T-Mobile US Gains Most Subscribers in 4Q 2015, But Market Becomign a Zero Sum Game

In a saturated but competitive market, nearly all account gains necessarily must come in the form of taking market share from another supplier, and the U.S. mobile market illustrates the trend. In other words, the U.S. market is becoming nearly a zero sum game.

By 2014, use of mobile phones had reached 110 percent in the U.S. market. And though half of the leading four carriers gained net accounts, while the other half lost net accounts, the big change might be that the majors are gaining subs at the expense of smaller providers.

source: Strategy Analytics

In the fourth quarter of 2015, AT&T had a net loss of six percent, Verizon had a net loss of three percent, Sprint had a net gain of three percent and T-Mobile US had a net gain of about 24 percent.

Other carriers had a net loss of 15 percent.

The analysis by Consumer Intelligence Research Partners shows that among customers that activated a phone in the quarter (approximately 12 percent of the U.S. market), T-Mobile US grew its customer base 42 percent (net 24 percent) at the expense of other carriers, as did Sprint, which gained a net three percent.

source: Consumer Intelligence Research Partners

20% of U.S. Households Rely Exclusively on Mobile for Internet Access

As "wireless substitution" gutted the fixed network voice business, there now are growing signs that mobile has become an effective substitute for fixed network Internet access.

“Mobile Internet service appears to be competing more directly with wired Internet connections,” says Giulia McHenry, National Telecommunications and Information Administration chief economist.

Between 2013 and 2015, “the proportion of online households that relied exclusively on mobile service at home doubled between 2013 and 2015, from 10 percent to 20 percent,” she says.

About 75 percent of U.S  households using the Internet at home in 2015 still used wired technologies for high-speed Internet service, including cable TV high speed access, digital subscriber line and optical fiber connections, she notes.

But that represents a sizable drop in fixed network  home Internet access use, from 82 percent of online households in July 2013 to 75 percent two years later.

                    Percent of Households Using the Internet at Home, 2013-2015

As is the case in many other regions globally, low-income households are significantly more likely to depend on a mobile data plan than those with higher incomes.

For example,  29 percent of online households with family incomes below $25,000 only used mobile Internet service at home, compared with 15 percent of those households with incomes of $100,000 or more.

                 Exclusive Use of Mobile Internet Service

Also, NTIA’s latest data shows that some of the demographic groups that have historically lagged behind in using the Internet—senior citizens, minorities, and Americans with lower levels of educational attainment—are erasing the gaps.

Internet use increased significantly among children and older Americans between 2013 and 205, for example.

Children between the ages of three and 14 became substantially more likely to go online, as Internet use among this group increased from 56 percent in 2013 to 66 percent in 2015.

While Internet use among those Americans with at least some post-secondary education remained steady between 2013 and 2015, it increased significantly among those with education up to a high school diploma.

Although those with lower levels of educational attainment are gradually increasing their online presence, the gap in Internet use based on education remains quite large, with 88 percent of college graduates going online in 2015, compared with 58 percent of those with no high school diploma.  

Internet use among those aged 65 or older increased from 51 percent to 56 percent during the same period.

Usage remained largely unchanged among those who were previously most likely to go online, with 83 percent of Americans between the ages of 25 and 44 reporting Internet use in both 2013 and 2015.

Intel Annouinces Shift Away from PC, to Cloud and IoT

Intel Corporation has announced a restructuring initiative to “accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices,” Intel says.

“The data center and Internet of Things (IoT) businesses are Intel’s primary growth engines,” Intel now says.

“These growth businesses delivered $2.2 billion in revenue growth last year, and made up 40 percent of revenue and the majority of operating profit, which largely offset the decline in the PC market segment,” Intel also says.

source: IDC

Why Comcast is Installing Direct Fiber for Gigabirt Pro Services

There is a good reason Comcast is making symmetrical 2 Gbps fiber-based Internet access available across much of its footprint, described as reaching 18 million homes, or about 85 percent of its current network footprint.

For consumer customers, the Gigabit Pro service allows higher bandwidth than the 1 Gbps standard Comcast now is preparing to offer all consumers.

But 2 Gbps symmetrical, provided over a direct fiber to home connection, will be more important for business customers.  

Chris McReynolds, Level 3 VP, says Level 3 does not consider Ethernet-over-HFC service to be competitive with the business Ethernet services that Level 3 sells to business customers.

Jitter is the problem. Jitter levels associated with Ethernet-over-HFC are too high, compared to telco fiber or copper access, he says.

But maximum transmission unit (MTU) performance of cable hybrid fiber coax access networks also is an issue.  

MTU is a key performance standard for Ethernet because it has a significant effect on the rate and efficiency of throughput.

The higher the MTU, the higher the rate of throughput. Ethernet-over-HFC delivers an MTU of 1518 bytes (1522 bytes with a single virtual LAN tag), he says. “This is significantly below the MTU that can be supported by Ethernet-over-fiber and Ethernet-over-legacy loop networks, which are increasingly supporting MTUs far above 2,000 bytes,” says McReynolds.

Also, he says, cable Ethernet access often is restricted to 10 Mbps.

Of course, all those issues will undoubtedly be resolved when Comcast adds Gigabit Pro access over dedicated fiber lines.

Has Hosted PBX Business Finally Hit an Inflection Point?

The global voice over IP (VoIP) service market totaled $73 billion in 2015, a five percent increase over 2014 levels.

That figure includes the value of consumer services--about 62 percent of total revenues at $45.3 billion--and business buying of managed phone services, hosted equivalents, SIP trunking services and unified communications services and software, according to IHS Technology estimates.

“The competitive landscape has become highly fragmented for VoIP business services, with an increasing number of PBX and unified communications (UC) vendors, enterprise agents and resellers expanding into the market along with traditional service providers,” said Diane Myers, senior research director, VoIP, UC and IMS, IHS Technology.

Of the roughly $27.7 billion in business IP telephony spending, about $9 billion is generated by purchases of SIP trunking services (access).

Managed IP PBX services amounted to about $10 billion globally, while another $9 billion worth of hosted PBX services are sold as well.

Roughly 10 to 20 percent of new IP PBX lines sold are part of a managed service or outsourced contract depending on region, Myers said. Annual sales of business phone systems might have amounted to $6.4 billion in 2015, extrapolating from second quarter 2015 sales estimates.

As a result, managed IP PBX services, including private cloud services, are expected to comprise the largest segment of business VoIP services over the next several years.

There were 230 million residential VoIP subscribers worldwide in 2015, an increase of 3 percent from 2014

In 2015, unified communications-as-a-service (UCaaS) revenue grew six percent over the prior year and seats sold grew 25 percent.

XO Integrates Skype, Salesforce into Hosted PBX Offer

XO Communications (XO) has integrated Skype for Business (formerly called Lync) as well as Salesforce into its hosted PBX (HPBX) solution, allowing phone calls to be placed directly from CRM systems and automatically accessing customer records upon call connection.

The Skype for Business integration allows users to leverage seamlessly all Skype collaboration tools while connecting phone calls through the HPBX platform.

The XO service now also supports multipoint video conferencing and allows customers to invite users not on the HPBX platform to participate in conferencing and collaboration sessions.

Those moves illustrate the difficulties of tracking the “business phone system” market separately from the unified communications and conferencing markets. In fact, most analysts include all those segments within a single unified communications market.

source: IDC

source: Synergy Research

Data Demand Will Exceed Supply by 2020, Nokia Bell Labs Argues

Data demand will exceed supply by about 19 percent by 2020, Bell Labs Consulting, a division of Nokia Bell Labs, now argues, unless access providers boost investment.

That would not be a surprising claim, coming from a major supplier of solutions for such problems.

Bell Labs Consulting found that audio and video streaming will be the highest contributors to the increased traffic demand in coming years, accounting for a 79 percent total increase by 2020.

Bell Labs Consulting models show that by 2020, 67 percent of the worldwide consumption demand can be met by Wi-Fi.

https://readymag.com/488083

Another 14 percent can be addressed by the current adoption rate of 3G, LTE, small cells and the emergence of new technologies such as 5G.

So network operators will need to accelerate their path to 5G and cloud technologies, such as network function virtualization (NFV) and software-defined networking (SDN), and adopt new business models to address the demand gap, Bell Labs argues.

The emerging unknown in the network equation is the Internet of Things, Nokia says.

The number of IoT connected devices is expected to grow from 1.6 billion in 2014 to between 20 and 46 billion by 2020.

Of this total, cellular IoT devices will be between 1.6 billion and 4.6 billion in 2020. Despite this massive adoption, the overall cellular traffic generated by IoT devices will only account for two percent of the total mobile traffic by 2020 until video-enabled sensors and cameras begin to predominate.

Signaling traffic is where there likely will be an impact, however.

A typical IoT device may need 2,500 transactions or connections to consume 1 MB of data, while the same amount of data can be consumed in a single mobile video connection.

As a result, daily network connections due to cellular IoT devices will grow by 16 to 135 times by 2020 and will be three times the connections initiated by human generated traffic.

By 2020, global consumption demand for digital content and services on mobile and portable devices will see a global average increase of 30 to 45 times from 2014 levels -- with some markets experiencing as much as a 98-fold jump.

Verizon Readies New FiOS IP Video Service

In addition to its go90 mobile video streaming service, Verizon appears close to launching a new managed video service to run over its FiOS network, but with features more like an over the top streaming service, though it apparently will require use of a Verizon decoder, as does the current FiOS TV service, Variety reports.  

Both go90 and the new TV service show Verizon is serious about its belief that linear TV is not going to be the dominant delivery method in the future.

Observers believe the new service will incorporate additional services such as AOL and Netflix, using the “menu” approach common to smart TVs and Internet TV dongles.

In the past, many have questioned how well firms such as Verizon (and other telcos) would perform in the entertainment video markets. It is not a core competency, many would argue.

That is true, but arguably is true for virtually all participants in IP content, app and service ecosystems who move into adjacencies.

One might argue that devices and video streaming are not core competencies for Amazon. One might argue Internet access, devices, self driving cars, artificial intelligence and most apps other than search are not core competencies for Google.

One might argue Facebook’s core competence is not messaging, or that cable TV companies would never be “good” at selling communications services to enterprises and mid-market businesses.

None of that has mattered.

These days, participants moving into adjacencies is simply part of business strategy in competitive markets.

U.S. Fixed Wireless Market About to be Rearranged

With Google, Facebook and AT&T exploring, testing or intending to deploy fixed wireless  for Internet access networks, the fixed wireless industry is on the brink of major redefinition. AT&T alone has said it would use fixed wireless to serve 13 million locations.

Others such as Starry, also are hoping fixed wireless emerges as a major platform for providing Internet access.

In 2012, there were perhaps 2,000 to 2,500 fixed wireless Internet service providers supplying Internet access to two million to three million subscribers in the United States, according to the Wireless Internet Service Providers Association.

So just about any serious deployment of Google, Facebook or AT&T fixed wireless would immediately reshape the U.S. fixed wireless business.

At 13 million connections, AT&T alone would represent 87 percent of all U.S. fixed wireless installed base, even if Google Fiber and Facebook added zero new accounts in the U.S. market.

Assuming Google is able to add only incrementally to its present installed base of accounts, while Facebook does not even enter the U.S. market, AT&T now looms as the major factor in the U.S. fixed wireless market.

Cloud Infrastructure Growing Faster than Software as a Service

The worldwide public cloud services market is projected to grow 16.5 percent in 2016 to total $204 billion, up from $175 billion in 2015, according to Gartner, Inc.

The highest growth will come from cloud system infrastructure services (infrastructure as a service [IaaS]), which is projected to grow 38.4 percent in 2016.

Gartner now also includes cloud advertising in its cloud services forecast.

Cloud advertising includes cloud-based services that support the selection, transaction and delivery of advertising and ad-related data.

Cloud application services (SaaS) are forecast to grow 20.3 percent in 2016, to $37.7 billion.

Cloud advertising services involve an auction mechanism that matches bidders with advertising impressions as they become available.

In fact, cloud advertising will be the largest segment of the global cloud services market, growing 13.6 percent in 2016 to reach $90.3 billion in 2016.

"The market for public cloud services is continuing to demonstrate high rates of growth across all markets and Gartner expects this to continue through 2017," said Sid Nag, research director at Gartner. "This strong growth continues reflect a shift away from legacy IT services to cloud-based services, due to increased trend of organizations pursuing a digital business strategy."

Worldwide Public Cloud Services Forecast (Billions of U.S. Dollars)	2015	2015 Growth (%)	2016	2016 Growth (%)
Cloud business process services (BPaaS)	39.2	2.7	42.6	8.7
Cloud application services (SaaS)	31.4	15.5	37.7	20.3
Cloud application infrastructure services (PaaS)	3.8	16.1	4.6	21.1
Cloud system infrastructure services (IaaS)	16.2	31.9	22.4	38.4
Cloud management and security services	5.0	20.7	6.2	24.7
Cloud advertising	79.4	15.4	90.3	13.6
Total market	175.0	13.7	203.9	16.5

source: Gattner

source: Forrester Research

Bankruptcy for Former Incumbent Telcos?

Few veterans of the monopoly telecom business can imagine outright failure of the former incumbents. But few should hold such views. Outright failure seems not only possible, but increasingly likely, over the next couple of decades.

Pre-1980, the notion that a national telecom company could go “out of business” was fanciful in the extreme. In the Internet Protocol era, any single provider probably can “go out of business” without imperiling the national interest in maintaining a viable communications fabric.

That is, to say the least, a huge change in possibility that all too often seems imperfectly reflected in regulatory approach. We keep regulating as though some markets need to be “stimulated,” when in fact markets already are evolving in a fundamentally more competitive direction.

We keep acting as though “former incumbents” have decisive market power, when at every turn their power is eroding.

Someday we will have to confront actual market failure on the part of former incumbents. Because we now live in an IP world, specifically designed to overcome failures and outages, the communications fabric will not suffer catastrophic damage.

But the mindset has to change.

Some big telecom companies can--and most likely will--eventually go out of business. There are multiple reasons. Some legacy firms simply have unsustainable cost structures, while operating in markets where lower-cost, higher-value competitors are emerging.

In the U.S. market, it is not unreasonable to argue that Comcast will eventually become the biggest and most-important provider of many fixed network “telecom” services (Internet access, voice, video) and a leading provider of mobile services.

It is not unreasonable to expect that although Verizon, AT&T and Comcast lead, other former leaders will be absorbed, merged, or otherwise removed from the market as branded entities.

It is not unreasonable to assume that leading app providers such as Google and Facebook, or major device suppliers such as Apple, might not become significant providers of mobile access services.

All of those trends will undermine the legacy telco business model, but also provide the replacement providers, so that the national communications infrastructure remains intact. IP really helps, in that regard.

“Dumb pipe” (access and transport functions) is “supposed” to support all the other layers of the software function. Over time, even as communications providers sell a mix of managed and “dumb pipe” services, dumb pipe is going to become more important.

But dumb pipe also tends to imply much lower profit margins. That is not to say incumbents cannot hope to create new managed services. They can do so, and will try very hard. They might ultimately succeed at finding big new revenue sources to replace the lost managed voice and messaging revenue sources.

It just is not easy. Eventually, some big household names are going to disappear, and new providers are going to emerge to replace them. Our switch from monopoly to competition, and from TDM to IP, are going to wring inefficiency out of the business, imperiling survival for high cost providers.