Users Now Want an Order of Magnitude More Speed

User expectations matter in virtually all markets. At any point in time, there is a bundle of values that constitute the minimum acceptable offer for any product. The obvious example is all the component parts and features of an automobile that are essential as part of the basic product. 

The same is true for end user expectations of what constitutes a minimum acceptable level of broadband access service. Back in 2008, policymakers routinely spoke of 2 Mbps as a minimum threshold. 


There is a reason. Historically, "broadband" was defined as any speed at or above 2.5 Mbps. These days, user expectations outstrip the original industry definitions. 

A new poll by thinkbroadband of U.K. respondents finds that about a third think 20 Mbps is the minimum speed for any universal service requirement.

That is an order of magnitude increase over the 2008 levels of expectation that were commonly cited by policymakers as a floor. But it appears policymakers might already have underestimated expectations by close to an order of magnitude. 

That is why it is dangerous for ISPs to assume too much about what customers want, and how fast expectations can change.

That, in fact, is precisely what Google Fiber intends to achieve: a disruptive increase in end user expectations about what a minimally acceptable offer is, in the area of Internet access. 

There are huge implications for ISP investment decisions. There are equally huge implications for the future roles of various types of networks. The point is that end user and customer expectations apparently are highly elastic. 

Elastic expectations mean ISPs must be prepared not just for higher speeds, but rapidly-changing end user expectations as well. 

Top-Line Revenue Growth Will be Challenging for U.S. Telcos

U.S. mobile and fixed network service providers are not the only firms struggling to grow top-line revenues right now. Nor might telcos and mobile service providers be unusual over the next several years, in that regard. 

AT&T and Verizon Wireless probably have the best shot at growing revenues. Other telcos without mobile capabilities might be unable to grow revenues, top line. 

That doesn't mean firms cannot grow. They can, and by acquiring other assets. For AT&T and Verizon Wireless, that almost has to come from offshore acquisitions. Not only will U.S. regulators not likely allow either firm to get much bigger, the telcos seem to be losing the battle with cable operators for high-speed access accounts which are the foundation for tomorrow's business. 

The Real Threat to Verizon Wireless, AT&T Might Not be Sprint or T-Mobile USA

It isn’t so clear whether the leaders of T-Mobile USA and Sprint really think they could become key threats to Verizon Wireless and AT&T, or whether the fallback position is simply to run their businesses as well as possible, under the circumstances, until an asset sale occurs.

At some level, one might wonder whether, at this late state of market development, it actually is feasible for anybody to unseat Verizon Wireless and AT&T. On the other hand, that does not mean that new upstarts could not attack the market in a new way.

If one’s concern were simply the fastest possible ubiquitous Internet access, provided at the lowest cost possible, other business models could emerge. One might simply have to assume the most-important requirement is Internet access, not carrier voice.

In fact, since most mobile users consume most of their Internet bandwidth at stationary locations (90 percent or more), “on the go” access, though important, might not be so important as Wi-Fi access. Whether a truly large national network can be assembled at reasonable cost, in reasonable time, is probably the issue.

Up to this point, it has been the 3G and now 4G networks that have offered national scale, and that might not change, any time soon.

That means the biggest threats to AT&T and Verizon Wireless are not Sprint and T-Mobile USA, but new competitors that really do not care about carrier voice, but Internet access. That would be firms such as Google, Apple, even Microsoft or Amazon.

The problem is that a rational buyer, interested primarily in Internet access, would not want to buy the liabilities associated with legacy firms with huge and underfunded pension obligations, for example.

The problem is simply the expense and political hassle of assembling a national Wi-Fi capability with extensive coverage, from the bottom up. Nor, in truth, is there much evidence suggesting that people would prefer to live without “always on” mobile access. So one logically would assume it could make sense to create a mobile virtual network operator capability, if not owning an entire network, specifically optimized for low-cost Internet access.

But carriers are embracing Wi-Fi for data offload, so the issue is not completely clear. One might assume that under some set of conditions, every Internet access provider would actually prefer a combination of full mobile access and fixed Wi-Fi.

Wireless networking is at an inflection point where it can completely replace wired networking everywhere but the data center," said Robert J. Pera, Ubiquiti Networks CEO.

Allowing for a bit of hyperbole, we are probably once again at a point where observers are going to speculate about whether Wi-Fi networks can compete with or displace mobile networks. That debate is not as robust as it once was.

It might not be too early to suggest that such displacement does not make as much sense for voice networking or messaging as for Internet access, where use of fixed access by mobile devices primarily for Internet access is a rather common occurrence.

Proportion of mobile network traffic that is generated indoors, by region

source: Analysys Mason

POS is Biggest Mobile Payments Change So Far

Transaction volume tells the story of where mobile payments have gotten early traction. 

As of year-end 2012, only 7.9 million U.S. consumers use consumer-facing mobile wallet systems such as Google Wallet.

But in-store mobile payments using such systems nearly quadrupled in 2012, representing about $640 million in transaction volume. 

This figure notably does not include swipes on mobile credit card readers like Square and PayPal.

Card readers such as Square represented $10 billion in transaction volume in 2012.  That two order of magnitude difference in transaction volume illustrates the perceived value of the solutions. 

What already has changed is the point of sale terminal business. 

Dumb Display is Analogy to Dumb Pipe

Can a home be a TV household without owning a TV? Nielsen now says that is the case. Henceforth, Nielsen will measure TV viewing on a "TV" as well as video viewing on other screens, such as smart phones, tablets and PCs. 

Of course, one might also say there are other potential ramifications. Way back in the old days when there were not PCs or smart phones or tablets, some technologists suggested that the best way to handle the matter of displays was to produce "dumb screens" driven by cable or other boxes that provided the channel tuning.

The reason is that, even today, the actual tuner in a TV becomes redundant, if the user is connected to a decoder supplied by the video entertainment service provider, and that is more than 85 percent of U.S. homes.

So the "obvious" solution was to create simple, cheaper, dumb monitors without the cost and overhead of "tuning" functions, on the assumption that the tuning would be supplied by a cable, satellite or now telco TV provider.

That never happened, and one reason is that TV manufacturers hate the notion that they make dumb terminals as much as service providers hate the idea that they sell dumb pipe access. 

One might suggest that the debate will arise again, now that any number of screens and CPUs are used to drive viewing. At least in principle, consumers might want flexible large screens that simply take inputs from any number of other CPUs, ranging from game players to tablets, smart phones, PCs or decoders of various types. 

TV set manufacturers typically will resist. So we are likely to see multiple, redundant CPUs used in the home, even when they might not strictly be necessary. The issue will be most relevant for decoders and game players, since all other CPUs have built-in smaller screens. 

Still, there is logic to big, dumb terminals outfitted to take CPU inputs of many types, with Internet access and other functions provided by the outboard devices, not the TV set. But don't hold your breath. TV manufacturers will not do so. 

Why India's "Slums" are Not a Bad Thing: They are Waystations

It frequently is necessary, in sports or life, to "skate to where the puck is going to be." Something like that arguably applies to "slums" in many parts of the world. True, conditions are far from ideal. But change is the main story.

The Asia Pacific region will, over the next couple of decades, drive the highest growth of communications revenue of any region, though Africa will surprise, as well. China and India will be a big part of the story. 

And the reason communications will grow so much is that personal incomes will rise dramatically. As huge numbers of new middle class consumers are produced, markets for all sorts of consumer products, not limited to communications, will develop. 

At Some Point, "Social" and "Messaging" Blur

Though Facebook posts generally are regarded as a form of "social" activity, while sending a text message is viewed as "communications," the difference between a one-to-many message and a one-to-many "post" is less clear. 

As a practical matter, it would be reasonable to suggest that use of over the top messaging cannibalizes some amount of text messaging, even if the two formats are not precisely perfect substitutes for each other. Sometimes, over the top messaging is a simple person-to-person form of communication.

Often, though, it is a one-to-many format. And that makes it more analogous to a Facebook post than a voice call or text message. That fuzziness occurs elsewhere. To some extent, social media become publishing outlets, not simply "votes" on what people think is important.