Facebook Will be ain Internet Access Platfom Enabler or Supplier

Does Facebook’s mission of connecting the world extend beyond social applications and messaging? It is hard to come to any conclusion but that Facebook does see physical connections as part of its eventual portfolio.

First off, Facebook is starting a new business unit to build “new hardware products to advance our mission of connecting the world,” says Mark Zuckerberg, Facebook CEO.

Also, Facebook's 10-year roadmap clearly indicates that a variety of access platforms are planned, ranging from unmanned aerial vehicles to satellites to lasers to “terrestrial solutions” and “telco infrastructure.”

That does not necessarily mean Facebook everywhere and always--or even primarily--will operate as an Internet access provider. There may well be cases where that happens, but a range of roles--wholesale, backhaul, access platforms or networking gear--are conceivable.

Some will not be happy about that roadmap, but Facebook’s initiatives in the data center networking space already show some of the likely approaches the firm will take.

By commercializing open source servers and creating new data center architectures, Facebook is showing a way for cloud operations to be created and run at lower cost.

But that also means Facebook has become a “competitor,” if indirectly, to suppliers of server hardware, software and platforms. It might be more accurate to say Facebook allows data center operators to build their own servers, instead of buying them from commercial suppliers.

In other cases, Facebook is likely to become a significant supplier of Internet backhaul, wholesale services or perhaps even retail services in some cases, if partners do not come to the table with business models that rapidly and affordably supply Internet access in hard-to-reach or hard-to-serve areas, at retail prices all consumers--everywhere--can afford.

In Africa, Facebook supplies its own satellite access, because other providers do not do so at prices Facebook finds compelling. The unmanned aerial vehicle and fixed wireless networks Facebook also is developing provider other examples of the emphasis on lower-cost Internet access.

It is not clear that Facebook prefers to operate as a retail Internet access provider. It might well prefer to work with retail ISPs as a platform or backhaul provider. But the movement into connectivity” goes well beyond present roles as a major supplier of social networking and messaging platforms.

U.S. Streaming TV Viewers Spend 42% of Their Time Using Streaming Services

U.S. consumers who use streaming services now spend about 42 percent of their television time watching such services, rather than linear TV, a study sponsored by Adobe and conducted by the Diffusion Group has found.

Of that time, 65 percent is spent watching subscription video-on-demand content, 30 percent  is spent watching free streaming services, while five percent is spent watching transactional streaming services (video on demand).

Some 82 percent of adult video streamers subscribe to some type of online subscription video service.

Netflix is used by 70 percent of adult video streamers, followed by Amazon Prime at 33 percent and Hulu Plus at 21 percent.

Some 88 percent of adult video streamers use free online video services. YouTube is by far the most popular free online video service, and is used by 83 percent of adult video streamers, followed by Hulu at 23 percent and Crackle at 19 percent.

"Telecommunications" Will be a Commodity LIke Sugar; Big Changes Necessary

It has been a tough couple of decades for much of what we used to know as the “telecommunications” industry, but it is likely to get much tougher. Several cases in point:

• With the death of monopoly regulation, profit margin is being wrung out of the business
• The Internet has become the biggest part of the “next generation network”
• Wi-Fi now is becoming the biggest part of the “access network”
• Value is migrating up the stack to “application layer”
• App layer will relatively easily move “down the stack” to vertically integrate experience

None of those trends are helpful to traditional “telecom” providers. That, in turn, is why some believe “telecom” industry incumbents should not be more-heavily regulated. The basic thesis: it does not make sense to place more burdens on a declining industry, and that is what legacy “telecommunications” happens to be.

“Wi-Fi has long since passed cellular as the dominant connection platform,” says Craig Moffett, partner at MoffettNathanson. “We’re going to move to a model where cellular is going to be what you roll onto when you have to.”

Says Moffett: “We’re going to think about Wi-Fi as the first network and cellular as the second network, rather than the other way around.”

If you think about Uber, it is a way of unleashing latent resources using a new business model. The analogy to Wi-Fi is fairly clear, as well. As Wi-Fi has become a major method of offloading mobile network traffic, so Wi-Fi is emerging as a new platform for supporting untethered communications that have a mobile component.

The other angle is that value always has resided in the applications people want to use, not the access method. Under monopoly regulation, people purchased the ability to make calls. Access was necessary to enable that value.

That remains the case. People want to use apps, and therefore need Internet access. In one sense, it is not as though value is migrating to the “application layer.” Value always resides in the application layer.

All the other layers enable the app layer. With the rise of IP networks, with access separated from apps, the sources of value simply become transparent, where they once were hidden.

In other words,  access is becoming commoditized in a new way because the apps and access are separate products for the first time.

We sometimes speak of “value shifting up to the application layer” in the new ecosystem. In truth, value always resided in the app layer.

It is simply that, under monopoly regulation, the access providers also had a monopoly on the valued app (voice).

“If you understand that Apple and Google want to control your experience of the cloud, you can understand why they would like to ‘uberize’ the entire wireless space so their brand dominates your cloud experience,” says Francis McInernery, partner at North River Ventures.

That is why “low cost” now matters so much in the access business. Though a reasonable strategy for a tier-one provider is to own some of the valued apps supplied over the access networks, access itself is becoming a commodity.

And that means the business model has to evolve towards “much lower costs.”

One knows that is true, experientially, when users understand they can switch between access platforms without endangering “experience.” That is the definition of a commodity: a product that has ample substitutes with fully-functional qualities (sugar, flour, gasoline, electricity), leading to easy substitution and hence, lower value, leading to lower prices.

To anticipate an objection, long haul transport is is one sense, not a full commodity. Capacity across the Atlantic cannot easily be a functional substitute for capacity across the Pacific, or between points within any single region.

Access networks still are geographically distinct, and thus "capacity" is not, strictly speaking, a commodity in the sense that buying trans-Atlantic capacity solves a trans-Pacific capacity problem.

But within any local area, the access function is much more susceptible to substitution. People can buy or use mobile, fixed network, cable TV, independent ISP or Wi-Fi access from multiple suppliers, with roughly equivalent experience.

Managed Voice over Wi-Fi Should Improve ARPU, Study Suggests

It stands to reason that a voice over Wi-Fi (offload) would boost profit margins for any mobile carrier voice service, at least marginally, as the carrier benefits from a lower cost per bit profile, as access is shifted to the fixed network.

A new analysis by ACG Research suggests that is the case.Looking at a business case for a developed country service provider with mature VoLTE penetration, ACG Research suggests managed Wi-Fi voice quality also helps, as it encourages users to make heavier use of voice over Wi-Fi mechanisms.

The results suggest that average revenue per user is maximized when the quality of VoWi-Fi is high (resulting in increased usage) and data offload is easily available (resulting in lower cost per bit).

In the first scenario, the service provider’s network features 10 percent use of untrusted VoWi-Fi and no use of trusted Wi-Fi.

This results in a low adoption of VoWi-Fi due to quality and user experience issues.

In the second scenario, the service provider’s network uses 30 percent trusted VoWi-Fi and seven percent untrusted VoWi-Fi, resulting in VoWi-Fi penetration that is higher than VoLTE.

This combination delivers $19.91 billion EBITDA (24 percent higher as compared to the first scenario) and a monthly APPU of $19.91 (35.5 percent higher as compared to the first scenario) with both ramping to Year five.

As VoWi-Fi grows the cost per voice minute drops, reaching a value of $0.0072. In the first scenario the service provider’s network is dominated by VoLTE penetration, resulting in the cost per voice minute being 19.5 percent higher than the second scenario.

EU Files Antitrust Charges Against Google

The European Union has opened an antitrust action against Google, formally charging Google with abusing the dominant position of its Android mobile operating system.

European Union antitrust regulators argue that by requiring mobile phone manufacturers to pre-install Google Search and the Google Chrome browser, the U.S. company was denying consumers a wider choice of mobile apps and stifling innovation.

The Commission also alleges that Google has breached EU antitrust rules by preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code.

Also at issue are Google’s alleged practices giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google search on their devices.

Google is already facing EU charges over the promotion of its shopping service in Internet searches at the expense of rival services.

To some, the action is reminiscent of similar charges against Microsoft. In 2003, the EU ordered Microsoft to offer both a version of Windows without Windows Media Player, as well as supplying the information necessary for competing networking software to interact fully with Windows desktops and servers.

In March 2004, the EU ordered Microsoft to pay €497 million ($794 million or £381 million), the largest fine ever handed out by the EU at the time.

Telefonica Looks for Other O2 Options in United Kingdom

source: Informa

It is starting to appear that regulators will not allow the proposed merger of Three and O2 in the United Kingdom, a prospect that now has Telefonica looking at other options  for its U.K. business.

Among the other options conceivable in the event of a merger denial are selling to another buyer or spinning O2 off as an independent company.

And some speculate that Liberty Global, owner of the Virgin Media cable TV assets in the United Kingdom, will be interested.

Any successful acquisition by Liberty Global would be a further move by major cable TV operators into the core mobile services business.

In the Netherlands, Liberty Global already is working with Vodafone to sell mobile services to its cable TV customer base. In the United States,

Comcast now says it will bid on 600 MHz mobile spectrum, while Comcast and other cable TV companies already have the right to resell Verizon Wireless services, with the eventual option to create a mobile virtual network operator business that uses wholesale Verizon assets to create a branded retail operation.

The switch in plans by Telefonica shows the big role regulators now are playing in global communication and Internet ecosystem markets.

In recent days, regulators have been active shaping communications markets, creating network neutrality rules that boost or limit business models, changing spectrum licensing rules in ways that permit more intensive use of existing licensed spectrum and freeing up more spectrum for use both licensed and license exempt.

But antitrust regulators also appear to be taking a more prominent role, essentially killing mergers that would have directly affected mobile market structures in the United States and European Union, while preparing to stop a big merger in the U.K. mobile market.

And antitrust investigations directly affecting software suppliers are underway in the European Community.

Actions by private actors matter, but so do ground rules set by regulators that directly affect market structures and potential costs and opportunities within various portions of the broader Internet ecosysetm.

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.