Mobile Broadband Changes the Way People Use the Internet

There were about 90 million U.S. fixed broadband accounts in service in June 2012, and 153 million mobile broadband accounts, according to the latest report from the Federal Communications Commission.

The study shows that both mobile and fixed networks are evolving towards faster speeds, but also shows how much more nuanced the subject of broadband access has become.

Where once the issue was fixed connections to places, we now confront a mix of fixed connections to places plus many mobile connections directly to persons.

To be sure, fixed connections tend to feature higher speeds than mobile connections. But the ways people use the Internet arguably has changed, with far greater use of “on the go” Internet usage. For the most part, mobile broadband complements fixed broadband.

But perhaps seven percent of users are “mobile only” for their Internet access requirements.

The Media Behavior Institute found that mobile phone and tablet devices were reducing the the percentage of U.S. Internet users who use a computer in a given week.

The percentage of respondents using a desktop PC slipped by five percentage points between the July 2012 and January 2013.

On average, 43.5 percent of participants got access to the internet using a mobile phone each week during the period ending in January 2013, an eight-percentage-point increase over the period ending in July 2012.

Tablets grew their average weekly reach by four percentage points, used by 17 percent of participants at the end of the study period.

In the first quarter of 2013 Experian Marketing Services found that U.S. mobile Internet users spent the greatest percentage of their mobile web time using email, a 23 percent share of time spent, compared to five percent of time spent on desktop.

Social networking was the second most used app on mobile, representing 15 percent of time spent with any Internet app or service.

Travel also occupied a greater share of time on the mobile Internet (nine percent) compared with the desktop (one percent).

80/20 Rules Apply for Service Provider Capital Investment

For large telcos making capital investments, the "80/20" rule holds, a study suggests. Some 80 percent of the attention goes to decisions that produce less than 20 percent of operating results. 

Conversely, decisions that drive 80 percent to 90 percent of operating results tend to get 10 percent to 20 percent of attention, when capital investment choices are to be made.

Firms that earn more from their capex expenditures typically have proposals justified on the basis of improving performance metrics from existing services or territories, a PwC study has found.

Most of the telecoms executives in the survey distinguish between ‘business-as-usual’ capex and ‘project’ capex (also known as ‘innovation’ or ‘growth’ capex).

But though project capex typically represents just 20 percent to 30 percent of an operator’s total capex, it receives 80 percent to 90 percent of the capex committee’s attention. That is not to say innovation and revenue growth is unimportant. It is to note that capital allocation is failing to pay attention to the 20 percent of decisions that drive at least 80 percent of the financial impact (the “80/20 rule”).

That might seem to run counter to the notion that tier-one telcos must find new revenue sources. It isn’t. It means that the emphasis for capital investment has to be related to actual impact on revenue generation.

The logic is simple enough. A $5 a month swing in revenue has huge impact when the revenue-generating units involved number in the scores of millions, compared to a $5 a month revenue swing on a revenue-generating service involving a hundred thousand units.

In other words, $5 a month incremental revenue on a base of 30 million units generates $150 million a month, or $1.8 billion a year. A $5 a month incremental increase in revenue on a service with 100,000 units generates $500,000 a month, or $6 million a year.

PwC analysed the financial performance of 78 fixed-line, mobile and cable telecoms operators around the world and then surveyed 22 senior telecoms executives from a representative cross-section of companies in terms of size, services, location and financial performance.

“The telecoms industry is at an inflection point ,” a PwC report argues. It’s spending lots

of money on new infrastructure, but it’s not optimizing financial returns. PwC claims “most

telecoms executives admit as much.”

European Mobile Revenue: Structural or Cyclical Problems?

Vodafone is the world’s second-largest mobile service provider or perhaps the seventh largest, as measured by revenue. In its past year ending in March 2013, Vodafone revenue fell 4.2 percent  to £44.4 billion.

The shortfall was caused principally by economic conditions in Europe and new EC rules on wholesale termination revenue, both of which are hitting revenues in European markets.

But there is a broader trend at work. In developed markets, revenue drivers continue to evolve.

Before 2000, global telecom revenue growth was driven by voice revenues. After 2000, as voice declined, total revenue was sustained by growth of mobile service revenues, driven by voice, and then supplemented by text messaging revenue.

So mobile service revenues became the growth driver for the global business, which also expanded to include the formerly separate video entertainment business.

In many markets, though, mobile voice revenue now is flagging, as are text messaging revenues. In the business as a whole, growth rates of mobile revenue have been dropping since 2007, while average mobile revenue per subscriber has been under pressure as well, as first voice usage and now text messaging usage has begun a decline.

The obvious next growth driver is mobile data, which grew about 14 percent. But Vodafone’s revenue issues show that is not an easy or foolproof process. Mobile data revenue is growing, to be sure.  

In 2014, telecommunications companies will make more money from mobile broadband than from fixed broadband for the first time.

But nothing remains the same in the communications business, these days. At some point, as smart phones displace most use of feature or basic phones, and as most consumers therefore start buying mobile data plans, mobile data will itself become a legacy revenue source.

So the big question is “what comes next?” For most service providers, machine-to-machine services are part of the answer. Bigger mobile data plans, generating more revenue, are part of the answer as well. For some, mobile applications will be part of the creation of new revenue sources. Mobile payments, mobile banking and mobile commerce likewise are among the potential new sources of revenue.

The point is that the next big transition for the mobile industry will come rather soon. And that transition will entail the maturation of the mobile data revenue “growth” story and its eventual replacement by a next wave of revenue drivers.

Much will hinge on how fast those new sources can be developed and scale.

1-Gbps LTE? Yes, But You Need 40 MHz of Bandwidth

There is a simple answer to the question of why mobile service providers and would-be providers want more spectrum. As usage continues to climb, and as access speeds continue to climb, there is little chance of boosting access speeds, in the mobile or fixed wireless realms, without adding more spectrum.

For example, it is possible to deliver 1-Gbps mobile Internet access using Long Term Evolution, but that requires a 40-MHz block of spectrum, not the 10 MHz or 20 MHz channels now used by LTE providers.

Numerical superiority: LTE Advanced vs LTE
Source: 3GPP

Dish Network Offers $2 Billion for LightSquared’s Spectrum

Dish Network reportedly has offered to buy LightSquared spectrum, offering $2 billion for LightSquared's 60 MHz of spectrum.

LightSquared apparently has until May 31, 2013 to accept the offer, which was made May 15, 2013, Bloomberg reports.

Dish already has received Federal Communications Commission permission to use former mobile satellite service spectrum to create a terrestrial Long Term Evolution network.

Dish had acquired that spectrum for $3 billion from bankrupt satellite companies DBSD North America Inc. and TerreStar Networks.

As with most initiatives undertaken by Charlie Ergen, Dish Network CEO, there typically are a number of ways to monetize an asset. Ergen always has believed spectrum has value, whether to support an on-going business venture or simply as an asset to be sold. 

But most observers might agree that Dish Network is acting as though it has clear intentions of entering the mobile business, and is not simply "bluffing."

Google Hangouts Video on AT&T Getting Broader Support

Mobile service providers have had a complicated relationship with over the top applications viewed either as displacing existing revenue-generating services (carrier voice services) or imposing high loads on mobile networks (video apps and video conferencing apps).

That is one reason why, at least initially, use of Apple iPhone “FaceTime” was restricted to Wi-Fi access on the AT&T mobile network, for example.

To be sure, there are both public policy issues (can a person use a lawful application) and .  management issues (how do resource intensive apps get access to the network?) In the past, there also have been business model issues (can a mobile service provider support unlimited use of video for a flat rate price?)

Google Hangouts provided the most recent issue. Hangouts unifies Google messaging services, including video chats and conferencing. But AT&T indicated initially that video chats could be used only on Wi-Fi networks.

AT&T seems to have quickly clarified that policy, at least for some users. AT&T originally had allowed mobile use of Hangout video chats on Apple, Samsung and BlackBerry devices used on “Mobile Share” or tiered data plans (3G). Long Term Evolution support will be enabled by mid-June, AT&T says.

In the second half of 2013, AT&T will enable pre-loaded video chat apps that work on the mobile network for all customers, regardless of data plan or device; that work is expected to be complete by year end.

Today, all of its customers can use any mobile video chat app that they download from the Internet, such as Skype, AT&T also says.

Smart Phone Shipments Will Pass Feature Phones in 2013

Global smart phone shipments will surpass shipments of basic and feature phones for the first time in 2013, according to NPD.

Global smart phone shipments are expected to reach 937 million units in 2013, compared to just 889 million units for basic phones and feature phones.

Between 2011 and 2016, smart phone shipments will grow at a compounded annual growth rate of 26 percent, to 1.45 billion units, which will account for 66 percent of the mobile phone market.

Emerging markets are driving most of the smart phone growth, NPD researchers say.  In these markets, entry-level smart phones priced below $200 are important.

China leads in the entry-level smart phone category, comprising 55 percent of shipments. China is also the largest market for smart phones as a whole, and the Asia-Pacific region will account for over 50 percent of smart phone shipments in 2013.

At the high end of the market, LTE-enabled smart phones will reach 23 percent market share in 2013, NPD DisplaySearch says.

Screen sizes are also changing. In 2013, more than half (57 percent) of smart phone displays will range between four and five inches, while screens larger than five inches will grow to 16 percent of the market.