U.S. Net Mobile Account Growth Now Driven by IoT

Of the 5.38 million net account additions gained the top-four U.S. mobile service providers, about 1.79 million were of the postpaid smartphone type that are prized by carriers. In other words, about 66 percent of the net account gains were devices of other types, such as tablets, connected cars or machine-to-machine links. Included in that bucket are wholesale accounts, such as net adds by mobile virtual network operators.

One common feature of all those types of connections is lower average revenue per account than smartphones represent.

Note that connected car and IoT accounts represented about 57 percent of the total retail net additions in the third quarter of 2016, vastly more numerous than the 10 percent of tablet adds.

To the extent that MVNOs continue to exist, it is as niche specialists, many serving credit-challenged or language and culture minorities.

source: Chetan Sharma

source: Strategy Analytics

Verizon	AT&T	T-Mobile	Sprint
140,100,000	130,400,000	65,500,000	58,800,000
Operator Brands
	Cricket Wireless	GoSmart Mobile	Boost Mobile
		MetroPCS	Virgin Mobile
America Movil US MVNO Brands 25.7 million subs
Tracfone	Tracfone	Tracfone	Tracfone
Net10	Net10	Net10	Net10
StraighTalk	StraightTalk	StraightTalk	StraightTalk
Page Plus Cellular		Simple Mobile
Total Wireless		Telcel America
Other MVNOs
GreatCall	Consumer Cellular	Consumer Cellular	Republic Wireless
Red Pocket Mobile	H2O Wireless	Ultra Mobile	Ting
Selectel Wireless	Airvoice Wireless	Ting	Credo Mobile
ROK Mobile	Red Pocket Mobile	Lyca Mobile	iWireless (Kroger)
		Red Pocket Mobile	Red Pocket Mobile
		TPO Mobile	TPO Mobile
		Univision Mobile (Ultra)	Kajeet
		Family Mobile	Text Now
		Project Fi	Project Fi

source: MVNO Blog

Quality, Not Just Quantity, is Required for Sustainable Consumer Internet Access

One can argue that ever-increasing capacity expansion, combined with relatively inelastic willingness to pay, pose either a challenge or a crisis for the internet access industry, at least at the tier-one level. Conversely, openings in the market for local, small specialists should increase.

Consultant Martin Geddes always talks about the need to emphasize quality, not just quantity, where it comes to internet access.

“The broadband industry is presently caught in an insane ‘fat pipes’ model that simultaneously fails to deliver predictable and consistent experiences, whilst also wasting huge amounts of capital and thus inflating costs,” he says. “In this model, the central belief is that the job of a network is to create as much data throughput as possible, which is (wrongly) conflated with enabling good user experiences.”

In effect, “quality of experience” issues underlie thinking about network neutrality (outlawing direct measures to improve quality in favor of measures to increase quantity). At the same time, measures that make “experience” possible within a sustainable business model (zero rating, for example) likewise are viewed strictly through a “restraint of trade” lens, ignoring the alternative issues of “experience that also is sustainable.”

In virtually all other product categories and industries, products can be developed and marketed within a framework that includes both price and quality. Consumer internet access often outlaws any dimension but quantity.

Those issues will begin to cause increased friction as the driver of internet access and bandwidth clearly shifts to video entertainment apps.

Municipal and State Networks for Internet Access Getting More Attention

One trend you always can count on when any former-monopoly market is opened to competition is that many new niches develop. In the telecom business, that meant the development of firms selling mostly to smaller businesses or enterprises; metro fiber wholesalers; data center operators and affinity mobile services companies. Some firms sell managed services; others Wi-Fi hotspot service.

But regional optical fiber networks also have developed, and some emerging networks are operated as public-private partnerships or municipal cooperatives. In a growing number of cases, towns themselves are opting to sell internet access directly to citizens.  

The KentuckyWired project (also known as Kentucky I-Way in eastern Kentucky) is building a network backbone costing $350 million over the next 30 years and plans to lease capacity to retail service providers.

The Massachusetts WiredWest program is a cooperative formed by 32 towns to build a wide area network and local fiber-to-home networks delivering local internet access in each of the towns.

Communities must get at least 40 percent of households in their area to commit to purchasing internet access service, making a $49 deposit that is reimbursed as a credit against the first bill.

The cost to build the network in the 32 towns is an estimated $79 million. The state is contributing up to 40 percent of the funds, but the towns must provide the rest.  A 55 percent vote in a town meeting is needed to approve borrowing the funds each town must contribute.

Retail internet access of 100 Mbps costs $79 a month. Gigabit service costs $109 a month.

WiredWest also sells phone service for $25 a month and also plans to sell entertainment video services.

Facebook Millimeter Wave Radios Hit 20 Gbps Each Direction

Facebook’s Connectivity Lab now is flight testing its first generation air-to-ground bidirectional link capable of 20 Gbps in each direction, intended to support the Aquila unmanned aerial vehicle for internet backhaul.

The aerial payload is mounted on a Cessna aircraft and is being flown at altitudes up to 20,000 ft., Facebook says.

The next generation air-to-ground communication system capable of supporting 40 Gbps each on uplink and downlink between an aircraft and a ground station will be flight-tested in early 2017.

source: Facebook

Earlier in 2016 Facebook tested a terrestrial point-to-point link in Southern California.

In that test the link achieved a data rate of nearly 20 Gbps over 13 km at millimeter frequencies.

Using a set of custom-built components, the team achieved that data rate using 105 watts of total direct current (DC) power consumption at the transmitter and receiver.

The transmission used a bandwidth of 2 GHz, resulting in an overall spectral efficiency of 9.8 bits per second per Hertz.

AT&T to Introduce Stream Saver Feature in 2017

Almost every decision made by service providers about consumer data consumption turns on video entertainment demand, as that is the application that drives most data consumption, by most consumers.

Starting in early 2017, AT&T will introduce AT&T Stream Saver, a free feature, user controllable, that reduces mobile data plan consumption by converting video content to 480p resolution. That feature will work for most, but not all video, as some providers deliver video in ways that can be converted, AT&T says.

Decried by some as unwanted “throttling,” the “Binge On” feature that likewise reformats mobile video to 480p is loved by consumers, T-Mobile US says. In fact, Binge On got a 99-percent approval rating by consumers, in a study by Strategy Analytics.

Telecom is a Tale of 2 Markets Now; Ultimately Just 1 Market

Revenue growth in the global telecom business is a story of two different types of markets. On one hand, service providers are challenged in developed markets, while subscriber and revenue growth mostly happens in “emerging” markets.

Sooner or later, many predict, the end of growth will be a problem for all service providers, in all regions, for the same reasons. Two of the huge revenue drivers--voice and messaging--are in decline, even in emerging markets (in terms of revenue per unit). One of the new revenue drivers--entertainment video--has passed maturity and is set to begin declining. One of the important newer revenue sources--internet access--does not yet face actual revenue decline, but does face rapidly-falling prices per unit sold.

All that means that in addition to hunting for, discovering and creating big new revenue sources, something big will have to happen in infrastructure and operating cost areas. If revenue is challenged, then costs also have to be controlled.

That is why innovation of all sorts is necessary. Virtualized or software-defined networks are part of the answer. Open source is part of the answer. New backhaul and access networks also must be part of the answer.

source: Oracle

Fixed Wireless is Necessary, Getting Much Better

No matter what limitations you presently believe fixed wireless networks suffer from, progress now is proceeding at stunning rates. An order of magnitude increase in spectrum efficiency is one example. An order of magnitude decrease in installation labor provides another example.

To be sure, predictions about wireless access adoption have been wrong in the past. But the promise of high capacity networks costing a fraction of traditional fixed networks especially is important.

Though there is disagreement about fundamental prospects for fixed and mobile network businesses (some still believe the big tier-one providers are dangerous monopolists), there is growing evidence that the ability to wring revenue out of even advanced fixed or mobile networks is challenging.

Stranded assets are one problem. As the number of leading providers in a single market grows, stranded assets also grow. Where, in a monopoly environment a service provider might reasonably hope to reach 80 to 95 percent penetration, in a competitive market, customer adoption rates might only reach 40 percent.

In the next wave of development, it even is possible that mobile networks (operating in both mobile and fixed contexts) will actually begin to take share from all fixed network providers.

Also, all the legacy revenue services are declining, forcing suppliers to create or develop big new revenue sources to replace those lost revenues. That never is easy. Indeed, most observers will tend to agree that big telcos have been fairly poor to awful at such innovation.

It would help if service providers could avail themselves of vastly more efficient network technologies.

source: Tarana Wireless

source: gigaom

source: STL Partners

Autonomous Vehicles and Job Loss

Productivity--the ability to produce more with fewer resource inputs--is important because it is directly linked to a rise in living standards. While that might be true at the macro level (whole economies or countries), it is not automatically true at the micro level (particular workers in particular industries and regions).

So consider the impact of autonomous vehicles, perhaps just one example of a worrisome trend, namely technology-caused job destruction.  

The US Bureau of Labor Statistics estimates that 758,220 people are employed in general freight trucking, with another 493,870 in warehousing and storage, 457,010 as couriers and express delivery drivers, and 337,530 as specialized freight trucking.

Morgan Stanley estimates that the freight industry stands to save $168 billion annually as a result of autonomous vehicle technology, and that $70 billion of that will come from a reduced wage bill.

There are an additional 173,770 school and employee bus drivers, and 180,960 taxi drivers and chauffeurs.

In total, the Transportation and Material Moving Operations section of the US economy accounts for 9.54 million people, with a mean annual wage of $35,160 – accounting for an estimated wage bill of $335.3 billion.

Autonomous vehicle systems could indicate a 50 percent reduction in that wage bill. As always, a “cost” to one participant in an ecosystem is “revenue” to another.

Churn Reduction Often More Valuable Than Direct Revenue

Not many mobile or fixed network service providers are likely to make huge amounts of direct revenue, or profit, from mobile banking services. Instead, value is going to come from indirect mechanisms, such as reducing churn.

The total transaction value of mobile financial services in emerging markets (including domestic money transfers, deposits on loans, insurance products, and savings accounts) will approach $500 billion in 2021, up from an estimated $198 billion in 2016, according to Juniper Research.

The Telenor Suraksha life insurance offer in India, for example, has seen nearly 50 percent of its 45 million user base sign up since its December 2015 launch. That might help with customer acquisition, but it certainly will help with retention.

Decreasing churn by one percent can yield a revenue improvement of 0.6 percent to 0.8 percent, some argue.

So churn reduction might yield more benefit than direct mobile financial services revenue. Retaining a single voice customer in a $7US ARPU market with three percent monthly churn would preserve approximately $250 in lifetime value.

To generate the same amount of revenues from a mobile money user would require the user to conduct transaction value of  $350 every month for three years (the average lifetime of a voice customer) and pay the operator two percent in fees.

Open Source Core Networks?

The CORD Project (Central Office Re-architected as a Datacenter) now says its open source virtualized Evolved Packet Core (EPC), part of the broader 5G M-CORD suite, now is available, building on  the Radisys EPC framework. “Today, with Radisys’ transformative open source EPC contribution, M-CORD is on its way to becoming a completely end-to-end open source platform that will deliver the fundamental value of 5G with economies of scale in the mobile network and accelerated delivery of new services,” said Guru Parulkar, executive director of the Open Networking Foundation and ON.Lab.

Open source core network platforms are the objective of the CORD Project, supported by AT&T, China Unicom, Google, NTT Communications, SK Telecom, and Verizon, Ciena, Cisco, Fujitsu, Intel, NEC, Nokia, Radisys and Samsung.

CORD and its partners also are developing the open M-CORD platform for 5G including open source solutions for programmable Radio Access Network (RAN), disaggregated and virtualized EPC, mobile edge computing, and end-to-end slicing from RAN to EPC, the group says.

CORD intends to bring data center economics and cloud flexibility to the telco Central Office and to the entire access network.

21 Billion Connected "Things" by 2020

Some 6.4 billion connected things will be in use globally in 2016, up 30 percent from 2015. The number of connecting devices will reach 20.8 billion by 2020, according to Gartner.

In 2016, 5.5 million new things will get connected every day, Gartner predicts.

Connecting those IoT devices will support a range of services spending of $235 billion in 2016, up 22 percent from 2015.

Those services are dominated by the design, installation and operation of IoT systems.  Connectivity services and consumer services will grow at a faster pace, however. In 2020, it is possible that some 13.5 billion consumer-facing devices will be connected.

Internet of Things Units Installed Base (Millions of Units)

Category	2014	2015	2016	2020
Consumer	2,277	3,023	4,024	13,509
Business: Cross-Industry	632	815	1,092	4,408
Business: Vertical-Specific	898	1,065	1,276	2,880
Grand Total	3,807	4,902	6,392	20,79

source: Gartner

Internet of Things Endpoint Spending (Billions of Dollars)

Category	2014	2015	2016	2020
Consumer	257	416	546	1,534
Business: Cross-Industry	115	155	201	566
Business: Vertical-Specific	567	612	667	911
Grand Total	939	1,183	1,414	3,010

source: Gartner

Is IoT the Leader of the Next Mobile Product Cycle?

Once upon a time, I did not think voice was a product like any other, with a life cycle. Clearly, I was wrong. International voice, long distance and “calling” all are products with a life cycle. As it turns out, text messaging is a product with a life cycle. So is linear video entertainment. Soon, it will be clear, even mobile data--the recent driver of revenue growth--also is a product with a life cycle.

As with any industry, or any business, facing a maturing set of products, new revenue-generating products have to be discovered or created. And that is why, even if internet of things revenues are small at the moment, they are strategically important.

And, at least so far, it is fairly clear that scale is required to participate extensively in the IoT business. In the U.S. market, AT&T and Verizon dominate IoT revenue streams in the operator space.

AT&T’s connected car reached the 10 million connected vehicles milestone in the third quarter of 2016, the first mobile operator to do so, argues Chetan Sharma. AT&T reached that milestone in less than 12 quarters, compared to the 25 quarters it took for tablet connections to reach the same level.

For 2016 through the third quarter, non-phone net account additions represented about 71 percent of all such account adds, with vehicles and IoT dominating.

Verizon’s IoT and telematics revenue rose 25 percent, year over year, in the third quarter of 2016, to reach $217 million of revenue, close to an annual run rate of about $1 billion.

Service provider IoT revenue passed the $1 billion mark in 2013, roughly tracking revenue growth for mobile data. Few likely believe that can continue, as IoT is about solutions, not simple connectivity, and not as direct a value as “mobile access to internet apps.” Also, IoT is industry-specific, and therefore a “vertical” sales opportunity, rather than a horizontal “every firm needs this” opportunity, for the most part.

source: Chetan Sharma

Hardware Knowledge is Becoming Less Important for Enterprise IT Buyers

One of the bigger changes in enterprise computing, with the advent of cloud computing, is that customers increasingly can de-emphasize hardware and not worry so much about the platforms software runs upon.

Conversely, Google infrastructure czar Urs Hölzle also argues that one of the key advantages of the cloud is that customers can get the benefits of new hardware without having to completely rework their software.

That, in turn, might lead to an easier hardware upgrade cycle than has generally been the case in the past. That advantage should apply both to Google and its cloud operations, as well as enterprise customer platforms. Google, for example, could safely experiment with a variety of hardware platforms without disrupting customer experience.

Hölzle sees a future where the overwhelming majority of customers won't even worry about what type of compute instance their workloads are running on. Instead, platforms will be responsible for intelligently suggesting what sort of compute resources customers should use and keep pace with what they need.

"So I hope, five years from now, one percent of cloud customers know the word 'machine type,' and 99 percent say 'I've never thought about it,"Hölzle said.

In a real sense, such changes also illustrate how enterprise applications are changing. Decades ago, enterprise computing was much more a case of buying the right hardware, installing and maintaining it.

With the shift to cloud, “computing” increasingly becomes a matter of what software enterprises and other businesses want to use, as provisioning from the cloud is a rather simple matter of ensuring that adequate quality bandwidth is available.

In a market where both computing and applications are managed services, even the process of buying potentially can change. To a growing extent, buying and using software and computing becomes a matter of buying a managed service.

At least in principle, that should mean suppliers of computing apps and platforms can expand from system integrators, value-added resellers and distributors to include new services specialists who no longer need to be as knowledgeable about computing platforms. In other words, where “knowing about routers and how to set them up and keep them running” once was a foundational skill set, that will be less true in the future, where knowledge about how particular software works in particular industry verticals will be more important.