Some Problems Some Themselves

Real life has a way of making some expected problems a non issue. Most readers now are too young to remember it, but half a century ago it was not clear how we actually would enable simple voice communications for half the people on the planet. 

That is not an unsolvable problem, looked at by 2020 standards. So one can occasionally hear people talk about the phrase “half the world’s people have never made a phone call” as an urban legend. That is not correct now, but might have illustrated the problem in 1980, when the only platform we had available was fixed networks. 

Globally, there were about 4.4 billion people on earth in 1980. In 1980, globally, there were about 7.4 phone lines for every 100 people. So global teledensity was 7.4 percent. That does not directly translate into use of phones, as there were payphones. So people used phones that were not theirs. But phone access was quite limited in many countries. 

In 1980, for example, the number of phone lines per 100 people was perhaps 20 in many developing countries. 

source: Researchgate

In 1980, India had less than half a phone line for every 100 persons. 

source: CEIC

The phrase “half the world has never made a phone call” was an estimate even in 1980. But that aside, it is ahistorical to say the statement never was true, or never illustrated teledensity. Today, when there are perhaps six billion mobile accounts in service, against a population of perhaps eight billion, voice usage increasingly is a diminishing problem. But it was not always so. Historical context matters. 

Likewise, other potential problems seem to solve themselves. It always can be argued that there are competitive implications to market power. In the context of communications, managed services are treated, in terms of regulation, differently than internet apps. 

Common carrier rules prohibit differences in terms of service for like classes of buyers. But not all network-delivered services are common carrier instances. Subscription TV, broadcast TV and radio, internet access and all apps are unregulated or lightly-regulated offerings.

Collect calls, toll-free calls or sponsored data provide examples of instances where a third party subsidizes user or customer consumption. In the mobile arena, sponsored data, or zero rating, have sometimes been viewed as impermissible violations of network neutrality rules or principles. 

But real life has a way of muting the potential market power abuses. AT&T, for example, zero rates mobile data usage when customers of its mobile network watch HBO Max content. Though any third party can buy the same feature from AT&T, apparently few do so. 

But there are other market forces at work. AT&T and other U.S. mobile operators have moved to unlimited usage plans that make any zero rating superfluous. In practice, the anti-competitive threat of zero rating is negated by unlimited data usage plans. 

Some potential problems essentially solve themselves.

International Calling Jumps 20% in March 2020

The stay-at-home orders issued to combat the Covid-19 virus have boosted international voice traffic about 20 percent in March 2020, compared to 2019, says i3forum.  Roaming traffic dropped by 30 percent, as travel shrunk. The average length of calls increased by more than 30 percent in March and over 60 percent in April 2020 compared to 2019 levels.

The issue is what happens after the pandemic has passed. It might take an unusual degree of confidence--or excessive linear thinking--to predict that such elevated levels of usage persist. 

IDC predicts a quick return to normalcy, when looking at global customer spending on telecommunications and subscription TV services. Spending is forecast to dip 0.8 percent compared to 2019. IDC expects the decline to continue in 2021, but at a somewhat lower degree. 

Global Regional Services Revenue and Year-on-Year Growth (revenues in $B)
Global Region	2019 Revenue	2020 Revenue	Growth
Americas	$623	$623	0.0%
Asia/Pacific	$471	$465	-1.4%
EMEA	$480	$474	-1.2%
Grand Total	$1,574	$1,561	-0.8%

source: IDC

Business spending might be a different matter. A significant percentage of small businesses will never reopen, so that spending will cease. Some larger businesses might allow some employees to continue working remotely, which will shift spending locations and types, even if it does not lower overall spending. Much also will depend on the speed and magnitude of post-pandemic recovery. 

Countries that fall into significant recession will see lower business spending on communications. 

The mobile segment, the largest segment of the market, will post a slight decline in 2020 due to lower revenues from roaming charges, less mobile data overages due to the stay-at-home situation, and slower net additions, especially in the consumer segment, IDC predicts. 

Fixed data services spending will increase by 2.9 percent in 2020. But spending on fixed voice services will continue to decline.

In 2020, telecom services spending will drop in all geographic regions.

Does Technology Cause Growth, or Does Growth Cause Technology Adoption?

A Deloitte survey of 1,300 enterprise information technology executives across 69 countries and 22 industry sectors finds, as do most such surveys, a correlation between higher-performance firms and lower-performing firms. What never is clear is whether there is a causal relationship between technology investment, customer obsessiveness or any other metric. 

Some 11.6 percent organizations “are delivering significant value through technology,” Deloitte says. Deloitte also notes that such firms also have “an orientation toward growth and leaders who advocate for, prioritize, and appreciate the value of technology.” 

Some industries “always” feature high rates of growth, most likely have moderate growth, while others have low to negative rates of growth. Some industries require high investment in technology, while others might not benefit even from high rates of investment, especially if customer demand is declining. 

source: Deloitte

Software firms, for example, have long-term growth rates between 19 percent and 22 percent, and have business models that virtually require significant technology investment. They also are high-growth industries 

Trucking, on the other hand, has a negative three percent growth rate over the next five years. When an industry is declining, it is not clear that technology adoption can reverse the decline. 

source: Deloitte

Deloitte’s argument is that technology-using, customer-focused, growth-oriented firms got that way because they have positive attitudes toward technology. One might make the argument in reverse: software and technology businesses are fast-growing firms whose very products are “technology.” They innovate because that is how they create new markets and new products, which in turn is the foundation of their growth. 

Such firms often are customer-obsessed because their very survival requires discovering what needs customers have that their products and firms can serve. They do not always know that in advance. 

Conversely, low-growth or no-growth firms might not be customer obsessed because, no matter what they do, demand and revenue drop every year. They essentially are in revenue harvesting mode, where business strategy might actually be to invest as little as possible, as growth is not possible.

How To Install HBO Max on a Fire Stick, Right Now

source: The Android Soul

Many people who use Amazon Fire sticks on their TVs might also have--or want to have--a subscription to HBO Max. Unfortunately, there is a contract dispute between Amazon and Warner Media (AT&T) about revenue sharing. So HBO Max is not yet available on the Fire stick menu. 

But there is an elegant hack that will allow HBO Max subscribers to watch content on their TVs (smartphones and PCs are not a problem, since there is no Amazon inserted into the value chain). 

Watch this video and follow the directions to install HBO Max on an Amazon Fire stick.

Is Work From Home the Future for Many or Most Workers?

Is work from home the wave of the future; a work pattern that will be radically more common and permanent for most knowledge workers?  Not everybody thinks so. 

“The current increase in productivity may be an illusion,” say Jason Gold, managing director and Alec Stapp, director of technology policy at the Progressive Policy Institute. 

Right now, “employees are leveraging the relationships, routines, and habits they developed from interacting with coworkers in person on a daily basis, says PPI. “Over time, however, as workers begin drawing down on this social and organizational capital — culture, structure, and processes — we may find that they become less productive as collegial networks and opportunities to acquire new skills erode.”

“As employees switch jobs, problems linked to the withering of collegial relationships may start to seem more obvious,” says PPI. 

The other issue is whether remote work affects the development of professional networks that aid advancement in a company or industry. Some surveys suggest employees have that concern. So actual productivity or ability to collaborate might not be the whole issue. 

Some employees might rightly believe that being “out of sight means being out of mind,” even if most workers who can do so believe work from home is a productivity booster. 

source: Binfire

“The future will likely feature a robust and variable mix of telework and office work,” the authors say. “Companies that leap prematurely to the conclusion that their ability to prosper during the shutdown proves that the “office” is obsolete risk burning through their organizational capital, just as their rivals start to build it back up.”

If Not Video, What?

Many critics say AT&T’s move into video content ownership and subscriptions has been a big problem. Execution issues might be an issue, but there also is much evidence that revenue growth in the fixed networks business is coming almost exclusively from video subscription services. 

In 2017, for example, video subscription services represented about 27 percent of total telecom service provider revenues, according to the U.S. Bureau of Labor Statistics. “Telephony has made up a decreasing share of the wired industry’s revenues in recent years,” BLS says. “In 2017, this figure was 11.8 percent of industry revenues.”

Internet access services contributed 28 percent.

source: BLS

Put another way, even as observers universally say internet access is the revenue driver for cable and telco fixed services, video in 2017 was producing almost as much revenue as did broadband. 

Some would call video services a distraction, or perhaps only poorly executed. But for an entity with high needs for free cash flow, a revenue generator producing nearly as much revenue as does broadband is nothing to take lightly, especially when voice services are such a small part of the revenue picture.

Nobody can seemingly name a viable and sizable substitute revenue source than subscription video, at the moment. Most of the proposed new services and revenue sources are related to the mobile network: edge computing and internet of things being the salient cited examples. 

Scale Matters: Fixed Networks Lose, Mobile Wins

Lack of customer scale now seems to correlate with lower productivity and profits for fixed network connectivity businesses, while high scale seems also to correlate with mobile network productivity and profits. 

“The difference in labor input between wired and wireless is mainly a matter of scale,” notes the U.S. Bureau of Labor Statistics.  “The extreme rapidity of the labor productivity growth in wireless suggests that technological innovations—new ways of doing things with new types of hardware and software—still play a leading role in the story.”

 “The difference in labor input between wired and wireless is mainly a matter of scale,” says BLS. 

That arguably is true in most--if not all--businesses: scale and market share matter. Profits tend to correlate with market share, for example. Market share also tends to correlate with cost structure. 

Drives to reduce operating cost and capex for new networks have been issues for a couple decades in the telecom business. Headcount reductions, tower sharing, streamlined customer service, open architecture, “do it yourself” servers and routers and open source have been tools used for that purpose, and the work continues. 

But it appears much of the easy gains have been gotten, for mobile networks, computers, communications infrastructure and semiconductors, according to the U.S. Bureau of Labor Statistics. Only the mobile industry has improved its productivity since 1987. 

source: BLS

Scale matters elsewhere. In the U.S. market, fixed network revenue peaked around 2000, and has steadily fallen since then. For example, long distance minutes of use peaked in 2000. The number of U.S. landlines in service peaked about 2001. Long distance revenue peaked about 2001 as well. Most markets will follow a similar trajectory. 

But mobile revenue has grown since 2000. So scale arguably matters for profitability and productivity, not simply gross revenue. 

In the wired industry, output peaked in 2000. “The wired industry actually produced less output in 2018 than it did in 2000,” the BLS says. “Conversely, output for the wireless industry has continued to multiply, growing at an average annual rate of 13.1 percent since 2000.”

Open source and open architectures have played a role in reducing capex and opex, and continue to do so. The Open-RAN Alliance, GSMA, Telecom Infra Project and others are working to create open standards and interoperability of mobile radio access networks, core networks and other key infrastructure. That, in turn, is expected to lead to lower RAN costs. 

But scale does matter most. The basic problem for a fixed network provider is stranded assets, caused by lost market share taken by competitors, product substitution that shrinks demand for fixed access. The installed base of assets remains the same, but declining subscriptions and revenue mean the actual cost per customer keeps going up. 

At the same time, though prices have not fallen consistently for all products, the general trend is lower average revenue per account, or at least lower revenue per unit sold. 

IoT Will Drive More Private WAN Networking

Internet of things deployments will likely rely on private networks rather than the public internet for connectivity, a study conducted by Omdia suggests. That should come as no surprise, if IoT deployment volumes grow as much as some expect. 

source: IoT Analytics

The study included 200 enterprise executives in North America and Europe in several vertical industries already using or in the process of deploying IoT, including financial services, retail, manufacturing, healthcare and hospitality. 

About 46 percent of respondents already use private networks and 40 percent are evaluating private networks to support their IoT deployments. That might tend to be important if private 4G and 5G networks operated by enterprises prove to be as big as Nokia hopes. 

If an enterprise uses its own private 5G network to support mission-critical operations, why would it not use a more-secure private WAN to support those operations, as enteprises now use private WANs?

source: Syniverse

Much Small Business Spending is Essentially Similar to Consumer Spending

There’s a reason tier-one service providers often report small business revenue in a “mass market” category with consumer accounts. Very-small businesses tend to buy consumer connectivity products, with buying processes very similar to that of consumers. Some surveys of small business suggest just 10 percent of such firms generate $500,000 or more of annual income.

source: Business Knowhow

According to the U.S. Census Bureau, there were about 7.6 million employer firms (businesses with employees) operating in the United States in 2017. Of those businesses, 89 percent have fewer than 20 employees.

According to statistics from the US Small Business Administration's Office of Advocacy, 81 percent of small businesses are classified as nonemployers because they have no employees. 

Possibly 40 percent of SMBs had annual revenue less than $100,000 in 2013, according to Parks Associates. Perhaps another 30 percent had annual revenue of less than $500,000. 

According to the U.S. Census Bureau, perhaps 26 percent of U.S. small businesses generated more than $1 million in annual revenue. 

source: U.S. Census Bureau

source: Parks Associates

One often hears rather big numbers where it comes to the number of SMBs. But a huge percentage of total businesses actually are very small, home-based businesses with no employees. 

source: the kickassentrepreneur

Average small business owner salaries were about $66,000 annually, according to PayScale, which gives you some idea of likely profits from many small businesses.  

The point is that much small business connectivity spending is not going to be that different from consumer accounts.

Verizon Says Calling and Text Messaging Already Have Returned to Pre-Covid Levels

Verizon reports that call volumes as well as text messaging are “returning to normal levels,” while physical mobility also is increasing. That last statistic is evidence that lockdown and stay-in-place rules are loosening. 

According to Verizon’s handoff metrics, 44 states have had increases in mobility over the last two weeks and 36 percent of states have surpassed their pre-COVID mobility levels, Verizon says. Verizon’s stats also show these trends have been in place since at least the end of April. 

Verizon’s April 29 report on usage indicated that “most categories of usage are starting to decline, with some falling significantly below peak levels.” Downloads were down five percent, week to week, and have dropped about 55 percent from the peak infection period. Gaming dropped 10 percent week over week and 45 percent from the point of peak infection. 

“Customers have placed 14 percent fewer wireless calls from the peak of COVID, while calling and wireless calls are now three percent shorter in duration,” Verizon said. 

On the other hand, we need to be careful about attributing literally every social phenomenon to the impact of the Covid-19 pandemic. Mobility normally increases in the spring, in any case. “In the spring, we often see an increase in handoffs as people move around more and volume on our networks increases over what we see in the winter,” said Verizon Chief Technology Officer Kyle Malady.  

Still, gaming is up 82 percent over pre-COVID levels, virtual private network connections are up 72 percent over pre-COVID levels and use of collaboration tools are about 10 times pre-COVID levels.

Nor can we be too confident about predictions of long-term changes in customer behavior as we move further from the pandemic. Changes that already were in place pre-Covid will persist. But the magnitude of such changes, out about five years, are hard to estimate. Even past traumatic events (the Great Recession of 2008, the internet bubble burst of 2001, 9/11 attacks) have produced changes that are hard to see, over longer periods of time. 

The return of calling and text messaging behavior might be an example. We are not yet out of the lock-down, and already basic behaviors are returning to pre-Covid levels.

That is not to say permanent changes in behavior are inconceivable. We simply should not extrapolate in a linear way from our emergency behaviors.

Fleet Logistics IoT Shows Impact of Stay-at-Home Orders on Traffic, Truck Speed

Fleet logistics analytics provider Geotab says the stay-at-home orders issued as part of Covid-19 mitigation rules have decreased the time trucks spend at intersections and increased average speed when driving. The data was gathered from fleet internet of things sensors. 

The U.S. city with the largest increase in average road speeds was found to be New York City, moving from an average speed of 17.5 mph to an average of 21.0 mph - a 20 percent increase. San Francisco and Washington had the second largest increase in average road speeds.

source: Geotab 

The city with the largest reduction in time spent at intersections was Atlanta at 17 percent, with an average of 35 seconds spent at an intersection compared to 42 seconds before March 15. The city that has shown the smallest reduction in time spent at intersections is Seattle, with a three percent difference since before March 15.

“As soon as the lockdowns began across North America, we saw a drastic reduction in (carbon dioxide) emissions, down to 40 percent or less of normal for some cities,” said Mike Branch, Geotab VP. 

New York City, in particular, has seen the largest reduction, sitting at 38 percent of pre-pandemic CO2 emissions.” 

No Surprise, Net Profit Margins are Generally Lower than in Monopoly Era

Globally, a  typical retail connectivity service provider selling to consumers and businesses, likely with universal service obligations, tends to have net profit margins in the five percent range, according to Deloitte, perhaps six percent in the first quarter of 2020, making the business more profitable than low-margin grocery retailing but far less profitable than finance or technology services. 

source: Factset

Ironically, those sorts of net profit margins are close to monopoly-era margins as well. In the monopoly days, profit margins were set at guaranteed rates of return not much different, often in the six percent to eight percent range. The difference is attributable in large part to competition, which tends to lead to lower prices and therefore lower profit margins for suppliers. 

But product substitution also plays a part, as consumer and business demand shifts from legacy to new products, not all of which require purchase of a service provider product. Better technology also plays a role in enabling supply of better or more product at equivalent or lower prices. 

That illustrates a near zero pricing trend for basic connectivity products, especially on a per-bit, per-incremental-unit or per-use basis. Over time, connectivity prices have tended to mirror computation prices: better performance and declining prices over time. 

In fact, some major business models are premised on near-zero pricing for computing and communications goods. Microsoft’s software business, Netflix, Amazon, Google and 
Facebook provide examples of major business models built on the assumption of cheap communications and cheap computing. 

That can be seen in declining average revenue per user or commoditization.

Brief Dip, Quick Rebound Likely for Telecom Revenue, Capex

Though many parts of many economies might not see a “V-shaped” recovery post-Covid-19, Analysys Mason believes 5G capital investment will do so. If that happens, and looked at from a longer time frame, it will be almost hard to see the impact of Covid-19 on capex. That would be in keeping with past experience in the aftermath of the 2008 Great Recession, for example. 

And though Analysys Mason also predicts a revenue decline in developed markets of as much as 3.4 percent in 2020, growth will return in 2021. That also would be in keeping with the connectivity provider revenue recovery from the Great Recession. 

source: Analysys Mason

"Your Connection is Unstable"

“Your connection is unstable” is a message I almost always see at least once per Zoom session these days. So I did some checking, assuming there had to be a performance issue on my access circuit. Apparently, not so. Jitter measures at 2 milliseconds, well under the threshold of perhaps 39 ms on that measure. Bandwidth downstream is always between 200 Mbps to 300 Mbps per user, upstream between 11 Mbps and 12 Mbps, so bandwidth is not the issue, and latency is about 29 ms. 

All of that, essentially, means the connection, including both access connection plus Wi-Fi link, should not have instability issues. And yet it wobbles. Perhaps to be expected on a “best effort” internet connection, even with a new router. 

Most of the solutions I could think of involve removing the Wi-Fi link and direct connecting to the router using Cat 5 or Cat 6 cable, which is not an option since my PC no longer has an Ethernet port and uses Wi-Fi exclusively. 

I briefly looked at buying any available over the top QoS solution, but at least so far nothing seems suitable. And, in any case, it does not appear that jitter could be an issue. The apparently momentary unstable connection issues are annoying, but not mission critical for video conference calls. 

That is going to be a bigger issue when I am the one conducting webinars. About all I think of right now is rebooting the router before each Zoom session.

Australian ACCC Says Many Households Only Need 50 Mbps

A new report by the Australian Competition and Consumer Commission says 50 Mbps is sufficient to support household consumption of two concurrent high-definition video streams. For that reason,  “higher priced NBN100 services are not generally required to support many households’ consumption of streaming services, and that in most cases an NBN50 service is sufficient.” In other words, 50 Mbps works fine for household HDTV video streaming. 

“For most RSPs (retail service providers), nearly all NBN50 services would be able to stream from Netflix in High Definition, even if two people were watching different programs at the same time. This remained true even during busy hours,” the ACCC says. 

source: ACCC