Cable TV Companies Now Drive Gigabit Internet Access in U.S. Market

source: NCTA

Some argue cable TV is bad for the Internet, in the sense that the industry prefers walled garden content, higher prices and data caps.

Others would argue that one reason the U.S. Internet access market has moved so quickly towards gigabit access is because cable TV operators are able to upgrade their services so affordably, compared to other platforms.

It requires a nuanced discussion.

As a content distribution provider, Comcast’ legacy business model is threatened by over the top distribution alternatives.

But Comcast also knows very well that the new Internet access business is what drives its future growth, not linear video services or voice. Between 2016 and 2026, cable TV operator video revenue will fall but Internet access revenue will climb, according to SNL Kagan.

In the second quarter of 2016, the biggest U.S. cable TV companies had more than 57 million high speed accounts and 48.9 million linear video customers, according to Leichtman Research Group.

Internet access will be important for U.S. telcos as well.

source: Business Insider

The point is that U.S. cable TV companies have a vested and big interest in growing their Internet access businesses, irrespective of other issues.

Also, cable TV companies--even if Google Fiber kicked off the gigabit upgrade movement--are the primary suppliers of gigabit connections in the U.S. market. In that sense, it must be said, U.S. cable TV companies have done much to rapidly upgrade U.S customer Internet access speeds and availability.

Comcast, the largest U.S. Internet access provider, is upgrading all its consumer locations to gigabit speeds, using software and device changes on the ends of the network, without access media changes.

Gigabit Internet Access Forecasts are Too Low, Ironically

Any linear forecast for gigabit Internet access connections is likely going to be wrong, since the biggest long-term change will be provision of gigabit service by mobile operators on a routine basis.

Deloitte Global predicts that the number of Gigabit per second (Gbps) Internet connections grew to 10 million in 2015, a tenfold increase, of which about 70 percent will be residential connections. All of that represents fixed network potential.

in 2015, the number of Gbps tariffs almost doubled in just three quarters, from just over 80 to over 150, and falling prices.

By 2016, 250 million customers will be able to buy gigabit service, all on fixed networks.

Some 600 million subscribers may be on networks that offer a gigabit tariff as of 2020, representing the majority of fixed network connected homes in the world.

At the moment,  between 50 and 100 million broadband connections may be Gbps, or can be purchased by customers, representing five percent to 10 percent of all broadband connections.

Of these about 90 percent are residential.

Those forecasts eventually will be eclipsed when 5G mobile networks become staples of the mobile business, as 5G--by definition--will support gigabit speeds.

In fact, we are likely to see a period where--at least on the metric of speed--fixed networks are nearly universally slower than mobile networks, something that has not happened, on a wide scale, ever before.

source: Point Topic

Unlimited* Plans Now Offered, in Some Form, by all Four Largest U.S. Mobile Firms

Despite the potential danger posed by truly "unlimited" usage plans, all four U.S. mobile service providers now offer some form of "unlimited" usage, though offered in ways that limit potential exposure.

Unlimited mobile data is one of those concepts that requires an asterisk (Unlimited*). Now offered in some form by all the leading U.S. mobile service providers, “unlimited” does not generally mean there are no usage limits.

Customers still buy buckets of data usage. But if those usage limits are hit in any billing period,  mobile data speeds get reduced, at some point, to 2G speeds (128 kbps, in some cases). That, many would argue, is better than losing all connectivity.

So many would not complain about that limitation, at some level. It does mean the dreaded “overage” charges are not an issue. That saves consumers money, should usage climb beyond the usage bucket the customer chose to pay for.

That is one way service providers limit their exposure to heavy users whose behavior might change, were usage literally unlimited.

Verizon "One Fiber" Shows Changed Fiber Economics and Business Model

Verizon’s “One Fiber” strategy for the city of Boston shows the changed role of the fixed network as well as a shift of the business model. The original vision for FiOS was consumer services, lower operating costs and support for broadband (mainly entertainment video, at the time).

The new vision builds on a number of revenue streams and operating considerations, anchored by enterprise services and support for the mobile network.

There probably also is a bigger potential role for fixed wireless backhaul, should use of fixed wireless develop further.

“I think of 5G initially as, in effect, wireless fiber, which is wireless technology that can provide an enhanced broadband experience that could only previously be delivered with physical fiber to the customer,” said Lowell McAdam, Verizon CEO.

That new use of fixed wireless will be designed to support gigabit speeds. “As we densify the network for 4G, it sets us up perfectly for deploying 5G with the millimeter wave technology,” said McAdam.

Compared to using fiber-to-the-home, fixed wireless should cut network costs in half, McAdam says. By using fixed wireless, Verizon also avoids the cost of drop cable connections, the second-biggest driver of the access network capital cost.

“We expect there to be a significant cost reduction” for fixed wireless access, compared to fiber, McAdam said.

Essentially, Verizon believes it can create a denser fiber network that initially supports enterprise customers and also supports backhaul for a dense network of small cells across the city.

But doing so also lays the foundation for consumer fiber-to-home services and support for Internet of Things applications as well.

"When we looked at running the fiber for wireless, we said, well that will enhance what we can do from an enterprise perspective and by the way, it's only $300 million more over the next six years to actually deploy fiber to the home from that same fiber," said Fran Shammo, Verizon CFO.

The larger point is that the business model for fiber facilities in metro areas has changed. Essentially, in dense areas such as Boston, what Verizon must spend to support business users, the mobile backhaul network and new small cell deployments, the incremental cost of targeted consumer fiber-to-home deployments is reduced dramatically.

And where consumer FTTH does not make sense, Verizon can use fixed wireless to supply gigabit access connections.

New Facebook Compression Method Works 3-5 Times Faster Than Older Method

A new open source compression method developed by Facebook has lead to a significant reduction in  storage and compute requirements for Facebook data centers.

Replacing zlib--the prior method--with Zstandard 1.0 resulted in six percent storage reduction in Facebook data warehouses, 19 percent reduction in CPU requirements for compression and 40 percent reduction in CPU requirements for decompression, said Yann Collet, Facebook compression expert.

Zstandard 1.0 compresses data about three times to five times faster than the previous method used by Facebook. Zstandard 1.0 also takes up 10 percent to 15 percent less storage space.

Compression speed also is about two times faster than zlib, the previous method. “Command line tooling numbers” are more than three times faster, as well.

Which IoT Network Wins, in the End?

source: Ericsson  

The attractiveness of specialized Internet of Things networks such as LoRaWAN and Sigfox has been that they allow much lower communication costs, in addition to lower-power sensors and devices, compared to traditional mobile networks.

In fact, cost reduction, often by an order of magnitude, generally is viewed as key to the success of IoT services.

Whether that advantage lasts is the issue, as mobile air interfaces designed to offer low-cost, low-power communications come to market.

LTE-M, which is an abbreviated version of LTE-MTC (or “machine-type communications”), is a part of 3GPP’s release 12 and 13.

The advantage of LTE-MTC for M2M communications is that is a standard LTE network air interface.

In other words, a mobile operator only has to upload new baseband software onto its base stations to turn on LTE-M and won’t have to spend any money on new antennas.

It’s also five times simpler than a category 4 receiver—like that found in user equipment like a cell phone.

LTE-M has a little higher data rate than NB-LTE-M and NB-IoT, but it is able to transmit fairly large chunks of data. Thus, it can be used for applications such as tracking objects, wearables, energy management, utility metering, and city infrastructure.

With modules expected to be priced below $10, LTE-M is expected to improve the economics of IoT for use cases like smart energy meters, industrial IoT sensors, asset trackers, smart city controllers and consumer wearables.

“The first shall be last” often happens in the communications business.

How Much Share Will Skype for Business Take?

source: No Jitter

In many ways, the relative slowness of hosted PBX adoption is a puzzle, given the feature richness and cost savings, compared to premises switch alternatives, in many cases.

A subsidiary question is how well some services, such as Skype for Business, might fare.

Of the 224 respondents to a No Jitter survey that say they are using Skype for Business on-premises, 33 percent said they are using Enterprise Voice as a PBX replacement.

source: No Jitter

Of those 75 respondents, 52 percent estimate that their organizations have replaced at least half of their prior PBX capacity with Skype for Business Enterprise Voice and 63 percent indicated that their organizations will have done so in two years.

Some 17 percent of these respondents report a full replacement of PBX capacity, with 25 percent reporting that they expect to have fully replaced their PBX capacity with Enterprise Voice in two years.

Overall, 61 percent of respondents using Enterprise Voice said they consider it to be "better" or "much better" than the PBX systems replaced or still in use at their organizations.

source: No Jitter

Conversely, 11 percent deemed Skype for Business to be "worse" or "much worse," while 22 percent said Enterprise Voice and PBX systems are about the same in their experience.

Of those respondents whose organizations have already shifted some or all of their UC to Skype for Business in Office 365, many seem to be open to the idea of using Microsoft's cloud-based calling services..

Just shy of 60 percent of 175 respondents said they are already using or have considered using Skype for Business in Office 365 for voice services.

source: No Jitter

New Thinking on Bundles?

For a couple of decades now, the triple-play bundle has been a mainstay of fixed network service provider strategy for coping with greater competition.

Simply, where it might once have been possible to garner up to 80 percent or 95 percent of all potential customers for a particular service, it now is quite common for any single contestant to get 30 percent to 40 percent share.

Under those conditions, selling more products to a smaller number of customers is necessary and rational.

Still, there always are niches in the communications business, especially for smaller providers without the benefits of massive scale.

Some independent Internet service providers might focus on dual-play packages. Some mobile services providers are pure-play mobile suppliers. Some might have wholesale-only business models, selling a single capability to retail partners.

Over time, even some former triple-play services providers might rethink that stance, and focus instead on dual-play communications bundles. Potential new regulations, it is claimed, could undermine the video business model for smaller cable TV operators, for example.

Even AT&T essentially now is emphasizing a different type of triple play (fixed network Internet access plus voice; combined with satellite video entertainment; or mobile voice and Internet plus satellite video) than in the past.

The point is that even when a particular strategy makes sense for scale players, there always are niche strategies for smaller specialists that defy the general rules.

"The Era of Paying for Voice Calls is Ending," Says Reliance Jio CEO

source: ITU

Reliance Industries Chairman Mukesh Ambani says domestic voice calls will be free forever on the Reliance Jio network. He also and announced a four-month introductory offer of free voice and data services for new customers, starting on September 5, 2016.

“The era of paying for voice calls is ending,” he said.

That, in a nutshell, the fundamental revenue problem faced by legacy service providers in the Internet era: it is tough to compete with providers that “give away what you sell.”

Analysts at Morgan Stanley Research expect Reliance Jio to generate more than $2 billion revenues in 2017 to 2018 period, gaining two percent voice market share and 19 percent market share in mobile data, without overall mobile market share of six percent.

That forecast sees Jio getting  more than 40 million subscribers in a year.

Analysys Mason says mobile data tariffs need to be reduced 75 percent to bring costs in line with developed nation levels.

India’s data tariffs for 1 GB of usage represent 2.6 percent of gross national income per capita

Developed country levels are 0.4 to 0.5 percent GNI per capita.

source: ITU

“Our analysis concludes that a 75 percent cut in data tariffs (average revenue per GB of Rs 57) alone could increase the user base to 645-667 million SIMs, and the level of monthly data usage to around 4.2-4.3 GB per SIM in 2019-20,” said Analysys Mason.

Perhaps nobody expects a 75-percent fall in tariffs over the next couple of years. Longer term, it is hard to bet against such an outcome. Fixed network Internet access prices in the developing world--arguably a much-tougher proposition, still have been falling towards developed country levels, on a percent of GNI basis.

By 2015, average mobile broadband prices corresponded to 5.5 percent of GNI per capita, worldwide. In developing countries, the average was more like seven percent. Of course, mobile Internet access was below one percent in developed countries, as a percentage of GNI per capita.

Further reductions in fixed network costs might be difficult, some data suggests. Since 2013, for example, fixed network costs seem to have grown, not shrunk.

source: ITU

Over 15 Years, Average Internet Speed Ceilings Have Become Floors

source: PCmag.com

Progress is very swift in the Internet access business. In 2009, the average Internet access speed in Australia was about 12 Mbps. So at the time, a boost to 25 Mbps, the minimum national speed promised by the National Broadband Network,  sounded pretty good.

In 2009, the average Internet access customer In the United Kingdom was getting 4 Mbps. So a boost to “superfast” (24 Mbps to 30 Mbps) likewise sounded pretty good.

That same year, typical U.S. speeds were in the 5 Mbps range. By 2015, though, average U.S. downstream speeds had climbed to nearly 36 Mbps.

So we don’t hear much about 24 Mbps or 30 Mbps being “superfast.” The U.S. Federal Communications Commission, in fact defines broadband as being a minimum of 25 Mbps downstream.

source: PCmag.com

In 2016, the biggest cable TV ISPs offer downstream speeds ranging between 49.6 Mbps and 39 Mbps. Verizon matches the top average speed of 49.6 Mbps.

Among other ISPs, Google Fiber is the absolute fastest, offering average downstream speeds of 354 Mbps.

In other words, what once was a “goal” now is simply a “fact.” For expensive, long-lived assets such as Internet access networks, all that shows how dangerous it is to make too many assumptions about “where we are, and where we are going,” where it comes to the Internet and Internet access.

Give Google Fiber credit for kicking off a major upgrade cycle in the U.S, market, despite some mocking of that role by AT&T.

But typical speeds have been increasing fast. In fact, Comcast, the leading U.S. Internet service provider, has been increasing speeds at rate equivalent to Moore’s Law--doubling about every 18 months.

With 5G coming fast, even mobile Internet access is going to happen at gigabit speeds.

source: Akamai

source: Ookla

Australia’s NBN now says the whole network will be finished by 2020. The NBN expects to earn about A$5 billion in wholesale revenue, with average revenue per user forecast at A$52.

The network also will deliver speeds of at least 50 Mbps downstream to 90 percent of fixed line premises.

Perhaps oddly, only customers served by hybrid fiber coax networks will be able to get gigabit per second service.

Flexibility or Debilitating Uncertainty From New Proposed EU Net Neutrality Rules?

Sometimes, it is sensible not to create hard and fast rules to cover circumstances that are expected to be novel. In other cases, the same stance can create such uncertainty that innovators will be dissuaded from trying to create new things.

New proposed rules on network neutrality are likely to cause just that problem.

As a practical matter, network neutrality is based on a principle that “providers of internet access services shall treat all traffic equally,” a concept initially seen as primarily relating to the notion of “best effort access only,” with no prioritization of packets by sender, receiver, terminal or access network.

Even if some think ISPs--or consumers, app providers and ISPs--should be free to create access services with quality of service measures, the default “best effort access only” principle is at least clear.

Other newer proposed principles are not so clear.

The net neutrality concept has been broadened, in some quarters, to rules about zero rating of apps or data received by a user or customer.

New proposed regulations  by the Body of European Regulators for Electronic Communications (BEREC) do not necessarily create clarity on that matter.

The guidelines prohibit zero-rating in circumstances "where all applications are blocked or slowed down once the data cap is reached," though the document also acknowledges that some cases are "less clear-cut."

Therein lies a problem. The proposed rules do not clearly permit or outlaw zero rating. Instead,

BEREC says practices will have to be looked at case by case.

Companies are not going to take many risks, under such circumstances, even if consumers want such features, services and price points.

There are other issues as well, but the creation of uncertainty is a clear problem.

Bandwidth Inequality is Going to Increase, at Least Momentarily

source: M. Hilbert

There are times when the amount of communications capacity, as available to consumers across the globe, becomes more equal, and times when there is more inequality. We seem to be heading for a time when gaps grow again.

Since 2006, gaps have tended to shrink, globally. In 2012, by one analysis, gaps began to grow again. The reason is that the introduction of new platforms tends to happen unequally, first in developed markets, later in developing markets.

source: 4G Americas

With 5G coming, platform-based inequality will grow, for a time. But there are some other

developments likely to widen gaps. In the U.S. market, unprecedented amounts of new spectrum are going to be released, while spectrum sharing and massive amounts of unlicensed spectrum also are coming.

At the same time, North America is witnessing huge leaps in bandwidth supply from cable TV companies about to innovate at their own pace, separate from what all other suppliers using traditional telecom technology can do.

At the same time, significant new uses for fixed wireless, especially in conjunction with new platforms, new radio and antenna technologies and use of shared and unlicensed spectrum, are going to make possible huge increases in delivered bandwidth, at prices lower than possible using fiber to the home.

As small cell technology is more-widely deployed, gaps between rural and urban users also will start to increase again.

AWS, Other Cloud Computing Leaders Best Telcos in U.S. Market

With NTT as the exception that proves the rule, tier-one telcos have not been able to outcompete the application and commerce providers that, oh by the way, have decided to monetize their cloud computing assets.

The “bundled services” strategy Verizon and AT&T attempted, melding cloud services with private internet networks, security, data storage and service guarantees, has failed to gain traction, compared to Amazon Web Services, Microsoft, IBM and Alphabet (Google).

Some would argue that the market changed. Though colocation remains a distinct segment within the broader “data center services” market, the cloud computing market arguably has changed because the original concerns about security have faded.

In substantial part, those buyer perceptions changed because the leading app cloud computing services were able to create security mechanisms strong enough to allay the original fears.

In other words, a buyer would often have closen AWS for cloud computing, unless convinced security was not sufficient. If AWS could prove that fear was unjustified, then it was going to make sense for customers to buy from AWS, rather than other suppliers without AWS moxie.

The other issue is that AWS and other leading cloud computing companies arguably were quicker to build ecosystems around their cloud offers, as well as making it easier for developers to create new features, services and apps in a cloud context.

Some will draw larger conclusions from those developments. Some will say that, once again, tier-one telcos have proven they are not adept at innovating. There is historically much truth to that argument.