U.S. Consumers Not Too Happy with Linear Video or Internet Access, Never Have Been, ACSI Data Suggests

With the important caveat that some service providers do much better than others, U.S. consumers generally do not say they are exceptionally happy with their internet access or video services. They never have been.

Customer service provided by U.S. cable TV providers likely has improved quite a bit over the last 30 years, and definitely over the last 40 years. Still, linear video service never has gotten much love from consumers, as video service virtually always ranks low on multi-industry satisfaction indices.

One might argue that, for all the progress, consumers still are not terribly satisfied. U.S. consumer satisfaction with subscription video ranks at 65 out of 100, among the very lowest scores for any consumer product.

Mobile services rank higher, across the board, with an industry average of 71 out of 100.

Internet access services, sold by the same entities, ranks lower than video or mobile, at an average of 64, earning the absolute lowest scores of any product tracked by the American Customer Satisfaction Index.

It is fair to note that there is more variation within categories (companies providing video, internet access or mobile service) than there is between different industries. The absolute highest average score is earned by TV suppliers (87 or 100), compared to an average score of 65 in the linear video subscription category. The lowest industry score in earned by the ISP business, at 64, a dynamic range of 23 points.

The best and worst mobile providers differ by just seven points. ISP satisfaction ranking vary by 17 points, high to low. Video service satisfaction varies by 16 points, high to low.

Fixed network voice scores vary by about 14 points, high to low, with an average industry score of 70.  

I cannot really explain why the fixed network services tend to generate less satisfaction than mos other products, other than to point to impressionistic evidence (consumers or businesses complaining about incorrect billing, overcharges, lack of responsiveness).

Once upon a time, service availability was far worse, with noticeable number of service outages every year. It has been argued that, aside from network outages caused by power outages or equipment failure, consumers notice immediately if their TV goes out, but might not notice if their phone stops ringing.

Given that TVs might be “on” for seven or more hours a day, while phones actually were used for minutes a day, there is some logic to that argument. If a phone did not ring, a customer would logically simply assume nobody was calling.

But almost every process related to linear video has gotten much better over the last 40 years, including network performance, billing and customer service performance.

Some four decades ago, most urban cable TV systems were under construction for the first time, meaning there was significant disruption of existing life, and the ever-present danger of accidents.

Over the next 30 years a process of acquisition also meant there was going to be a chance of customer service irritation as staffs and processes changed, billing systems were revamped and databases merged.

The all-copper networks were prone to outages, when built, for reasons having to do with the concatenation of failure points (amplifiers in series). Cable operators generally were cash strapped and arguably under-investing in customer service operations. It would not have been unusual to wait all day for an install. More recently, install windows moved to four hours, and in some cases even two hour windows.

The hybrid fiber coax architecture, meanwhile, has dramatically improved network availability performance.

Some will point to rate increases as a big source of irritation. If so, then wider adoption of “skinny bundles” and streaming services could move the needle.

source: ACSI

Still, it remains a bit of a puzzle why the subscription services, with the exception of mobile service or even fixed network voice service, always ranks so low.

Some will suggest that is at least in part because the customer has to keep paying every month. Others might argue the receipt of the bill is a constant reminder to the customer of the value-price proposition. But that also is true of groceries or supermarkets, fuel and utilities and personal services. And none of those products are ranked as low as internet access or video subscriptions (on average).

Ironically, though the linear video experience is unquestionably much better, satisfaction has not grown too much. For some of the suppliers, virtually no improvement has been seen over the last 15 years.

Why Ubiquitous Fiber to Home No Longer Makes Much Sense for AT&T, Verizon, CenturyLink

Perhaps you can argue that the CenturyLink acquisition of Level 3 Communications actually is not so much transformative as deepening a transformation that already had happened. But the proposed transaction still represents an important change.

Before the transaction (assuming it is approved by regulators), CenturyLink already was earning 64 percent of total revenues from business customers.

After the transaction, CenturyLink will earn fully 76 percent of total revenues from business customers, not the consumer segment.

Compare that to Verizon and AT&T. Verizon earns about 66 percent of total revenue from business customers.

AT&T earns about half its revenue from business customers, in large part because it is much more involved in the entertainment video business.

So after the acquisition, CenturyLink will be the service provider most reliant on business customer revenues. Of the three firms.

That should indicate fairly clearly why, even as it upgrades consumer internet access services, CenturyLink might not be able to justify a full “fiber to home” strategy. It is doubtful CenturyLInk can, at this point, recover its costs, as all consumer revenues combined amount to less than a quarter of total.

Verizon, which upgraded much of its consumer network to fiber already, alread had halted consumer fiber to home deployments, and appears now to be preparing a fiber distribution strategy that relies as much on wireless services as fixed network support.

AT&T, on the other hand, has much more reliance on mobile and satellite platforms to support its mobility and video services, and seems clearly to believe that mobile access is the foundation for the next wave of on-demand video entertainment.

So one reason telcos have been losing market share in consumer internet access to cable operators is because they are, indeed, investing elsewhere for growth. That is rational. At this point, none of those three firms likely could recover their costs if they invested heavily in consumer fiber-to-home access. There simply is not enough revenue to be gained, by doing so, as consumer revenues no longer represent the bulk--in some cases, overwhelming bulk--of revenues.

Targeted builds, in some neighborhoods, have a different payback, and might make good sense. But we are likely past the point where ubiquitous fiber to home makes financial sense.

That inevitably means these telcos will lose market share in consumer fixed network services, including internet access accounts. But it is rational to assume that is inevitable, and to focus growth efforts elsewhere.

source: Revenues and Profits

source: Market Realist  

source: CenturyLink

Most U.S. Consumers Choose Not to Buy the "Fastest" Available Internet Access Speed

Methodology always matters. “What” one chooses to account and “how” one chooses to count always affect the results. There also is a difference between what providers choose to supply and what consumers choose to buy.

The former can point to gaps in supply, the latter to the nature of demand.

The latest Federal Communications Commission’s latest report on fixed network internet access illustrates the interplay between consumer demand and supply. That is to say, it is easy to mistake “what is available” from “what people buy.”

The FCC report illustrates the services “most people buy,”  and not directly “what people could buy, if they wanted.” Services faster than 300 Mbps, if offered, are not included in the analysis if less than five percent of consumers choose to buy them (where available).

To be sure, what gets bought is in substantial part driven by what suppliers choose to make available, and at what prices, including promotions and other packaging mechanisms that actually obscure the actual “retail price.”

In other words, the FCC study reflects what most people choose to buy, which itself is shaped by the inducements (bundle offers) offered by ISPs. When the offers change, so will the data.

A similar, but different methodological problem applies to estimating the average “price” of internet access. Advertised plans are not necessarily the ones people actually buy.

That is necessary, at least in part, because most consumers buy bundles (two or three services, typically) for a flat monthly fee. By some estimates, in 2015 some 61 percent of U.S. consumers bought a bundle.  So it actually is something of a guess what the actual internet access service “costs.”

In such cases, it is necessary to “impute retail prices” for consumers who buy bundles, since they do not pay a separate retail internet access fee.

Those methodological issues noted, among the clearest conclusions one might draw from the the Federal Communications Commission’s latest report on fixed network internet access, based on 2015 data, is that median U.S. internet access speeds are growing; that consumers are buying faster tiers; and that cable companies have driven most of the speed increases and gained the most accounts in the 100-Mbps and faster ranges.

Conversely, digital subscriber line speeds are stagnant, and gigabit services either had not been significant enough by 2015 to affect the median speeds, or the FCC simply chose not to track them (presumably on the correct assumption they could not yet be among the “most popular” tiers of service, as availability was still too limited in 2015).

The study arguably also indicates that--at least in 2015--the interplay between demand and supply. On the supply side (what consumers are able to buy), the “most popular” services actually purchased by consumers were in the 100-Mbps range.

That is not to say these tiers were the “fastest” speed tiers available, but that these were the tiers most consumers chose to buy. That is a key distinction. Consumers in some markets are able to buy gigabit service from Google Fiber, AT&T or CenturyLink, for example, but it does not appear that many consumers actually do so.

The most popular advertised speed plans purchased by consumers tend to range about 100 Mbps for cable providers. AT&T U-verse plans generally were in the 45 Mbps range in 2015, while DSL speeds (all-copper access)  were quite low, in comparison, and have not changed in several years. Verizon FiOS speeds are generally in the 80-Mbps range.

 

source: FCC  

The study reflects deliberate policy choices by internet service providers, with cable operators choosing to boost speeds the most, and providers of fiber-to-home services already have scale choosing to maintain speeds.

It arguably is the case that most suppliers of DSL services face technology constraints, so the lack of progress on that front is a reflection of decisions not to upgrade either to fiber to neighborhood or fiber to home platforms.

Such choices also are evident for fiber-to-home services. Among participating ISPs, only Frontier and Verizon use fiber as the access technology for a substantial number of their customers, the FCC notes. While the maximum supplied download speed for Frontier’s Fiber product has remained 25 Mbps, the maximum popular download speed included in the FCC survey for Verizon more than doubled from 35 Mbps to 75 Mbps in 2012 and has remained at that speed in subsequent years.

The report shows median internet access speeds of about 39 Mbps, with that increase of 22 percent over the prior year driven almost entirely by cable TV providers, as digital subscriber line accounts have increased little, if at all, and deployment of  new fiber-to-home services was too small to affect the overall results.

The maximum advertised download speed among the most popular service tiers, weighted by the number of panelists in each tier, increased from 72 Mbps in September 2014 to 105 Mbps in September 2015, a growth of 45 percent, the FCC says.

Likewise, the percentage of customers able to buy gigabit connections remains small, and actually cannot be tracked in the report, as the study examined only the “most popular” tiers of service, which top out at 300 Mbps.

source: FCC  

The point is that consumer purchasing behavior, which indicates “most” consumers buying services at lower rates than a gigabit, is partly a matter of supplier investments and packaging (including price points and bundling) as well as consumer demand. Most consumers do not seem to buy the “fastest” tier of service.

Shared Spectrum On Many Levels is Coming

Federated Wireless and Alphabet have demonstrated interoperability between their respective spectrum access systems (SAS). The SAS is the key enabler of shared spectrum allocation at the heart of the Citizens Broadband Radio Service (CBRS).

The 3.5 GHz CBRS is a revolutionary approach to increasing the supply of communications spectrum, protecting the rights of licensed spectrum owners while also enabling use of such spectrum by sub-licensees, or on a best-effort basis in other cases.

The CBRS will mean an additional 150 MHz of spectrum can be made available to new communications users and applications without the costly relocation of existing users to allow shared use by new commercial entities.

In principle, spectrum sharing will make possible a wider use of existing communications spectrum, allowing present licensees priority access, while also allowing secondary licensees access to unused or lightly-used spectrum, as well as supporting unlicensed, best effort access when primary or secondary users do not require use of the assets.

Such dynamic spectrum allocation mechanisms are quite new, as traditional allocation mechanisms were highly static, giving exclusive use to some licensees, whether that spectrum was used, or not, and often specifying what applications could be run, and just as often what platforms could be employed.

As spectrum in the low and mid-bands remains relatively scarce, dynamic allocation will improve the efficiency and intensiveness of use of those assets.

The other new development is sharing of different spectrum assets across licensed and unlicensed boundaries, such as bonding of mobile and Wifi assets.  Significant spectrum sharing of this type is expected to be a key feature

The advent of 5G mobile networks, for example, will feature the use of “bonded spectrum” approaches such as License Assisted Access (LAA) to aggregate across spectrum types, LTE Wi-Fi Aggregation (LWA) to aggregate across technologies, CBRS/License Shared Access (LSA) to share spectrum with incumbents and other deployments, says Qualcomm. In addition, there will be new platforms such as Qualcomm’s “MulteFire” that provide quality-assured services exclusively in unlicensed spectrum.

All of those developments represent a revolutionary approach to spectrum usage, moving away from command-and-control to more-dynamic allocation processes.

Airtel Commits to Big Mobile Banking Effort in India

It still remains to be seen whether mobile banking will be a widespread, or simply a niche business, for mobile operators. In regions where retail banking is well developed, it is likely to be a niche dominated by financial providers. In regions with undeveloped banking infrastructure, mobile banking is going to be more important.

So far, in fact, mobile operator involvement in mobile banking has failed to get traction. That is not th case in other markets, such as regions of Africa where M-Pesa operates. In India, mobile banking is about to get a big boost, as well.

Airtel M-Commerce Services, which presently provides money transfer services in 800 towns in India, has been renamed Airtel Payments Bank, and also now plans to use the Airtel network to deliver banking services from 1.5 million outlets covering 87 percent of India’s population..

Kotak Mahindra Bank also has acquired 19.90 percent stake in Airtel Payments Bank.

Though not every tier-one access provider will inevitably become a supplier of banking services, many, in areas where the retail banking system is undeveloped, will do so. In some cases, that will take the form of remittances and payments. In other cases, a wider range of traditional banking operations will be supported.

In other instances, mobile operators might seek roles in retail payments as well.

source: Merrill Lynch Global Research

Mobile operations in core banking activities are important less for revenue upside than for cost reduction in some countries where banking systems are robustly developed. Cost savings and better customer quality of experience are the drivers in such markets, not “branch bank coverage.”

In fact, it might also be correct to say the shift in virtual banking in developed nations, is from online capabilities to mobile interactions, from retail payments to customer service functions, account balance checking and balance transfers.

source: the financial brand

In 2020, IoT Will Not Be Sufficient to "Move the Needle" for Telecom Suppliers, Globally

With the caveat that suppliers and customers always can be wrong, potential solution providers and customers believe as much as $470 billion will, by about 2020, be generated, with $60 billion in profits. About 40 percent of that revenue will be generated by purchases of devices, perhaps $15 billion by connectivity services, some $20 billion in apps, analytics and hosting services and about $20 billion in system integration and implementation services.

If correct, it is fair to note that the biggest potential changes in service provider business model cannot be driven by IoT services and revenues. In an industry with annual revenues in the nearly $2 trillion range, $15 billion simply is not going to move the needle.

The big changes therefore will come in other existing parts of the business (existing revenue sources and existing cost structures, plus "growth by acquisition").

source: Bain

Are We at "Peak" Internet Access Adoption? In the U.S. Market, That Might be True for Fixed Accounts

“You can lead a horse to water, but you can’t make him drink.” The principle, that making something available and having it used, applies to internet access. Not every household buys a fixed line internet access connection.

Some 83 percent of U.S. residents buy (or use) fixed network internet access service at home, according to Leichtman Research Group.

Consistent with the profile of those not online at home, the most common reason for not getting an Internet service at home is a lack of need (50 percent of non-buyers). Cost is said to be the barrier for 17 percent of non-buyers. Some eight percent say they “cannot” buy service.

About 60 percent of non-buyers say they do not own a personal computer or notebook.

At least eight percent of non-buyers say they use smartphones for access. Other studies suggest that perhaps 13 percent of U.S. residents report they use their smartphones exclusively for internet access. Some 65 percent of the smartphone-only respondents say the smartphone lets them do all they need to online, according to a Pew Internet and American Life Project survey.

The availability of other access options outside the home also is a reason some rely on smartphone-only access. Some 34 percent of smartphone-only users say they go online at a public library. Others (about 40 percent of smartphone-only users) access the internet using facilities at a high school, college or community college.

The point is that there is a difference between supply of access services and demand for those services. Virtually everyone would agree that access should be made available to everyone. But that is a different matter from actual purchase. A significant number of households do not want to buy.

One might even predict that the percentage of homes buying a ‘fixed network” service might actually continue to decrease, as tethering, 5G fixed wireless and Wi-Fi (especially homespot access) becomes widespread.

We might already be at the peak of fixed network internet access adoption. "Peak" cable TV adoption was about 80 percent (satellite competitors, then telcos, and now over the top streaming are taking share). "Peak voice" happened about 2000 or 2001, as mobile substitution took hold. Internet access is likely next to begin receding.

Regulators Should Not, or Can Not, Ignore Long, Slow Decline of the Landline Business

Telecom regulators always face the challenge of balancing policies to promote rapid investment and adequate competition, no easy challenge, but also complicated by industry dynamics that are anything but promising, especially in the fixed network segment. Virtually all observers would say they are in favor of much more investment in broadband internet access facilities, for example.

Over the last decade or so, with the exception of Verizon, relatively less investment has been made by telcos to match cable TV internet access speeds, for several reasons. AT&T and Verizon logically have invested most of their network capital in the mobile side of their businesses, a logical move since mobile drives half to 80 percent of total revenue.

But there are other competing uses of capital, such as acquisitions to grow the revenue base. And make no mistake, acquisitions--rather than organic growth--account for most of the revenue growth achieved by AT&T (about 26 percent of revenue growth between 1996 and 2008), and a substantial percentage of Verizon revenue growth (about 46 percent) between 1996 and 2008, for example.

In other words, those firms have to balance capital for acquisitions, dividends and network investment. It is not easy.

source: Deloitte University Press

As a result, U.S. telcos have vastly lagged U.S. cable operators in upgrading internet access speeds, leading to cable operator dominance of that key product segment.

It might be easy to criticize the firms for ignoring their own long-term interests. But such behavior is rational if managements believe the long term prospect is for slow, steady decline.

The other institutional factor is that fixed network telcos are viewed by investors as dividend payers, not “growth” vehicles, which means telcos must make dividend payments a priority, even if that capital might be deployed into faster internet access networks.

The situation, though difficult, is not necessarily that dire for the a few of the tier-one integrated providers who own both mobile and fixed assets. Verizon made a decision to upgrade much of its access network to fiber-to-home within the past decade, though apparently concluding it did not make business sense, since about 2010. AT&T has made more controlled investments, focusing on fiber-to-neighborhood for most of the past decade, though recently switching to a more-targeted gigabit upgrade plan based on fiber to home platforms.

What comes next will be telling. A range of firms, including Google and Facebook, AT&T and Verizon, now are investigating whether new platforms might provide a better business case, including fixed wireless.

The coming 5G upgrades of the mobility networks will include lots of small cell deployment in denser areas, supporting new opportunities for gigabit upgrades without the full cost of fiber to home. That might be a game-changing development for at least some telcos.

The larger point to be made is that the fixed network business is a very-tough proposition for any telco, but especially for smaller providers without mobile assets. With the exception of growth provided by acquisitions, organic growth in the fixed network segment will be difficult, at best.

Why Content and Access Mergers Still Make Sense

There is good news and bad news in the global tier-one telco business. Between 2009 and 2015, most telcos, perhaps as many as two thirds, experienced revenue growth. The bad news is that up to a third of tier-one telcos saw  negative revenue growth, especially in Europe.

The issue is “why?” that pattern exists. One line of thinking is that continent-specific factors are at work (market fragmentation, heavy regulation, wholesale policies, lack of incentives for investment to create new products). Another line of thinking is that, as a “mature market,” Europe points to inevitable revenue erosion in all legacy services (fixed voice, mobile voice and data), as well as modest returns from relatively-new services such as internet access.

We will know a bit more over the next decade, if revenue growth begins to “go negative” across a broader set of geographies or countries. Asia, which now drives most of the global growth, has one singular advantage: lots of people to convert as customers of new internet access services. That also applies for Africa. Those two continents will be, on the whole, the last to see any revenue pressures from market maturation.

Those trends might help explain why AT&T proposes to buy Time Warner, and 21st Century Fox wants to acquire the remainder of satellite broadcaster Sky that it does not already own, or why Verizon seems determined to establish itself as the default buy for advertisers who want a choice from Google or Facebook venues.

It might also be fair to again ask why firms such as Comcast choose to buy assets such as NBCUniversal.

source: STL Partners

The traditional arguments for blending distribution and content assets in the cable TV business had to do with revenue growth more than synergy within the ecosystem (we used to call this “vertical integration”). In part, the revenue growth would come from scale; in part from the ability to create new products; in part from diversification (the distribution business was mature, both in terms of products and regulations on additional growth).

Ownership of complementary assets arguably is useful, but programming rules prevent a distribution entity from restricting sale of its programming assets to rival distributors, or applying non-standard rates when the distribution entity buys content from the programming entity.

When Comcast bought NBCUniversal, in 2009, it was a revenue growth play. Comcast in 2004 had tried to buy Disney, for the same reasons.

As we near 2017, a newer set of justifications exist. One way of describing Comcast’s transformation from “content distributor” to “content owner,” in substantial part, is the notion that doing so allows Comcast to benefit from at least some of the content it delivers over its distribution networks. In other words, Comcast benefits from the revenues generated by the content assets used by customers of its access networks.

That, in a sense, also underlies Verizon’s attempt to fashion a major role for itself in internet--and especially mobile--advertising. As would other access providers, Verizon gains from customer use of applications enabled by its access operations.

To be sure, diversification of revenue sources is seen as valuable. Access and content or app providers are in distinct industries, so multiple roles provides some protection from sector downturns. Beyond that, the content and apps businesses are growing, while core telecom access products are mature and declining.

To a significant extent, owning both content and access also makes easier the creation of new on-demand products to replace the expected declining linear service revenues. That advantage comes not so much from “exclusivity” as from fewer institutional barriers to innovation. The point is not so much the “exclusive” nature of the on-demand content services, but rather incentives to fashion content assets in that manner, faster. Comcast becomes simultaneously a seller and buyer of such services, creating incentives for cooperation between content and distribution entities.

"Bigness," By Itself, is Not an Antitrust Problem

Antitrust regulation is the “normal” remedy for excessive market power, even when obtained through competitive processes: people use the dominant products because they prefer them. What might be new is that oligopoly exists in the internet applications space, as tends to occur in the more-regulated telecommunications business. That “winner take all” market outcome now is expected for internet apps.

That gatekeepers issue is relevant for the internet ecosystem because it could, or should, shape policies intended to maintain investment and competition within the ecosystem. Federal Communications Commission policy of the last eight years has assumed that internet service providers are among the key gatekeepers, if not “the” gatekeeper, requiring regulation of internet access under common carrier rules.

Others might argue there are other key gatekeepers as well.

Consider that Alphabet has an 83 percent share of the mobile search market in the United States and just under 63 percent of the US mobile phone operating systems market.

To be clear, some of us are in favor of light or lighter regulatory touch for every part of the ecosystem--app and access providers alike. That is not the only choice. As always, regulators can apply heavier regulation to some industries or companies as a way of fostering more competition. The other approach is to lighten regulation on some potential competitors within the ecosystem able to provide competition.

Some might argue the right approach is to take account of rising and declining “gatekeeper” power within the ecosystem. There might be multiple gatekeepers, but some arguably are gaining power, others losing it. Few who follow the internet ecosystem would disagree that app providers are growing much faster than ISPs. In fact, one might actually argue that ISPs are losing power within the ecosystem.

A not-so-often comparison to telecom providers is made by media entrepreneur Jonathan Taplin, who notes that AT&T has a 32 percent market share in mobile phones and 26 percent in linear subscription TV.

Google and Facebook have 85 percent share of the internet advertising market.

The combined AT&T-Time Warner will have $8 billion in cash but $171 billion of net debt. Alphabet has $76 billion of cash and total debt of less than $4 billion.

Alphabet alone has a market capitalization of around $550 billion. AT&T and Time Warner combined would be about $300 billion.

That is not sufficient reason, some would argue, for taking antitrust action against any of these firms. In some markets, especially the tier-one level of telecommunications, scale seems an inevitable requirement. Scale in application markets arguably means those firms can invest in many new services and capabilities at a high level, and fast.

In fact, in most app markets, the “winner take all” nature of the markets might suggest something about what is needed, at the tier-one level of apps, to compete globally. The point is that “bigness alone” might not be the point, at the tier-one level in the access or apps business. Oligopoly might be the natural outcome of competition in such markets, at the tier-one level.

For tier-one telecom companies, capital intensity might be the issue. For app providers, huge scale required to drive advertising markets might be the requirement.

source: Precursor

AT&T Acquisition of Time Warner is Not an Antitrust Problem

Though good arguments can be made to the contrary, some argue that an AT&T combined with Time Warner would have too much power in the internet ecosystem. Reason enough, some argue, to block the deal, even though the acquisition would not reduce suppliers in the content business, or increase AT&T’s footprint, customer base or assets in the access business.

That might not be the point, critics essentially argue. The point is too much more power held by a gatekeeper. That, one might argue, ignores the simple consolidation trend that is, and will continue to sweep, the media and communications industries. Scale, one might argue, now is required to maintain profit margins, beyond increasing revenue.

Consider the linear video business. ISPs argue they have to raise prices every year because content fees keep rising every year. Scale, ISPs argue, will allow them more bargaining power. Conversely, content owners believe they need to match that scale to maintain their own leverage.

Consumer benefit hangs in the balance: lower service fees are not possible unless content prices are controlled and content contract terms made more flexible, allowing skinnier bundles that cost less.

In a related sense, core ISP revenues are under pressure, as voice, messaging, internet access and video revenue streams face lower demand and higher competition from substitute products. In other words, ISPs (access providers) sell generally-declining legacy products. To wring profits from a declining business, costs have to decline. That is as true in the content business as in any other.

On the other hand, content is easier to differentiate than internet access, voice or messaging. That is why content prices have been growing every year, while price per unit for voice, messaging or internet access has been dropping.

To use a simple explanation, the path forward for any large ISP is to “own at least some of the content” delivered over the access pipe. That is what Comcast already has done, and what AT&T (and eventually Verizon) will conclude they also must do.

Some see antitrust danger in the AT&T proposal to buy Time Warner. Some of us just see a “keeping up with the Joneses” move that mimics what Comcast already has concluded must be the strategy.

Like it or not, "bigness" might be a survival requirement in the access market, at the tier-one level.