Metaverse is Part of Movement Towards "More Realism"

Not all observers believe metaverse environments  will actually happen. Others might argue it just  makes no sense. 

But there is another way to look at movement towards full metaverse experiences that suggests it will arrive: realism. Defined as the experience that “you are there,” realism approaches “real life” experiences: three dimensional, interactive, using multiple senses. 

Think about the experience of participating in a sport, watching others play a sport live in a stadium, watching it on television or listening on radio, viewing a photo of the game or hearing somebody talk about a great play during that game, reading a story about that game or viewing an artist’s rendition of a key moment in a game. 

The point is that there are degrees of immersion and realism, and that the degree of realism has tended to improve in the eras of electronic media. 

source: Prezi 

“Real life” experiences are the ultimate in realism: you actually are there, actually doing something. All media are efforts to portray activities such as surfing, playing baseball or cooking in ways that simulate “being there and doing that.”

Storytelling is perhaps among the oldest forms of media or content. But it requires use of imagination on the part of the listener. Live theater performances were early developments in realism, as “you had to be there” watching real people in real roles. 

Electronic media extended participation in experiences, but with less realism. Radio was sound only, and monaural. Stereo arguably improved realism. “Surround sound” added more realism. 

Film was more immersive, but without sound. Movies were more realistic after sound was added. Film arguably became more realistic after the addition of color. 

Television began in black and white, then added color. Digital media improved realism by increased image definition (first DVDs, then Blu-ray). Broadcast television switched from lower-resolution NTSC to HDTV. Now we are moving to 4K and 8K. 

Think about 3D movies or TV as efforts to further extend immersion and therefore realism. 

Videogames initially were quite two dimensional. Today’s games are graphically much more realistic and immersive. 

In that framework, our movements toward metaverse are the next stage of improvements in realism and immersion. Persistent, three-dimensional environments where “you” and other people and objects “are there” is simply part of the on-going development of media realism. 

Of course, there are other angles. In manufacturing, realism might mean that whole processes can be modeled and replicated in real time. For videoconferencing, realism might be the sensation that all participants are in the same room. 

Metaverse will get traction as it proves to enhance realism in media experiences. And that is why, despite the hype and the long journey to commercialize it, metaverse ultimately will arrive. 

Humans have adopted all forms of media that provide higher realism.

Cogent Communications Gets Former Sprint WAN Business for $1

T-Mobile’s sale of the former Sprint wide area network asset for $1 to Cogent Communications is not as shocking as it might seem. The asset was not central for T-Mobile, though generating about $739 million in annual revenue. T-Mobile likely will get a big discount on IP transit services it will buy from Cogent for nearly five years. 

Also, Sprint’s network has received relatively scant investment for up to two decades, as other wide area network service providers (mostly new entrants) were winners as WAN traffic shifted to TCP/IP and much traffic was carried on owned networks, rather than purchased from wholesalers or retailers. 

source: Cogent Communications 

Cogent sees benefits in the form of increased fiber network footprint will be owned in fee simple rather than leased under IRUs with finite terms. Cogent also will gain scale in dedicated internet access, IP transit, Virtual Private Networks (MPLS, VPLS) and colocation/data center market spaces.

Cogent also will gain entry into the North American market for wavelength and dark fiber sales.

Additional international operating licenses (India and Malaysia) also will be gained in large markets where Cogent has no presence today.

T-Mobile unloads a business that increasingly was viewed as a distraction from the core mobile services business. 

U.S. ISPs Do Not "Discriminate" in Supply of Internet Access, Based on Census Bureau Data

An analysis of U.S. internet access speed conducted by the Phoenix Center for Advanced Legal and Economic Public Policy Studies does not find evidence of invidious discrimination based on race, in the supply of internet access services. 

The U.S.  Infrastructure Investment and Jobs Act of 2021 says “it shall be the policy of the United States, insofar as ‘technically and economically feasible,’that subscribers ‘within the service area of a provider’ should benefit from the ‘equal opportunity to subscribe to an offered service that provides comparable speeds, capacities, latency, and other quality of service metrics’ at ‘comparable terms and conditions.’” 

The intent is to prohibit “redlining,” where some households in some areas are specifically denied access to some product generally available in a town or city. 

“Digital discrimination, as we define it, is present when differences in some relevant outcome exists across communities when the profitability of serving the communities is equal,” says George Ford, Phoenix Center chief economist. 

The outcome here is not the “take rate,” which is in part a function of end user demand, but “availability” in terms of “a potential customer ability to  buy a product with the same performance and price attributes generally available to potential customers across the market area. 

That is an important distinction. Some consider the existence of any statistical differences in take rates as evidence of discrimination. Differential rates of Tesla ownership, for example, might not be the result of discrimination by suppliers, but rather buying preferences on the part of consumers. 

So “discrimination” implies more than mere differences among protected classes, says Ford.  “Discrimination requires differences in outcomes caused solely by membership in a protected class, other things constant.”

The concept is similar to “redlining,” a once-practiced policy by banks to refuse loans to potential customers in some areas of a city for non-economic reasons (race, generally). 

“Redlining is present when people with equal economic characteristics (who thus may be expected to produce the same “profit” to the firm) experience unequal treatment based on non-economic factors such as race,” Ford notes. 

After analyzing data at the census block level, including downstream speeds, Ford concludes the data show “no evidence of meaningful digital discrimination in any of the comparisons.”

That is not to deny that household income does correlate with take rates. The point is that such divergences are not caused by invidious practices on the part of internet service providers. As is well documented, take rates for premium tiers of internet access service also vary by educational attainment, age or household wealth, for example. 

Still, the average maximum download speeds are approximately 1 Gbps for all groups across all comparisons (race and income), says Ford. That noted, Ford reminds readers that the analysis is at a “whole market” level and does not address individual providers in those markets. 

“Discrimination, at least in economics, is a term of art, and implies differential treatment of equally-profitable groups based on membership in some sort of protected class,” says Ford. The study shows no evidence of such invidious treatment.

Another Co-Investment for FTTH: Liberty Networks Germany

Liberty Networks Germany, a joint venture between Liberty Global Ventures and InfraVia Capital Partners, has started construction on a new fiber to premises network in Germany. That move is only part of a broader co-investment trend happening in the access business. 

Investment firm Meridiam is co-investing in fiber-to-home infrastructure with T-Mobile in Austria, each firm investing about a billion euros to construct facilities reaching 650,000 homes in rural areas and small towns. 

The firm began investing in digital infrastructure in 2000, and has made prior FTTH  investments in Germany and Canada. 

The deal essentially solves a problem for Magenta Telekom, namely the high cost of wiring rural and lower-density homes. 

Liberty Global, Telefonica and InfraVia Capital Partners have created a joint venture on a larger scale, aiming to build FTTH past seven million U.K. homes. 

Such moves represent a change in thinking  on the part of fixed network internet service providers, who historically have favored fully-owned access infrastructure. But high capital requirements and heightened risk have led to more willingness to give up full ownership of access infrastructure. 

Telefónica Group, Crédit Agricole Assurances and Vauban Infrastructure Partners are joining to create Bluevia Fibra to build fiber to premises networks in rural parts of Spain. 

The consortium formed by CAA/Vauban will acquire a 45 percent stake in Bluevia from Telefónica España. Telefónica Group will retain a 55 percent stake in Bluevia. 

The 55 percent stake owned by Group Telefónica will be held by Telefónica España and Telefónica Infra, with 30 percent and 25 percent stakes respectively.

Operating with a wholesale model, Bluevia will offer wholesale FTTH access to all telecommunication services providers. Based on an initial footprint of 3.5 million premises currently passed, Bluevia will increase its network to five million premises by 2024.

Bluevia’s anchor tenant, as you might guess, will be Telefónica España. The deal is among many globally where service providers try to decrease the cost of building new infrastructure by partnering with investment firms looking for long-term, stable cash flows in the digital infrastructure area.

Is 1996 Internet Experience Comparable to 2022? Is a Rose Still a Rose?

When is a rose no longer a rose? When is an apple an orange? If you used the internet in 1996, and use it today, is the experience so qualitiatively different that we are talking two different things? 

That is the practical implication of changes in product quality over time, known by economists as hedonic change. 

“Hedonic” changes are hard to quantify, but are crucial in the internet and computing businesses, as improvements in product quality are assumed to exist as a routine and fundamental matter. 

A dial-up internet access product is not the same as a gigabit internet connection. A mobile phone or personal computer that is 20 years old is arguably not the same product as a top of the line device in 2022. 

The same applies to application experiences. Amazon.com offers an experience which arguably is different from a character-only bulletin board of 1990. So does Uber or Google Maps. 

Hedonic adjustments--not to mention indexing for inflation--is crucial for evaluating home broadband as well. Price is one matter; quality (speed, for example) another matter. 

One analysis of home broadband prices using hedonic adjustment showed that speed and price both varied across countries in the Organization for Economic Cooperation and Development in 2016. 

source: Semantic Scholar 

The point is that comparing typical prices has to be qualified by typical speed (and currency differences). A 25-Mbps service in one country and a 800-Mbps service offered at the same currency-adjusted price in another country might arguably represent different products, values and “real” prices when evaluating both quality and quantity.

Assumptions Drive Forecasting Success and Error

If you have ever been called upon to build a financial model or market forecast for any sort of product, you know such models are exceedingly sensitive to the assumptions used to create the model. 

So difficult are such projections that clients might well--n volatile or brand-new markets--be satisfied with forecasts that miss within an order of magnitude (10 times eventual reality). Any forecaster missing by that much in an established market will have problems, as divergence from reality should never reach two to three times the actual circumstances. 

But that can happen--even in mature markets--when forecasters use accurate data without considering the assumptions about that data. 

Cable TV operators in many markets, for example, sell multiple products, but send a single bill. And that can lead to false assumptions about household spending, for example. Is “average” U.S. household spending on linear video closer to $200 per month or $80 per month? It matters. 

Some use the higher figure, but the actual figure is closer to the latter. The mistake is easy to make. A household purchasing linear video and internet access plus either fixed network voice or mobile service could spend, “on average,” $200 or more per month. 

Using either a median or mean approach to generating “average,” the point is that it is reasonable for an “average” video charge to be in the $60 per month to $80 per month range, before bundling discounts. 

source: S&P Global Market Intelligence; Fierce Video 

The point is that all forecasts are extremely sensitive to assumptions made about future developments, but also about current behavior. 

Ignore for the moment the assumption that growth rates are predictable or that no unexpected macroeconomic events will occur. It is quite easy to make faulty assumptions based on an incorrect understanding of user behavior, costs or potential revenues. 

Risk of this sort arguably is lessened when the modeler has access to multiple different data sources; different methodologies for estimating the current size of the market for any product and  domain knowledge.

Would Utility Regulation Really Lead to Lower Prices?

One frequently hears that home broadband or internet access is a utility similar to  electricity, gas, water, sewers, phone lines, roads, seaports or airports. It is not always clear what proponents of viewing home broadband “as a utility” have in mind when they say such things.

Some might mean home broadband should be, or is, a public utility in the sense of “common carrier” with obligations to serve the general public. Others might mean essential or regulated in terms of price or conditions of service. Others might fix on the used everyday sense of the term.

Classically, the term referred to industries that operated as monopolies, often because they are capital intensive and difficult to replicate. 

   

source: Market Business News 

As it pertains to “home broadband,” generally the term refers to fixed network supply of home broadband, not mobile network supply. 

The common unstated reason for calling for utility treatment seems to be the expectation that this means lower prices. Actually, it is not clear how prices might be affected. True, some elements of consumer service were price controlled. But other elements were horrendously expensive.

Most of us are too young ever to have experienced “connectivity services” as a public utility. But prices were not uniformly low. 

In 1984, before the breakup of the U.S. AT&T monopoly, calling between states cost about 90 cents a minute. In 1955, a phone call between Los Angeles and San Francisco (not even interstate) cost about 70 cents a minute, not adjusted for inflation.

In 2022 currency that would be about $7.75 per minute. So, no, prices were not uniformly lower under monopoly or public utility regulation. 

Of course, that was by policy design. High long distance charges and high business services were intended to subsidize consumer local calling. 

Were home broadband to become a regulated service, something similar would happen. While prices for some features and plans might be price controlled, other elements of value would increase sharply in price. 

And price is only one element of value. Service innovation was sharply limited in the monopoly era. In the U.S. market, consumers could not own their own phones, or attach third party devices to the network. All consumer premises gear had to be purchased from the phone company, for example. 

To be sure, AT&T Bell Labs produced many innovations. But they were not directly applied to the “telephone service” experience. Those included Unix, satellite communications, the laser, the solar cell, the transistor, the cellular phone network, television and television with sound. 

Though ultimately quite important, none of those innovations arguably applied directly to the consumer experience of the “phone network” or its services. 

The point is that monopoly regulation tends to produce varied prices for different products (some subsidized products, some high-cost products), but also low rates of innovation in the core services. 

Utility regulation? It would not wind up being as beneficial as some seem to believe.

Supply and Demand are Dynamic, So Sometimes You Get the Opposite Result from What You Expected

If you have you ever noticed that adding more lanes to an expressway often does not seem to less auto congestion, you are seeing a dynamic supply-demand response in action. 

So one wonders: if video chat for customer service really becomes popular because it works so well, demand might well grow so much that response times are slowed. thus creating an outcome the opposite of what was intended. 

Economist John List talks about this inThe Voltage Effect. Uber wanted to reward its drivers so it raised wages. The higher wages attracted more drivers. So average wages declined, instead of increasing. 

Uber issued discounts to stimulate demand, which apparently worked for a short time. But that demand also lengthened wait times, which depressed demand. 

Supply and demand are dynamic. What you get sometimes is the opposite of what you intended. 

No Productivity Boom from New IT or Remote Work?

It seems incontestable that knowledge and office workers prefer remote working. Whether such work results in higher, lower or no change in productivity is among the issues, though. 

Some economists say there was no post-Covid productivity increase, despite the information technology investment boom that happened during the pandemic lockdown. That is not surprising. 

There long has been a lag--sometimes lasting a decade--before big IT investments show up as correlated with higher productivity. It can be argued that the places new IT was deployed are not likely to grow productivity. 

Supply chain investments might or might not contribute to productivity, even if they improve resilience. Investments in security, remote work, personal computers and so forth likewise might or might not contribute to any measurable lift in productivity, even over a five-year time frame. In fact, to the extent such investment were necessary simply to allow work to continue, and might actually be duplicate investment of sorts (people already had computers and broadband at work), they might reduce output, compared to input. 

Work-life balance arguably is better. But is that necessarily good for productivity? It is terribly hard to say. 

Outcomes also often are based on team output, not individual output. In such cases it is team productivity that matters. And such output often is intangible. How do you properly measure an intangible?  

To be sure, such measurements always are difficult, whether we are looking specifically at post-Covid or “during Covid” time periods or non-Covid times. 

Where it comes to knowledge or office workers, some might say the task is nearly impossible. Indeed, observers often note the difficulty before proceeding to argue such measurements can be made. 

Whether measurements actually can be made remains debatable. The point is that all our discussions about the productivity of remote work are opinions, not facts. We mostly cannot measure knowledge worker or office worker productivity, especially non-tangible outputs, whether remote or local.

Anna Karenina and Successful Startups

If you have ever worked at a startup that failed, the “Anna Karenina principle” will make sense to you. If success requires solving a number of key problems, then failure to solve just a single one of those problems produces failure. My personal experience is that failure happens as much as 70 percent of the time and perhaps closer to 100 percent over a decade’s time, if one considers acquisition to be an outcome or failure to scale outcomes that represent failure. 

To put it another way, failure goes through a wide gate; success through a very-narrow gate. 

source: slideshare 

The way I have come to understand that principle is an analogy to high walls, locked doors or hurdles. Success requires scaling a series of high walls; opening a series of locked doors or jumping over a series of hurdles. And each obstacle must be successfully navigated. Failure at any single obstacle kills the venture. 

source: Inc. 

Those obstacles can include failure to get the next round of funding; making a bad key hire; betting on the wrong product; launching too early or too late. Trying to solve the wrong problem; burning out the founding team; failure to manage remote teams; making the wrong pivot; lack of domain knowledge; team discord or lack of focus also are gates, hurdles or locked doors. 

Not “listening to customers” is a gate. But sometimes one has to ignore feedback as well. Poor marketing; lack of a viable revenue model; user interface problems; the wrong pricing model; a “too high” cost model; more-nimble competitors; having the wrong team; running out of cash before you are ready to go to market or misjudging the existence of a market also can be key hurdles, walls or gates. 

The point is that success requires success at every single obstacle. Failure requires only one obstacle not surmounted.

How Big is the "Value" Segment of U.S. Home Broadband Market?

Home broadband for $25 a month is the value proposition Verizon fixed wireless now offers for top-end customers of its mobility service. For T-Mobile fixed wireless customers on premium multi-user plans,  the recurring cost is $30 a month. 

Say what you will about the expected speeds of such services, or the cost of higher-speed services from either cable or fiber-to-home service providers. 

For a possibly-substantial portion of the market, such price points are going to be attractive, even if the trade off is lower top-end speeds. 

It might be the case that “good enough” service is worth a “reasonable price” for that service. 

That is important for home broadband market competitors. Even if such offers do not appeal to the entire market, the “good enough service for a reasonable price” segment of the market could be substantial, especially for Verizon and T-Mobile mobility service customers. 

That is similar to the “same service, lower price” positioning often used by attackers in established markets. If the top possible speed for fixed wireless sold by Verizon is about 300 Mbps (millimeter wave assets help), then Verizon theoretically could reach between a third and 45 percent of U.S.home broadband buyers, based on data from Openvault. 

T-Mobile speeds for home broadband are said to range up to about 182 Mbps, suggesting a third or so of U.S. home broadband accounts could be addressable. 

  

It is too early to say whether fixed wireless platforms will be long-lasting drivers of market share in internet access markets, or only relatively temporary. Some believe speed limitations will ultimately reduce fixed wireless attractiveness. Others think fixed wireless capacity can keep growing. 

But at least for the moment, it is hard to ignore U.S. cable operator lost market share and the availability of fixed wireless from Verizon and T-Mobile. In the near term, fixed wireless market share gains seem a certainty. 

Comcast continues to claim that fixed wireless is not damaging its home broadband business, and that might well be correct. For any ISP, a customer move is an opportunity to gain or add an account, so lower rates of dwelling change should logically reduce the chances of adding new accounts. 

In the second quarter of 2022, Comcast reported a net loss of customer relationships and “flat” home broadband accounts. 

That might suggest to some observers that stepped-up telco fiber-to-home and fixed wireless account gains might be starting to change market share dynamics. Those trends possibly were not obvious in the first quarter of 2022. 

All that said, there are possible signs of change. Fixed wireless already is driving net home broadband additions for T-Mobile. On its second quarter earnings report, T-Mobile added more than half a million net new home broadband accounts, which might put it on track to be the biggest net gainer for the third quarter in a row. 

In the fourth quarter of 2021, fixed wireless represented 74 percent of Verizon net home broadband additions.  

Comcast did not gain net accounts for the first time, ever, according to market watchers. Verizon added significant numbers of new home broadband accounts in the same quarter.  

The longer term  issue is demand as typical data consumption keeps growing, and “typical speeds” likewise keep climbing. 

Perhaps use of millimeter wave assets and better radio technologies will solve much of that problem for fixed wireless operators. Perhaps new wholesale arrangements will develop. 

What might also be happening is that consumer appetite for “more affordable” internet access is substantial. Many households might be willing to trade “speed” for “lower price.” In other words, as with any product, value is a combination of features and price. Fixed wireless might show the existence of a market segment that cares about “reasonable speed for a reasonable price” more than “fast” levels of service. 

That is not the whole market, but it is potentially a big enough segment to shift billions of dollars of home broadband revenue and significant market share. 

Users Will Not Care about Web3 or Web 3.0

Is semantic web, or web 3.0, not the same thing as web3? Apparently not, some argue. But others will argue the terms will ultimately be interchangeable, even if purists will continue to argue the two concepts are quite different.  

Web 3.0 might be defined as a standards effort related to making the reading of machine data universal. That is akin to saying that the “internet” is different from TCP/IP or Ethernet. 

Web3, on the other hand, refers to a decentralized internet based on blockchain. 

Others will argue the semantic web (web 3.0) focuses on efficiency and intelligence by reusing and linking data across websites, while web3 focuses on decentralization, security and end user ownership of data.

As a practical matter, users will not care very much, any more than they care about how data is transported, where it is stored, how their phones or cars work. 

The nomenclature will eventually settle down. “Semantic” is not likely to gain widespread universal usage. For that matter, “web 2.0” never really became popular currency, either. And so it is possible that neither web3 nor web 3.0  ever really become mainstream user terms. 

source: mdpi.com, cointelegraph 

Far more likely is the common understanding that people use “phones” or “computers” or “cars.” So people will simply say they “use the internet.” But as has been the case in the past, applications, features and capabilities will continue to develop, for devices, apps and platforms. 

Most people will still not care how far towards a “next generation internet” we have gotten. They will simply be able to do and experience new things, in new ways, as we have found in the past. 

We have moved from a character-based internet to a visual internet; from “read only” to “read-write;” from content to commerce. Metaverse use cases will eventually develop. But it is possible that much of the shift to blockchain-based security will happen in the background. 

Regular people will not care much about decentralization or machine-readable data, if they care at all. People do not know how electricity works, how cars are made or what software powers their devices, to use them every day. 

Telco Choice of TCP/IP for Next Generation Networks was Fateful

Technology decisions, it goes without saying, can dramatically change access provider, data center and application business models. Cloud computing creates the business opportunity for data centers and “software as a service.”

Fatefully, connectivity provider adoption of TCP/IP upended the “closed” business model and substituted an “open” model that also relegates access providers to “connectivity” roles. If telcos did not want to become “dumb pipes,” they should not have adopted TCP/IP as their “next generation network” platform. 

TCP/IP was the computing network model, where value was created on top of layered and disaggregated transport and access. Modern computing necessarily operates on an “over the top” basis, with hardware and operating systems disaggregated from apps that use that hardware and operating systems. 

To be sure, there were strong arguments in favor of TCP/IP and Ethernet: connectors were low cost, compared to proprietary telco connectors. Data networks using TCP/IP and Ethernet were relatively simple. The ecosystem was well developed and disaggregated, presumably leading to faster and easier innovation. 

As all communications networks began to operate as “data” networks, that made sense. 

None of that necessarily requires retail pricing of data connections on a flat fee, unlimited usage model. 

As access service providers complain about capacity costs and seek new revenues from hyperscale app providers, other common solutions exist, even if hard to implement under highly-competitive conditions. 

Obviously, selling more customers unlimited usage plans, even at higher recurring prices, does not encourage customers to be careful about their consumption. 

By choosing TCP/IP as its next-generation network, the global “telecom” industry chose to operate data networks based on the use of loosely-coupled layers. But it is not a given that flat fees and virtually unlimited usage is a mandatory pricing model. 

Arguably much of the ISP concern about business models grows directly from decisions made to operate retail access networks with a flat fee/virtually unlimited usage model.