IoT Simply is the Future

There is a very good reason why firms such as AT&T, Verizon and others are investing in what might be called the next generation of revenue models for mobile and fixed networks: carrots and sticks.

The carrot is the huge range of applications and services related to Internet of Things, ranging from connected car to smart cities, that will underpin future revenue models.

The stick is the need to replace half of all current revenue over a decade, and perhaps over each of the next decades to come after that.

So mobile operators are investing to support future IoT apps for the same reason people pick certain spots to fish: that is where the fish are. That is reflected not only by high level strategy--the need to discover or create huge new revenue sources--but also by the prosaic changes in market demand for communications-related services.

To a greater extent than at present, more of the communications demand generated by IoT will come from urban areas, less from rural and suburban areas.

At a high level, more people will choose to live in urban areas, as opposed to rural and suburban areas. Higher density will mean better economics for autonomous vehicles and transportation overall.

So smart cities will be built on huge networks of sensors, big data and rich communications.

To be sure, it is possible everybody is wrong. But enterprise executives believe they will need IoT, and that IoT could be transformative for their industries.

source: IoT Analytics

T-Mobile US Customers Lead Daily Mobile Data Usage

Lower the price of some desired product and consumers will buy more of it, basic economics suggests.

And that might be precisely what is happening with U.S. customer mobile data consumption, as T-Mobile US, generally considered the “price leader,” has the highest average daily mobile data consumption, while Verizon Wireless, generally considered the most-expensive of the four leading U.S. mobile service providers, has the least average daily data consumption.

source: Business Insider

Are Telcos Shifting Investment to Fixed Network, Away from Mobile?

With the caveat that it always is difficult to abstract local trends from global trends, Dell’Oro Group says investments in fixed networks are growing, while investments in mobile networks are declining, in the first half of 2016.

That is not to say that overall capital investment is dropping. In fact, investment might well continue to grow.

source: IHS Infonetics Research

A relatively flat trend, by some estimates, be not be unusual, as global telco capex has been dropping since perhaps 2013.

source: Infonetics Research

There always are logical reasons for the cyclical fluctuations. Mobile investment tends to be spiky, rising when new next-generation networks are being built, then leveling off as those networks reach completion, and capex shifts back to maintenance.

But there arguably are other important drivers of behavior. With the growing need for faster fixed network access speeds, as well as continuing competitive threats, many service providers with the option to invest more in either mobile or fixed networks might be shifting funds to upgrade the fixed networks.

Unfortunately, from a service provider perspective, less-robust revenue growth in the mobile segment also is an issue. If revenue upside from incremental mobile investment slows, it is rational to slow capital investment to match.

Investment in fixed networks is more strategic, though. Some amount of incremental investment is required--especially in markets where there are cable TV competitors--simply to maintain competitive parity.

Longer term, some investments in backhaul now are viewed as necessary to support expanded deployment of 4G and 5G small cells, or to grow business customer revenues.

The other long term issue is that capital investment as a percentage of total revenue, after a period of higher investment intensity, might be returning to more-typical ranges.

Analysts at Dell’Oro Group believe telecom capex will decline at a faster pace than revenues over the next three years.

Capital intensity might drop from 18 percent in 2015 to 16 percent in 2018, the analysts say. That would be about what longer-term investment levels have been.

source: Dell'Oro Group

How Much Data Will "Average" U.S. Homes Consume in 2 Years?

In 2011, the average U.S. household data consumption was perhaps 26 Gbps. Time Warner Cable says  the company’s average household usage in December 2015 was 141 gigabytes a month and has grown about 40 percent a year.

Such rates of growth, should they continue--and most believe double-digit annual increases are reasonable--quickly can up to doubling of consumption every 2.5 years to three years.  

In other words, by the end of 2016, the average Charter Communications customer (in legacy Time Warner areas) household might be consuming 197 GB worth of data, topping 276 GB by 2018.

But as with all things related to use of the Internet, averages might obscure as much as they reveal. Many consumers will use far less, but some might use far more.

U.S. homes using Internet-based video surveillance systems might require substantial upload bandwidth, for example, beyond that required for growing amounts of video entertainment in the downstream direction. Entertainment video requires an order of magnitude or more increase in transferred gigabytes, compared to web surfing, for example.

Typical upload bandwidth usage for a “Nest” home security system can reach 380 gigabytes, for example.

source: Southcentral Communications

What's the Advantage of Combining Chrome and Android?

Others of you can probably think of many other reasons why a single operating system blending Chrome and Android would be helpful, such as making tablets that work as notebooks, or notebooks that act like tablets.

Personally, this is the biggest obvious attraction: using the smartphone as the processor, docked to an external monitor or other tablet-sized screen.

For some applications, including content production, keyboards are a necessity and bigger screens very helpful. Sure, you could carry a tablet and external keyboard. You could carry a tablet and a PC, plus your smartphone. Many of us do.

But maybe having less to carry would be very useful.

source: Android Central

Will DirecTV Now be AT&T's Primary Video Platform in 2021?

AT&T’s new online streaming video service, DirecTV Now, will become the company’s primary video platform in three to five years, some inside AT&T apparently now predict. The speed of that change--and its implications--show just how much change might be expected in the entertainment video business and the service provider business model.

By switching to over-the-top delivery, AT&T in principle could avoid truck rolls, marketing, in-home capital and other fulfillment cost. DirecTV Now, though primarily aimed mostly at attracting new subscribers among the ranks of consumers disenchanted with linear services, might also eventually appeal even to consumers of facilities-based services that require a physical connection (satellite dish installation or installation of cables and set-tops.

Eliminating a truck roll and customer premises equipment could eliminate several hundreds of dollars of cost whenever a new customer is signed up and activated.

DirecTV Now, set to be introduced by the end of 2016, appears aimed at about 20 million households that have no cable or satellite service, competing with services such as Sling by Dish.

One might argue that DirecTV Now is worth doing if the “unconnected” were the only target. But the benefits might also extend to other consumers who already buy either a fixed network or satellite-delivered linear service.

For AT&T there are trade-offs in other areas, particularly the need to ensure that its access bandwidth assets are plentiful enough to support the big upsurge in bandwidth consumption on mobile and fixed networks.

Linear Subscription TV Continues Slow Subscriber Decline

Though linear subscription TV is a mature business, indeed likely a product in the declining phase of its product cycle, it is not yet a business in sharp decline. Instead, it continues to decline very slowly, in terms of subscribers, while average revenue per account keeps climbing.

Some 82 percent of U.S. TV households (there are more homes than “TV homes”) subscribe to some form of linear TV service, according to Leichtman Research Group.

The percentage of TV households subscribing to such services is down from 87 percent in 2011,

Among TV households that do not currently subscribe to a subscription service, 14 percent reported they had paid for a service in the past year.

Overall, about 2.6 percent  of TV households bought linear TV service in the past year, but currently do not, compared to 2.5 percent in 2015 and three percent in 2014.

Average (“mean”)  reported monthly spending on such services is $103.10 -- an increase of four percent in the past year. Though the lowest annual increase in five years, that rate continues to remain above the average rate of price increases elsewhere in the economy.

How much longer account revenue can grow at that rate also is an issue, as average household incomes are not increasing, in inflation-adjusted terms. As a result, the percentage of household income spent for linear video is rising.

That is among the reasons for new emphasis on "skinny bundles" featuring a menu of fewer channels, sold at a lower price.

That percentage can continue to rise if consumers reduce spending elsewhere in their budgets, as they have done with spending on mobile services. But even those increases have come at the cost of reduced spending on fixed network services.

The big unknown is whether the rate of decline remains linear, or becomes non-linear at some point in the future, and when that could happen.

source: IHS

source: nScreen Media

source: BLS

source: IHS

Comcast to Sell Business 100 Gbps Ethernet in Annapolis, Md.

Comcast is going to sell business customers 100-Gbps Ethernet in Annapolis, Md., illustrating once again that it is cable TV operators who now set the standards for much of the U.S. Internet and data communications market, consumer, small business or enterprise.

Such speeds would not be unheard of in the long haul network, but are rare in metro access markets.

You would think speed leadership would come from Verizon's fiber to the home network, but cable TV operators such as Comcast have matched and now are eclipsing Verizon FTTH speeds at the top end, and have been leading telcos in "average" speeds since before 2004, with big increases since 2006.

So far, Google Fiber has few enough customers that it does not factor into the national picture, even if Google Fiber can be credited with launching the latest round of upgrades to gigabit speeds.

Nokia already has demonstrated 10 Gbps symmetrical speeds on hybrid fiber coax, supporting the CableLabs “full duplex” version of DOCSIS 3.1. Full duplex uses time division rather than frequency division.



source: FCC National Broadband Plan

20% of T-Mobile US Binge On Users bought Data Plan Upgrades

The T-Mobile US “Binge On“ program that zero rates streaming video has gotten a 99-percent satisfaction rating in a study of consumers produced by Strategy Analytics.

Also, some 20 percent of Binge On users traded up from a lower tier T-Mobile US price plan to get Binge On’s benefits, so the program arguably is paying off for T-Mobile US.

All of that arguably also helps video packagers who have gotten more viewers and engagement.

The survey also found 68 percent of customers of rival mobile networks indicated either strong or moderate interest un-metered video streaming over the mobile network in exchange for streaming limited to DVD quality.

Also, some 14 percent of users reported they were either “very interested” or “extremely interested” in switching to T-Mobile to get zero-rated video.

That would explain why both AT&T--and Verizon to some extent--now have responded with similar offers.

Digital Realty Launches Service Exchange

Digital Realty is launching a cloud connectivity platform, The Digital Realty Service Exchange, which will provide private, direct connections between enterprise data centers and the public clouds of Amazon Web Services, Google Cloud Platform, IBM SoftLayer, and Microsoft Azure, in addition to other clouds.

Service Exchange will provide more-flexible and scalable interconnection services, with bandwidth-on-demand features, creating wide area connections that are virtually the same as if co-located partners were inside a single data center, and are managed with a single interface.

The service also provides redundancy across the whole network as though clouds were cross-connected inside a single data center, and allows customers to instantly self-provision extra bandwidth on demand.

The service will be available later this year--as early as November 2016--in 24 data centers and 15 markets, using software defined network capabilities provided by Megaport. “Traditionally, interconnection was a very physical operation and arcane,” said Eric Troyer, Megaport CMO. “We abstract all that.”

Essentially, Service Exchange gives even small customers the same capabilities as once possessed only by large carriers.

Service Exchange also should allow more customers to create express, point-to-point connections between their various data centers and apps, reducing latency by reducing unnecessary traverses of the WAN.

Among other advantages are better ability to move workloads across all available data center assets, easily and rapidly. In that sense, the new service makes all resources “local,” even when physically separated.

It might go without saying that the new features will make Digital Realty a more-capable alternative to similar services offered by Equinix.

Will Oligopoly Still be the Outcome, As New Platforms Emerge?

Capital-intensive industries tend to produce oligopoly market structures. Even some industries that are scale-intensive or moderately capital intensive also tend to do so, it seems. Look at Apple’s market share , for example.

So one reasonable question in the global access business is to ask whether technology platform advances can reduce capital investment hurdles enough to break the “oligopoly” market structure.

If so, then a wider new competitors might expect to break into the top ranks. If not, then only big firms can hope to do so.

At the moment, in several markets, it appears the latter thesis will be tested. In India, the entry of Reliance Jio already is rearranging market structure, forcing consolidation. In the U.S. market, Comcast and Charter Communications are getting ready to enter the market. In Myanmar and Singapore,  new competitors are being authorized.

So far, no breakthroughs in platform cost have occurred that could challenge oligopoly structures, though. In other words, the zero sum game continues to prevail, and one contestant’s gains will come at another’s expense.

It is unknown how much new fixed wireless and mobile platforms might change possibilities for non-oligopolistic market structures, on a marketwide basis. But it might be reasonable to suggest that the new platforms will lower provider cost, but not enough to overcome oligopoly assumptions.

That is not to underplay the potential importance of several new platforms, as well as continued advances by hybrid fiber coax networks. Lower platform costs are helpful in increasingly-competitive markets where capital and operating costs must be lowered.

Lower costs are required to serve rural customers as well. But, at least so far, none of the platforms seemed poised to break the background setting that business models assume costs high enough that oligopoly is the outcome.

In addition to devices, oligopoly also seems to prevail in the consumer applications market.

According to comScore, in the United States, the top seven apps, and eight of the top nine apps are owned by Facebook or Google.

Indeed, one might ask whether it is possible for any new apps providers to displace Google and Facebook, either.

Some might argue that stable oligopolies are possible somewhere between two and four providers, with many arguing three strong contestants is the optimal sustainable outcome. That four or more providers exist in many markets is considered by many a “problem” in that regard, generally called the rule of three.

Most big markets eventually take a rather stable shape where a few firms at the top are difficult to dislodge.

Some call that the rule of three or four. Others think telecom markets could be stable, long term, with just three leading providers. The reasons are very simple.

In most cases, an industry structure becomes stable when three firms dominate a market, and when the market share pattern reaches a ratio of approximately 4:2:1.

A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest, according to the rule of three.

In other words, the market share of each contestant is half that of the next-largest provider, according to Bruce Henderson, founder of the Boston Consulting Group (BCG).

Those ratios also have been seen in a wide variety of industries tracked by the Marketing Science Institute and Profit Impact of Market Strategies (PIMS) database.

In U.S. and U.K., 10-12% of Internet Users are "Mobile Only"

More than 90 percent of Australians under 50 go online using a mobile phone. That does not mean that “only” do so using a mobile device, only that the behavior is ubiquitous.

As with many other aspects of Internet behavior, older age cohorts use their mobile devices to use Internet apps at a lower rate.

Some 75 percent of all consumers in Australia access the internet using a mobile phone, according to a June 2016 survey by Sensis.

But that figure is because just 61 percent of those ages 50 to 64 do so, and just 33 percent of those ages 65 and up do the same.

For some, the more interesting question is what percentage of people use “only” the mobile device for Internet access.

In earlier 2016, for example, 11.7 percent of U.S. Internet users were going online exclusively using a mobile device mobile device, and do not use personal computers or other devices at all.

In fact, since 2015, according to comScore, there are more “mobile-only” than “desktop only” Internet users.

In the United Kingdom, about 10 percent of Internet users use mobile exclusively to get online, according to Ofcom.

source: comScore

source: eMarketer

Ting Will Face Big Test in Denver, Colo. Suburb

Ting will face an important test of its abiliity to compete against the tier-one providers when it lights a gigabit network in Centennial, Colo., where both CenturyLink and Comcast already offer, or soon will offer, their own gigabit services.

It might be one thing to offer gigabit services in a smaller community where it will not have to face a tier-one provider. It will be something else again to compete against two tier-one providers, each of which already is committing to offer gigabit services.

That will be the case in Centennial, a suburban community in the southern part of the Denver metropolitan area. For that reason, it is a crucial test, not only for Ting, but all other independent gigabit providers.

AT&T DirecTV Now Launch Will Include Zero Rated Bandwidth on the Mobile Network

In the fourth quarter of 2016, AT&T will launch DirecTV Now , an over the top video entertainment product with a heavy mobile or untethered focus, featuring “100-plus premium channels.”

There are a couple angles here. Consider the way AT&T plans to manage bandwidth consumption and pricing, something that, in the mobile realm, has been a challenging barrier.

“And when you buy this content, the data required to stream it on your mobile device is incorporated into the price of the content,” said AT&T CEO Randall Stephenson at an investor conference.

“If you choose to use that in a mobile environment on AT&T your data cost associated with this is incorporated into your content cost,” he said.

There is a precedent for this: broadcast TV, broadcast radio, Sirius XM and cable TV and other linear video services. Or, if you like additional examples, newspapers and magazines that consumers can subscribe to, with delivery cost simply bundled into the price of the subscription.

Media products, in other words, always have featured incorporation of delivery cost into the purchased product price.

Zero rating of delivery cost (no incremental charge, in the above examples), is simply a common media and content product pricing model. Though some insist on casting zero rating as an infraction of network neutrality, it is simply an accepted model for media products.

As some have argued, video entertainment services can be viewed as “managed services,” not “Internet” apps. By definition, managed services are not subject to network neutrality rules.

The other angle is that in zero rating video entertainment, AT&T shows its belief that its mobile network can handle the huge increase in consumed bandwidth. And if the mobile network can handle entertainment video, it can handle all the other conceivable media types.

If the mobile network can handle all the media types, and former bandwidth restrictions are not impediments, then mobile increasingly will be a viable substitute for the fixed network.

AT&T Believes Default Future Architecture is Wireless

Just in case you were wondering whether tier-one service providers such as Verizon and AT&T actually believe they can use fixed wireless and mobile services to compete directly with fixed networks--including optical fiber directly to the premises--consider what AT&T CEO Randall Stephenson recently said at an investor conference.

“Our default or target network architecture in the long run is wireless,” he said. “We think that's where we need to be.”

But what about fiber to the premises? “ Obviously fiber is going to be important for several years,” Stephenson said. Of course that will be the case, in enterprise, backhaul and wholesale settings in particular.

But that is not the key point. AT&T might be wrong, but it actually believes wireless will do the job.

“But as we look out in a world of 5G our target architecture is a wireless architecture,” he said.

Fortune 500 CEOs are a sober lot, not given to flippant remarks when speaking in investor forums. So that is a significant statement.

So that little tidbit is instructive. It will bother some in the ecosystem. Many will doubt the shift to wireless is going to be easy, or even possible. But many of us would not bet against the premise.

There simply is too much development effort, too much new technology, too much new spectrum coming and too clear a need for lower infrastructure and operating costs, for that shift to wireless not to be attempted.