Does More Privacy Mean Fewer Ads?

One way of the other, users are going to have more privacy and control over their data where it comes to its use for advertising. But that almost assuredly does not mean there will be less advertising. There could plausibly be more advertising, simply because less-targeted ads mean "more waste."

To make up for the less-effective targeting, advertisers will have to spend more.

It is probably the case that most people, most of the time, do not prefer to see or hear advertising. Which is one way of saying they do not like advertising. 

Of course, many argue what people hate is bad advertising. Some surveys suggest 70 percent of consumers globally tolerate ads, including about a quarter who say ads can be enjoyable. 

source: Marketing Week 

 

But that is likely a minority opinion, sometimes advanced by marketing professionals, not consumers who are exposed to the ads. These days, people tend to view ads as intrusive, too numerous and an infringement on privacy. 

source: Stepan Stroe 

It’s more than that: ads are viewed as intrusive, in much the same way that  many people also do not appreciate unexpected phone calls, which likewise are viewed as intrusive. 

And yet advertising is a big business of perhaps $300 billion in annual revenue in the United States alone. But grumbling about targeted advertising seems to be growing in some quarters. The European Parliament is looking at legislation outlawing targeted ads using religious beliefs, sexual orientation and racial or ethnic origin.  

Facebook already does so. And Google is ending behavioral targeting. That means cross-site tracking will not happen, outside properties Google itself owns. 

Perhaps more important, many in the internet ecosystem--especially Apple--are moving to give consumers more control over ad tracking data. 

Apple will allow its users to opt in or out whenever an app wants to track a user’s activity across other companies’ apps and websites. 

source: Medium

And the trend has been underway for some time. Restricting use of third-party cookies provides one example. 

One way or the other, targeted advertising is going to change. Which also means advertising is going to change. But most of us likely do not believe there will be less advertising. It might be more private. 

Ads might be less effective. But who believes there will be fewer ads? Probably nobody. Not so long as advertising enables access to “free content” that people want. And not so long as firms still need to sell their products. 

source: Statista

Video Drives Most Bandwidth Consumption, Mobile Phones the Most Connected Devices

Some really-important trends might not be entirely obvious in this description of a report about how customers used Wi-Fi on the Comcast network. 

You might think the biggest use would be video streaming, and that is likely true in terms of bandwidth consumption, though the report is organized around “numbers of connected devices” not “bandwidth consumption.”

You might be somewhat surprised that personal computers do not even show up as a category worth quantifying. It is not so much home broadband as a platform for work, homework or economic growth is unimportant. PC use for work or learning is important. 

But such use cases do not dominate bandwidth consumption, which is led by gaming, TV and other entertainment purposes. 

source: Comcast  

Bandwidth consumption is another matter, as global bandwidth consumption is dominated by video, including entertainment video and video clips on social media and for advertising. 

source: Comscore

source: Comscore

source: NCTA  

If Digital Transformation Does Not Create Outcomes, Why Bother?

IDC has predicted that 65 percent of global gross domestic product will be “digitalized by 2022.”  IDC also predicts that by 2023, 75 percent of organizations will have comprehensive digital transformation (DX) implementation roadmaps.

We might disagree about precisely what “digitalization” means without disagreeing that it ultimately must result in outcomes. It is one thing to change a business process; it is quite another to change a business outcome. So it is with any applied effort involving digital transformation. The objective is always to change business outcomes. 

source: AWS 

So here is the point: DX is important when it allows entities and organizations to achieve more. 

source: McKinsey 

By 2025, 75 percent of business leaders will leverage digital platforms and ecosystem capabilities to adapt their value chains to new markets, industries, and ecosystems, argues IDC. 

Note the key phrase: “New markets, industries, and ecosystems.” New; not existing or incumbent or legacy. 

That is not to say almost every business process will be affected; obviously that seems the case. But digitized processes do not help much if they do not also support the move into new markets, industries and ecosystems. 

“In some cases, the use of digital tools and technol­ogies can upend entire business models or create entirely new businesses,” McKinsey consultants say. “Look no further than the way the internet has changed the way consumers research and purchase airline tickets and hotel rooms, disintermediating many traditional travel agents—one of the original cases of industry reinvention,” McKinsey has said.

Or look at the way  video-streaming services has disrupted the economics of traditional broadcast and cable TV channels. 

Consider the way cloud computing has changed “how we do computing” but also has disrupted and changed the computing hardware and software businesses. Or look at the way enterprises, businesses and consumers now use computer applications and services: remote and distributed applications are the rule. 

source: Deloitte 

Our apps are stored “someplace else” and accessed using the internet when we need to invoke them. 

We used to say that “digitization” allowed any media type to be transported over a single connectivity medium. It also has proven true that the internet allows almost any application or process to be supported by remote computing and storage facilities. 

We have separated “where computing is used” from “where computing happens.” But there is more to it than that. Some might argue that DX is just what we used to call “information technology.” 

It arguably is much more. According to IDC, DX is the way to achieve business advantage. We often have proxies for advantage. Sometimes we say DX is valuable because it increases resiliency, or provides agility. DX-enabled firms can survive crises better, and innovate faster. All of that really matters if revenue is at stake; if survival is at stake. 

To be sure, customer experience, product development, fulfillment, marketing, human resources and all other business processes are potentially affected by DX. But it is the ability to protect the legacy financial returns and potentially accelerate revenue growth in new areas that is the foremost outcome of digital transformation. 

source: McKinsey 

IOT and Blockchain, Plus AI, Drive Automation, Lower Costs and Cost of Sales

Distributed or automated ordering and fulfillment, plue bandwidth or services on demand, have been desired capabiltiies in the connectivity business for many decades. Blockchain adds automated settlements to the mix. 

Internet of things adds new requirements for low-cost, secure, automated ordering, fulfilment and settlement. Blockchain should help. 

"Digging into the Future"

Highlights of season one. 

Claude Shannon and TeraHertz Spectrum

Claude Shannon’s information theory is the reason we are moving to millimeter and teraHertz frequencies in the mobility business, as well as higher optical frequencies for fixed network communications.

In fixed network optical networks, the higher the carrier’s frequency, the greater the channel bandwidth channel bandwidth and the higher the information-carrying capacity of the system.
The rule-of-thumb for estimating the transmission bandwidth is that its maximum value is approximately 10% of the carrier frequency. 

Shannon defined the maximum data capacity over a communications channel in the presence of noise.

source: CableLabs 

Basically, capacity requirements are a linear function of the bandwidth available. Shannon’s model shows that as the available bandwidth in the frequency range increases, so does the capacity of the channel. All else being equal, a doubling in frequency can double the channel capacity.

Basically, as frequency increases, wavelength decreases. As wavelength decreases, there are more opportunities to code symbols per second.

Basically, if a mobile signal in the 800 MHz to 2 GHz range has a wavelength between one meter and 10 centimeters, a radio signal in the 6-GHz to 30-GHz range has a wavelength in the 5 cm to 1 cm range. 

source: Researchgate 

That shapes potential bandwidth because there is a direct relationship between frequency and capacity. All other things being equal, signals in the above-6-GHZ range can carry 10 times the information of signals in the less-than-2-GHZ range. 

Since end user bandwidth consumption in the wireless space grows over time, as does consumption over fixed networks, there is a continual need to add spectrum (capacity) over time. 

Aside from the fact that lower-frequency bands already are occupied by other users, 10-times increases in capacity (again, all other things being equal) can be gotten only by adding new frequencies higher in the spectrum. 

This is relatively easy to visualize. This chart shows the traditional mobile communications spectrum in light blue, compared to other bands used for point-to-point (non-mobile communications). The orange bar supports Wi-Fi and some other uses. 

source: Researchgate 

The point is that above 38 GHz, most of the spectrum is commercially unused. So as bandwidth demand increases, we will make more extensive use of the sub-40-GHz spectrum, and then begin adding frequencies higher than that. 

So Claude Shannon’s information theory explains why we will move into millimeter and teraHertz radio frequency ranges to support future mobile network generations. Since there is no way to reassign most of the lower-frequency assets to mobility, unused bands must be sought. 

And most of those resources are in the millimeter and teraHertz regions. 

Or, if you like, uncertainty plus information volume is the driver of the move upwards in frequency.  It is the combination of the minimum number of bits required  to represent any bit of information and the amount of information to be coded that fuels the move to millimeter and teraHertz frequencies, as challenging as that might be, in terms of building commercial wireless networks.

Mobility and Internet Access Buying is Similar to Consumer for Micro-Sized Organizations

There is a good reason why telco small business marketing often includes those organizations in a “mass markets” segment. “Micro” businesses with no more than nine employees often buy consumer mobile service plans, for example.

“Small” businesses with 10 to 49 employees more commonly buy business plans of some sort. “Medium” businesses with 50 to 249 employees buy business plans about 85 percent of the time, according to an Analysys Mason estimate. 

source: Analysys Mason 

Roughly the same might be noted for other products such as internet access. 

Perhaps the single biggest difference is that small- and medium-sized organizations are more likely to require dedicated internet access with assurances about bandwidth. Micro-sized organizations are much more likely to buy “best effort” consumer grade services.

Should Telcos "Stick to What They Know Best" or "Move into Adjacencies?

One recurring strategic problem for connectivity providers is whether to focus on what they know best--connectivity over the wide area network--or to move "up the stack" or "across the value chain" to take on new roles beyond connectivity. That has historically proven to be quite difficult.

But opportunities to reverse declining revenue growth rates might be difficult if service providers choose to remain focused primarily on their traditional connectivity roles, as revenue growth rates have slipped for the past decade globally.

For example, most telcos globally have to contend with revenue growth that has declined between 2017 and 2020, according to data from World Wide Technology. 

source: World Wide Technology 

Some of the challenges grow from various roles beyond connectivity, assuming continued low growth rates in the core connectivity business. In edge computing, for example, as with most other applications and use cases, the highest value--and most commonly the highest financial return--come from the actual application role. 

The lowest value, and typically most modest return, comes from the real estate function supporting edge computing. World Wide Technology estimates that 59 percent of edge computing revenue will be earned by the actual computing services--the end user facing apps-- supplier, for example. 

source: WWT, Analysys Mason 

As defined by Analysys Mason, the “edge location owner” role is the traditional connectivity function.

The “edge connector” role is different, entailing integration of edge computing with the enterprise’s current infrastructure, with specific focus on cybersecurity capabilities.

The “edge application enabler” role involves end-user use cases and associated applications. 

To succeed as an “edge connector,” mobile and fixed network service providers must operate much more as system integrators, with “some expertise” to “great expertise”  in integrating edge computing with the existing platforms. 

Few mobile or fixed operators have natural competencies as providers of the end-user-facing applications and business use cases. 

Even if a Niche, Fixed Wireless Can Have Outsized Returns for Some Firms

Some niches are more important than others, especially for some contestants in the U.S. home broadband market. Revenue growth is not always and necessarily the big story. A niche in fixed wireless might have outsized returns for firms such as T-Mobile, which historically has had zero market share in home broadband, or for Verizon, which not can compere nationwide in that market, where it historically has been limited to about 20 percent of the national U.S. market.

Fixed wireless is not new, having been used to support home broadband for decades. three million fixed wireless home broadband accounts in service in the United States, for example.  

What is new is the ability of 5G fixed wireless to supply higher bandwidths with less deployment cost. Where traditional fixed wireless required direct line of sight positioning, 5G fixed wireless allows self installation by consumers with no elaborate wireless engineering work or a truck roll to install antennas. 

And though fixed wireless also has been a niche platform--key for wireless internet service providers--it is a major platform for big mobile operators such as T-Mobile and integrated operators such as Verizon to enter or expand their share of the home broadband market. 

"We expect fixed wireless will make up 45 percent of broadband net adds in 2022 and 50 to 55 percent thereafter," says ISI Evercore. "We expect that in 2025 fixed wireless will have seven percent share of total broadband subscribers.”

Right now it is a matter of debate whether the primary fixed wireless market will be in rural areas or elsewhere. But we might already note that, in the third quarter of 2021, though fixed wireless represented significant net account additions, the Fios fixed network garnered 43 percent of the new accounts. 

One quarter later, fixed wireless accounted for 74 percent of home broadband net additions. 

source: Verizon

 

source: Verizon

source: Verizon 

Fixed wireless might always be a niche, but it is a fast-growing niche and key for the home broadband aspirations of T-Mobile and Verizon. 

Lumen FTTH Revenue Assumptions Show FTTH Business Case has Changed

Lumen reports its fiber-to-home average revenue per user at about $58 per month. For those of you who have followed fiber-to-home payback models for any length of time, and especially for those of you who have followed FTTH for many decades, that level of ARPU might come as a shock. 

Though some honest--and typically off the record--evaluations by some telco executives 25 years ago would have predicated the FTTH business model as “you get to keep your business” rather than revenue increases. 

Few financial analysts would have been impressed. 

The theory was that upgrading to FTTH would allow incumbent telcos to essentially trade market share with cable companies: gaining video subscription market share from cable as cable took voice share. The assumption was that home broadband share would remain about where it was. 

The thinking was that per-home revenue could range as high as $130 to $200 per month, even as overall market share was gained by cable and lost by telco providers. 

So the $58 ARPU is a shock. Essentially, telcos are investing in FTTH to reclaim market share in home broadband, but largely harvesting video and voice revenues, both of which are dropping. 

Some telcos able to operate in both mobile and fixed network segments of the business have seen revenue growth shift decisively to mobile sources. 

Incumbents restricted to fixed network services only have faced huge challenges, which explains why many have been acquired by private equity and institutional investors with different financial motivations. 

Much investment in digital infrastructure is made to gain exposure to alternative assets that in past decades would have consisted of real estate holdings. The objective is asset diversification into a category that offers stable long-term cash flow with some presumed moats, but not necessarily revenue or asset value growth. 

If FTTH ARPU for home broadband remains in the $50 to $60 range, then payback models from FTTH will have to incorporate additional revenue sources, especially for publicly-traded firms. 

That is why one hears so much about FTTH value for supporting 5G small cells, edge computing, internet of things and private networks and network slicing. 

Monthly recurring FTTH revenue of $50 to $60 for home broadband might be strategically important for a telco’s sustainability, but unattractive if the argument is made that “FTTH will boost consumer revenues.” It might not.

On the other hand, without the upgrade to FTTH, most fixed network telcos face extinction. Investors will not like the idea that FTTH basically allows the business to remain viable, but does not necessarily lead to additional revenues. 

The same sort of worry also exists for 5G and coming mobile next-generation platforms. These days, the upgrades are necessary for business survival. Hopefully, new revenue sources develop, at scale.

But even if they do not, the capital investment is required. If not, the viability of the business is threatened.

Verizon Activates 2 Gbps Service; Comcast 3 Gbps: All Pointing to 10 Gbps

With the news that Verizon is introducing 2-Gbps symmetrical fixed network access in New York for about $120 (using autopay), along with Comcast’s similar moves to 3 Gbps, we see continued improvement in home broadband in the U.S. market, and a continual movement towards 10 Gbps service. 

Comcast prices its 3-Gbps service--available nationally--at about $300 a month, making it a service mostly appealing to business users. The service also has a $1,000 install fee. 

The Verizon 2-Gbps service clearly is aimed more squarely at the top end of the consumer market, while also having appeal for business users. 

At the same time, the increasing speeds also are accompanied by lower prices. 

According to a new study, U.S. home broadband prices have fallen since 2016, says Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

Verizon Introduces 2-Gbps Service In New York, at Prices as Low as $120 Per Month

With the news that Verizon is introducing 2-Gbps symmetrical fixed network access in New York for about $120 (using autopay), along with Comcast’s similar moves to 3 Gbps, we see continued improvement in home broadband in the U.S. market, and a continual movement towards 10 Gbps service. 

Comcast prices its 3-Gbps service--available nationally--at about $300 a month, making it a service mostly appealing to business users. The service also has a $1,000 install fee. 

The Verizon 2-Gbps service clearly is aimed more squarely at the top end of the consumer market, while also having appeal for business users. 

At the same time, the increasing speeds also are accompanied by lower prices. 

According to a new study, U.S. home broadband prices have fallen since 2016, says Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now 

U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

source: Broadband Now

A Handful of Hyperscale App Providers--and Video--Drive Global Internet Traffic

There is a simple reason why hyperscale app providers  now drive global data traffic. The single greatest driver of WAN demand is movement of traffic between a handful of hyperscale app provider data centers.

In 2021 just six firms generated 57 percent of global traffic, and much of that WAN traffic supported data flowing between hyperscale data centers. In 2021, intra-data-center traffic was about at the same magnitude as data consumed by retail end users.  

moving between data center locations.  

source: Cisco 

About six firms are responsible for about 57 percent of 2021 WAN traffic, according to Sandvine. 

source: Sandvine, IN Forum

These days, voice demand is paltry in relation to content bandwidth--largely video--that flows between hyperscale application provider data centers and internet points of presence where local internet service provider traffic pours onto the backbones.