Will Austrian Spectrum Set Aside Work?

Reserving spectrum for new competitors is a relatively common tactic regulators take when trying to encourage competition when new blocks of communications spectrum are to be licensed.

Austria in 2013 will be holding an auction of 28 blocks of spectrum in the 800MHz, 900MHz and 1.8GHz bands, for launching Long Term Evolution networks.

Two of the 800-MHz blocks will be set aside for a new mobile firm not already in the market. The minimum reserve price for this spectrum will be €45.6 million.

Some think such spectrum set asides are not economically effective, essentially denying use of spectrum to the providers who can put resources to work most efficiently.

Nor is it clear that spectrum set asides actually wind up changing market structures long term. One might argue Illiad’s Free Mobile is shaking up France’s mobile market, but the full story is not to be told, yet.

One might argue the auction of personal communications service spectrum did enable firms such as Sprint to enter the U.S. market, and Sprint remains the number three provider, in terms of market share.

But it also is possible to argue that Sprint’s final story also is yet to be written. On the other hand, Sprint’s market entry was not enabled by a set aside, either. Typically, set asides do not allow a new contestant to amass enough total spectrum to really challenge market leaders.

The financial backers of a “set aside” firm do stand to profit. They do. But whether markets actually are changed, long term, is far from clear.

It is likely more nearly the case that a new competitor, using set aside spectrum, can introduce some amount of competition in a market, at least for a time. What remains unclear is whether such firms can affect the structure of a market over the long term.

5 Billion New Internet Users Next 10 Years?

"Only about two billion of the world's seven billion people have an internet connection, and I believe the remaining five billion will get one in the next decade," says Eric Schmidt, Google chairman.  "Almost one billion of them will come online in India."

Whether Schmidt is precisely right about the timing, adding five billion people to the ranks of Internet users in just a decade is a huge and obviously significant undertaking. 

Developing nations will become the focus of broadband growth over the next decade or two, building on a substantial amount of growth since about 2005.

By the end of 2011, 2.3 billion people (around a third the world’s population) accessed the internet globally, almost double the 1.2 billion figure recorded in 2006, according to Ofcom.

Over this period growth in internet use was fastest among developing countries, and by 2011 62 percent of Internet users were located in developing countries , an increase from 44 percent in 2006.

developing nation broadband will double between 2011 and 2015, for example.

Tablet Penetration Reaches 50% of Internet Homes

Tablet penetration of U.S. Internet-using homes has reached 53 percent, according to the NPD Group. 

PC penetration among U.S. Internet connected households is nearly ubiquitous at 93 percent.  

Smart phone penetration now stands at 57 percent of mobile phone users. 

What Problem is Network Neutrality Solving?

Not everybody has been convinced that "network neutrality" rules are a terribly good way to solve the problem of unfair business competition. 

As a practical matter, U.S. "network neutrality" rules mean that Internet service providers can sell consumers one type of Internet access service, namely a "best effort" class of service that does not prioritize any packets, at any time, for any reason save security. 

For a person who wants to watch video or use VoIP at times of network congestion, that is not terribly helpful. 

DSL Leads Cable in Rural Markets

Cable high speed access might hold the largest market share in many urban markets, but that does not seem to be the case in rural markets, where digital subscriber line access has the largest market share, a study using 2010 data suggests.

In 2010, DSL had 28 percent share in rural areas, while cable services had about 20 percent share. Fiber to home services had about one percent share.

Mobile broadband access had gotten six percent share, while satellite services had three percent share, and “others” had about one percent share.

It is possible, perhaps likely, the study says, that use of mobile broadband has grown since 2010. In fact, mobile phones were used for broadband access more frequently than satellite connections in 2010.

Rates of broadband adoption in non-metropolitan households increased from 10 percent to 57 percent, mirroring an increase of adoption for people in metro regions, between 2003 to 2010. By 2010, household broadband adoption in metro areas had grown to about 70 percent of homes.

Despite that huge increase in broadband adoption since 2003, the broadband adoption gap between metro and non-metro areas is about 13 percent in 2010, about the same as the gap was in in both 2003.

But the most rural counties experienced significant improvements in broadband adoption between 2008 and 2011, a study conducted by Brian Whitacre (Oklahoma State University), Roberto Gallardo (Mississippi State University),and Sharon Strover (University of Texas), has found.

Pay for Performance for Cable Networks?

Just how much the subscription TV business will change over the next decade is not at all clear.  There is the obvious lure and threat of Internet distribution. 

Somewhat ironically, TV distributors themselves may be helping to push networks toward Internet distribution. In some part, that is especially going to be the case for "niche" programming networks of all types, as video distributors increasingly are not able to continue spending as much as programming costs as they have in the past.

That new limit is directly caused by growing consumer resistance to the size of their monthly bills. 

Verizon Communications, for example, reportedly has begun talks with several "mid-tier and smaller" networks about paying for their channels based on actual ability to attract an audience, according to a WSJ.com report. 

In the past, fees have generally been set based on "subscribers," (the distributor's customer base, and then the tier of service on which a particular channel is carried) rather than "viewers." (ratings) with some allowances for popularity.

The new Verizon proposal obviously will mean lower revenue for networks that are not watched very much. The principle might someday also help distributors with the other parts of their content acquisition cost problem, namely the costs of carrying the most-viewed channels, such as ESPN. 

But a switch to ratings-driven payments is directly affected by the way video distributors package their content. So long as ESPN is carried on the tier with the broadest distribution, it probably won't make much difference whether distributors pay by ratings or "per subscriber."

But all bets would be off if the major distributors created "sports tiers" that allowed subscribers to opt out of paying for ESPN and the other sports channels.

Of course, ironically, such efforts by distributors will increase the attractiveness of online distribution channels such as YouTube, Netflix and other alternatives. 

By optimizing the current business, service providers are creating the foundation for tomorow's business, which will use Internet delivery. 

Mexico's 1984 Moment Coming?

The year 1984 was significant for the U.S. communications business because it was the year the AT&T monopoly was broken up. 

It now appears at least possible something similar could happen in Mexico, as the legislature considers a bill that would create a new agency with the authority to literally break up the dominant telecom company, America Movil. 

The thinking is that doing so will lead to more competition. That should be the case. Sometimes, though, breaking up a monopoly has different outcomes than were expected. You might argue that the AT&T breakup lead to success for MCI and Sprint.

The divestiture also lead to the creation of the seven regional Bell operating companies, all of which eventually were recombined to form Verizon and AT&T (SBC having gobbled up several of its sisters before buying the formerly independent AT&T). 

After nearly three decades, there are two dominant telcos, both the progeny of the original AT&T.