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.

Why "One Talk" Now?

source: Software Advice

One obvious question about the new Verizon “One Talk” service, a unified communications offer that, among other things, forwards landline calls to mobiles, is whether Verizon can take significant share from other existing providers such as 8x8, RingCentral, Vonage or West, for example.  

One other obvious question is why the new offer, and why now. And a high level, the issue is that Verizon now is mostly a mobile services company, with a declining business customer base.

A new business phone service heavily based on the mobile network suits Verizon more than a number of other providers.

At the same time, if hosted PBX is a business Verizon really wants to be in, it has to make moves to gain market share. While Verizon is not an “also ran,” neither is it in the top ranks of the business, based on seat licenses.

To some extent, the offer also aims to provide a solution small businesses say they want. Some 29 percent of small businesses surveyed by Software Advice want a phone system that forwards calls to alternate devices.

That survey also found that small businesses tend to rely more heavily on mobile devices than on other kinds of phone system endpoints such as softphones and traditional desk phones.

The price for One Talk is typically $25 per month per user, but customers also need to buy new IP desk phones.

Of course, there are other potential savings, for any business considering a full installation or replacement of a premises phone system.

source: Software Advice

Factoring in hardware costs (the hardware itself, plus the installation), along with the wiring and the man-hours to run and terminate all those cables, plus the new phones to work with the system you’ve bought, you’re looking at costs between $500 and $800 per user, says John Macrio, Edgewater Networks VP.

For a 25-user installation, that’s between $12,500 and $20,000. With the VOIP option, the phones are all you buy, which will run you between $100 and $250 each.

If much of the cost now is the cost of buying a switch, and wiring or rewiring a location, then the attraction of a mobile-based offer is clear: no switch, no wiring.

Adding the Verizon One Talk dialer to a certified device (e.g., Samsung Galaxy S6 or Galaxy S6 edge at launch) with no shared endpoints on the same mobile line, costs $15 a month.

The Auto Receptionist and Hunt Group numbers are $20 each month (buyers get one feature free of each) per business account. Each additional number is $20 is month.

The Software Advice survey confirmed that small businesses rely on auto-attendant features, so the auto receptionist feature offered by Verizon is significant.

Verizon One Talk Feature	Description
6-Way Conference	Expand a voice call to include up to 6 participants without dialing in a conference bridge.
Account Codes	Codes that allow you to associate individual calls with a specific code for tracking purposes. The system administrator can later view the calls placed using each code.
Anonymous Call Rejection	Your business will not receive calls unless there is a Caller ID number from the caller.
Automated Receptionist	The Automated Receptionist will answer incoming calls to your business and allow the caller to select which department or person they wish to speak with.
Automatic Callback	Automatically redial a busy number until it is available.
Bridge Line	You can allow your number to ring on one additional desk phone.
Call Forwarding	Keep your business in touch with callers by automatically forwarding incoming calls to the best available resource. There are various options available to best fit your business needs.
Call Waiting	Alerts you and allows you to take a second call while you are on the phone with someone.
Caller ID Blocking	Prevents your number from being sent on outgoing caller ID.
Calling Line ID Delivery	Define a number from your Simple Talk group that will be sent to other callers when you call them.
Calling Plan	You can require authorization codes for dialing outside of the Simple Talk business group; that could include calls to Local/Long Distance and/or International numbers.
Custom Ringback	Use the default or upload a custom audio file that gets played when callers dial a Simple Talk business line. This would replace the standard ringing tone.
Group Forwarding	Quickly forward multiple user lines to the same destination/number; most commonly used for business continuity.
Hunt Group	Set and apply rules for passing incoming calls to the first available line in the pre-defined group of users/lines.
Messaging	Mobile devices associated with either One Talk Dialer or One Talk Mobile App can send and receive SMS messages.
Pre-Alerting Announcement	Play an audio file of your choice while the caller waits to be connected when your number is called.
Remote Call Pickup with Barge In	Allows other members of your business to remotely pick up your line while it is ringing or join your call in progress with or without a warning tone.
Remote Group Pickup	Ensures calls are answered by allowing you to remotely pick up someone else's ringing line in the group from your phone.
Schedule	Allows the company to set office hours of operation and holidays. These scheduled hours can be used for call management features at the user and group level.
Selective Call Acceptance/Rejection	Only accept specific calls based on conditions you define, or reject incoming calls based on pre-defined conditions you set.
Simultaneous Ring Service	Have more than one phone number ring when someone calls your number.
Video Calling	Telephone numbers associated with video capability can receive and send video in a 2-party call.

Looking only at the number of seat licenses sold, in 2016 the market leaders were RingCentral, 8x8 and Vonage.

source: 8x8