Netflix Sees Cable as Bioggest Competitor

Netflix believes its biggest competition comes from video entertainment subscription providers, namely cable, satellite and telco video providers. Lots of people would say Hulu Plus or Amazon Prime as Netflix's biggest immediate competitors, and that would be logical. 



Netflix notes that it competes for consumers’ viewing time with a variety of video services, including linear TV, DVRs, over-the-top (OTT) pure plays, and authenticated streaming offerings of the video entertainment providers and cable networks (cable operators, satellite TV and telco TV providers, and "TV Everywhere" offerings associated with those providers).


"We have yet to see HuluPlus or Amazon Prime Instant Video gain meaningful traction relative to our viewing hours, but as we continue to build a domestic profit stream they are likely to increase their efforts to gain viewing share," Netflix says. 


Netflix also believes "Redbox Instant" by Verizon will have a tough time breaking into the ranks of the top three providers. 


Still, Netflix believes its "biggest long-term competition for viewing hours will come from MVPDs and cable networks, both directly and through their TV Everywhere offerings."


The operant word is probably "long term."

300 Mbps Access is Great, But not a Consumer Offer

Comcast is readying a 305 Mbps high-speed access service to counter Verizon's 300 Mbps FiOS offer of 300 Mbps, costing $205 a month. Though some consumers might actually be willing to pay that much, most will not. 


U..S. access speeds are about 5 Mbps, some studies have suggested. At some level, it might be useful to calculate "cost per megabit per second," though no consumer buys access using that metric, opting instead for an assessment of actual monthly recurring cost, and headline speed. 


At the moment, U.S. offerings, overall, cost about $3.33 per megabit per second, with huge differences between urban FiOS access and rural digital subscriber line price-per-megabit-per-second, for example. 


Over time, we should anticipate that users will spend more money, per month, on broadband, simply because speeds and caps are correlated. And as more entertainment video gets watched, users will need larger caps. 


Mobile access makes a difference, though, especially as more consumers might opt to use mobile broadband, either in place of fixed access, or as a complementary form of access. 


But one problem is that "nominal prices" are not "effective prices" when most consumers buy a triple play bundle including broadband access, voice and entertainment video.


In  2010, for example, Comcast reported a monthly total revenue per video customer of $129 a month. By correlating the number of revenue generating units (RGUs) Comcast had at the time, one might suggest that the video portion of the bundle cost about $71 a month; the broadband access about $42 a month and voice service about $36 a month.

• Video (22.8 million customers at $71.37/mo)
• High-speed internet (17.0 million customers at $42.07/mo)
• digital phone (8.6 million customers at approx $36.15/mo)

That rather suggests to some of us that most consumers are not likely to spend much more than $40 to $50 a month for high speed Internet access, with a tendency over time for higher prices. 

Content Consumption is Now the Top "Purpose" of a PC

"Games" now are the number two most popular tablet activity, surpassed only by accessing the Internet, a study by Frank N. Magid Associates has found.


In fact, the list of top activities conducted on tablets shows the evolution of the personal computer, one might argue. In the 1980s, when PCs first were adopted in significant value, it was the spreadsheet and financial analysis that created the driver for adoption by businesses.


A variety of other business uses then developed, including desktop publishing. PCs became useful for consumers for other reasons, but included the ability to work and communicate "at home."But the new consumer killer application seems to be content consumption.

Significantly, the top apps on smart phones aren't all that different from what is done on tablets, the study also found. 


Of course, mobile devices are multiple-function appliances to a greater extent than tablets or PCs. Even so, calling is only a percentage of total activities smart phone owners now conduct on their devices. 


The big change is that content consumption activities apparently had grown to represent about half of all the time spend interacting with, and using, a mobile device, in 2011, according to comScore. 


The point is that the "purpose" of using a computing appliance has changed. For the most part, people rely on "computers" for media consumption. 

European "Network Neutrality" Issues Different than U.S. Issues

Last year the European Commission concluded an initial study on the issue of network neutrality, with findings that suggest issues are different in the European market, than in the United States.


A subsequent Body of European Regulators of European Communications (BEREC) investigation of Internet traffic management practices found that the most frequently reported restrictions on EC networks were the blocking or throttling of peer-to-peer traffic on both fixed and mobile networks and the blocking of Internet telephony traffic on mobile networks.


The report estimated that between 20 percent and 50 percent of European Internet users have contracts that allow providers to restrict services.


That points up a key difference between U.S. and EC service provider practices. In the U.S. market, blocking of lawful Internet applications is prohibited by the Federal Communications Commission's "Internet Freedoms" principles. In other words, no service provider can block a user's access to a legal application such as VoIP or peer-to-peer apps.


That appears not to be the case in EC countries, where at least some service providers block mobile VoIP, for example. 


But network neutrality really is a complicated issue, including distinct issues such as blocking of legal apps, ability to manage traffic to preserve quality of service and whether managed services can be created. 


In the U.S. market, no outright blocking of lawful appllications, including VoIP or peer to peer services, is permitted. 


At the moment, different frameworks exist for U.S. fixed network broadband access and mobile access where it comes to traffic management. On fixed networks, no traffic grooming, even for purposes of alleviating congestion, is permitted. Mobile operators may do so.


On fixed networks, no managed services providing quality of service benefits are permitted, though such practices are lawful on mobile networks. 


But network neutrality rules often bump up against business model issues. There is not dispute about whether a TV or radio broadcaster, or a cable TV or satellite network, can optimize its content for delivery to end users. 


The new area of uncertainty is whether application and content providers should be able to do more, in the area of content delivery, for example, to optimize applications on behalf of consumers or application providers. 


As content delivery networks actually favor some content over others, so it is conceivable that either end users or app providers might want to pay for quality of service mechanisms. Though you might argue that is no different than app providers paying for content delivery services, such quality of service mechanisms pose competitive issues, some argue. 


Obviously, optimized content will have an advantage over non-optimized, "best effort" content. That isn't so much an issue for non-real-time services. But real time services suffer when there is network congestion. Any over the top voice or interactive video application, for example, is quite sensitive to congestion. 


At issue is whether any end user or application provider ought to be able to buy an over the top Internet application or service that uses optimization techniques to improve experience, just as app providers buy content delivery network services. 

Transparency is a contested part of thinking about network neutrality, the notion being that users are entitled to know what terms and conditions might affect their use of Internet access services. 


The other real complication is that virtually all networks now use Internet Protocol, and not just for "Internet" apps. Users and regulators accept that a managed service has to be "managed" for quality reasons. 


But such managed services might use IP mechanisms on either private or public networks. Precisely what a "managed service" is, or ought to be, is a growing area of contention. Users, suppliers and regulators might agree that a service provider ought to be able to use quality of service mechanisms when providing carrier voice, video or messaging services, for example.


What is more contested is whether over the top suppliers of such services should also have the ability to create quality of service mechanisms as well. 

How Important are Shared Data Plans?

Data revenue will grow to 65 percent of total U.S. wireless service revenue as voice declines to 35 percent in 2016, according to Hugues de la Vergne, principal research analyst at Gartner.


What might not yet be so clear is how the industry will get to that point, but different retail packaging likely will play a key role, even as more users adopt smart phones that almost automatically boost data revenue because devices have most value when an Internet connection is available, all the time. 


But nobody yet can be sure whether shared data plans offered by AT&T and Verizon Wireless will work as planned, namely lifting overall revenues while creating a usage-based data revenue model, while encouraging users to add tablets to their accounts for mobile broadband access. 


But some think the entire industry eventually will move in that direction, as was the case with some earlier packaging innovations, including the mobile industry's abolition of domestic long distance with AT&T's Digital One Rate, or the adoption of family plans for domestic voice and texting. 


As the number of devices with mobile network modems increases, consumers and small businesses in the U.S. will demand matching multi-device data rate plans, according to Gartner. 


The disagreement about adoption probably will not be decided, one way or the other, for some time. The reason is that the current structure of the shared data plans does not offer significantly better economics for users, compared to what they already can buy.


There are some marginal advantages and inducements to add tablet devices, for example, but the price advantage might not be so obvious to most users, or valuable. 


But Gartner believes multi-device rate plans will be a key driving factor in the expansion of U.S. data revenue from $81.4 billion in 2011 to $151.9 billion in 2016. 


One could get a rather robust argument at the moment about the importance of new shared data plans launched by Verizon Wireless and AT&T. Those two carriers clearly believe consumers want such plans, and also believe that the plans will boost revenue. 

Others are not so sure, or might even think the plans are unnecessary or less advantageous to consumers than more traditional plans. 

U.K. Customers of Three Increase Data Consumption 100% in 12 Months

In about a year's time, smart phone customers of U.K. mobile service provider Three have doubled their "average" data consumption to 1.1 Gbytes a month, Three says. 


That rate of increase is faster than for the U.K. audience as a whole, as Ofcom reports the overall volume of mobile data consumed in the United Kingdom has doubled in the 18 months to January 2012. 


By way of comparison, according to Nielsen’s June 2012 analysis of U.S. mobile phone bills for 65,000 lines, smart phone owners, especially those with iPhones and Android devices, were consuming about 435 Mbytes a month in 2011, roughly the same as in the United Kingdom.  


T-Mobile USA, meanwhile, reports that its users consumer about 760 Mbytes a month. 

Ofcom estimates that the average U.K. consumer now spends ninety minutes per week using a mobile to access the Internet, largely replacing their use of PCs and laptops for watching video clips and sending messages. 


Those of you with an engineering bent will realize what that means. Nothing stresses an access network like video.


Since mobile networks are more "bandwidth challenged" than the fixed networks, when users switch video viewing preferences to mobile access modes, mobile networks experience the "worst of all worlds" (the media type with the greatest bandwidth requirement is consumed on the networks with the least available bandwidth). 

And one might well expect consumption to keep climbing, as more users adopt smart phones, come to rely on mobile access to the Internet and as fourth generation networks are built, since faster access drives higher data consumption. 


A year ago, average consumption was about 450 megabytes. As you would expect, the growth has happened because of smart phone user behavior. About 95 percent of Three smart phone customers use data on a daily basis.



About 42 percent of respondents surveyed by Ofcom agree with the statement “my phone is more  important to me for accessing the Internet than any other device."


Levels of  agreement with this statement are highest among those aged 16 to 24 (51 percent) and 25 to 44  (48 percent). Levels of agreement have also increased over time, with 42 percent net agreement in 2012,  compared to 33 percent net agreement in 2011.


Ofcom reports that mobile broadband (data dongles or cards) now are used by about 13 percent of U.K. mobile users, while smart phone adoption grew from 27 percent in 2011 to 39 percent of U.K. adults,  representing 43% of mobile phone users.


Some 66 percent of U.K. users 16 to 24 and 60 percent of those aged 25 to 34 have a 
smart phone,

ATM and Frame Relay Gone by 2015

“By 2015, ATM and frame relay will virtually vanish, while private leased lines will be around a bit longer,” says  Michael Howard, co-founder and principal analyst of Infonetics Research. 


In large part, that is because replacement services such as Ethernet and IP VPNs are taking the place of frame relay and ATM.  “Despite some slowdown in Europe in 2011 and 2012, we see solid growth ahead for both IP MPLS VPNs and Ethernet services, together topping $81 billion worldwide by 2016,” Howard says. 


Global Ethernet and MPLS IP VPN service revenue grew a combined 13 percent in 2011 to just over $50 billion, fueled by surging data traffic, cloud services, and cost-cutting initiatives, Infonetics says.