4G LTE Makes a Difference

Long Term Evolution, the fourth generation mobile network air interface that has become the global choice for 4G, makes a big difference.


In the Kansas City market, which RootMetrics last tested in August 2011,  AT&T's average download speed was about 4.1 Mbps. In the latest test, after AT&T launched its LTE network, average speed rose to 16.3 Mbps in the downstream direction.


The average upload speed jumped from 1.5 Mbps to 5.9 Mbps, according to RootMetrics. 


Verizon’s average download speed, boosted by its LTE network, grew from from 1.2 Mbps to 17.1 Mbps. The average upload speed increased from 1 Mbps to 10.7 Mbps.


T-Mobile USA which has not launched an LTE network saw average download speed increase from 2 Mbps to 4.3 Mbps, while  average upload speed moved from 0.5 Mbps to 1.3 Mbps.


Sprint, which likewise has not yet launched its LTE network saw average downstream speeds decrease to 3.1 Mbps from  4.6 Mbps in August 2011.

Dish Network Gambles with "Hopper"

Dish’s "Hopper" is a digital video recorder that allows Dish customers to automatically hop past all the commercials on some prime-time network TV shows. Understandably, the TV networks aren't too happy about that, even if Dish customers might like the feature.


It's a gamble, to be sure. Consumers never claim to "like" commercials, but generally would rather view commercials if that means they get "no incremental cost" access to content they want. DVRs have been a threat, in that regard, and Hopper is one of the biggest threats so far, at least for major broadcaster prime-time fare, which Hopper will record automatically.


Dish Network therefore is gambling that it will gain more than it loses. The gains might come in the form of more subscribers and higher satisfaction. The losses will come if the networks retaliate against Dish in some significant ways. 


The growing tensions between programmers and video distributors are not going to end, and Hopper provides only one example of the building tensions within the video ecosystem. In a sense, Dish is gambling that the "surgical" approach, allowing users to skip virtually all commercials on broadcast network prime-time programs, will please customers more than it irritates the few affected networks.


Hopper would have faced across the board opposition had it proposed eliminating all commercials from all programming, automatically. Of course, that also is a theoretical impossibility, since the Hopper hard drive actually could not store all programming, in any case. 


But Hopper poses a threat to broadcaster advertising streams, depending on how popular it becomes. 

Comcast to Boost Bandwidth Cap to 300 Gbytes

Comcast is going to test new metered bandwidth plans, with a boost in the basic usage cap from 250 Gbytes a month up to 300 Gbytes a month, with incremental changes for consumption above the cap.


The 300 GByte usage allotment will be tested for Internet Essentials, Economy, and Performance tiers, with additional gigabytes costing$10 for 50 GBytes, Comcast says. 


In markets where Comcast is not trialing the new plans, Comcast will suspend enforcement of its current usage cap. 


To be sure, streaming media providers would prefer to have no caps at all. Netflix is an example. 


But the new plans will strike many as a fair way to allow users to make their own choices about how much bandwidth they want to consume, while still allowing Comcast to better match consumption to its costs of providing bandwidth. 

Would Regulators Allow T-Mobile USA and Sprint to Merge?

CEO Dan Hesse apparently believes regulators at the Department of Justice and Federal Communications Commission would be open to wireless industry consolidation if the resulting combination created more competition for Verizon Wireless and AT&T Mobility. 


That line of thinking might obviously include Sprint merging with T-Mobile USA, as difficult as that might be, for reasons of incompatible air interfaces, at least until Long Term Evolution displaces much of the legacy air interface (CDMA and GSM). 


"I actually believe that Washington would be receptive to consolidation to provide more balance to the big two," he said. Others might not be so sure. A big issue when the AT&T purchase of T-Mobile USA was considered was the degree of competition in the U.S. mobile market. 


To be sure, there remains continuing sentiment that the U.S. mobile market is not "stable" over the long term. 



Is the share of market now characteristic of the U.S. market sustainable? Many would say "no." Among the common observations is that two of the top four national providers have market share two to three times greater than two of the others.


Many observers would say a market with four national providers is about one too many for a sustainable and stable market. But even without more merger activity among any of the top four providers, will any single U.S. provider be allowed to gain 50-percent market share?


In principle, one is tempted to say "yes." But regulatory intervention to prevent such an outcome probably would happen before that happened. 

Some observers think the U.S. mobile market already has become substantially non-competitive.


The Department of Justice, for example, recently opposed the acquisition of T-Mobile USA by AT&T, citing a standard methodology for determining the competitiveness of markets.

One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem

For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.

 

The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.

The competitive equilibrium point in the mobile industry seems to when the market shares of the top three providers are 46 percent, 29 percent and 18 percent, argues Chetan Sharma says. In any country, that "rule of three" seems to hold.

That roughly corresponds with a rule of thumb some of us learned about stable markets. The rule is that the top provider has twice the market share of the contestant in second place, while the number-two provider has about twice the market share of the number-three provider.

That suggests the U.S. mobile market still has room to change. At the moment, Verizon Wireless has perhaps 34 percent share, while AT&T has about 31 percent share. Classic theory would suggest the ultimate market share could approach a market with the top-three providers having a market share relationship something like 50:25:12.

That would have highly-significant implications for the four current providers that today represent 93 percent of all subscribers. One of the leading contestants reasonably could hope to grab half of the available market, while two of the contestants could face significant losses.


All that assumes regulatory action did not occur before that market structure was obtained, though.

Why Google Needs "Mobile First" for Search

Profit margin might be one reason why Google "needs" a device play to support its mobile search business. “On a tactical level, while we estimate mobile queries account for just 20 percent of searches, we believe they are growing four times to five times as quickly as desktop queries, Goldman Sachs analysts say.


"We estimate Google pays Apple roughly 75 percent revenue share to be the default in the Safari search bar, which we estimate accounts for roughly one third of all mobile queries,” Goldman Sachs says and GigaOm reports. 


In principle, Google could boost its profit margins on mobile search advertising by shifting more traffic (search queries) to its own devices, for example. 

Promotional Pricing Adds Uncertainty to Cable, Telco Revenue Gains

By offering reduced triple play pricing, cable operators are successfully softening subscriber gains made by satellite and telco video competitors. What is not clear is what might happen when those offers expire and consumers start paying the list prices.

IHS Screen Digest, for example, expects that the third and fourth quarters of 2012 will likely see the resumption of cable video subscriber declines as promotional pricing comes to an end for new customers.

At the same time, IHS Screen Digest expects that cable operators will continue to make significant gains in broadband subscribers, and to a lesser extent, voice subscribers.

The same observation about what happens when promotional pricing ends might also be made about cable gains in broadband access as well, as there are some signs firms such as Comcast are offering new subscribers free service for six months, while telcos such as CenturyLink are offering “half price for six months” offers.

On the other hand, there is a general perception that cable access services remain in stronger demand than telco digital subscriber line services. AT&T U-verse, for example, only recorded a net gain of 103,000 customers in its first quarter of 2012.

Verizon, for its part, added 193,000 new FiOS subs and a loss of 89,000 DSL subscribers, vision2mobile reports.

In the first quarter of 2012, Comcast added 439,000 high-speed Internet customers while Time Warner Cable picked up 214,000 residential broadband subscribers.

One might argue that cable operator promotional pricing has more impact in the video area than in the broadband and voice areas, though, in part because broadband and voice are growth areas for cable operators, while video is a declining product.

By 2016, IHS Screen Digest expects that the cable subscriber market share will have shrunk by 6.9 percent from 2011, with satellite making gains of 3.6 percent and telco video share growing 42.5 percent.

But cable will grow broadband subscribers by 18.6 percent, and voice subscribers by 19.7 percent, IHS Screen Digest says.

Total combined revenue from video, broadband and voice will therefore grow by 11.5 percent during the same period, from $81.3 billion to $92.8 billion. IHS Screen Digest argues. That continued trend of revenue growth also is what virtually all observers expect for telcos as well, at least those such as AT&T and Verizon that can rely on robust wireless revenue gains.

Bobsled by T-Mobile Shows Over the Top Issues

Since April 2011, more than 10 million calls have been made on the over the top Bobsled Calling application made available by T-Mobile. 


Of the millions of Bobsled calls made to phone numbers, 80 percent originate from outside the United States, though messaging seems to be a U.S. phenomenon. Although Bobsled Calling has seen significant international usage, Bobsled Messaging users are predominately U.S. based, with 90 percent of messages sent domestically.


Usage statistics also show one of the key present realities of over the top apps sponsored by communications service providers, namely that usage might often be by "non-customers."


Of the more than one million Bobsled Calling users, 95 percent are not T-Mobile wireless subscribers, T-Mobile says.


That should suggest one key strategic difference between a carrier-offered app or service, and an over the top app, namely that in some cases the OTT apps do not necessarily cannibalize current customer use of carrier services, but essentially are an "out of region" service that gets used by non-customers. 


Bobsled Messaging is now available for download free of charge on all Android-powered smartphones and tablets through the Google Play Store on Android and can be accessed through any browser-enabled device. 


The Bobsled Calling application also is available for download from the iTunes App Store. 


That might suggest one as-yet misunderstood way service providers can approach OTT apps, especially those which are functional substitutes for current "paid" services. In many instances, OTT is a way of extending service to non-customers or non-subscribers.


That means OTT can be an out of region growth strategy similar in principle to the ways service providers have grown by launching service outside their legacy service territories. 


In Bobsled's case perhaps five percent of users might be using the app to reduce spending on T-Mobile USA services. The other 95 percent are not T-Mobile USA customers. That suggests there is a large incremental revenue opportunity among non-customers.