Customer Satisfaction Might be Important, It Just Is Not Predictive of Behavior

Most firms consider “customer satisfaction” an important business outcome, the belief being that satisfied customers are repeat buyers; “loyal” customers less likely to desert a firm for a rival. In other words, happy customers are supposed to be loyal customers.

source: B2B International

But even repeat buyers are not necessarily “loyal” in the sense that they are relatively immune from churn.

However logical that thought might be, the evidence suggests that even satisfied customers are not loyal customers.

source: Fiserv

For example, Juniper Research has found that 98 percent of surveyed U.K. mobile banking users are “very happy” or “quite happy” with their service.

But the survey also found that 31 percent of mobile banking users would consider changing banks if they had a bad experience with their service.

In the U.S. market, where respondents have similar levels of satisfaction with mobile banking, about 16 percent of those surveyed would consider leaving their current bank if the experience was unsettling.

In other words, customer churn, in the consumer services realm, is a problem even when customers say they are highly-satisfied with a service.

That is not to argue that customer satisfaction scores are unimportant: they might be generally significant. Virtually non-existent is the company executive that believes customer perceived satisfaction is unimportant.

The issue is simply that consumers who say they are satisfied are not necessarily loyal, in the sense that they are relatively immune to offers from rival firms.

"Featuring" Apps Drives Downloads, Especially for Games, Especially in South Korea

The impact of featuring on downloads was substantially greater for games than for apps outside of games, though being featured help both types of apps, according to an analysis by App Annie.

Featuring had a clear positive impact on app downloads (both game and non-game), with a median effect around four times larger for games.

Featured game downloads improved about 140 percent, for featured apps on iPhones (Apple App Store) between 2013 and 2016, App Annie says. Apps other than games gained perhaps 40 percent during the same time period.

source: App Annie  

The impact of featuring on iPhone downloads appears to be decreasing across the board, though at a much quicker pace for apps outside of games.

The higher rate of decline for apps is likely due to differences in the typical lifecycles of games and apps. Users tend to cycle through apps at a lower rate than games, which translates over time to less instances of users actively browsing for apps, App Annie argues.

Featuring boosted downloads as much as 480 percent in South Korea and as low as 90 percent in the United States.

source: App Annie

The impact of featuring has been declining overall, but at a particularly high rate for apps outside of games, going from a roughly 80 percent expected download boost in the second half of 2013 to less than 25 percent in the second half of 2015.

Does Zero Rating Harm Consumers?

Virtually nobody seems to argue that zero rating of mobile Internet access--for one, a few or a bundle of apps--actually harms consumer welfare in the near term. Instead, opponents cite other concerns related generally to preserving competition in the ecosystem.

Whatever the other concerns might be, it seems clear that zero rating actually provides benefits for low-income Internet access customers, or people who do not routinely use mobile Internet apps and services.

“Zero-rating is also poised to play a key role in helping to close the digital divide by addressing cost concerns and strengthening the value proposition offered to skeptical non-users, two key considerations for the millions of Americans who remain offline,” argues the Multicultural Media, Telecom and Internet Council (MMTC).

source:Disruptive Analysis

One survey found 84 percent of adults would be “extremely/somewhat likely to try a new online service if it is a part of a free data offering,” while 85 percent reported they were “extremely/somewhat likely to use more data if it didn’t count against their monthly data usage.”

That should come as absolutely no surprise.

T-Mobile US, which offers such features as part of its “Binge On” program, found customers watched twice as much content from free streaming sites on plans with limited data. Again, that should not come as a surprise.

But some argue zero rating will have only negligible impact on carrier revenues, one way or the other.

In Asia, Income Inequality Gap Widens, Poverty Declines, Middle Class Grows

source: IMF

Income inequality is rising in China and India, the International Monetary Fund says. 

On the other hand, poverty has dropped since 1990, virtually across the board. 

Also the size of the Asian middle class has grown as well, since 1990, especially in urban areas.

Some might note the tension here, as well as the pattern observed in other economies over time. 

Inequality increases as poverty declines and the middle class grows.

Economists will debate whether, in fact, growth in inequality is an almost necessary evil for an economy that rapidly reduces poverty levels and grows the middle class.

That typically happens when an economy enters a growth phase based on new technology, some would note.

That is a positive underpinning for suppliers of Internet access, but rural gaps illustrate why it is so important to work hard on increasing Internet access in rural areas, where the middle class has not grown nearly as fast as in the urban areas.

As you might guess, there is a correlation between educational attainment levels and income.

The percentage of people with less than four years of schooling is much higher for the poorest quintile than for the richest quintile. This is particularly true in Bhutan, Cambodia, India, and Nepal, among other countries.

source: IMF

Likewise, access to financial services varies with income.  The share of adults with a bank account is much higher in the top 60 percent of the income distribution than in the bottom 40 percent. This is true in a number of Asian economies, including India, Indonesia, Vietnam, and the Philippines.

Much the same pattern exists in access to health care.

Don't Let Any "Good" Be the Enemy of the "Greatest Good"

source: Rype

The Pareto distribution can be seen in one’s personal or business life, in business strategy or business performance. The fundamental principle is that effort and outcomes are non-linear. A small number of inputs or instances drive most of the outputs or results.

The practical implication for communications or app providers is that a relatively small number of decisions and priorities actually matter, where it comes to making a transition from legacy to next generation business models.

The corollary is that there are a many “good” or “useful” or “helpful” things any service or app provider can do, but which should not be done, to concentrate on the few areas where breakthroughs are possible.

In other words, the temptation to “do” any number of helpful things actually can be detrimental to strategic success, which requires intense concentration on a relative handful of decisions, investments and effort.

There are always lots of useful or helpful things a company might do, to support its business. Many of those things actually will deliver a measurable result. But most will fail to help a company make a strategic breakthrough.

So saying “no” to most of those helpful things can be a prerequisite for focusing effort on a few matters that can decisively change a company’s future.

The areas in which Pareto applies are rather large. The Pareto theorem is the underlying principle of the “long tail” approach to freemium pricing, for example, where basic versions of a product are free, and users then pay incrementally more for additional features.

The Pareto rule can guide resource allocation, the principle being that there is some allocation or resources that makes a person or an organization better off, while not harming existing persons or the organization itself.

The principle is popularly understand as the 80/20 rule, which stipulates that about 20 percent of effort produces 80 percent of results.

The Gini coefficient essentially follows Pareto distribution patterns as well, and describes national income inequality patterns as well.

In the United States, the number of homes without a broadband connection follows a Pareto distribution.

It illustrates the law of diminishing returns. The cost of building access loops generally follow Pareto rules, for example. The inverse of the Pareto distribution is that a small number of instances produce most of the “per-line” access cost.

In other words, a small number of remote locations represent a disproportionate share of network cost, based on cost per mile.

source: National Broadband Plan

source: National Broadband Plan

17% of Accounts Drive 60% of India Mobile Operator Revenues

Customers spending more than Rs 300 per month will account for 60 percent of India mobile industry revenues, said CLSA.

In other words, 165 million customers drive 60 percent of total industry revenues. 

If there are now about a billion total Indian mobile accounts active, then 17 percent of accounts drive 60 percent of revenue, a classic demonstration of the Pareto distribution, often called the “80/20 rule,” where a disproportionate amount of results is driven by a relatively small number of instances.

source: Trak

source: CLSA

India and U.S. Decide More Communications Regulation is Needed

Whenever new substitute products arise in the Internet and communications ecosystem, and especially when the new products threaten to cannibalize the legacy products, regulatory strife is inevitable. And the issue always boils down to one question: more or less?

Should existing regulatory burdens on legacy services be lightened, or should challengers be brough under the existing frametworks?

What is not inevitable are the solutions, which broadly fall into several buckets. In the Internet era, substitute products tend to be over the top apps or services, while legacy products tend to be carrier managed services.

So one solution that always seems “obvious” to regulators and policymakers is to impose legacy regulations on the new products and services.

The equally-plausible, but comparatively rarely chosen path is to remove regulations from carrier managed services, and let consumers decide the outcome.

In India and the United States, regulators seem to prefer the former approach rather than the latter: extending legacy regulations to new platforms rather than removing restraints from legacy platforms.

In India, one example is a preference for regulating OTT messaging under legacy telecom regulations, while likely rejecting a Bharti Airtel plan to offer streaming video as a managed service.

In the United States, one example is a recent Federal Communications Commission proposal to bring cable TV operators under common carrier rules for wholesale special access for the first time in history.

There are effects--on investment, revenues, market shares, innovation--no matter which course is taken. But if one policy goal is innovation, extending regulation arguably reduces the amount of innovation, because incentives to do so are reduced.

source: Celcom

Usage-Based Billing Removes One ISP Concern About Growing OTT Video Consumption

Advocates and suppliers quite often differ about the need for usage-based billing of Internet access services. Some argue all usage should be unlimited. Suppliers often argue that is an unsustainable policy.

MoffettNathanson analyst Craig Moffett argues that usage-based billing is important for Internet service providers in one sense because it removes one reason for ISPs to “fight” over the top video apps.

The reason is drop dead simple: ISPs make more money, almost on a linear basis, as more OTT video is consumed by their customers. That aligns usage, network investment and revenues.

SpaceX Successfully Lands Rocket Booster at Sea

SpaceX successfully landed a Falcon 9 rocket booster at sea, the second such successful landing, and a major step on the way to commercializing reusable booster rocket technology. 

That, in turn, will help lower launch costs, an important development for lowering the cost of satellite communications and earth-orbiting manned space stations. 

Lower costs are important for suppliers of satellite high-bandwidth Internet access services, since coming market demand will require cost-per-bit performance orders of magnitude beyond what has been required in the past.

 

China Authorizes 4th Mobile Operator

China has authorized a fourth mobile operator, allowing state-owned China Broadcasting Network--which was created in 2014 to consolidate cable TV and broadcast operations in China--to enter the mobile services market.

Two angles are noteworthy. First, CBN marks the entry of the cable TV industry in China into the mobility business. Second, the move illustrates a continuing divide among communications regulatory authorities about the “best” market structure for mobile communications.

Given a choice, most seem to believe “four” providers a better structure (at least in terms of competition) than “three.” French regulators are foremost among proponents of a “three supplier” structure, largely to bolster the climate for more-robust investment.

The tension illustrates the problem regulators face. On one hand, they would likely prefer both vigorous competition and robust investment. On the other hand, excessive amounts of competition will choke off appetite to invest.

source: Light Reading

source: China Internet Watch

On a long term basis, some argue any structure with two suppliers, though not generally considered to be as good in terms of innovation, is the most stable market structure, the reason being that it is difficult for three providers each to maintain a minimum market share of about 30 percent.

That is a level many believe correlates with a minimum cash flow capability required to sustain long-term viability. By that test, China’s mobile operator market already is unstable, as only China Mobile has at least 30 percent market share.

Globally, profitability of operations for individual players correlates strongly with in-market scale measured by achieved revenue market share, McKinsey consultants have noted.

Sustaining an EBITDA margin of 30 percent can be considered a minimum proxy value for achieving capital returns above the weighted cost of capital, McKinsey says.

Entrants unable to capture a significant revenue share of their market--more than 25 percent-- will be unlikely to achieve EBITDA margins above 30 percent.

That implies a sustainable long-term structure featuring just two providers.

source: McKinsey

There is an important caveat, however. If, somehow, the average cost of creating a mobile business should change in an important way, reducing especially infrastructure capital investment and operating costs, then it is possible sustainable market structures could change.

It might be possible, long term, for more than two major suppliers to be profitable. But that might hinge on major changes in capital requirements and operating cost. That is why all developments in network virtualization, access to shared and unlicensed spectrum, and networks based on use of unlicensed and shared spectrum, are important.

Such developments can change the industry cost profile.

Telecom Outsourcing Will Grow 3% Annually Through 2020

It never is easy for any executive to clearly identify a company’s “core competence.” Asked to do so, most people cite a list of “things we think we do well.”

That is not core competence. To the extent a firm has such competence, and it is possible many firms do not, it is the singular capability that competitors cannot replicate. It is not “things we think we do well,” if other competitors also can make a credible claim in those areas.

As it turns out, many mobile operators find that operating access networks really is not a core competence, or at least adds little value.

Still, outsourcing is rather a subtle thing. About 52 percent of carrier outsourcing revenue in 2015 was in the areas of network maintenance, build, planning and design, not core operations.

Managed service revenues for outsourced operations, network maintenance and network planning and design s expected to grow at a three percent CAGR from 2015 to 2020, driven by a mix of full operation outsourcing and radio access network (RAN) sharing, according to Infonetics estimates.

In 2015, global outsourcing services revenue increased three percent over 2014 to reach $69 billion.

In 2014 worldwide telecom outsourcing and managed services revenue decreased 0.4 percent from 2013, falling to $66.6 billion, according to IHS Infonetics Research.

Network maintenance, build, planning and design accounted for over half of service provider outsourcing revenue in 2014.

Managed service revenue—the sum of operations, network maintenance and network planning and design—totaled $36 billion in 2014.

Telecom outsourcing services will reach $76 billion by 2020, growing at a compound annual growth rate of two percent and driven by mobile network outsourcing deals as more and more mobile operators try to keep their opex under control by removing non-core tasks.

source: Infonetics

Europe, Middle East, Africa remained the world’s largest outsourcing and managed services market in 2015 and is expected to do so through at least 2020.

Survey Shows Heavy Industry Leading IoT Deployments

In 2016, 43 percent of organizations will either already be using the Internet of Things or be implementing it within their environments, according to Gartner's survey of 465 IT and business professionals.

Some 29 percent of respondents already have deployed IoT technologies. Some 14 percent expect to do so in 2016.

"Heavy" industries, including utilities, energy suppliers and manufacturers are lead users at present, with 56 percent of businesses in those categories indicating that they will have implemented IoT by year's end.

"Up until now, the leading adopters of IoT have been more the industrial, heavy-industry-type businesses" involved in mining, manufacturing and the like, Gartner research Chet Geschickter, said.

Manufacturing and utilities are currently the top industry verticals currently driving the Internet of Things (IoT), says Jim Tully, Gartner VP.

In 2015, manufacturers had an estimated 307 million installed devices while utility companies had deployed 299 million. Those two verticals are responsible for over 600 million of the IoT devices currently in use.

"This makes intuitive sense; control systems using sensors have always been an integral part of manufacturing and automation processes, and we certainly see a lot of smart meter deployments by utilities leading to energy efficiency improvements and operations like automatic billing, energy management and monitoring," said Tully.

Geschickter noted that demand from consumer- and service-oriented companies in "light" industries is picking up. By the end of the current year, 36 percent of these businesses will have implemented IoT technologies.

CenturyLink "Between a Rock and a Hard Place"

CenturyLink, the third-biggest “telco” fixed network services provider is "caught between a rock and a hard place,” according to Jennifer Fritzsche, Wells Fargo senior analyst for telecommunications services.

Basically, CenturyLink is not competitive with cable TV offers, so it either must step up investment or admit defeat and hope to make up revenue losses elsewhere.

Operating revenues for first quarter 2016 declined to $4.40 billion, compared to $4.45 billion in first quarter of 2015.

In its business customer segment, revenues of $1.58 billion declined 3.4 percent year over year. Total consumer segment revenues of $1.49 billion declined 0.5 percent, year over year.

source: CenturyLink

source: CenturyLink

FCC Says Set-Top Monopoly is a Big Issue; Consumers Might Not Care

As the U.S. Federal Communications Commission moves towards requiring third party supply of decoders used to receive linear TV programming, a survey by Leichtman Research suggests consumers do not care too much about renting decoders.

“Pay-TV subscribers tend to express little enmity toward set-top boxes,” Leichtman Research suggests.

Some 20 percent of respondents to a Leichtman Research poll agree that  “set-top boxes from TV companies are a waste of money.” On the other hand, 44 percent of respondents disagree with the statement.

About 42 percent of respondents agree that set-top boxes from TV companies provide features that add value to the TV service. Some 16 percent disagree that the boxes add value.

The study also found that 77 percent  of TV sets in pay-TV households have a service provider set-top box, with a mean of 2.2 boxes per pay-TV household.  

Virgin Media to Add 1 Million FTTH Connections; BT to Add 2 Million

Virgin Media, owned by Liberty Global has said it will use fiber to home to connect about a million U.K. homes by 2019. That is historically unusual, as cable operators have insisted loudly that the hybrid fiber coax network is extensible enough to underpin the business.

The Virgin Media decision is a rather major step towards use of a physical media platform suggesting Virgin sees an end to HFC as a market-leading platform.

To be sure, there is a key difference between the protocols telcos normally run when deploying FTTH and what Virgin Media will do.  Virgin Media will use a technique known as Radio Frequency over Glass (RFoG).

The advantage is quite simple. Doing so allows Virgin Media to retain use of the same modulation techniques used to support HFC customers. That means a single set of headend resources can support either access method.

RFOG also means the same mix of services can be provided to all customers, no matter which network they are served by. That is important for marketing consistency, as it means Virgin Media will not risk confusing customers about what services they can get, depending on which network they use.

The big change: Fiber to the home is described as the “best and most modern” access technology. That is an extremely rare statement for any cable TV executive to make.

For its part, BT now says it will add two million fiber to home connections by 2020.

Of course, it might also be possible to infer the migration path. At some point, the primary advantage of RFOG (backwards compatibility) becomes a disadvantage (the full bandwidth of a passive optical network cannot be tapped).

But cable operators are big on “hybrid,” gradually evolving access networks. Still, at some point, HFC will run out of gas. In a strategic sense, that always has been true. But it never has been a tactical necessity.

It still is not, in this case. Comcast seems to be taking a different tack in its U.S. operation, planning to make use of FTTH to support symmetrical 2-Gbps access networks across perhaps 85 percent of its current footprint. Those networks will not use RFOG.