Video Charging is the Big Issue to be Solved

It is hard to escape the notion that video applications are the key issue for access providers, especially mobile access and service providers. As has been true on the global backbone networks for some time, video is the predominant traffic type.

And since video bandwidth is between one and two orders of magnitude more intense than any other application (voice, for example), the transition to a largely video-driven usage mode has serious implications for access providers.

You don't have to agree with any particular method for cost recovery to note that video really is the preeminent bandwidth problem, going forward. Up to this point, end users have paid the charges. But there are other obvious models. No subscriber to a video entertainment service pays for "bandwidth" in a direct sense.

Consumers pay for access to content, and the bandwidth costs are simply part of the overall cost of creating and delivering the experience. Someday, that principle might have wider application.

 

Top European Regulator Calls for Telco Mergers

It isn't every day that one hears a major telecom regulator call for significant consolidation of providers in a market. But that is precisely what Europe's top technology regulator, Neelie Kroes,European Community commissioner for the "Digital Agenda," says is necessary in Europe.

Further mergers would create  a handful of strong cross-border telecom leaders, which can invest more in mobile and broadband networks to close the gap with the United States and Asia, Reuters reports.

To be sure, Europe's market is more fragmented than that of the United States, China, Canada or Australia, larger countries where a relative handful of leading firms already is the pattern. To the extent that communications is a scale business, larger size makes a difference.

What might not be so clear is the extent to which a wave of mergers and consolidation necessarily would provide a better climate for investments in fiber to home facilities the EC wants to see built.

At a tactical level, current calls for even-lower wholesale rates for leasing copper access facilities to competitors will create a worse climate for fiber investments.

Entertainment Spending Grows, Digital Grows Faster

The communications and major media businesses are alike in some ways. The economics of the businesses favor firms that can operate at scale.


Both have a business-to-consumer as well as a business-to-business component. Among the differences is the advertising revenue models that are more important for much of media. 


Communications still is dominated by subscription sales.


But the "media" business is fundamentally unlike the communications business in one sense. It is based on "scarcity" to a much greater extent than the communications business.


Media also is about "audiences," not "subscribers" or "users." That is not to say subscribers and users are unimportant.


It is to say that media succeeds only when it creates engagement and attention. And that turns out to be a matter of "art," not science.


There is plenty of "media" produced and consumed, but precious little of it attracts any significant amount of advertising support.


That scarcity accounts for the different pricing mechanisms in media and communications. 
Where retail prices can, and do, rise every year in media, prices tend to decline in communications, even as both types of industries shift to a digital format.

Global entertainment and media spending on digital advertising and consumer formats increased by 17.6 percent in 2011, for example, according to PwC.

Digital's share of total spend will grow from 28 percent in 2011 to 37.5 percent in 2016, and digital spending will account for 67 percent of total entertainment and media spending growth to 2016.


That includes both consumer spending on content as well as advertising.


Global spending on digital recorded music formats will overtake physical distribution in 2015, reaching 55 percent of total revenues in 2016.


And global spending on online and wireless video games will overtake console and PC games revenues in 2013.


By contrast, the digital component of consumer magazines will account for only 10.4 percent of spending by 2016, up from 3.1 percent in 2011.

Wi-Fi Overhead Becoming an Issue?

Wi-Fi, the well-known standard for wireless internet, is reaching its technical limits in areas of high usage, a study suggests. Wi-Fi efficiency, measured as a percentage of theoretical ability to handle "bearer" traffic, compared to signaling overhead,  drops significantly in busy surroundings where many different networks and numerous wireless internet enabled devices are operating, the study suggests.

In some cases, the amount of bearer traffic that can be carried can drop to less than 20 percent.

Handheld Gaming Devices in Downward Spiral Because of Smart Phones, Tablets

Over 38 million handheld gaming devices from Sony and Nintendo are expected to ship in 2013, a maximum that is significantly lower than the previous peak of 47 million units in 2008, according to ABI Research.

That is one sign that casual gaming has shifted to smart phones and now tablets, and away from dedicated mobile game consoles.

Unit shipments following 2013 are expected to decline slightly, but dedicated handheld gaming devices are a sustainable niche, ABI Research argues, with forecasts relatively flat through 2017.

Do Mobile Data Plans Reflect or Shape Usage?

What is the relationship between the structure of a data plan and usage? Do people adapt behavior to the plans, or does the choice of a data plan reflect existing behavior? It’s a harder question than might first appear, as several processes likely are at work.

Over time, people tend to consume more data. Use of video-based applications is growing. But virtually all studies show that, even in instances where bandwidth usage actually is “unlimited,” or so generous that no typical user ever approaches a limit, only a small percentage of users actually push the limits.

It is an unquestioned fact that a small percentage of broadband users, on virtually any network, use vastly more data than typical users do. The top one percent of data consumers account for 20 percent of the overall consumption, for example, a fact the study by Benoît Felten, Yankee Group analyst,  confirms.

But users also seem to be able to adjust their behavior and expectations. When bandwidth usage carries direct financial implications, people adjust by changing their behavior, switching their smart phones to Wi-Fi access when at home, for example.

Also, data from Ericsson suggests a bit of both processes might be at work. It appears that, over time, virtually all users consume more bandwidth.


But “typical usage” remains a far different issue from “average” usage. Even as overall usage grows, a small percentage of very-heavy users represents a disproportionate amount of usage. In that sense, choice of data plans follows behavior. Heavier users will seek the biggest plans. Lighter users will choose plans with less capacity, when available.

On the other hand, usage patterns are also related to the data plan that comes with a device. That is significant because it suggests people actually modify their behavior based on plan policies. In other words, the Ericsson study suggests, people use more when their plan allows it.

If so, service providers have a wide range of options for shaping end user demand, using price and other packaging mechanisms. Generally speaking, people use more data when they buy bigger buckets of usage.

But it is a nuanced matter. It can’t be precisely determined whether people use more data because they have bigger plans, or have bigger plans because they use more data over time.

Also, since new devices aside from phones  tend to get used over time (notebooks and tablets), and since usage profiles for those other devices are different from phones, consumer usage and shaping of retail plans also will tend to change over time.

On the other hand, one might argue, given any set range of plans, users will virtually always fall into a distribution that is stable and predictable.


“Nearly all communications traffic, including Internet traffic, can be approximated with high accuracy by the log-normal distribution,” says Phoenix Center Chief Economist Dr. George S. Ford. That’s important, as it means we generally can predict overall end user behavior when we actually know only a couple of key data points.

Among the practical implications are estimates of what is likely to happen when  a broadband service provider imposes a monthly usage cap of 250 gigabytes. The log-normal distribution suggests how many customers would hit the limit.

The log-normal distribution also generally allows some estimation of how consumption will vary across the entire customer base, knowing only the consumption of the top one percent, and the consumption of the top 10 percent of users, an analysis by Dr. Ford suggests.

The point is that “averages” (the arithmetic mean) don’t tell an observer very much when any service has an asymmetric distribution, as always seems to be the case for Internet consumption by consumers.

Cisco’s Visual Networking Index reports that the top one percent of users accounted for more than 20 percent  of Internet traffic and that the top 10 percent of users accounted for 60 percent
of traffic.

That means a Pareto distribution, which would ideally show that 20 percent of instances account for 80 percent of the impact would also likely hold.

Ford notes that Comcast’s 250 GByte  per month usage cap on its residential broadband
customers, taken with Comcast’s own statements that 99 percent of its residential customers will not approach that cap suggests that only one percent of Comcast’s residential users consume 250 GBytes per month or more.

Comcast also indicated that its median customer consumes about 8 GBytes to 10 GBytes per month.

The log-normal distribution could well inform many other sorts of policies, such as what amount of consumption a “typical” user requires.

“My approach to approximating usage patterns may be useful for variety of policy issues,” says Ford. “ For example, when addressing universal service for broadband, the level of service that qualifies as ‘broadband’ will have to be parameterized.”

Knowledge of the usage distribution may aid in establishing these service level definitions that can be described as “reasonably comparable to those services provided in urban areas, for example.

The relationship between “typical” usage and “heavy” usage seems to be internally consistent, no matter what the “heavy” consumption levels might be.

Answer, Send to Voicemail, Reply with Message, Remind me to Call Back Later

Apple's latest operating system roughly doubles the typical inbound call handling options most people will use, especially for those of you who, for any reason, think call waiting is not something to be used.