Apple and Samsung Lead Tablet Market in First Quarter 2013

Global tablet shipments shipments grew 142.4 percent, year over year, in the first quarter of 2013, according to International Data Corporation. And as has been true for the smart phone market, the market is lead by Apple and Samsung.

But Samsung's share is growing, while Apple's share is falling. Tablet shipments totaled 49.2 million units in the quarter.

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How Much “Dumb Pipe” Revenue Does Comcast Have?

Comcast’s first quarter 2013 earnings report sheds some light on the value of “dumb pipe” revenues earned by Comcast's cable segment. In its cable segment, Comcast booked revenue of $10.22 billion.

Assume that voice, video entertainment, advertising and all other revenue is a “service,” not dumb pipe Internet access.  

Of the amount, some $5.1 billion came from video entertainment. Comcast earned $900 million from consumer voice. Comcast also earned $940 million in advertising and other revenue.

Comcast earned about $2.5 billion in consumer Internet access revenue.

Comcast earned $741 million from business services, presumably a mix of high speed access and voice services. For the sake of argument, assume half of that revenue is high speed access, half hosted voice. So assume Comcast can attribute $370 million in the quarter as Internet access revenue.

That implies about $7.3 billion in smart pipe or service or application revenue. That also implies

“dumb pipe” revenue of about $2.9 billion. So dumb pipe directly represents 28 percent of revenue.

Google, Like AT&T or Comcast, Needs Big New Markets

Google has gotten so big — it booked $50 billion in annual revenue in 2012 — that it needs to find new markets in the billions of dollars to continue moving the sales needle. Small markets just won't do.

AT&T, Verizon, Cisco Systems and Comcast have the same problem. As big as they are, new markets and revenue streams smaller than $1 billion annually just aren't worth pursuing. 

If you want to know why specialty providers often thrive in most big markets, that is the reason. There is a threshold below which it simply makes no sense for a large supplier to compete, and those markets are left for other suppliers. 

Of course, there often comes a time when a former specialty market becomes so lucrative that the big fish have to jump in. Those are key transition points, as the former specialty players typically cannot compete, or simply are bought out. 

20 Mbps for Everybody, for $20 a Month, by 2020?

One should understandably be skeptical about much of what gets said by government officials, for the obvious reason that much of what gets said is for some political purpose, and is not necessarily reflected in real-world policy.

But there probably are reasons to believe that multiple pronouncements by government and non-governmental group officials will actually correspond to a high degree with actual supply of broadband services by private suppliers. First, the pronouncements.

The Secretary-General of the International Telecommunication Union, Dr Hamadoun Touré, is in favor of setting a United Nations goal of ensuring that everybody in the world can access broadband Internet access at speeds of 20 Mbps, selling for $20 a month (£13.25) by 2020.

More to the point, are the corollaries also true? If consumers can buy 20 Mbps access for $20 a month, will they also be able to buy 10 Mbps for $10 a month, or 5 Mbps for $5 a month, or 2.5 Mbps for $2.50 a month?

One way of estimating demand is to note that in many markets, once households reach income of about $10 a day ($300 a month), the possibility of those households falling back into poverty decrease dramatically. And financial stability is conducive to discretionary purchases. At $300 a month income, a household might reasonably expect to afford Internet access costing $9 a month.

The key is more a matter of economics than anything else. How fast will substantial numbers of users in the developing world reach monthly incomes of $100 a month? At that level of income, it is reasonable to expect users to pay $2.50 to $3 a month for broadband.

If one assumes that in 2005 the middle class population of China was about eight percent, by 2030 it will be as high as 72 percent. In India, where the percentage of middle class people in 2005 was perhaps in the low single digits, by 2030 some 41 percent of India’s people will be middle class, defined as households with annual disposal income between 200,000 rupees up to one million rupees ($3,606 to $18,031 in annual disposable income).

Over the last decade, there has been a 50 percent jump in the number of people in the “middle class in Latin America and the Caribbean, The World Bank reports. Roughly speaking, about 30 percent of people in the Latin American and Caribbean region were middle class in 2009, using a definition of income between $10 a day and $50 a day.

A report on the Latin American middle class  found that the middle class in the region grew to an estimated 152 million in 2009, compared to 103 million in 2003, an increase of 50 percent. Even if one assumes a slowing rate of growth, there comes a point where the ability to pay $2.50 to $3 for broadband is predictable.

Even more predictable is the ability of more households to buy access packages providing higher speeds.

The other important development is that ISPs are finding ways to slash costs. Between 2008 and 2009, 125 countries saw reductions in access prices Internet access prices 

, some by as much as 80 percent, the ITU says.  

Between 2009 and 2011, for example, prices for fixed broadband have dropped by 52.2 percent on average and mobile broadband prices by 22 percent, globally.

Affordable broadband programs are starting to emerge in countries such as Sri Lanka and India, with service providers offering connectivity solutions starting as low as US$2 per month.

At present the United Nations (UN) global digital development targets for internet access are focused on ensuring that “all countries should have a national broadband plan or strategy or include broadband in their Universal Access / Service Definitions” by 2015.

The existing goal also includes affordable broadband. By 2015, entry-level broadband services should be made affordable in developing countries, quantified as a monthly price that is less than five percent of average monthly income.

By 2015, 40 percent of households in developing countries should have Internet access.

By 2015, Internet user penetration should reach 60 percent worldwide, 50 percent in developing countries and 15 percent in the Least Developed Countries, the U.N. already says.

Europe’s Digital Agenda expects 100 percent of EU households to have access to service speeds of at least 30 Mbps by 2020, while the United Kingdom is aiming for 90 percent of people to have access to speeds of 25 Mbps  by 2015.

The point is that we have reasons to be quite optimistic about such goals.

How Disruptive Will Online Video Be, for Satellite, Telco, Cable?

Online video distribution will be disruptive for video service providers. But the degree of disruption will be highly disparate. Comcast or Verizon and AT&T might suffer some financial distress, but far less so than the satellite and broadcast TV providers.

In fact, in a strategic sense, on-demand online delivery improves the strategic position of cable and telco networks, and is a major disadvantage for the other networks, which simply will not be able to adjust. The reasons have to do with the network topologies.

Telephone networks always have been designed for one-to-one communications. Most other content delivery networks (broadcast TV, satellite TV, cable TV, over the air radio) were optimal for multicast content. As the market slowly moves to more unicast delivery, topology is going matter quite a lot.

What a multicast network cannot do is support much unicast traffic. So as video content delivery slowly moves to unicast, on-demand modes, the providers with the biggest point-to-point networks, with the most bandwidth, will have advantages. Conversely, multicast networks will be stuck with linear, multicast delivery.

If you want to know why Dish Network is so intent on getting into the mobile business, that is why. Whether he says it directly or not, Dish Network CEO Charlie Ergen realizes the limitations of a satellite video network in an on-demand market.

The conventional wisdom (which isn’t always wrong) suggests new Internet-based providers such as Netflix will gain, while traditional incumbents lose customers, revenue and market share. That is a reasonable view, but is not so simple as some seem to think.

For one thing, the existing video distributors undoubtedly will also have the right to offer online programming, on similar terms and conditions, as Netflix, Amazon Prime or any other online services. In some cases, that will mean less revenue than now is earned. In other cases, the shift might well be revenue neutral.

Nor will online distributors have an especially easier time getting unique or even standard content rights. The studios and networks wil decide what their content is worth, and distributors will have to pay.

Nor will online competitors have an especially easy relationship with content owners. As Netflix faces growing resistance from its suppliers, Netflix will have to pay more for content rights, or lose content deals, for example.

Some content owners will try to “go direct” to end users. But one might be skeptical of prospects for single-studio streaming sites, such as the Warner Archive streaming service, as volume will matter, as will ease of use. And it just won’t be convenient for end users to buy multiple discrete services from lots of suppliers. The largest catalog, “with all the good stuff,” will win.

But the fact remains that Netflix and other online services will face significantly higher programming costs, going forward, as they emphase original content.

Also, cable and telco providers will have strategic advantages. Where now both contestants face the two big satellite providers, in the on-demand business they mostly will not have to compete with them.

Oddly enough, cable and telco will face far less competition in an online market than in the current linear video market.

Also, the magnitude of the revenue change might be less than expected, in net terms, as it also is logical to expect telco and cable ISP revenues to grow as demand shifts to online-delivered video.

Telcos and cable companies might be selling higher-priced broadband access services (though the Google Fiber pricing umbrella is a huge problem), even as they face erosion in video revenues. But telcos and cable companies also stand to gain back market share from satellite providers.

Also, telco and cable revenue drivers already are changing. For cable and telcos, the importance of voice, business services and video services are mirror images.

For cable, video is a legacy service that is dwindling because telcos are taking market share. For telcos, share of business services will shrink as cable takes customers, as already has happened in the voice area.

Overall, both voice and video entertainment revenues will be under pressure, mitigated mostly by bundling that provides incentives for consumers to buy services they might not want, to obtain lower overall prices on a basket of services. But satellite and broadcast TV distributors will face bigger problems: unicast destroys much of the value of their networks.

It isn’t completely clear that broadband access revenues will compensate for declining video entertainment revenues. Especially if Google Fiber succeeds in creating a new value-price expectation for gigabit access ($70 for a symmetrical gigabit), there might not be that much upside for broadband access prices.

According to industry researcher Strategy Analytics, the margins on cable broadband services are 70 percent to 110 percent higher than those on video services (depending on whether or not advertising revenues are included in the calculation). What is not so clear is what margins will be possible for online services.

By 2017, 50% of Enterprises Will Require Employees to Supply Their Own Computing, Communications Devices

By 2017, possibly 50 percent of enterprises will require employees to provide their own computing or communications tools, Gartner now predicts.

Some 38 percent of companies expect to stop providing devices to workers by 2016, according to a global survey of CIOs by Gartner.

Those forecasts, if borne out, indicate that an inflection point in enterprise computing already has happened.

"BYOD strategies are the most radical change to the economics and the culture of client computing in business in decades," said David Willis, vice president and distinguished analyst at Gartner.

The changes come for a myriad of reasons, including the power of consumer devices, the preference for consumer devices, the growing prevalence of cloud computing, the ubiquity of high-speed access, the ability to offload mobile traffic to the fixed network and the advantages to enterprises of changing information technology costs.

Gartner defines a BYOD strategy as an alternative strategy that allows employees, business partners and other users to use a personally selected and purchased client device to execute enterprise applications and access data. It typically spans smart phones and tablets, but the strategy may also be used for PCs. It may or may not include a subsidy.

Though enabled by cloud computing, the switch to user-supplied devices also will further drive cloud app adoption, since that is one way enterprises can enforce policies and allow access without the traditional support labor.

While BYOD is occurring in companies and governments of all sizes, it is most prevalent in midsize and large organizations ($500 million to $5 billion in revenue, with 2,500 to 5,000 employees). BYOD also permits smaller companies to go mobile without a huge device and service investment.

Adoption varies widely across the globe. Companies in the United States are twice as likely to allow BYOD as those in Europe, where BYOD has the lowest adoption of all the regions.

In contrast, employees in India, China and Brazil are most likely to be using a personal device, typically a standard mobile phone, at work.

Today, roughly half of BYOD programs provide a partial reimbursement, and full reimbursement for all costs will become rare. Gartner believes that coupling the effect of mass market adoption with the steady declines in carrier fees, employers will gradually reduce their subsidies and as the number of workers using mobile devices expands, those who receive no subsidy whatsoever will grow.

As you might well expect, the BYOD change will affect enterprise spending on all manner of computing devices. The impact on enterprise IT spending also should be positive for enterprises but negative for existing suppliers of enterprise premises systems and gear.

CenturyLink to Launch Omaha Gigabit Network "Pilot"

Google Fiber seems to be succeeding in changing ISP behavior about access bandwidth. Count CenturyLink as the latest big ISP to launch a gigabit network project. CenturyLink is going to build a gigabit network reaching 48,000 homes and businesses in part of Omaha, Neb. 


CenturyLink's service apparently will be available at first for 9,800 potential customers in west Omaha neighborhood that was a test bed for Qwest Communications "Choice TV," meaning meaning much of the physical infrastructure already is in place. 

The new service, called Lightspeed Broadband, will be available to all of the 48,000 households and businesses in that territory by October 2013.

The CenturyLink residential service will sell for $79.95 a month when bundled with other CenturyLink services, or for $149.95 a month a la carte. 

On a stand-alone basis, the CenturyLink service will sell for more than double what Google Fiber charges, though CenturyLink clearly would prefer customers buy a bundle.