payments, has shifted a bit.  “Already for many people, it is sometimes difficult to see clear lines between online, in-app or in-store experiences,” said Dan Schulman, PayPal CEO. “As we help create this new world in which all commerce is digital commerce, our opportunity will be the entire $25 trillion universe of global retail spending, an addressable market that is 10 times larger than the one we have traditionally targeted.”

MasterCard now talks about the “MasterPass” ecosystem, not so much a “wallet.” Visa, for its part, launched Checkout in July 2014, replacing V.me, Visa’s mobile. As does MasterCard, Visa now focuses on creating an ecosystem for e-commerce.

Chase Pay, which was built on the Merchant Customer Exchange (MCX), might need to refocus on that MCX itself seems to be foundering, as founding member Walmart now is creating its own branded mobile wallet, with Target, another MCX founder, also said to be planning its own mobile wallet.

And even the Starbucks card now focused on “Mobile Order and Pay,” not just mobile payment.

The shifts are not so surprising, as retail mobile payments remain a work in progress, causing contestants to look for roles that can grow faster.

Compared to retail checkout e-commerce growing four times as fast, while mobile commerce is growing at eight times the rate of traditional commerce.

Starbucks, Walgreens, NFL Shop, HSN and Match are among the latest merchants to sign up for Visa Checkout, while Walmart.com will do so as well.

According to new research from comScore, Visa Checkout is more effective than other checkout options at driving conversion, which means that shoppers who start a checkout process are more likely to complete it, when using Visa Checkout.

The December 2015 comScore survey found that enrolled Visa Checkout customers completed 86 percent of transactions from the online shopping cart, with a 51 percent higher conversion rate when compared to customers using a merchant’s traditional online checkout.

Some 45 percent of Visa Checkout shoppers used a smartphone, tablet, or other mobile device in making an online purchase during the 2015 holiday period, up from about 33 percent a year earlier.

Between July and November, the share of Visa Checkout customers using a mobile device grew by 10 percent.

The ability to use a mobile device as a payment mechanism remains. But many suppliers have shifted their efforts from retail payment to platform or ecosystem; to online in addition to retail; or online almost in place of retail.

Cox Communications Finds CDN Improves Page Loading 9 to 15 Percent, on Average

As more of the value of the Internet shifts to apps with video content, content delivery networks become more important for end user experience and content provider revenues.

Amazon has estimated that a 100-millisecond increase in webpage load time can decrease sales by one percent.

Google has found that faster-loading pages mean more ad inventory can be displayed. When the average page load time increases from 400 ms to 900 ms, reduced traffic has meant ad revenue lower by 20 percent.

Linkedin, for its part, argues that a one-second increase in median latency causes a 15 percent engagement drop and a five-percent bounce rate increase.

Facebook pages that are 500-ms slower result in a three-percent drop-off in traffic, and a delay of one second causes a six percent drop-off in user activity.

A SamKnows study of EdgeConneX connections designed to reduce latency was conducted in Norfolk, Virginia and San Diego, California.

In Norfolk, Cox Communications, established connectivity with a leading content provider in early February 2015, supported by a CDN service, and resulted in page load time for a major search engine improved by an average of 15.4 percent.

Some users saw page load time improvements of more than 40 percent.

In San Diego, Cox moved to an Akamai CDN service and saw a 9.2 percent improvement in page load time.

Extrapolated to the entire base of website requests, performance improvements could be as high as 65 percent.

How Video Changes Peering and Transit Demand

Consumers ultimately drive demand for all communication and content services, it goes without saying. The corollary is that a relatively limited number of “content stores” will aggregate and deliver the bandwidth-intensive apps (entertainment video, largely) consumers demand.

That is not to say entertainment video is the “most important” type of app people want to use. They want to use many. But as a driver of bandwidth, video is everything.

IP video will account for 80 percent of all IP traffic by 2019, up from 67 percent in 2014, according to the Cisco Visual Networking Index.

With the caveat that IP traffic is not 100 percent of data traffic, the fact remains that IP networks will, by virtue of traffic volume, become content delivery networks.

Another corollary is that global bandwidth is driven from a relatively limited number of locations, including major video app provider data centers. If that is true, then the economics of “owning” rather than “leasing” long haul bandwidth are changed.

That is likely one reason IP transit volumes are dropping. It simply is easier for bandwidth-dependent content stores to create their own facilities. That, in turn, is one reason why peering represents more of the total amount of global network interconnections.

source: TeleGeography

source: TeleGeography

For Mobile Operators, Remittances Yes, Retail Payments, Not so Much

At least so far, it is safe to say that mobile operator value in the “payments” ecosystem has been most clear for remittances and other retail payments in developing regions and least successful in retail mobile payments.

In fact, mobile remittances might be just at the beginning of their growth curve. Already, the volume of existing mobile banking transactions for remittances is an order of magnitude higher than any other application, according to the GSMA.

source: GSMA

The reason many are optimistic is that remittances by any means represent over $1 trillion in value annually, and only about $5 billion is transferred annually in the United States, for example, using a mobile phone.   

For mobile operators in some markets, revenue contributed by M-Pesa, the mobile payments system, already is greater than revenue earned from mobile data, for example. Some 18 percent of mobile operators polled by GSMA in 2014 reported that mobile money revenues represented more than 10 percent of total revenue, for example.

M-PESA represented just under 20 percent of total revenues for Safaricom in 2014, for example.

MTN Uganda’s mobile money services generated about 15 percent of total revenue in mid-2014.

Tanzania’s M-Pesa service represented 21.3 percent of the operator’s total service revenue in 2014.

source: GSMA

source: GSMA

By 2014, 255 mobile money services operated in 89 countries and is now available in 61 percent of developing markets.

source: Maris Strategies

source: GSMA

source: GSMA

Retail mobile payments in developed markets have, to this point, been another story. Though In 2015 mobile payments might have represented $8.71 billion in mobile retail transaction volume, very little of that activity flowed through mobile operator services.

The SoftCard initiative lead by AT&T, Verizon and T-Mobile US was quietly folded into Google Wallet, not that Google Wallet has fared better.

The space has been tough for many others, as well. The Merchant Customer Exchange, branded as CurrentC, and representing major mass market retailers, faces a splintering.

Walmart was a lead backer of MCX, but now plans to introduce its own mobile payments service, Walmart Pay. Target, another early MCX supporter, appears to be mulling its own payments system as well.

It remains to be seen whether retail mobile payments will, in the future, be a significant revenue driver for mobile service providers.

Internet Access: Moore's Law Not Fast Enough for You?

Author Samuel Clemens once quipped that there are “Lies, damn lies and statistics.” Psychologists know a Rashomon” effect exists, where people have distinctly different impressions of the same event.

So it always seems to be with understanding of how much progress any nation or service provider is making in the area of Internet service quality.

Improvements nearly at Moore's Law rates seems to be a “problem.”

The Federal Communications Commission takes one view; some take the other.

“Broadband deployment in the United States--especially in rural areas--is failing to keep pace with today’s advanced, high-quality voice, data, graphics and video offerings, according to the 2015 Broadband Progress Report adopted today by the Federal Communications Commission,” the FCC says.

The FCC observation about rural areas is correct, and likely always will be, for many of the reasons that hipster bars and restaurants never will be as plentiful in rural areas as they are in urban areas.

Density is required for some businesses to exist, or be sustainable.

The FCC notes that “55 million Americans--17 percent of the population--lack access to advanced broadband,” defined as 25 Mbps in the downstream and 3 Mbps in the upstream.

At the same time, firms such as Comcast, Google Fiber, AT&T, CenturyLink and many others are actively deploying gigabit access networks, where demand will sustain those services.

More important, Comcast and AT&T continue to demonstrate they can scale Internet access bandwidth nearly at Moore’s Law rates.

To the extent the FCC sees itself--and to the extent that it is--the protector of citizen and consumer rights, it is understandable that the agency can say we are not making enough progress.

But that does not mean we are not making progress. We clearly are, unless you think Moore’s Law rates of improvement are not fast enough.

The other observation is that, to a large extent, we will never experience, in rural areas, the same amenities we see in urban areas.

In that sense, “lack of progress” will always  be a problem. That does not mean we are not “solving” the problem, generally.

Nine Years Since the iPhone Introduction

Steve Jobs unveiled the iPhone nine years ago, on Dec. 9, 2007. It might not have immediately changed the world, but it set in motion a huge change in the way mobile devices are developed and commercialized, loosening mobile service provider control.

Some of us would argue the iPhone was the first device to capture end user imagination in a matter similar to the way people have emotional identifications with their clothing, perfumes, autos, shoes, favorite vacation destinations or sports teams.

In other words, for the first time, there was a physical product that embodied the value of "bandwidth" or "network access."

Intangible services (legal or financial services, for example) are hard to market, since the buyer has no tangible way to judge the quality of the product until after the product has been purchased and consumed.

Internet access and voice service, for example, are intangible. The iPhone was a breakthrough. It personified the value of mobile data access. We already knew the value of a "mobile phone" for voice or messaging. But iPhone personified the value of mobile Internet access.

1.66 Million Employed in App Industry; Perhaps 2.6 Million in Telecom Service Provider Industry

The U.S. app industry represents 1.66 million as of December 2015, according to the Progressive Policy Institute.

PPI includes among the firms employing those people large and small app developers; software and media companies; financial and retail companies; industrial companies; health and education enterprises; leading tech companies such as Google, Apple, and Facebook; nonprofits and government suppliers; and large accounting and consulting firms.

Such employees have direct information technology jobs, non-IT jobs that support those jobs, or spillover local retail and restaurant jobs, construction jobs, and all the other necessary services.

Core app economy workers number about 550,000.

By way of comparison, there were an estimated 910,000 people directly employed in the core telecom industry in 2010, according to US Telecom.

According to the U.S. Bureau of Labor Statistics, there were in December 2015 some 868,000 core service provider jobs. Using the same ratio of indirect jobs to direct jobs as for the app economy analysis, there might be 2.6 million people employed by the core telecommunications services industry.

                                    Estimates of App Economy Jobs

Date of estimate	Date of publication	App Economy jobs, thousands
Fall 2011	Feb. 2012	466
April 2012	October 2012	519
June 2013	July 2013	752
Dec. 2015         January 2016		1660
Data: South Mountain Economics, Progressive Policy Institute, The Conference Board, Indeed, BLS

Cloud Computing Services Sales $47 Billion for 12 Months Ending in September 2015

Cloud computing infrastructure spending was about $60 billion for the 12 months ending in September 2015, according to Synergy Research Group, growing 28 percent annually.

About $47 billion was earned by sales of various cloud services.

Service revenues included $20 billion for cloud infrastructure services (IaaS, PaaS, private and hybrid services) and $27 billion from software as a service.

Public infrastructure as a service and platform as a service had the highest growth rate at 51 percent, followed by private and hybrid cloud infrastructure services at 45 percent.

Private cloud spending grew 16 percent.

source: Synergy Research

2016 Year the Phone Number Disappears?

With 800 million people using Facebook’s Messenger app every month, it is understandable that

David Marcus, Facebook VP of Messaging Products, would say that 2016 is the year we see “the disappearance of the phone number.”

Many of you have been hearing such predictions for a decade or two, so will not pay too much attention. It is not that use of Messenger and other social messaging apps will stall. Indeed, it seems certain usage will grow.

But there simply is too much necessity for phone numbers, globally, for other reasons. Many of you know all the reasons why people do not rely on “phone numbers” to dial or reach people.

Underneath, in the network, there is little way to avoid such conventions.

75% of Cars Sold in 2020 Will Be Connected Car Capable

By 2020, 75 percent of cars shipped globally will be built with the necessary hardware to allow people to stream music, look up movie times, be alerted of traffic and weather conditions, and even power driving-assistance services such as self-parking. according to Business Insider Intelligence.

The connected-car market is growing at a five-year compound annual growth rate of 45 percent, about 10 times as fast as the overall car market.

Of the 220 million total connected cars on the road globally in 2020, connected services will be activated in 88 million of those vehicles.

Business Insider

Ration or Use Prices: There is No Other Way to Manage Use of Network Resources

All the arguments about network usage aside, “networks are finite resources, and there are only two possible ways of allocating those resources,” says analyst and consultant Martin Geddes.

Either there is a market for a “quantity or quality” and the price mechanism decides who really values it, or here is rationing of resources by some decision process imposed on users.

“There is no third option: pick one of the above,” Geddes says.

In other words, we have the choice of using a price mechanism, or rationing. Geddes argues that all T-Mobile US customers essentially win when Binge On is enabled, because overall network load is reduced.

Some prefer rationing, even if that is not what they claim is the case. Others prefer price mechanisms. Congestion is actually a form of rationing. So is Binge On.

Some argue use of price mechanisms would work better, in part because a price mechanism allows buyers to decide how much they want to pay for, and encourages them to consider alternate ways of satisfying their bandwidth demand.

That is why Wi-Fi offload works. People choose to use it, instead of staying on the mobile network, because there are actual or potential cost savings.

No Simple Way Forward for Access Providers

Communications service provider strategic and business model issues that were challenging before the Internet became far more acute afterwards. The widely-held notion that access providers were in danger of becoming “dumb pipes,” with application value migrating up the stack, is not misplaced.

The fundamental problem is that the historic, vertically-integrated voice model is difficult, at best, in the Internet era, where the fundamental model of computing is horizontal (layers) rather than vertically integrated.

That, in turn, has profound business implications. Of four major market positions examined by BCG analysts, though it is possible for a traditional telco to keep its legacy business model, some might say that will prove challenging, as it requires both vertical integration (apps and access) as well as the ability to maintain profitability with only incremental improvements to the key processes and services.

The problem is that the logical moves that could provide sustainability move in contradictory directions: towards a real focus on “hyper-scale” wholesale operations with massive scale, without worrying about innovation.

The other direction leads towards apps or platforms, both of which arguably are built on non-traditional telco skills and competencies.

The four types of roles “require different skills and motives, present different financial profiles to investors, and need to be managed on different time horizons.,” BCG argues. “A company can flourish in multiple layers—Amazon does it—but most organizations consistently underestimate the enormous challenges.”

Communities of users, professionals, and small entrepreneurs are typically found toward the top of the stack (application layer). “They flourish when uncertainty is high but the economies of mass are weak and where innovation comes through many small, seat-of-the-pants, trial-and-error bets,” BCG says.

Infrastructure organizations are typically found at the bottom of the stack. “They are most useful when uncertainty is low and economies of mass (specifically scale) are overwhelming,’ says BCG. “heir core competence is in long-term, numbers-driven capacity management.”

Curatorial platforms, narrowly defined as organizations that exist solely as hosts for communities, are a hybrid. In the stack, they lie immediately below the community they curate.

Traditional oligopolists occupy the broad middle of the stack. They have the advantage when uncertainty is high but not incalculable, and economies of mass (scale, scope, and experience) are significant but not overwhelming, BCG argues.

They exploit economies of scale and scope by placing big bets on technologies and facilities and make incremental improvements in products and processes.

Telcos and cable TV companies are “traditional oligopolists.” To sustain that role, they must sustain or create vertically-integrated services, continue to operate with economies of scale, and hope that incremental improvements are sufficient to sustain the business model.

That is a tall order, given the declines we continue to see in all the core legacy services. And that is why strategy now matters so much, and why Internet of Things now matters hugely. IoT might offer the best opportunity for creating a big, new vertically-integrated replacement business.

source: bcg

IoT Could Turn "Digital" Laggers into Leaders

The Internet of Things is going to be a big deal for a number of reasons, not least of which is the likelihood that IoT is the way “physical” industries, unlike “virtual” industries, will be able to leverage digital technology.

Up to this point, the industries that have been most able to take advantage of digital technology are based on intangible, or largely intangible (software) products, including information technology, media, finance and insurance.

It does not take much insight to suggest that manufacturing, trade, health care and other industries can benefit from IoT capabilities.

source: McKinsey