AT&T to Launch Mobile OTT Service in 2018

AT&T plans to launch its own mobile-centric, over-the-top streaming solution that is access provider agnostic, with a planned commercial launch in 2018.

AT&T is going to build on its DirecTV Now service and then have it available as “the primary service” in a home.

Operationally, customer acquisition costs could be lower than linear services. Provisioning costs will absolutely be lower. There will be no need for truck rolls, drop cable installation, decoders and outlet installation. There will be virtually nil trouble tickets created because customers have decoder problems.

Also, in the same way that DirecTV allowed AT&T to sell linear video virtually nationwide, for the first time, so mobile streaming service will be available nationwide, without the specific need to add new facilities, as the service will use a “bring your own broadband” approach.

At least initially, the mobile OTT offer will aim to please potential customers who do not wish to buy a traditional linear video service. That target audience is about 20 million U.S. households. One virtually-certain feature is a skinnier bundle, with a lower price, possibly between $30 a month and $60 a month. Linear “big bundle” packages tend to cost between $80 and $100 a month.

There will be other upside as AT&T deepens its media activities.

For many participants in the media business, advertising is the sole or primary revenue source. For others it is a key revenue source, even if direct end user subscriptions are the major revenue driver. Both Verizon and AT&T now believe advertising will be a significant revenue contributor.

AT&T believes a key advantage of its content plus distribution strategy is the ability to create a new targeted advertising capability, according to Randall Stephenson, AT&T chairman and CEO.

“Within AT&T and DirecTV, we have an inventory of advertising that we sell every year, about 200 billion impressions that we sell every year,” said Stephenson. “Time Warner has 750 billion impressions that they sell every year predominantly through Turner networks.”

In other words, AT&T soon will have about a trillion impressions per year to sell. Just as important are the new targeting possibilities. AT&T says it is able to sell about two to three times the targeted advertising that Time Warner is able to sell. So simply creating a targeted ad capability for Time Warner inventory could yield big returns.

Comcast's distribution business (cable TV operations) generates about two percent of total revenue from advertising. On the other hand, its NBCUniversal unit (which contains the programming networks) generates more than 31 percent of total revenue from advertising.

New Telecom Infra Project Team Effort on Fixed Wireless, Backhaul, Smart City Use Cases

Facebook’s work on “Terragraph,” a fixed wireless  network using millimeter wave spectrum, multiple input, multiple output radios (MIMO), mesh networking and open source licensing now forms the foundation for a new development group called the Millimeter Wave (mmWave) Networks Project Group, co-chaired by Deutsche Telekom and Facebook.

Lead applications include:

• Fixed wireless access
• Mobile backhaul
• Smart city applications

The mmWave group will use data and lessons learned from Facebook’s Terragraph solution, a proof-of-concept system that overcame the signal range and absorption limitations that previously confined the 60GHz frequency to indoor use, Telecom Infra Project says.

The proposed architecture has many similarities to a “fiber to light pole” design, where highly-distributed radio sites (small cells) are the “access” network launch points. Verizon’s deep fiber design calls for extending the fiber trunking network to nearly every light pole, potentially.

The mmWave network architecture being developed by Telecom Infra will not require fiber distribution that extensive, as it is designed to rely on a relative handful of optical nodes, and primarily uses the mesh radio network to distribute signals to most small cells.

That feature is designed to minimize capital expenditure on fiber distribution.

The mmWave group will focus specifically on use of the 60 GHz frequency band, expected to remain unlicensed. That also helps minimize distribution network costs.

Disney Plans to Cannibalize Itself

As the video entertainment market shifts to over-the-top distribution methods, content providers will face a problem telcos are well aware of, namely revenue issues caused by product substitution.

Much of the cost to Disney of launching its new streaming services will come from increased operating costs, as it will have to market itself, instead of relying on its distribution partners to do that. UBS has estimated that cost at about $806 million annually.

That is not even the biggest cost, though. As many legacy product providers often find, new products often simply cannibalize existing products.

When an internet service provider using digital subscriber line shifts to newer platforms such as fiber to the home, it loses a DSL account for every existing customer it converts to a fiber access. So net gains are the issue, as a telco trades lost DSL accounts for new fiber accounts.

That problem is obscured a bit by the fact that few telcos in the U.S. market have completely replaced their copper access lines. So, in some areas, there is not an opportunity to even swap fiber lines for copper lines.

That is akin to the problem Disney will face in “going direct” to consumers with its content.

Unlike third-party distributors, Disney does not have a “cost of goods” line item, as it owns its own content. That is a huge plus.

On the other hand, Disney will have a huge “lost revenue” problem, as it loses licensing revenue presently earned by supplying third parties with Disney content. That is very much like the “fiber for DSL” problems faced by telcos. Creating the new platform necessarily causes losses on the old platform.

UBS estimates that Disney’s film TV licensing alone could suffer a $2.1 billion a year loss, and that its streaming licensing through services like Netflix might all $500 million in additional current revenues.  

source: UBS

So before the Disney streaming services can hope to achieve breakeven, they start with a potential loss of up to $2.6 billion in annual lost current revenues from licensees who will not be able to buy that content from Disney. It is a high hurdle.

UBS estimates Disney must find  32 million customer accounts, at a $9 a month subscription fee, to reach breakeven on an operating basis. Though Netflix has 100 million accounts globally, Netflix is unusual. Most of the network-specific streaming services have single-digit million accounts, at least so far.

HBO Go has perhaps 3.5 million subs, while all the CBS streaming accounts might number about four million.

So the biggest single business problem for Disney is the lost revenue it will incur when it stops licensing its content to other distributors.

U.S. TV Antenna Households Increase to Nearly 16 Million Homes

One sign that consumers are unbundling their video entertainment purchases is the increase in purchasing and use of over-the-air antennas, presumably then combined with subscriptions to one or more streaming services.

A study sponsored by Ion Media and conducted by Nielsen shows the number of broadcast-only homes has increased 41 percent over the last five years, to 15.8 million households.

That shift, in turn, is part of a larger rearrangement of buying preferences in the video entertainment business, which has consumers shifting buying to over-the-top streaming services, reducing or halting the buying of linear services and use of streaming services.

The report finds that broadcast-only homes have a higher percentage of young viewers (median age 34.5) than total TV households (39.6).

Some 39 percent of broadcast-only homes have children in the household, compared to 34 percent of total TV households.

The new reliance on over-the-air antennas is part of a range of other trends including a shift to mobile video, cord cutting of linear video subscriptions, a shift to skinny bundles and use of streaming services.

The shift to use of over-the-air TV is related to a larger problem in the communications business, namely the process whereby products and services become features. In the case of broadcast TV, the shift if from paying for a linear video subscription that also includes the local off-air channels, to buying an antenna to avoid paying for such content access.

Vodafone Has 50 Million IoT Accounts

Vodafone says it is the first global IoT provider to amass 50 million internet of things connections, adding about one million new connections a month, with particularly strong performance in the automotive, healthcare and utilities sectors, Vodafone says.

In 2016, global IoT revenues earned by mobile operators was in the range of Eur 11 billion, according to Berg Insight. Average revenue per connection was Eur 1.40 on average, ranging from Eur 0.30 in some developing countries to Eur 3.00 in developed countries.

Some 56 percent of organizations have integrated IoT data into their existing core business systems such as ERP, cloud hosting platforms, analytics tools, and mobile applications.

About 55 percent of IoT adopters in the Americas surveyed by Circle Research have seen revenue growth by greater than 20 percent following IoT implementation.

Globally, IoT now accounts for 24 percent of the average IT budget,  equivalent to IT spending around cloud computing or data analytics, Vodafone ’s fourth annual Internet of Things (IoT) Barometer Report says.

Pangea Will Come Again: Earth in 250 Million Years

Video Becomes Part of Core Telecom

The global telecom and media market will generate $1.58 trillion in revenues in 2021 from 11.96 billion connections, according to Ovum. Video entertainment largely accounts for the growth, as that product becomes a mobile and fixed service provider core offering.

“Core” telecom revenues have been in the range of $1 trillion annually, in recent years. To sustain those revenues, video entertainment increasingly is seen as a new “core” offering.

source: FCC

Using that example, much of the future telecom service provider revenue growth will come from other applications. Many expect that will happen as new internet of things apps develop, and as service providers are able to create new roles for themselves in those areas.

The United States  will be the world’s largest telecom/media market by revenues, with $402 billion in 2021 generated from 805 million connections.

U.S. revenues will be 25 percent of the global total in 2021, compared to US connections, which will be seven percent of the global total.

China will be the biggest market in 2021, as measured by accounts. China will have 2.4 billion connections, representing 20 percent of the global total, and the second-largest market in terms of revenues, with revenues of $220 billion in 2021.

But growth largely will come from emerging markets. The world’s top ten markets ranked by revenue growth from 2016 to 2021 will be concentrated in the Middle East, Africa, and Asia-Pacific regions. The markets in order of revenue CAGR are Myanmar, India, Kenya, Indonesia, Ghana, Tanzania, Nigeria, Iran, Uganda, and Pakistan.

Mobile will be a big contributor everywhere, but content will be a bigger revenue source in some markets.

In 2021, the mobile market will generate 87 percent of total telecom/media revenues in Africa and 70 percent in the Middle East, compared to 50 percent in North America and 49 percent in Western Europe.

Still, mobile  will dominate the market overall, with revenues of $933 billion and nine billion connections in 2021. Fixed broadband will generate $288 billion in revenues in 2021, ahead of entertainment video at $239 billion and fixed voice at $122 billion.  

Roaming Revenues to Shrink 11% in 2017

Juniper forecasts that annual mobile roaming revenues, worth an estimated $54 billion in 2016, will decline to $48 billion in 2017 as revenues generated from increased usage in many markets fail to offset those lost by lower roaming charges in the EU.

That represents an 11 percent decline in 2017.

But that is only part of a larger problem, Juniper Research suggests. Globally, account growth continues, as customers in developing countries become mobile subscribers. But that essentially accounts for all account growth in the global business.

And then there is revenue. We might already have reached “peak mobile,” in terms of revenue. In other words, it is conceivable that total industry revenue will begin to shrink, from this point forward, for the foreseeable future.

In part, that is a result of account saturation (everyone who wants to buy the service already does so) as well as declining average revenue per account.

The bigger potential problem is value shifts within the internet ecosystem, which the whole telecom industry now is part of.

Telecom is not a “growth” industry. To be sure, “telecom” was not a growth industry in its monopoly phase, either. It was a utility. In the competitive era, telecom has managed to grow its revenue and scale, based largely on huge growth of mobility services in developing nations.

In developed markets, “telecom” arguably has reached saturation. And that is the larger problem: how to reignite at least enough growth to allow the industry (especially in developed markets, at the moment) to maintain steady revenue growth rates, as legacy revenues shrink.

source: Juniper Research

source: Strategy Analytics

source: A.D. Little

CenturyLink Faces a "Two Types of Network" Problem

CenturyLink has an interesting problem. It earns most of its money from enterprise and business customers, but it has a consumer communications business that covers the most-rural territory of all the entities formerly known as “Baby Bells.”

In fact, CenturyLink now earns as much as 88 percent of revenues from business customers, and nearly all its profit.

Prior to the Level 3 merger, CenturyLink claimed enterprise, small business and wholesale  revenue would amount to 76 percent of total revenue.

source: CenturyLink

CenturyLink might have as many as 17 million access lines in service. Since it does not report total access lines anymore, it is difficult to say with precision what profit margin contribution now is made by the consumer business, except to note that internet access accounts for about 46 percent of consumer segment revenue, with consumer voice contributing about 41 percent of total revenue.  

So what is interesting is that CenturyLink operates as a business services specialist--akin to a competitive local exchange carrier, metro fiber provider or long-haul capacity provider--but still also operates a huge network of relatively low density consumer access lines.

That means CenturyLink likely makes most of its profits from the business segment, with higher profit margins, compared to the consumer segment. That is not a terribly unusual state of affairs for a tier-one fixed network service provider in the U.S. market with universal service obligations.

More than most tier-one service providers, CenturyLink would really benefit from lower-cost platforms to supply high speed internet access services, without having to install fiber to home facilities in rural areas.

Unlike AT&T and Verizon, CenturyLink does not own mobile network assets that will help, in that regard. On the other hand, perhaps CenturyLink can provide small cell backhaul service to those and other firms.

But CenturyLink faces severe capital constraints. It has grown by acquisition, which means high debt loads. CenturyLink gross revenue also is declining, in both business and consumer segments, and has to pay out a high dividend.

One might argue that among the big strategic problems CenturyLink faces is that it is an amalgam of two different types of businesses: a largely-rural fixed network business using one type of network and a separate enterprise services business that uses different facilities.

source: FCC, CenturyLink

"5G LTE" Illustrates Technology Evolution from 4G to 5G

One way of illustrating the “evolutionary” nature of the transition from 4G to 6G is to note the language now used to describe “pre-5G” developments. Sierra Wireless, for example, now talks about “5GNR” and “5G LTE.”

Some skeptics will argue that neither is “real” 5G; optimists will say such criticisms miss the point. The 5GNR air interface uses 4G signaling, but a 5G-compliant radio. Some internet service providers have pushed for a rapid introduction of the 5GNR standard because they plan to use 5GNR to support new fixed wireless services based on use of the mobile infrastructure.

5G LTE arguably is the bigger stretch, as most would say that is simply the latest release of  LTE Advanced Pro (Release 15). On the other hand, Release 15 features are foundational for standards-based 5G.

Support for internet of things applications (LTE-M, NB-IOT, V2X (automotive) provide examples, adding the ability to support long-battery life, low data rate services that will be key for 5G.  

Also important is use of aggregation capabilities that use both licensed and unlicensed spectrum. Much-lower latency and higher speeds also are key features of 5G that Release 15 will introduce first for 4G.

“it’s important to note that 5G LTE is not a ‘transitional’ technology; as mentioned, it’s an essential part of a true 5G system,” Sierra Wireless argues.

U.S. Fixed Network Speeds Grew About 31% Over Last Year, Cable Speeds Grew Faster

U.S. fixed internet access provider speeds are growing, and arguably poised for faster growth, as leading providers push for introduction of gigabit per second speeds. Year over year, average speeds grew about 31 percent.

Cable TV operators have been in the lead, in terms of average speed. In fact, Comcast speed increases have grown nearly at Moore’s Law rates, doubling about every 18 months to two years, since about 1999.

Comcast was the internet service provider with the fastest overall speeds in the first half of 2017, but Verizon FiOS is moving up, according to Ookla Speedtest. But telcos generally lag cable in terms of highest average speed.

Verizon Fios’s significant spike in download and upload speeds in April directly correlates to their introduction of gigabit tier at an affordable $69 price point, Ookla notes.

The challenge for telcos is to find some way to match cable speed advances; in other words to reach improvement close to Moore’s Law rates.

source: Ookla Speedtest

Unlimited Usage Plans Reshape AT&T, Verizon "Average Speeds"

A widespread shift from fixed-usage buckets to unlimited use should, all other things being equal, boost consumption. And that is what appears to be the case, according to Ookla tests of mobile internet access performance in the first half of 2017.

At the same time, overall speed increased about 19 percent overall. “During the past 12 months, improvements in technology and usage of available network spectrum led to a 19 percent increase in average mobile download speeds in the United States,” Ookla notes. “All four major carriers have boosted download speeds, but not all carriers are improving equally and not all areas of the country are seeing the same benefits.”

In its recent tests, average downstream speed grew to 22.69 Mbps, on average. Average upload speed over mobile improved four percent to 8.51 Mbps.

T-Mobile US clocked the fastest speeds, followed by Verizon Wireless.

source: Ookla

One would expect the greatest impact of increased usage to occur on the AT&T and Verizon networks, since Sprint and T-Mobile US already offered unlimited access plans.

That is what the Ookla data suggests. “Our data shows that in the case of Verizon and AT&T, the percentage of test results with the lowest-end download speeds (those under 5 Mbps) shot up compared to the period before these unlimited data plans were widely available.”

Both T-Mobile US and Sprint are seeing the opposite effect: year over year, there were fewer instances of performance “below 5 Mbps.”

But usage on the AT&T and Verizon networks might not be due to actual congestion, but efforts to prevent congestion. Both firms say they might throttle maximum speeds after some amount of monthly usage by any single account.

Both Verizon and AT&T say unlimited customers may experience reduced speeds if customers exceed 22 GB in a month and the cell site is congested. That could explain the greater percentage of AT&T and Verizon accounts experiencing slower overall speeds.

So the AT&T and Verizon networks may not be saturated; just throttling heavy users.

source: Ookla

How Will UAVs Operating Beyond Line of Sight Be Controlled?

Eventually, unmanned aerial vehicles are going to operate commercially, beyond line of sight, which means a relatively low-cost flight control system has to be created.  Some believe Wi-Fi can accomplish the task, while others believe mobile networks make more sense.

In other words, a parallel air traffic control system, optimized for UAVs, will have to be created.  

Alliance for Telecommunications Industry Solutions (ATIS) naturally argues mobile networks are best optimized for such purposes.

One certainty: the Federal Aviation Administration will be involved, which means all sorts of considerations around flight safety will be foundational, and link reliability cannot be an issue, no matter which radio approach is taken.

Satellites are used to control large drones travelling great distances, but some might argue cost is likely to be an issue for small industrial and retail UAVs.

source: www.expouav.com

How Big a Deal Will Wholesale Be, in the 5G Era?

Wholesale is likely to emerge as a key revenue stream for 5G services, especially using the virtualized capabilities of core and edge radio networks to enable end-to-end private networks by third party customers.

The whole point of operating virtualized networks (network functions virtualization) is to support rapid and easy creation of network services and features, almost on-demand, for internal and external customer purposes. In the 5G era, that will include “network slicing.”

Network slicing allows the creation of customized virtual private networks to support mobile operator offers or wholesale opportunities to support third party applications.

source: www.wballiance.com

And such wholesale opportunities might develop as quite an important revenue source. About 44 percent of industry executives surveyed by GSM Intelligence believe operating as a “platform provider” will be the “primary role” for a 5G network, in both business-to-business and business-to-consumer” realms.

About 41 percent believe the primary role in the 5G era will be as a digital service provider, which might have both wholesale and retail aspects.

Likewise, 31 percent of respondents believe third parties will partner for neutral host services. Another 26 percent believe third parties will partner with 5G operators to offer their own services.

source: www.gsmaintelligence.com

source: www.gsmaintelligence.com

How Big is Service Provider IoT Opportunity?

How big is the Internet of Things opportunity for mobile operators? One has to be careful when big numbers are thrown around.

Internet of Things represents a US$1.8 trillion in global revenue for service providers by 2026, according to Machina Research. That does not mean service providers will earn that much revenue themselves. The $1.8 trillion almost certainly includes the total ecosystem activity, much as “e-commerce” includes the retail value of goods sold, but not direct revenue or profit for any single part of the ecosystem.

Having not read the full study, and without knowing the methodology,  it is hard to say whether the $1.8 trillion includes the full value of all exosystem sales (likely, in my opinion) or something more important for communications service providers, namely mobile participation in connectivity, applications, devices and platform revenue streams.

My guess has to  be that the forecast represents Iot ecosystem revenue, not service provider revenues.

It is hard to see how service provider IoT revenues could be as big a market as $1.8 trillion, simply because global mobile revenues in 2012 were about $1.2 trillion. In fact, GSMA estimates total industry revenues will only be about $1 trillion in operator revenue in 2020.

There is no way IoT, in 2026, generates more revenue than the entire global mobile industry in 2017.

source: machinaresearch.com

The research also indicates that the Americas region will account for an estimated US$534billion, or approximately a third of the total revenue.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 percent of all LPWA connections, Machina estimates.

By segment, consumer demand for connected home will be US$441 billion, consumer electronics will be US$376 billion) and connected car technologies will represent US$273 billion in activity.

However, other areas such as connected energy look set to reach US$128 billion by 2026 as a result of local governments and consumers seeking smarter ways to manage utilities. Similarly, revenues from connected cities are forecast to reach US$78 billion by 2026, Machina Research sys.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 per cent of all LPWA connections.

source: Machina Research

source: Machina Research

source: machinaresearch.com/

IoT is crucial, strategic and necessary if the global mobile industry is to replace expected lost revenues from voice and text messaging, as well as slower growth of mobile data services and device revenue.

But IoT will not be as big a connectivity revenue stream as some believe. Success really hinges on mobile service providers becoming key suppliers in other areas of the ecosystem as well.