FCC to Release 11 GHZ of New Mobile and Wireless Spectrum; Another 18 GHz is Coming

In an unprecedented move, the U.S. Federal Communications Commission is making available an extraordinary amount of new spectrum--including seven gigaHertz (7 GHz)  worth of unlicensed spectrum, in the millimeter wave bands, and a total of 11 GHz, including 3.85 GHz of licensed spectrum, in a first wave.

As a practical matter (because the higher frequencies can carry much more data than lower frequencies), the new millimeter unlicensed spectrum arguably represents more access spectrum than presently allocated for all other mobile, Wi-Fi and fixed wireless purposes.

Nor is that all. The Commission also adopted a Further Notice of Proposed Rulemaking, which seeks comment on  rules adding another 18 GHz of spectrum encompassing eight additional high-frequency bands, as well as spectrum sharing for the 37 GHz to 37.6 GHz band.

That means a total of about 29 GHZ of new communications spectrum, available for mobile and untethered use, will eventually be coming to market.

The new rules create a new “Upper Microwave Flexible Use” service in the 28 GHz (27.5-28.35 GHz), 37 GHz (37-38.6 GHz), and 39 GHz (38.6-40 GHz) bands, and a new unlicensed band at 64 GHz to 71 GHz.

Altogether, that will make nearly 11 GHz of high-frequency spectrum for flexible, mobile and fixed use wireless broadband, including 3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum.

These rules will support unlicensed, licensed and shared access. That, and the fact that so much new spectrum is being made available, will have business model implications for quite a number of ecosystem participants. To the extent that spectrum scarcity is a source of business advantage, or a barrier to competitor entry, that will be less of an issue.

The availability of so much new unlicensed spectrum should make possible new business models for Internet service providers, who will not have to pay for spectrum.

The millimeter era is coming, and it will upend current business models and market structures.

Linear TV Really is a Legacy Service with Declining Fortunes, Study Suggests

A decade ago, it was an open question whether younger consumers who did not favor linear TV would adopt the habit as they got older and had families. The other question was whether consumers would eventually buy linear TV as their incomes increased.

It appears those hopes are not entirely well founded. Despite the presence of children and higher incomes, a significant percentage of younger consumers simply do not want to buy the linear TV product. So that makes linear subscription TV a legacy services with declining fortunes.

Cord cutters/have an average income of US$59,000, with 47 percent buying an subscription “on demand” service and 63 percent using over the top streaming services.

Some 37 percent of these households have children in the household.

Cord-nevers (consumers who never have purchased linear TV) have an average income of US$47,000, with 30 percent buying some form of on-demand subscription TV, while 35 percent use OTT video sources.

About 26 percent of those “cord-never” homes have children in them.

Some 17 percent of U.S. TV homes now rely on over-the-air reception, up from 15 percent in 2015, while six percent exclusively use internet TV services such as Netflix, Amazon Prime, Hulu or YouTube and have no broadcast or linear TV subscription service at all.

The “streaming only” households increased from four percent of TV homes in 2015.

For TV homes with a resident between 18 and 34 years old, 22 percent are using over-the-air reception only, while 13 percent are only watching internet TV.

Some 38 percent of households with an 18 to 34 year-old resident rely on some kind of alternative TV reception or video source, where 25 pe rcent of all TV homes do so.

Households with at least one resident over 50 are more likely to take cable or satellite services, with 82 percent buying linear TV subscriptions.

Low-income households, meaning those with household income of less than US$30,000 (€27,000), are more likely to rely on over-the-air reception, with 26 percent of these homes taking broadcast-only TV.

High-income households, meaning those earning over US$50,000 are more likely to take satellite TV than the average, with 27 percent of these homes taking a satellite service against a US average of 21 percent.

Overall, cord-cutters have an average income of US$59,000.

“Cord-nevers” (consumers who never have bought a subscription linear TV service)  have an average income of US$47,000.

source: GfK

Mobile Payments Still Have Not Crossed the Chasm

Even if rates of consumer embrace of many new gadgets is stunningly fast, adoption of any important new technology often takes far longer than many would forecast. That is likely to true for Internet of Things and mobile payments as well.

Generally, adoption “crosses the chasm” and becomes a mass market reality sometime after about 10 percent of people start using any new innovation. But how long it takes to reach that take-off stage is the issue. It can take decades. Some might point out that Internet of Things already has been growing for 16 years.

Bharti Airtel Uses an Old Tactic to Smooth Out New Network Demand

Here us one more example of a business practice some might see as a network neutrality infraction that actually does involve network management, but does so by offering incentives for off-peak use of a mobile network.

Consider a pricing plan Bharti Airtel has instituted for the reason of managing loads on its network.

As mobile and other service providers learned long ago with voice services, it makes sense to encourage customers to use the network when it is not heavily loaded.

That is why (and most readers are too young to remember it) long distance calling rates used to be set lower, or much lower, on weekends and evening hours. The idea was drop dead simple: most calling happened during working hours. There was comparatively little usage at other hours, and very little late at night.

Aside from saving consumers money, the lower prices for evening and late-night calling also distributed some of the network load.

Bharti Airtel now is doing the same thing for in-app content downloads, offering what amounts to lower prices for its prepaid mobile customers between 3 am and 5 am.

The offer is “50 percent data back” for all in-app content downloads, effectively cutting the price of usage in half.
   
But some might argue that is network neutrality infraction, as prices are set on a differential basis.

Some might argue it is efficient to shift network demand by offering incentives to users to do so. There seems to be no danger of predatory behavior, even if consumers take advantage of the offer.

That is the same sort of problem some see when zero rating is seen within a network neutrality framework. So long as antitrust is not a problem, firms should be free to experiment with retail packaging, promotions and pricing as they see fit, especially when there is a direct and tangible consumer benefit.

Potential predatory and unfair action by ISPs is a danger we have existing institutions policing. Beyond that, the problem with a broad application of the “best effort only” rules is that they actually do crimp supplier ability to innovate in ways that are demonstrably or arguably valuable for consumers.

One growing problem with network neutrality rules--even if one agrees fully with the objective of preventing antitrust activity by access providers and fostering an innovative and robust Internet--is that the rules (intentionally or not) do place obstacles in the path of some Internet service providers who want to experiment with business models, pricing, packaging and network management efforts.

New Smart Cities, Millimeter Wave Networks Speakers for Spectrum Futures

NSN Murty, Executive Director, Smart Cities, PwC, India, now is as a speaker on smart cities across South Asia, as part of the Spectrum Futures conference, to be held 19-21 October, 2016 in Singapore.

Also joining as a speaker: Prakash Kamtam, Advisor at Smart Cities India Foundation, India.

In addition to smart cities and internet of Things, Spectrum Futures will be addressing the new role of fixed wireless, millimeter wave networks for 5G and Internet access, use of shared spectrum, unlicensed spectrum, spectrum policy across the region, the role of venture capital for application partnerships, collaboration between ISPs and app developers.

Jonathan Brewer, Consulting Engineer at Telco2, will be speaking about use of millimeter waves for rural access across the region.

Other confirmed speakers include:

Chris Weasler, Facebook, Director of Global Connectivity

Greg Leon, Google Product Manager

Jay Fajardo, Founder, LaunchGarage

Praveen Sharma, Tata Communications, Head of Regulatory Affairs

Rajan S. Mathews, Cellular Operators Association of India, Director General

Shrinath V, Product Management & Design Thinking Consultant and Google Developer Expert

Mohamed El-Moghazi, National Telecom Regulatory Authority of Egypt, Director of Radio Spectrum Research and Studies

Camilo Alberto Jiménez Santofimio, Comisión de Regulación de Comunicaciones, Colombia, Senior Advisor

Reza Arefi, Intel Corporation, Director of Spectrum Strategy

Bob Horton, Horton Consulting, Director & Principal

Vern Fotheringham, V-Satcast, LLC, Executive Chairman

Josh Gordon, Red Pocket Mobile, President

Narendra K. Saini, Telecommunication Engineering Center (TEC), India, Chair - Smart Governance WG

Rajnesh Singh, Internet Society, Director, Asia-Pacific Regional Bureau

Muhammad Rashid Shafi, Multinet Pakistan (PVT.) LTD., CEO Global Business & Chief Strategy Officer

Devid Gubiani, Bolt Super 4G - PT First Media, CEO

Leo Sugandhi, spectrum frequency planning analyst for mobile services at Directorate of Spectrum Planning and Policy; Ministry of ICT, West Java Province, Indonesia

Basheerhamad Shadrach, Independent Consultant, Bill & Melinda Gates Foundation; Asia Coordinator, Alliance for Affordable Internet, New Delhi Area, India

Mr. Sushil Kumar, IoT standards and implementation, Telecommunication Engineering Center, Department of Telecom (DoT),  India. (will speak about IoT opportunities in India in several industries)

Syed Ismail Shah, Chairman, Pakistan Telecommunications Authority, Pakistan

Additional speakers are being added weekly. Here is a fact sheet about the event. Join us.

Peak PC in 2011, Peak Fixed Network Connections in 2000 or 2001

Fixed network connections in the United States peaked around 2000. It now appears that sales of PCs peaked in 2011.

In Access Business, Demand Won't Change Very Much; Supply Will. You Know What That Means

In addition to the possible issues (lower value, commodity status) caused by business model inversion, telco service providers also face further disruption on a range of other fronts.

We can assume high levels of competition for all current and future products and services that drive revenue, from traditional sources (other service providers) and new contestants (over the top app substitutes).

What comes next is likely additional forms of competition from non-traditional places, something that arguably can be seen in recent and expected developments in areas ranging from fifth generation (5G) standards to use of millimeter wave frequencies, use of unlicensed and shared spectrum, as well as moves to create more open source access platforms (Facebook OpenCellular, unmanned aerial vehicles, Google Project Loon).

Where in the past it was fairly easy to figure out “who the competition is,” it will be less easy to categorize in the future. Developments such as “network slicing,” for example, will allow app and service providers to buy attributes of networks that are optimized for the particular applications and business models those providers wish to offer.

In a functional sense, network slicing is a form of “wholesale access” to network features. It allows any enterprise or app provider to bundle network access and features with services and apps that drive the revenue model.

Spectrum sharing and unlicensed spectrum, plus new access platforms likewise represent new ways for all sorts of business models combining apps, services and then network access.

As all disputes over spectrum policy are rooted in perceived business advantage, so too are debates over shared spectrum and unlicensed spectrum.

That is normal. What is atypical is the vast potential amount of new spectrum to be made available in many markets, plus the unprecedented effort to create open source models and therefore costs across data center and now access platforms.

To some extent, all ISPs and access providers will benefit from lower platform costs. But that’s the rub: the same shift to lower costs that helps incumbents also enables new potential roles for attackers.

“Dumb pipe” poses the same sort of contradictory implications. On one hand, dumb pipe Internet access now drives revenue growth for mobile and fixed service providers alike, as traditional revenues earned from voice and messaging fall.

On the other hand, such commoditized access does not necessarily drive the same level of profits as the former managed services once did (though there is room for true argument on that score, at least for the moment).

The longer-term strategic issue is simply that there will be so much new spectrum, available at potentially lower costs, plus advances in access network platforms, that new competitors are expected. Adding more supply, in any market, has clear impact on demand. Just as clearly, lots of new supply has predictable impact on profits.

It is hard to see how the access business can avoid further commoditization.

Telco Business Models are Inverting

Telco, mobile and cable TV business models are becoming inverted. Traditionally, revenue was earned by consumers using apps and services, though there always has been some “access to the network” revenue as well.

The inversion has everything to do with “dumb pipe” business models.

Perhaps transfer payments to support rural access are the purest forms of “access to the network” revenues (flat fee providing ability to use the network for local calling, for example), while international or other long distance services traditionally were the purest form of “use the application” revenues (usage).

Traditionally, cable and satellite TV providers have earned zero revenue from access, bundling the cost of network assets and operation into the overall price of a content subscription.

In business customer markets, data services have been a mix of apps and access, as frame relay, ATM and MPLS for example, arguably are services, while a T1 or DS3 line might have been an access service.

But all that started to change with the advent of Internet access as a driving, and arguably dominant driver of entity revenues.

That is, after all, the primary meaning of network neutrality: consumer Internet access is defined as a “dumb pipe” service, with no class of service differentiation and no value add from quality of service assurances.

Where providers earned most of their money when users bought and used “voice minutes,” or sent text messages, the future will be based on customers consuming Internet access gigabytes.

But note the key differences. Voice and texting, plus MPLS, frame relay and ATM, are “services” using the network. Simple consumer connections to the Internet represent “network access,” with no assumptions or bundling of apps using that access. You get access to third party apps you want to use; all you are buying from the Internet service provider is the access to the Internet and its resources.

So the business issue is clear enough. App providers represent the value of the Internet. ISPs provide the means to get to, and use, those apps. When network neutrality rules are in place, the ISP, legally, is a “dumb pipe,” by design.

That explains, simply enough, why access providers are working to create new owned value-added services using their networks. Doing so creates application revenue, in addition to access revenues.

The issue is not “vertical integration” on a wide scale, as that simply is not possible. What might be possible is creation and ownership of a few applications owned by the access provider. That model is akin to cable TV providers owning programming networks: you own some of the content you deliver to customers.

Globally, 27 percent of consumers currently receive some form of value added service from their mobile operator, a study conducted by KAE on behalf of Nokia suggests.  

Such services include over the top messaging services,  streaming content, security services, cloud storage, handset insurance, or offers of free or discounted services (cinema tickets, music or video subscriptions).

Value-added services are more prominent in transition markets 34 percent of consumers in transition markets currently receive value-added services, the study suggests.

The growing provision of value-added services is largely driven by markets such as Turkey and Mexico, where 43 percent and 42 percent of consumers respectively claim to receive them.

In comparison, just 25 percent of consumers in mature markets receive value-added services. This trend is driven by markets such as the UK and Japan, where only 18 percent of consumers receive value-added services.

Business model inversion (app to access) already is happening. What remains unknown is the degree to which the process can be reversed. To what extent can primacy of access revenue revert to the older model (access to app)?

That is what Verizon is attempting with its mobile advertising and content efforts (AOL), what AT&T has done with DirecTV, and what both are attempting with Internet of Things or connected car services.

But here’s the strategic issue: under what conditions might the revenue model flip, with “access” services  less than half of total revenue?

Ironically, as mobile or fixed network operator revenues move from reliance on voice, messaging and content to “Internet access,” they also invert their business models, moving from being application providers to becoming access providers.

In India, where voice still drives 80 percent of total revenue, most of that process remains ahead, as mobile Internet access revenues will drive revenue growth.

But that’s the conundrum: to grow revenues means to emphasize the dumb pipe access role, not the former applications-lead revenue model.

What do App Developers Need to Know about Working with ISPs?

Shrinith V, consultant and Google Developer Expert

Telecom now is part of the computing industry, and that the computing industry increasingly is about apps and services, not hardware. Also, since “access” and “apps” are structurally separated, access providers are providers of dumb pipe services (that is what network neutrality is all about).

That means applications and services can be developed by anyone, and any company, without owning access pipes and facilities.

Just as clearly, that means most service providers now realize they must “move up the stack,” in some way, and own at least some of the applications delivered over their access facilities.

Not every app provider will want to partner with telcos or ISPs. There is no inherent reason why that must be done. Some app and service developers will want to partner, for their own commercial reasons.

But how does an app developer create a service that will get traction, and also be valuable to an ISP partner? How is the “go to market” strategy shaped and conditioned by the partnership strategy.

And what should developers know about working with ISPs? Those are some of the major issues to be discussed by speakers at Spectrum Futures.

Shrinath V, consultant and Google Developer Expert is among speakers at Spectrum Futures who will address the way app developers get commercial traction and “go to market.” The event will be held 19-21 October, 2016 in Singapore.

We Are All Part of the Computing Industry Now

By now, we all are familiar with a set of key business model transitions. Products are becoming services while services are becoming apps.

Jay Fajardo, venture capitalist, Philippines

Manufacturing companies selling elevators or jet engines can move from selling those products once to providing ongoing service, said Chuck Robbins, Cisco CEO. That is an example of the “products become services” trend.

Over the top voice, messaging, audio, video and most other content is an example of the latter “services become apps” trend. Those trends have clear implications for service providers.

In fact, one can say that telecom now is part of the computing industry, and that the computing industry increasingly is about apps and services, not hardware.

Just as clearly, people want Internet access only because they want to use the apps that Internet access enables.

And with big new markets developing in consumer and business domains, just about every stakeholder--from government to service providers to app developers and infrastructure suppliers--is looking for the next big thing.

Right now, the Internet of Things, broadly defined, holds the most promise for app development of interest to ISPs and service providers, just as investors continually look for the next big wave of money-making apps consumers will embrace.

For that reason, for the first time, venture capitalists will speak at Spectrum Futures, to be held 19-21 October, 2016 in Singapore.

Why IoT Matters for Rural Internet Access

Narendra Saini, TEC

Ubiquitous communication networks--including Internet access networks--always have multiple revenue segments, including consumers, small businesses and enterprises. Also, profit margins and revenue potential differ by geography, as well.

Most fixed and mobile operators earn a disproportionate share of revenue and profit from a relatively small number of locations and cell sites, for example.

The top 10 percent of total sites contribute over 30 percent of total revenue, whereas the bottom 50 percent of sites contribute under 10 percent of revenue, a Vodafone report says.

Of the top sites, just 10 percent are in rural areas.

Data revenues also represent a much greater proportion of revenue at the highest earning cell sites than at the lowest earning sites; the top 1,000 sites contribute 37 percent of total data revenues, whereas the bottom 2,000 sites contribute less than one percent of total data revenues.

That illustrates the importance of lower-cost infrastructure to supply communications and Internet access in rural areas. Also key: revenues and profits earned from some customers and areas that effectively subsidize users in other areas.

As always is the case for ubiquitous networks, more-profitable customers and portions of the network subsidize the less-profitable customers and portions of the network. Analysis of individual cell site revenues and costs suggests that around 30 percent of Vodacom’s cell sites would not be profitable on a standalone basis, for example.

That also suggests the importance of potentially big new revenue sources such as Internet of Things. Mobile and other network platforms will require the profit such services provider to business and enterprise customers to generate the surplus that allows more support of rural access facilities that will not generate much net revenue or profit.

Narendra Saini, of the Telecommunication Engineering Center (TEC) India, is among the speakers who will address smart city initiatives and the Internet of Things across South Asia and Southeast Asia at Spectrum Futures, to be held 19-21 October, 2016 in Singapore.

Google Fiber Launches Three Small Business Plans

Google Fiber now offers three classes of service for business customers, with speeds set at 100 Mbps for $70 a month; 250 Mbps for $100 a month and a gigabit for $250 a month, each offering up to 13 static IP addresses, and support teams available 24 hours a day, seven days a week.

Compared to a consumer symmetrical gigabit connection costing $70 a month, the business plans seem priced to support the additional customer service required for customers who might rather routinely be running servers on such connections.

source: Google Fiber

IoT Developers Grow 34% Year over Year

The number of developers currently working on IoT applications has increased 34 percent since 2015 to just over 6.2 million in 2016, according to Evans Data Corp.

In addition, the increase of development for mobile devices, up 14 percent since last year, has led to smartphones being the most commonly connected IoT platform.

For the general developer population, estimates and projections for growth to 2021 show Asia leading--especially in China and India-- with nine hundred thousand more developers than Europe, the Middle East and Africa.

The worldwide  developer population will reach 25 million by 2021 Evans Data also predicts.

The number of developers currently creating mobile applications is estimated at 11.9 million, while the number of developers who target Android first is 5.9 milliion, with 2.8 million developing for  iOS as a first platform.

In Asia, 2.2 million developers target Android first, while in North America iOS is targeted first.

How Competitive is the U.S. Special Access Market?

How competitive is the U.S. special access market? Apparently, more competitive than previously thought. Four of the largest cable providers now report they have 22 times more Ethernet-capable locations than the data on which the Federal Communications Commission based its May 2 further notice of proposed rulemaking.

A Comcast executive, for example, recently argued that the U.S. special access market is “healthy and competitive and the entry of cable companies shows that competition is growing," said David Cohen, Comcast senior EVP. "The government should step back and regulate less.”

Wi-Fi Value is High, Direct Revenue is Not

Even if roughly 70 percent of U.S. mobile consumers say they are interested in Wi-Fi-only data plans, there remains scant evidence that Wi-Fi-only is a big and present segment of the mobility market. Cablevision Systems Corp., for example, launched such a service in its territory, but appears to have found only modest interest.

Wi-Fi carries around 80 percent of mobile data traffic, says Mobile Experts Principal Analyst Joe Madden. He predicts that 90 percent of mobile data will be carried over Wi-Fi and other unlicensed spectrum by 2020.

Such statistics show the nuances of value in the access services space. One might be tempted to suggest that, with that much traffic offloaded to Wi-Fi, much more access revenue “ought” to accrue to Wi-Fi hotspot networks, or the fixed line Internet access services, than to the mobile network.

But, as so often is the case in telecommunications, usage and revenue are different matters. It often happens that usage is indirectly related to revenue. There is a connection, though. The business model impacts, for suppliers of mobile devices, fixed and mobile access services, are quite significant.

For many years, the primary value of a public Wi-Fi hotspot network was the incremental value generated for fixed Internet access services. Likewise, the ability to offload data consumption, as well as the ability to tether a mobile device to Wi-Fi, have been important contributors to the value of specific mobile service plans and devices.

That remains the case. The new issue is how much additional value can be wrung from Wi-Fi, as an access method supporting or replacing mobile access. Wi-Fi-only services have been quite rare. Cablevision Systems Corp. tried that, and will be shutting down its service.

On the other hand, Wi-Fi access, as well as the ability to “roll over” unused mobile data, might be quite important, at the margin, as features attractive to potential “switchers” in the U.S. market.

That is vitally important in any saturated mobile market, as most gains are possible only by taking a customer from another provider. So churn management is more important than ever.

“U.S. operators have ramped up incentives to lure subscribers from competitors and encourage their own to stay longer—their game plans have switched gears from ARPU growth to churn management,” said said Harry Wang, Parks Associates senior director.