"Fiber to the Home" is No Longer the Right Answer, or the Right Question

For the last 30 years, in many quarters, the generic answer to almost any retail telecom problem (bandwidth, new services, operating cost, future-proofing) was “fiber to the home.”

It is reasonable to ask, given the outsized role now played by mobile networks (and despite the acknowledged value, in some markets, for some apps and business models) globally, whether “how to do FTTH, when, where and why,”  is even the right question to be asking.

It is relevant to ask how best to supply gigabit-per-second internet access (eventually) to every potential user.  

source: Ericsson

Part of the issue is that fixed voice lines have been in decline since it peaked at 1.3 billion in 2008, with significant reductions in developed countries. That means a growing “stranded asset” problem, as access network investments must be paid for by a shrinking base of customers.

That effectively raises the “investment per customer” threshold.

In Europe, adoption rates (as percentage of population, not location) dropped from 45 percent to 26 percent in the last 10 years, according to Statista. That accentuates the problem, as homes and small businesses buy lines “per household” or “per location,” not “per person.” Enterprises buy trunks, not lines.

Europe: Percent of Population Using a Fixed Voice LIne

source: Statista

The global peak for fixed line subscriptions appears to have happened about 2006, with continued declines, going forward. In the United States, fixed lines peaked in 2000 or 2001.

source: FCC

Global Fixed Line Subscriptions

source: ITU

In the U.S. market, fixed line subscriptions (as a percentage of households) dropped from 95 percent to just over 50 percent over the decade starting at 2000.

Customers shifted purchasing of fixed network services from voice to internet access over the same period, partly offsetting voice line losses. Fixed broadband worldwide grew from 220 million to 794 million over a decade.

The point is that “fiber to the home” is not the answer to revenue, profit of growth problems, as we have passed the peak of fixed network subscriptions, as a percentage of total human network connections. We might still see incremental, but low growth, globally, in the fixed network subscription area, but growth will be modest.

The lesser problem of “how” to supply internet access therefore is better phrased as “how do you provide gigabit per second speeds to every location or device?” Formulated that way, mobility and fixed wireless often will be better answers than “fiber to the home.”

“Fiber to the home” is not the universal (or mostly universal) answer to the question of “how do we create a platform for growth?” FTTH is not even the answer to the question of “how do we provide gigabit per second speeds to consumers?”

What we care about is “gigabit access speeds.” Physical media is a lesser--and more tactical--problem, with more answers than once seemed possible.

Cable modems on hybrid fiber coax networks, satellites, fixed wireless and even standard mobile access are potential answers. More exotic solutions might yet also arise (balloons, unmanned aerial vehicles).

AI Can Boost Productivity 40%, Accenture Argues

Artificial intelligence has the potential to increase productivity 40 percent or more by 2035, according to Accenture and Frontier Economics.

AI could increase economic growth rates by an average of 1.7 percent across all industries through 2035, according to consultants at Accenture.

Information and communication (4.8 percent), manufacturing (4.4 percent) and financial services (4.3 percent) are the three sectors that will see the highest annual gross value added growth rates driven by AI in 2035.

The bottom line is that AI has the potential to boost profitability an average of 38 percent by 2035 and lead to an economic boost of $14T across 16 industries in 12 nations by 2035.

Artificial intelligence adds value by boosting the productivity of some other process or product. AI is not so much a “big new product” as a feature of a cloud computing service, analytics capability or an enabler of a product’s features (voice recognition for home computing appliances).

source: Accenture

source: Accenture

How Do You Measure the Size of the Artificial Intelligence Market?

It is very hard at the moment to define with much precision the “size of the artificial intelligence market,” for some of the same reasons that it is hard to quantify the size of “e-commerce” or mobile payments or banking.

Are we measuring the value of transactions, the incremental revenue generated by new marketplaces, the value of new software, hardware or services to create, install or support such transactions?

Depending on how we approach quantifying “the market,” it is possible to come up with big--but almost useless numbers.

With artificial intelligence, the cleanest way to measure might be the sales value of hardware and software that creates the AI capabilities. But that is a problem, as well. Most of AI value is not derived by “selling” the capability, but by using the capability to support something else that actually represents a current line of business activity.

So AI adds value by boosting the productivity of some other process or product. AI is not so much a “big new product” as a feature of a cloud computing service, analytics capability or an enabler of a product’s features (voice recognition for home computing appliances).

In other words, if AI, or machine learning, is a feature of a computing operation or process, most of the actual value will be embedded in some other product, and will remain difficult to measure. The direct, incremental and “new” markets are mostly software products that provide AI functions. And that is a difficult figure to create.

Indeed, the AI “outcomes” are mostly of an intangible nature: what is happening? What should I do?

source: R Ray Wang

At the moment, most of the actual AI activity is acquisitions of small software firms able to supply the AI functions.

source: CB Insights

IoT: Billions of New Connections by 2020

The total number of IoT connected devices (not including wearables) is expected to grow from 1.6B in 2014 to anywhere between 20B (conservative view) and 46B (disruptive view) by 2020, according to Bell Labs.

Of this total, mobile IoT devices will be between 1.6 billion and 4.6 billion in 2020. Despite this massive adoption and traffic growth of 50 to 70 times from 2014 levels, traffic load is not the issue. All traffic generated by IoT devices will only account for two percent of the total mobile traffic by 2020.

In contrast, the signaling requirements will be significant. A typical IoT device may need 2,500

transactions or connections to consume 1 MB of data.  In the disruptive view, daily network connections due to mobile IoT devices will grow by 16 times to 135-fold by 2020 and will represent three times the number of connections initiated by human-generated traffic.

source: Bell Labs Consulting

Does LPWAN Complement or Compete with 4G, 5G?

Nobody can yet say for sure how the various internet of things access platforms will fare in commercial markets. Some will argue that the specialized IoT access networks using unlicensed spectrum have (and might continue to have) cost advantages over networks based on use of licensed spectrum.

Others argue that device costs and retail prices eventually will become equivalent. It is clear that “wide area” or “long range” connectivity is where the IoT wireless platforms will compete. In many “local” cases, IoT devices and apps will use existing Wi-Fi or other “close by” connections, then connect to fixed networks.

The issue for connectivity service providers is that such connections do not necessarily increase revenue for access providers.

source: Sigfox

source: Sigfox

4 Competitive Dimensions: Connectivity is Just One of Them

By 2025--barely eight years from now--connectivity will be only one of four key competitive dimensions in the telecom industry. “Control, content and cloud” will be the other three key dimensions, according to researchers at Bell Labs.

You can call that an example of why “moving up the stack” now is an imperative, not a “nice to have” example of generating “ancillary” revenue. In other words, value and revenue are likely to hinge on analytics and insights, as well as marketplaces, services and apps that build on insight.

Moving up the stack typically requires both resources and scale beyond the capabilities of most smaller telcos. That is one reason why a huge wave of industry consolidation, in part to achieve customer mass and scale that leads to higher gross revenue and profit, is going to happen over the next decade or so.

Moving up the stack is going to require capital, human resources and geographic scale that only the very-largest firms will be able to attain. And most of the largest firms will get there by acquisitions, both horizontal and vertical.

Horizontal acquisitions will be for scale in the basic connectivity business. Vertical acquisition will be to acquire applications and insight assets that represent industry growth and value propositions.

source: Bell Labs

How Telecom Industry Will be Like the Airline Industry

Sometimes, you have to say what nobody really wants to hear. So here is a nugget from Bell Labs: By 2025, the global telecom service provider industry is going to shrink from 800 firms to about 110, lead by just five global giants, according to Bell Labs. That is a reduction of 86 percent, by 2025.

To use an analogy, the future telecom business (eight years from now) will look like the global airline industry. A handful of firms will operate globally. About a hundred firms will be local partners, affiliated with one or more of the global entities into a “network” such as “Star Partners.”

In recent years, three global alliances have gotten 73 percent passenger share.

source: ITC Infotech

There are other similarities. Both airline and telecom industries are nearing maturity (already mature in developed regions, still in growth phase in many developing regions) and facing declining average revenue per unit.

source: Ryanair

source: Deepak Nagi

In the telecom business, a new competitive landscape will emerge, characterized by “the emergence of a new global-local duality of new service providers with either global or local focus,” says Bell Labs. There will be 10 global service providers that offer global connectivity, cloud and contextualized control and content (C&C) services.

In addition, there will be  100 local cloud-integrated network providers that offer domestic, hyper-local connectivity, edge cloud and contextual C&C services.

“Stitching it all together: a global-local alliance framework that connects and interworks the local and global service providers, similar to that of the airline industry,” says Bell Labs.

Will you be working for one of those 110 firms in 2025? And, if so, what do you need to know, today, to get ready?

That is the key challenge that underlies “Telecom Week,” a five-day training program created by the Pacific Telecommunications Council and aimed at mid-career telecom professionals, regulatory staffs and C-suite executives who will have to evaluate what 5G means for their businesses.

The premise is that, within a decade, there will be a dramatic, stunning reshaping of the global telecom business, and that, to survive, telecom professionals, regulators and suppliers need to prepare right now, for a cataclysmic change.

Instructors for telecom week will be leading discussions of what will future networks--and your business--will look like in the future, and what must you do now, to get there.  

The strategic problems the leaders of tomorrow’s telecom companies be grappling with, and what can today’s middle managers do--now--to prepare for the day when they are part of those leadership teams, also are key.

Telecom Week, to be held in Bangkok beginning 18 September and concluding on 22 September, is an unparalleled effort by PTC to quickly train telecom professionals on the profound changes coming in mobile and fixed telecommunications, with two full days looking at mobile and 5G, and three days looking at the broader strategic context for the telecom industry.

By the end of the week, attendees will have learned what 5G means, where the industry is headed and how they need to think about a vastly-different industry, and new roles within their companies.

The program begins with two days of training on 5G/mobility, at Spectrum Futures. The program continues with three days of management training at PTC Academy, introducing mid-career professionals to the strategic issues they and their firms will face in the near future.

Attendees at each of the programs will earn a certificate of completion, as well as gain key insight on where the industry is headed, what will happen and how to prepare for the coming changes.

Register now for Telecom Week events Spectrum Futures and PTC Academy. Your future may depend on it.

By 2025, There will be Just 105 Service Providers, Down from 810

By 2025, the global telecom service provider industry is going to shrink from 800 firms to about 105, according to Bell Labs. That is a reduction of 87 percent, by 2025.

Will you be working for one of those 105 firms in 2025? And, if so, what do you need to know, today, to get ready?

That is the key challenge that underlies “Industry Transformation Boot Camp,” a five-day training program created by the Pacific Telecommunications Council and aimed at mid-career telecom professionals, regulatory staffs and C-suite executives who will have to evaluate what 5G means for their businesses.

The premise is that, within a decade, there will be a dramatic, stunning reshaping of the global telecom business, and that, to survive, telecom professionals, regulators and suppliers need to prepare right now, for a cataclysmic change.

Instructors for telecom week will be leading discussions of what will future networks--and your business--will look like in the future, and what must you do now, to get there.  

The strategic problems the leaders of tomorrow’s telecom companies be grappling with, and what can today’s middle managers do--now--to prepare for the day when they are part of those leadership teams, also are key.

Telecom Week, to be held in Bangkok beginning 18 September and concluding on 22 September, is an unparalleled effort by PTC to quickly train telecom professionals on the profound changes coming in mobile and fixed telecommunications, with two full days looking at mobile and 5G, and three days looking at the broader strategic context for the telecom industry.

By the end of the week, attendees will have learned what 5G means, where the industry is headed and how they need to think about a vastly-different industry, and new roles within their companies.

The program begins with two days of training on 5G/mobility, at Spectrum Futures. The program continues with three days of management training at PTC Academy, introducing mid-career professionals to the strategic issues they and their firms will face in the near future.

Attendees at each of the programs will earn a certificate of completion, as well as gain key insight on where the industry is headed, what will happen and how to prepare for the coming changes.

AI Is Going to Disappoint, in Terms of Impact, for Some Time

 Quite often, big new information technology projects or technologies fail to produce the expected gains. That “productivity paradox,” where high spending does not lead in any measurable way to productivity gains,  is likely to happen with artificial intelligence and machine learning, at least in the early going. And that “early going” period can last far longer than many believe.

To note just one example, much of the current economic impact of “better computing and communications” is what many would have expected at the turn of the century, before the “dot com” meltdown. Amazon, cloud computing in general, Uber, Airbnb and the shift of internet activity to mobile use cases in general provide examples.

But that lag was more than 15 years in coming. Nor is that unusual. Many would note that similar lags in impact happened with enterprises invested in information technology in the 1980s and 1990s.

So prepare now: artificial intelligence and machine learning are eventually going to have the impact many now expect. It simply will take far longer than many expect.

No doubt, spending is growing. Some surveys suggest enterprises have dived into machine learning (artificial intelligence).

Half of those adopting machine learning are looking for insights they can use to improve their core businesses. About 46 percent report they are looking for ways to gain greater competitive advantage. Some 45 percent are looking for faster gleanings of insight. And 44 percent are looking at use of machine learning to help them develop new products.

source: MIT Technology Review

source: Tractica

Crown Castle Small Cell Plan Hightlghts Value of Trunking Fiber

The rationale for fixed network optical fiber deployment has in the past been driven by three different use cases: enterprise data networking; consumer TV/internet access and signal distribution (trunking or backhaul).

These days, spending on optical fiber in the U.S. market is driven more by distribution and enterprise apps than consumer retail services (at least in a direct sense, using fiber as the access media).

The reason is the coming use of millimeter waves to support 5G networks. Millimeter waves will not propagate as well as lower-frequency signals used to support mobile networks. That means much more “fiber deep” deployment of the trunking network, especially to reach small cell sites.

That, in turn, is pushing immediate spending towards trunking fiber that can support small cell deployments.

Crown Castle, for example, plans to deploy 25,000 small cells within the next two years, according to Guggenheim Equity Research. That, in turn, is driving Crown Castle efforts to secure much more trunking (distribution network) fiber.

“Among the three publicly traded tower companies, Crown Castle has uniquely chosen to focus on small cell development to supplement its macro site tower business,” Guggenheim’s Robert Gutnam argues.. “Currently, this segment comprises 16 percent of total revenue, and generates six percent return on investment, expected to grow to about 10 percent as second tenants are added.

Moving Up the Stack: 1/2 of Addressable Mobile IoT Opportunity?

Moving up the stack in the internet of things ecosystem will not be easy for mobile operators, if necessary.

The most-logical approach for many tier-one service providers is to create an application enablement platforms for IoT connections. Essentially, using the frameworks mean IoT devices will be “plug and play” on a specific network.

Such platforms generally supply a set of tools that simplify the process of building IoT solutions. Most solutions support analytics, data integration tools and run-time environments and are “horizontal” in focus, rather than aimed at specific industry verticals.

source: Analysys Mason

Several roles seem now to make sense. Mobile operators can offer a horizontal enablement platform, supplying device management for developers. That might represent a global market worth about US$20 billion in 2025.

Some mobile operators might try to create solutions for industry verticals. Such platforms might make sense in the healthcare area, as that overlaps with the “health and fitness” category where personal monitors already are routine.

That might represent a US$10 billion opportunity. A few mobile operators might develop end-to-end solutions for verticals such as fleet management. That might be worth US$19 billion, Analysys Mason predicts.

Mobile IoT Access Might Not Generate as Much Revenue as You Expect

As important as internet of things is likely to be for telecom revenue opportunities in the 5G era, it is not at all going to be easy to realize those gains. In a real sense, IoT and 5G represent the first era of mobility where the real upside has to come from applications, not access. 

Even if connectivity revenue has driven industry growth for all of its history, that is likely to begin a historic change in the 5G era. This is more than a new emphasis on "moving up the stack."

Eventually, if not so clearly at first, revenue either will be dominated by applications or total telecom revenue will shrink. 

By 2025, Analysys Mason predicts, global mobile operator revenue will reach about $888 billion (fixed network revenue not included). Some expect or hope that special-purpose wireless networks and fixed networks will play connectivity roles, with direct or indirect revenue models, as well. But the direct mobile opportunity seems to lie outside connectivity, per se.

Connectivity revenues earned by mobile ISPs will amount to about $28 billion. With the caveat that the forecasts might be too pessimistic, if correct, that prediction suggests there is not as much internet of things connections revenue as many might believe.

If correct, that reinforces the argument that most of the potential revenue upside from IoT for ISPs will come from participation in other segments of the ecosystem.

It always is important to differentiate between robust growth of broad IoT revenue streams and the portion that specifically will accrue to mobile and other ISPs in the form of connectivity revenue.

It is the same issue we faced early in the development of either internet retailing, mobile payments and smartphone markets. Total transaction value (the value of merchandise purchased through online channels) is not revenue for telecom providers. Nor is transaction value the same as profit, for any ecosystem participants.

Analysys Mason estimates total revenue from IoT solutions enabled by mobile operators (devices, applications, connectivity) of something greater than US$200 billion in 2025, with revenue growing at a compound annual growth rate of 18 percent.

But telecom access revenues, though growing, might still represent just about three percent of total telecom industry revenue by 2025. Machina Research research suggests “connectivity” might be the absolute smallest revenue opportunity within the ecosystem.

source: Machina Research

When Telecom Markets Stabilize, What Will the Structure Look Like?

 We are now some several decades into a process of regulatory, competitive and technology changes that change the shape of telecom markets. Where once every market was a sanctioned monopoly, we have moved to new market structures where there are multiple providers. What is not clear is how new stable market structures will develop, and what form those structures might take.

In a competitive industry, one might expect to find a stable structure where the market share leader has twice the share of provider number two, while provider number two has twice the share of provider number three. So a 40-20-10 structure would be possible.

In many highly fragmented industries, there could be scores of firms with single-digit share, with a 20-10-five structure, or even more fragmented than that, in terms of brands.

In the smartphone market, the leader market share of the top-three providers was 35-23-five, for example, in 2016.

source: newzoo.com

In the U.S. browser market n 2015, Chrome had 40 percent share, followed by Internet Explorer at 31 percent, then Firefox at 16 percent.

source: softpedia.com

Telecom, for course, is a highly-capital-intensive industry, with the consequence of oligopoly structures. Whether stable markets eventually will be lead by two, three, four or even more providers is unclear.

In South Korea, Korea Telecom had in 2014 43 percent share; SK Telecom 22 percent, LG Uplus 17 percent.

In Japan, in 2007, NTT had 53 percent, KDDI 29 percent, Softbank 17 percent share. By 2013, NTT had 41 percent, Softbank had 30 percent, while KDDI had 29 percent share.

In many mobile markets, there is a tendency for three providers to hold significant share, with a range from 40-percent range for the leader to 20-percent range each for the others.

source: Infinita

source: Point Topic

But even some app industries show an oligopolistic pattern. In the U.S. mobile advertising market, Google has 32 percent share, Facebook 20 percent, Twitter four percent.

source: eMarketer

The point is that, eventually, an oligopoly structure lead by just a few firms (three or two) is a reasonably safe bet, in either mobile segment. In larger markets with multiple fixed and mobile providers, it is possible a stable structure could develop with four or more providers. We just do not know, yet, as telecom markets arguably have not reached a stable state.