Cloud Data Centers Now Originate, Terminate Traffic

Among the many changes happening in the global communications industry are changing patterns of traffic origination and termination. It has been some time since central offices originated and terminated most traffic. For some decades, internet exchange points were the places where traffic moved to, and from. 

Now it is starting to be the cloud data centers that originate and terminate most traffic. 

How Artificial Intelligence is Relevant for a Mobile Apps Company

Charles Fan, Cheetah Mobile CTO, has a marvelous ability to take somewhat abstract ideas and make them concrete. You might wonder, for example, why a mobile apps firm actually thinks about how artificial intelligence and machine learning affects its business. 

The immediate application for Cheetah is a news curation app. But Fan thinks artificial intelligence algorithms, which might today seem to represent value, eventually will be commoditized. When that happens, value will no longer be conferred by access to the algorithms, but to owners of content stores. 

In other words, he wins who has the best data stores. That will be a change from today, when perhaps value is generated by firms able to hire "hundreds of PhDs." In the future, that will not confer value, Fan argues. 

Managed Wi-Fi Service: How Big an Opportunity?

Consumer interest in managed Wi-Fi services represents a $6.7 billion missed opportunity for service providers globally, a new study from XCellAir suggests. That includes up to $3.3 billion in incremental revenue, as well as $3.4 billion in lower operating costs (fewer customer service interactions and truck rolls).

Data from a new survey of 1,000 consumers each in the United States and United Kingdom reveals that on average, 15 percent of consumers say they would be willing to pay for managed Wi-Fi service from their service provider or a third party, and are willing to pay $34 per year for such managed services.

Presumably, the main problem consumers experience is “coverage.”

The XCellAir Home Wi-Fi Advisor service for ISPs has in the past found that the average household typically is a single family of three people, with 14 internet connected devices.

The average home has two floors, with the majority keeping their primary Wi-Fi router on the first or ground floor.

While the average Wi-Fi speed need for a household is 23 Mbps, the peak speed needed to support all devices within the home is 40 Mbps.

Taking into consideration the number of people, devices, and size of home, the average household requires 2.6 access points in order to have complete Wi-Fi coverage throughout the home, XCellAir argues. So, presumably, the big advantage of a managed service is placing and monitoring the performance of multiple Wi-Fi base stations or repeaters.

As Wi-Fi suppliers increasingly market systems capable of such management, on their own, it is not so clear that the service opportunity is so much the solution as the diagnosis.

The consumer study, carried out in December 2016, found that 50 percent of consumers blame their internet service provider for problems with their Wi-Fi, regardless of who provided their router.

Despite 18 percent of consumers blaming their Wi-Fi equipment when service falters, as many as 39 percent of consumers would still call their ISP to assist with troubleshooting faults or problems.

The survey also revealed that as many as 89 percent of consumers have completely unmanaged Wi-Fi, yet there is notable appetite for managed and paid-for services from their ISP or other third party.

Some 80 percent of consumers surveyed experienced at least some issues with their Wi-Fi, with 31 percent experiencing occasional or frequent Wi-Fi problems.

As many as 19 percent of users in the United States, and 10 percent of respondents  in the United Kingdom, said they were willing to pay their service provider or a third party technical services firm, such as Geek Squad or Knowhow, to manage their Wi-Fi for them.

The mean (arithmetic average) fee per month that consumers are willing to pay for managed Wi-Fi in the US was nearly $4 per month, with six percent indicating they were willing to pay as much as $15 or more. In the United Kingdom, the mean fee was £1.49, with six percent willing to pay up to £4 per month.

Some 74 percent of consumers get their Wi-Fi equipment from an ISP.

3 or 4 for U.S. Mobile Market? Answer Might Still be "4"

The optimal mobile market structure for any national mobile market  remains an open question. Some believe most markets balance consumer welfare and supplier sustainability better with three leading suppliers rather than four, but regulators in many markets continue to believe that four suppliers are necessary for robust competition.

Indeed, most financial analysts likely agree that three suppliers in the U.S. market, for example, would be better for suppliers. Were T-Mobile US and Sprint to combine, three roughly-equal firms would lead the market.

Under that structure, the fierce pricing wars would abate, many believe, while allowing Sprint and T-Mobile US to attain better scale economics. At the same time, many believe, AT&T and Verizon revenues and profits also would improve.

Of course, all such assumptions are just that: assumptions. What has to be considered is that Comcast and Charter Communications also are entering the market. So no matter what happens with mobile service provider consolidation, at least two potentially-powerful new contestants will be entering the market.

Some believe regulators and antitrust officials will have key problems with market share, were Sprint and T-Mobile to try a merger, as they have in the past concluded. Though many believe it will be easier to gain approval under the new administration, the international tests of market concentration are what they are, and antitrust officials still will be using those tools.

In fact, a horizontal merger might not even wind up being the key transaction to be weighed. Vertical mergers or acquisitions (cable plus mobile, for example) are equally likely.

Three Buys UK Broadband for Spectrum Rights

When does it make sense to spend £250 million (US$310 million)--$2,067 per account--to acquire 15,000 money-losing mobile subscribers? When the acquisition also comes with spectrum rights.

UK Broadband is the UK's largest commercial holder of national radio spectrum suitable for 4G mobile services and fixed wireless solutions.  UK Broadband has rights to use 124 MHz of spectrum in international LTE bands 42 and 43 (3.GHz and 3.6GHz), as well as additional spectrum suitable for high-capacity point-to-point and point-to-multipoint services in the 3.9GHz, 28 GHz and 40 GHz bands.

source: Analysys Mason

Nobody Yet "Knows" How IoT Will Create Value

In the early days of any potentially-revolutionary technology, even the most-experienced industry executives might be nearly clueless about the eventual impact. That is worth keeping in mind as internet of things, artificial intelligence and machine learning are applied to a wide range of industries and processes. Right now, we cannot predict the outcome. In most cases, we are not even sure about the strategies that produce the best outcomes.

In the past, executives have disparaged demand for telephones, alternating current, automobiles, television, audio systems, satellites, mobile phones, video on demand or iPhones.

Bill Gates, when he was CEO of Microsoft, missed the importance of the internet. IBM executives once believed the global market for computers was less than a half dozen.

The CEO of DEC believed nobody would want a computer in their home. Gates once believed nobody would need, or use, a 32-bit computing system.

An overwhelming percentage of insurance industry executives believe the internet of things will “revolutionize” the business. They just do not know precisely “how” that will happen.

Those executives believe IoT will allow better risk-based pricing and will change customer behavior in ways that benefit the industry. But it also is fair to note that executives are at such an early stage of IoT application that strategies have not been developed.

At the moment, most seem to believe that better analytics will produce benefits.

Source: Insurance Nexus

Low Power Wide Area Netwoks Using Unlicensed and Licensed Spectrum Will Support 1.4 Billion IoT Devices by 2022

One more sign of the growing role played by unlicensed technologies in “public communications” is the expected use of unlicensed spectrum to support Low Power Wide Area (LPWA) services.

Such LPWA services will play a large part in supporting 1.4 billion Internet of Things (IoT) connections by 2022, according to Machina Research, even as NB-IoT and LTE-M, using licensed spectrum, also contribute.

The GSMA’s Mobile IoT Initiative, which promotes adoption of LPWA technologies, is currently backed by 67 global mobile operators, device makers, chipset, module and infrastructure companies worldwide, GSMA says.

LPWA networks are an emerging, high-growth area of the IoT, designed to support M2M applications that have low data rates, require long battery lives and operate unattended for long periods of time, often in remote locations. They will be used for a wide variety of applications such as industrial asset tracking, safety monitoring, water and gas metering, smart grids, city parking, vending machines and city lighting.

Casa Systems Shows Mobile Access Using Cable Wi-Fi

Casa Systems, a provider of untethered access, demonstrated a virtualized fixed-mobile convergence solution that enables cable service providers to offer mobile services using Wi-Fi access from cable TV plant.

Casa supplies small cell solutions optimized for use by cable operators, and the latest proof of concept demonstrates the viability of using cable homespots and hotspots to support mobile access.

  

Lifeline Internet Access is Not in short Supply in U.S. Market

Some are making a big deal about a Federal Communications Commission decision not to allow nine firms to sell lifeline internet access service. The decision was made largely on procedural grounds. The nine firms are not accused of any shortcomings, but the lifeline program itself has been plagued by waste, fraud and abuse, the FCC says.

At the same time, lifeline service at what many would consider reasonable costs already are provided by all of the largest U.S. fixed network providers.

AT&T lifeline service, depending on a potential customer’s location, offers 10 megabits per second, for $10 per month; 5 megabits per second, for $10 per month; 3 megabits per second, for $5 per month; 1.5 megabits per second, for $5 per month or 768 kilobits per second, for $5 per month.

Lifeline internet access also is sold by Verizon, CenturyLink, Comcast, Cox Communications, Charter Communications, Suddenlink, Frontier Communications and others. Generally speaking, those services sell for about $10 a month.

Will Dumb Pipe Always be the Foundation of the Telco Business Model?

It always is difficult to figure out precisely how tier-one service providers (telcos, cable, others) will reposition revenue streams and services to remain viable in the future, as all legacy revenue streams  decline. The fundamental issue is how far that process can move, beyond “access” services, since that is the fundamental “telco” role in the application ecosystem.

The colloquial way of describing the challenge or dilemma is that telcos and other access providers must “avoid becoming dumb pipes.”

One way or the other, nearly every telco executive would agree with some version of a strategy that involves “moving up the stack” in terms of value and applications, as well as moving into new lines of business.

Left unsaid is the fact that “dumb pipe” (access) has to remain the foundation of the business--whatever other new businesses or apps can be created--because access is the particular part of the ecosystem telcos are in.

To be sure, a telco might divest its whole access business (sell it) and use the proceeds to become another type of company, in another part of the ecosystem. In a sense, Verizon has been divesting fixed network assets to support its mobile segment. And many other firms are harvesting earnings from traditional access businesses to jumpstart new content or app businesses.

On a broad level, that same strategy will be used by every tier-one telco hoping to create new roles in the internet of things ecosystem. Up to this point, for most service providers, smartphones have enabled much of the growth of value-added services.

But access will “always” be the foundation of any business whose fundamental role in the applications ecosystem is, precisely, “access” and transport.

Even if service providers sell unified communications services, hosting services or IoT communications, those services remain partly or wholly anchored in the “access” function

source: Wireless Intelligence

source: Telco 2.0

In principle, a former telco might even contemplate leaving the telecom business altogether.

SK Telecom, for example, says “our new CEO firmly believes that SK Telecom’s goal is to secure the leadership as the new ICT as the leader in the new ICT ecosystem within the era of the Fourth Industrial Revolution,” according to Keun-Joo Hwang, SK Telecom CFO and EVP.

IPTV and internet access are growth areas, but fundamentally are “access” businesses. The big issue is what other new access-related businesses can be created or fostered, assuming the specific role of an access provider in the internet and app ecosystem is, in fact, access.  

By 2025, Mobile Internet Could Contribute $4 Trilliion to $11 Trillion in Economic Value

By 2025, mobile and other telecom technologies could have significant impact on health applications, manufacturing, mining, information technology, software, applications and transportation, according to McKinsey analysts, with the impact from mobility alone contributing between $4 billion and $11 billion in economic impact.

source: McKinsey

FCC Closes Zero Rating Inquiry

The Federal Communications Commission's Wireless Telecommunications Bureau has closed its inquiry into sponsored data and zero-rating practices in the mobile broadband market.

In so doing, the FCC also "sets aside and rescinds" an earlier FCC report that did raise issues

about zero rating. The Commission did not see a T-Mobile US offer, which zero rates all video streams, as problematic.

The FCC had raised more questions about zero rating of AT&T and Verizon offers that allowed data-cap-free access, but--the FCC argued--only to services owned by each firm. Both AT&T and Verizon say they make the same zero rating feature available, on the same terms used internally, to any companies that want to do the same.

The FCC originally had said it would cost a company, like a Netflix or Hulu about $47 a month per customer to offer 30 minutes of free video-streaming a day on AT&T's network, based on a wholesale charge of about $5 per gigabyte.

Shared Infrastructure for Small Cells?

Service provider thinking about infrastructure sharing always is intimately and directly related to their perceptions of business advantage. Actors will favor sharing when economic or business advantage can be obtained, and will oppose it when there is perceived harm.

New questions will arise as small networks become essential for 5G networks. In many markets and scenarios, it will be argued that only a shared infrastructure approach will work.

Networks that are dense, with large numbers of small cells, and virtualized baseband signal processing, will require a huge number of new radio sites, backhaul links and power sources. In markets with multiple suppliers, there is “a clear argument for a single, shared network,” argue Rethink Wireless analysts.

On the other hand, as always, larger suppliers will think hard about any shared infrastructure proposals that allow competitors to compete more effectively. In the U.S. market, that has been a major reason why larger incumbents have resisted and opposed mandatory wholesale requirements that are similar to shared infrastructure proposals.

As always, that might be an argument better received in some markets than others. Where one or two suppliers believe they have financial or other advantages favoring building and owning their own network, they are likely to act that way. In other markets, where no single provider believes it can reap advantages for building and owning its own small network, cooperation and shared infrastructure are likely to be better received.

Those third party networks might work much as tower companies now operate, offering colocation and backhaul to multiple mobile operators. There are some differences, where it comes to small cells.

Cable TV operators long have expected their dense high-capacity networks would allow them to become retail or wholesale operators of small cell infrastructure. That means multiple entities might believe they have advantage where it comes to access networks. AT&T, with its large fixed network footprint, is among them.

Most other fixed network telcos, including Verizon, have smaller in-region fixed assets to leverage. Sprint and T-Mobile US would be most likely to favor some shared approach, as they own virtually no fixed network assets. It is possible each of those firms, if acquired by a cable operator, would have less interest in third-party shared small cell infrastructure, unless their parents wished to consider it.

And even there, cable operators are more likely to partner with other cable operators to fill in the out of region coverage.

At the moment, one might argue the prospects for small cell infrastructure in the U.S market are less favorable than in some other markets.

Line Between Managed Services and OTT is Getting Harder to Define

Managed services  are not the “internet,” a source of some confusion about the proper limits of

policy intended for one or the other domains. Managed services such as business access services are specifically exempted from “net neutrality” regulations. In the consumer arena, subscription video or no-incremental-charge “over the air” services also are managed services.

There are clear business model implications. Consumers who watch “free, over the air TV” do not pay the provider for bandwidth consumed to deliver the services. Neither do buyers of linear subscription TV services.

The situation is a bit less clear for  “over the top” services, where there is no charge levied by the app provider, but the customer “pays” for bandwidth only in an indirect sense, for an internet access connection. But one business model “rule” is clear. Consumers do not expect to pay, and have not in the past, paid for bandwidth used to deliver their subscription TV services.

Debate and confusion are likely to grow, as legacy linear video providers increasingly move into on-demand, over-the-top services themselves. Among the reasons for confusion: the same physical facilities and bandwidth can support internet access and managed services alike. That is virtually always the case for single-fiber access (fiber to the home) using one wavelength and time division. In principle, the services could be logically and physically separated using two or more wavelengths on the same fiber.

In fact, it is clear that the existing TV subscription business model would not work at all, in most cases, if consumers had to pay for bandwidth charges in a direct sense. The implied full cost of a video subscription--assuming half of all account bandwidth is consumed when watching subscription entertainment video--could be higher by about half the cost of the whole internet access subscription.

That might range from a minor annoyance to a bit of a problem on a fixed network, where usage caps are generous and per-gigabyte charges are low. The same cannot be said for mobile consumption.

On a fixed network, a $100 video subscription, consumed on demand, would have to cost about $125, assuming a $50 fixed network subscription and use of half that bandwidth directly by the video subscription.

That might not be a model killer; just a key impediment.

Where the model breaks down almost completely is consumption of that same video on mobile networks, where bandwidth costs as much as an order of magnitude (10 times) more than on a fixed network.

If consumption of a mobile gigabyte represents about an hour to three hours of video, depending on resolution, then watching one hour of video could cost nearly $10 to $30. That is unsustainable.

If you want to know why some mobile video service providers consider  “zero rating”  so important, that is  why: if data consumption charges are required, the entertainment video model collapses.

There are lots of other ways the business model is affected. Bundling policies and access rights, for example, affect the business model, as when access providers require the purchase of one service to use a feature.

Comcast, for example, has released a beta version of the Xfinity TV app for Roku, allowing Xfinity TV customers the ability to watch their TV content on a Roku box. That fundamental principle--granting access to the streaming product when a customer has a linear product account, is fundamental for Comcast: a clear way to protect the legacy product while creating the new product.

Among the implications: access to the streaming product is a feature of the managed service subscription. Think of that as a strategy akin to adding steam engines to a sailing ship, a hybrid stage in the evolution from sail to steam.

Biggest Impact of Gigabit is Sales of Lower Speed Services, AT&T Finds

Success-based deployment of capital is one way access providers try and match incremental capital investment to incremental revenue. That is why firms from Google Fiber to AT&T build gigabit networks in neighborhoods, not whole cities; where demand for gigabit services and faster speeds is higher than average.

In its latest statements about take rates where it is building its fiber-to-home networks, AT&T suggests it is finding what other internet service providers have tended to find, when offering a range of speeds. Among the primary effects of launching gigabit service is that it spurs buying of services at lower speeds (40 Mbps, 100 Mbps, for example).

“After we launch our 100-percent fiber network in the new market, we're seeing about half of the new broadband customers buying speeds of 100 megabits per second or higher with 30 percent of the customers taking a gig,” says John Stephens, AT&T CFO.

In other words, 70 percent of customers buy speeds other than a gigabit per second, when it is possible for them to buy a gigabit access service.