Value-Added Services Double the Typical Business Customer Monthly Billing

Value-added services generate business customer monthly spending twice the average customer account size, according to J.D. Power. Security services and videoconferencing are among the services that increase customer recurring spending the most.

Value-added services increase the industry average customer bill of $322 to $582 among subscribers to cloud computing services; to $766 among subscribers to security solutions; and to $792 among subscribers to videoconferencing applications.

Service providers offering value-added services achieve higher overall satisfaction scores than do providers not offering such services, J.D. Powers reports.

For example, overall satisfaction among business customers who subscribe to videoconferencing applications is 816, which is 75 index points higher than the overall industry average score of 741.

Offering security solutions to protect against corporate hacking (812) and cloud computing (794) are other advanced technology services that lead to higher overall satisfaction, according to J.D. Powers.

Google Fiber Costs Do Not Appear to Have Been Materially Better than Any Other Telco

One key issue since the advent of Google Fiber, as well as market entry by any number of other independent Internet service providers, is whether Google Fiber had uncovered some cost advantage over all other leading providers that would allow it to make a profit selling gigabit Internet access connections at $70 a month, when other major ISPs were selling services operating at far lower speeds, at comparable prices.

To be sure, getting streamlined permitting processes from cities arguably helped a bit. Building networks neighborhood by neighborhood was an important innovation municipal regulators decided to allow.

But it never was clear that Google Fiber had material advantages in construction costs that represent perhaps two thirds of the total cost of building a new fiber to home network.

A decade has passed since the first FTTH network deployments, yet the cost of building
a network remains the primary obstacle to ubiquitous fiber connectivity for every household,” says Commscope.

From 2005 to 2015, the cost per home passed dropped from $1,021 to just under $700, Commscope notes. Those costs likely are fairly standard, no matter how big or small a firm might be.

The problem is that most of the cost of building a fiber-to-home network comes from civil engineering, not network elements.

Construction, civil works engineering, obtaining permits and right-of-ways account for roughly 67 percent of total cost, while the equipment accounts for about 33 percent.

So while GPON and fiber equipment costs have indeed fallen, skilled labor rates have risen.

In other words, a fiber-to-home network mostly represents construction costs, not network element cost.

My simple way of explaining this is that most of FTTH cost comes from “digging holes, then closing the holes back up.”

If so, then the cost of FTTH cannot be reduced too much more.

That rather suggests that Google Fiber has no particular business advantage in construction costs.

Consider that Dycom Industries, whose main business is network construction for tier-one telecommunications providers, counts AT&T, Comcast, CenturyLink, Verizon and a “customer who has chosen to remain anonymous” among its top-five customers.

Most everyone believes the unnamed customer is Alphabet (Google Fiber).

If so, it is unlikely Google Fiber has material advantages in either network elements or construction cost. It might have some marginal advantages in permitting and other sorts of make-ready work, but those are not the primary cost elements.

Perhaps Google Fiber has saved a bit by making its own set-top boxes for video, as well as network interfaces for Internet access services. But not necessarily. At low volumes, Google Fiber might well have spent as much, or more, than it would have spent buying gear off the shelf.

Nor is there any particular reason to believe Google Fiber has gotten network element prices very different from what AT&T, Comcast or Verizon might pay. In fact, if volume discounts apply, then Google Fiber might be paying higher prices than AT&T, Comcast and Verizon.

With rumors that Google Fiber has fallen quite short of its subscriber forecasts, and might be getting ready to cut its workforce in half, it might be reasonable to assume that whatever else might be the case, Google Fiber did not uncover some new cost-saving way of building a fiber to home network.

One might have hoped for lower overhead costs, something that seems key to success for small, independent ISPs. But Google Fiber probably did not have overhead costs materially better than Verizon or AT&T, and perhaps had overhead higher than that of Comcast.

Even if Google Fiber had some marginal cost advantages in a few areas, it does not appear that the cost side of the network build was materially different from any other bigger providers.

Google Fiber Falling Short of Expectations?

Google Fiber does not seem to be achieving as much success--measured by subscriber growth--as it originally expected. Though nobody outside Google can say for certain, many believe accounts now number only in the couple of hundred thousand range, not the five million many had hoped would be signed up by now.

Google Fiber also seems to be planning major staff cuts.

Oddly enough, Google Fiber clear has succeeded in one goal everyone agreed was an objective: spurring other Internet service providers to dramatically boost access speeds.

Many speculate that new interest in fixed wireless is partly driven by expected lower infrastructure costs. But that does not directly speak to the issue of less-than-anticipated account growth.

Perhaps Google Fiber’s marketing efforts have been less than required to make serious inroads into cable TV or telco customer bases.

Perhaps the incumbents have showed they still have the moxy to fend off even stout challengers, using price promotions and bundling, as well as unexpected consumer inertia, to fight off the challenge.

In markets where Google Fiber clearly was a superior offer (in terms of speed), one might have expected Google Fiber to get 20 percent to 25 percent adoption relatively quickly, growing to as much as 40 percent over three or four years.

Verizon FiOS, for example, was able to achieve numbers in that range, for its high speed Internet access offer.

Ting, the gigabit fixed network service run by Tucows, expects 20-percent take rates in the first year, growing to 50 percent within five years, for example.

But maybe three-provider markets really are that much more difficult than two-provider markets, even when the latest challenger has a disruptive offer. Maybe market selection really does make a difference.

Perhaps it really is harder for a third major ISP to get traction in a tier-two market, compared to smaller tier-three towns. Some of us cannot understand why Google Fiber would not have done about as well as Ting expected, in the first year of active marketing in any of its markets.

Perhaps the marketing effort has been flawed.

But maybe customers themselves are not yet clearly convinced that a symmetrical gigabit service for $70 a month really is “better” (in terms of the value proposition) than a $50 a month service offering 100 Mbps, symmetrical.

Perhaps consumers are proving once again that a “good enough” product, offered at a reasonable price, is preferable to a “best in class” product offered at a significantly higher price.

It’s curious.

Gigabit Internet Access Now Drives Telecom Network Construction

In a strategic sense, one might argue that the value of a fixed telecom network (cable TV, telco,  ISP, metro fiber specialist) is backhaul for mobile traffic. That obviously is most true for consumer apps and customers, less true for enterprise apps and customers.

One anecdotal way of illustrating that concept: “There are some industry experts who have said that for a 4G LTE network, about 90 percent of the communication path is wired, and for a 5G millimeter-wave communication path, it could be 95 percent or more of the path is actually wired,” said Steven Nielsen, Dycom CEO.

Still, any changes in access platform choices (use of fixed wireless instead of fiber to home; small cell architectures) should materially affect Dycom’s prospects.

Dycom's main business is contracting services (network construction, principally) for telecommunications providers and enterprises.

The company's five largest customers are AT&T, Comcast, CenturyLink, Verizon and a “customer who has chosen to remain anonymous.” Most everyone believes this customer is Alphabet (Google Fiber).

AT&T represents 28.1 percent of total revenue or $221.6 million. Revenue from Comcast was $112.7 million or 14.3 percent of revenue.

Revenue from CenturyLink was $110.7 million or 14 percent of revenues.

Verizon was Dycom's fourth-largest customer for the quarter at 12 percent of revenue or $95.1 million. Revenue from Windstream was $43.5 million, or 5.5 percent of revenue.

Charter Communications was sixth largest,  at 4.8 percent of revenue. Customer seven (believed to be Google Fiber) drove 3.6 percent of revenue.

Frontier Communications was the eighth-largest customer  at 1.4 percent of revenue.

Without question, gigabit Internet access services are driving current business activity.

Entertainment Video Drives 62% of Data Consumption on North American Android Devices

In North America, on Android smartphones, entertainment video represents about 62 percent of total data consumption.

The typical North American household now has over seven active devices in use each day, with six percent of households having more than 15 active devices, according to Sandvine’s Global Internet Phenomena Spotlight: Inside the Connected Home report.

As you might guess, that also means traffic is fragmenting. PCs now account for less than 25 percent of total traffic on fixed access networks.

Conversely, mobile devices (tablets and smartphones) now account for almost 30 percent of North American fixed access traffic.

Looking at applications, the big change is video streaming, which now accounts for 65 percent of bandwidth consumption, across all devices.

Game downloads drive about 25 percent of  bandwidth consumption.

30% Smartphone Adoption in Philippines

Mobile data will drive mobile revenue in the Philippines: just about 30 percent of people already use a smartphone, even if most people use feature phones. 


source: Pawn Hero

What is a Good Wave Worth?

What is a wave worth? By one estimate, waves ridden by surfers represent $51 billion in economic activity.

source: Save the Waves

That is the result of a study of 5,000 locations by Oxford University economists Thomas McGregor and Samuel Wills, who studied night-time light emissions as a proxy for economic activity.

“We find that high-quality surfing waves boost activity in the local area (<5km 0.15-0.28="" 18-22="" 1992-2013="" amounts="" between="" billion="" by="" comparable="" from="" globally.="" his="" locations="" log="" low="" million="" or="" per="" points="" ppp="" quality="" relative="" researchers="" say.="" span="" the="" to="" us="" wave="" waves="" with="" year="">

Another study of Australian activity over a two-month period of about $20 million for local economies.

The notion of applying market forces to conservation or preservation of natural assets sometimes is criticized as applying a market test to non-material values. Surfers who think about it might agree that highlighting the value of waves can contribute to preservation, conservation, cleanliness and other non-material values.

$45 per day is an estimate of the economic value of surfable waves found near the coastal community of Huanchaco, Peru, the non-profit Save the Waves organization has estimated.

In Pichilemu, Chile, for example, the average surf tourist spends $168 per day.  In Uluwatu in Bali, Indonesia, the typical surf tourist spends $150 per day.

Google Researchers Apply Artificial Intelligence to Image Compression

Google has applied artificial intelligence to the problem of optimizing energy usage in its data centers, and researchers now say they have developed a way to use AI for compressing  images more efficiently than using JPEG.

Such practical applications for artificial intelligence will be needed to push machine learning into the mainstream of business processes.

Global Enterprise Spending Flat Through 2020, Garner Predicts

source: Gartner

With several caveats--that global trends are not necessarily reflected in every local market; that some spending is disguised (open source investments, for example); that market share shifts are happening; and that some sectors are growing while others decline--Gartner says global telecom spending by enterprises is flat in 2016, and likely will stay that way through 2020.

The other caveat is that major global upticks and downturns tend to affect enterprise capital investment as well. So any synchronized global downturn will have more negative impact than current projections incorporate.

Also, currency fluctuations also affect the reported level of spending. On a constant currency basis, information technology spending would be up about 1.5 percent.

At the same time, productivity improvements mean enterprises can spend less, while gaining greater advantage from any fixed amount of spending.

 

Separately, Ovum says second quarter 2016 earnings by public service providers show that service provider revenues overall grew about one percent in the second quarter, year over year.

That, Ovum says, is the first his year-over-year growth since the third quarter of 2014. Those figures include both consumer and business segments, and likely reflect revenue gains in consumer segments of the business.

Much small business spending on cloud services or mobility often gets disguised as consumer spending on such services, as well.

U.K. Business Telecom Spending Falls, but SME Grows

If 2015 enterprise and business spending on telecommunications services has relevance for the U.S. market, business segment revenue likely is down (fixed and mobile), but small business buying of voice and Internet access lines is up.

Leased line and web hosting revenue likely climbed fractionally.

Web hosting grew 1.3 percent, while Ethernet or leased-line services grew 1.5 percent.

IP-VPN services revenue fell slightly (0.8 percent), while frame or cell (ATM) services revenue plummeted 53.5 percent.

Total U.K. business revenue fell by £0.2 billion (2.4 percent) to £9.1 billion in 2015. This was driven by a £0.2 billion (7.6 percent) decrease in fixed voice revenues and a £0.2 billion (5.4 percent) fall in mobile revenues, partly offset by a £0.1 billion (14 percent) increase in non-corporate internet services.

.

The decline in business monthly retail revenue per fixed line was due to call volume and price declines.

The proportion of business calls that originated on mobile networks was 56 percent in 2015, representing a 1.2 percentage point increase on 2014.

source: Ofcom

But total business call volumes fell by 2.2 billion minutes (4.9 percent) in 2015, driven by a fall of 1.5 billion (7.5 percent) fixed business minutes and 0.7 billion (2.9 percent) mobile business minutes, excluding use of IP telephony services.

At the end of 2015 there were 7.6 million business fixed lines and ISDN channels, a year over year fall of 0.3 million (4.3 percent), and 2.0 million (21 percent) fewer than there had been at the end of 2010.

The number of small and mid-sized business broadband lines increased by 0.1 million (5.2 percent) in 2015. Between 2010 and 2015 SME broadband lines increased by 0.6 million (a five-year CAGR of 5.4 percent).

At the end of 2015 there were 9.5 million business mobile connections (excluding the 6.7 million M2M connections), equivalent to 13 percent of all such connections.

Some 77 percent of businesses’ dedicated data subscriptions were M2M connections.

U.K. Households Increase Data Consumption 41%, Year over Year

In 2015, the average U.K. household buying fixed network Internet access consumed 82 GB of data each month, a 41 percent increase compared to the 58 GB per month recorded in June 2014.

Higher consumption of over the top entertainment video was a driver of the change, as well as faster speeds. As always, faster speeds mean more data can be consumed in any given unit of time. Also, faster speeds mean each household user can consume more data in any given unit of time.

source: Ofcom

That noted, well over half of all U.K. household telecom spending (54 percent) is for mobile services. Some 18 percent of telecom spending is for fixed Internet access. About 28 percent of spending is for fixed network voice (inflated, to a certain extent, because digital subscriber line service also requires purchase of voice service).

U.K. telecom revenue grew in 2015, up £0.2bn (0.5 percent) to £37.5 billion, propelled by  (Figure a £0.5 billion (4.2 percent) increase in retail fixed revenue, itself driven by a 12.6 percent rise in fixed internet revenues. Some 0.9 million more Internet access connections were added in 2015, representing growth of 3.9 percent.

Mobile revenue actually fell 0.4 percent, while wholesale revenue fell 4.2 percent.

Enterprise data revenue also fell by one percent.

In the consumer segment, average revenue per account drove a 3.2 percent increase in telecom spending.

U.K. telecom services spending spending now accounts for 3.5 percent of total spending (not total household income).

Fixed network voice lines decreased 0.3 million, or one percent. Mobile subscriptions grew 1.8 percent (including machine-to-machine accounts).

Fixed network voice call minutes fell by seven billion minutes (9.2 percent) to 74 billion minutes in 2015 and mobile voice call minutes increased by five billion minutes (two percent) to 143 billion minutes.

The total number of outgoing SMS and MMS messages continued to fall in 2015, down by eight billion messages (7.6 percent) to 101 billion messages, although this was a smaller fall than in either 2013 or 2014, in large part because people are shifting to over the top messaging alternatives.

source: Ofcom

Termination Charges Now a Key Business Issue for India Mobile Operators

Arcane network interconnection rules are anything but irrelevant for service providers (mobile or fixed) whose revenues are directly affected by such rules. So it is that a proposal to change interconnection fees for service providers terminating calls has become a big  business issue for India’s mobile operators.

Now, an interconnection charge for terminating a mobile call generates 14 paise about two-tenths of a U.S. cent) per minute (some call this “calling party pays”).

Conversely, no termination charges are levied on calls made from one landline to another or from a smartphone to a landline number, using the “bill-and-keep” method for interconnection.

But the Telecommunications Regulatory Authority of India (TRAI) wants to change mobile interconnection to a “bill and keep” approach as well.

The has big implications. In the U.S. market, “bill and keep” was viewed as favorable to upstarts and attackers, for reasons related to traffic flows.

Simply, small challengers tend to terminate more traffic on other networks than the big legacy networks terminate on the small networks. Using one methodology, the network that terminates a call gets paid for doing so.

Using “bill and keep,” carriers are not paid for terminating calls.

So why the proposed change? TRAI believes a shift to bill and keep would make IP telephony services more competitive, as IP telephony providers would not have to pay the termination charges. As it happens, Reliance Jio, the big new player in the Indian mobile market, will use IP-based voice.

Incumbent mobile service providers would lose revenue under the bill and keep framework, which is why they accuse TRAI of setting policy in ways that favor Reliance Jio, the big new challenger.

Of course, regulators always get accused of that, irrespective of their intended objectives. It is not possible for any regulatory policy to be completely neutral in its impact. And, often, the desired impact is to upset the existing order of things. That appears to be, in substantial part, what TRAI intends.

As always, arcane network interconnection rules have real-world business effects.

50% Discount on Spectrum Futrures

As a member of PTC's Advisory Council, I’d like to extend a personal invitation for you to attend PTC's Spectrum Futures 2016 event, taking place from 19-21 October 2016 at the Marina Mandarin Singapore.

As one of my contacts, I am able to offer you a special VIP pass, for a 50% discount on registration. There are a limited number of VIP passes, so the sooner you register the better.

Organized by PTC, Spectrum Futures explores the ways new capacity—and the business models needed to sustain it—can be brought online, fast, to connect two billion additional Internet users across South and Southeast Asia.

The attached flyer includes additional information, along with several of the subject matter experts on spectrum that will be participating. I think Spectrum Futures 2016 will be particularly relevant to you, and I expect you'll find many of the discussions at this year's event important to your business.  

Use this link to register for the VIP Pass: https://www.regonline.com/SpectrumFutures2016.

Select VIP Pass, then Standard Rate (if you are not currently a PTC Member). Enter discount code SF1650 to receive the 50% discount rate.

I hope you will be able to attend Spectrum Futures 2016!

From 10 Mbps to 1,000 Mbps in 15 Years

Consolidated Communications has launched gigabit Internet access in Roseville, Calif., just after

AT&T has launched its GigaPower gigabit Internet access service in the Sacramento market, in parts of Placer County (Roseville, Rocklin, Lincoln, and their surrounding communities).

That is notable in some ways because the Roseville market was one of the first in the United to get fiber to the home services from SureWest Communications, formerly Roseville Telephone Company, back in 2002. Back then, state of the art was symmetrical 10 Mbps service.

These days, that doesn’t even qualify as “broadband,” according to the Federal Communications Commission.

In roughly a decade and a half, we have gone from state of the art as 10 Mbps to 1,000 Mbps, two orders of magnitude.

Careful market selection, plus operating cost advantages, arguably are key to all the independent gigabit Internet access provider efforts springing up around the United States. That is as true for Google Fiber as for AT&T, Rocket Fiber, Ting or any other independent entity.

By definition, capital cost is basically not a source of material advantage: all technology is available to all potential buyers. Construction costs, with some exceptions, also are what they are, for all would-be suppliers. The difference is that some suppliers arguably must use union labor, while others have a choice.

Of all choices, it is the market geography which is most important, at the moment. When Google Fiber decided to build in Portland, Ore., there were no other gigabit ISPs in the market. Now, both CenturyLink and Comcast are doing so, making Google Fiber the possible third supplier in the market.

Some observers think Google Fiber’s decision to delay the Portland, Ore. build, and some in the San Francisco Bay Area, are driven by changing competitive dynamics. Google Fiber arguably once aimed--among other things--to spur key ISPs to upgrade their services.

But now that the ISPs are doing so, it apparently is more difficult for Google Fiber itself to sustain its own operations. Google Fiber arguably has succeeded in getting major U.S. ISPs to boost access speeds. So much so that Google Fiber itself has to rethink its own prospects and business model in many markets, apparently.