Mexico Communications, TV Markets to See Market Share Shifts

Mexico now has become a focal point for potential market change after Mexican President Enrique Peña Nieto signed into law a new framework for competition in the telecommunications and TV broadcast industries that has the express aim of limiting market power and shifting market share  in Mexico’s communications and media businesses.

In essence, the bill allows for something like the 1984 breakup of the AT&T Bell system, though it isn’t clear that is the preferred method for altering market share in the Mexican markets.

At least initially, regulators are likely to try new network unbundling and interconnection rates that will favor competitors. Just how much share could change is the big question. In the U.S. market and in Western Europe, competition has in many cases reduced the former market leader’s share to as little as 30 percent to 35 percent.

But that required asset divestitures. In the absence of such asset disposals, some of the existing competitors might expect to gain perhaps 10 percent to 15 percent share.

What is clear is that the “problem” is seen to be excessive market control by one company, in this case América Móvil, which has 80 percent share of fixed lines and also 70 percent share of mobile accounts as well.

The new law creates a brand new regulatory body, Ifetel, which will have the ability to apply more restrictive regulations on dominant competitors or force them to sell assets.

But Grupo Televisa likewise controls 70 percent of the broadcast TV market, and also is expected to see new competition, ironically from Carlos Slim, who controls América Móvil.

One way or the other, regulators will take actions to reduce the market share held by the leaders of the fixed line, mobile and TV broadcast industries. That, of course, is the whole point of inducing new competition: the leaders lose market share.

Two new national television networks will be authorized, and existing satellite and cable TV companies will be required to carry those signals at no charge to the new networks.

Aside from changes in interconnection rates to favor attackers, foreign businesses will be permitted to own up to 49 percent (up from zero percent) of radio firms, and can increase their stake to 100 percent (up from 49 percent) in other telecommunications operations.

SoftBank Raises Sprint Bid

Though SoftBank had said it would not alter its original bid to buy Sprint Nextel Corporation, SoftBank has raised its offer for Sprint. Essentially, the offer funnels more cash to shareholders, and less to Sprint in the form of additional capital.

Sprint’s Special Committee and Board of Directors have unanimously approved an amended merger agreement and again have unanimously recommended to stockholders to vote for the revised SoftBank transaction.

Under the amended Merger Agreement, SoftBank will pay an additional $4.5 billion of cash to Sprint stockholders at closing, bringing the total cash consideration available to Sprint stockholders to $16.64 billion.

The cash available to stockholders has increased by $1.48 per share, from $4.02 to $5.50, based on the June 7, 2013 share count.

Sprint also says it has ended talks with Dish Network about that firm's rival bid for Sprint. Perhaps significantly, one significant shareholder Paulson, now seems willing to vote for the sale of Sprint to SoftBank. That could tip the votes in favor of the SoftBank bid. 

But expect another, and higher, bid from Dish Network. Though T-Mobile USA offers a fallback position, Dish Network seems to believe Sprint, with its Clearwire spectrum assets, are a better fit.

And Dish is highly motivated. The billions worth of valuation for its Long Term Evolution spectrum will fall dramatically if it cannot be used as part of a viable operating network, with significant market share.

SDN Will Follow "Big Data" Through the Peak of Hype

Software defined networks already have started down the path of “hype” that is a normal part of the adoption process for any new technology.

Big data is the trend that will precede software defined networking along the typical hype cycle, many would argue. The point is that SDN value is going to vastly disappoint many would-be users, for quite some time.

That typically happens with most new technologies that ultimately prove to have value. In the meantime, there will be the normal jockeying for position, with the odd result that some of the touted advantages (multivendor support, lower cost of network elements) will emerge only within specific ecosystems.

Apple Could be a Dangerous Mobile Service Provider

A new global survey conducted by Accenture suggests Apple might be a formidable Internet service or mobile service provider.

The global survey of mobile users by Accenture finds that 31 percent of all respondents surveyed prefer that their device supplier also supply their communication needs, including Internet access service.

In fact, 40 percent of Apple owners prefer all communications needs to be met by Apple.  

A majority of mobile Internet users prefer device makers over their mobile provider as their unified provider of communication needs. Mobile providers actually rank third in preference.

This preference is exceptionally strong in emerging markets, where more than 40 percent of mobile Internet users prefer mobile device or OS makers to fulfill all their communication needs, compared to only 17 percent who prefer the mobile provider.

In emerging markets, fully 42 percent of respondents would prefer that their device supplier also provide communications and Internet access.

About 28 percent of all respondents do not care what entity provides their Internet access, as long as those needs are met. The study indicates how big the opportunity for new ISPs might be.

Only 21 percent of all respondents indicated that their mobile service provider was their “preferred supplier.”

Accenture’s Mobile Web Watch 2013 study surveyed nearly 31,000 consumers in 26 countries.

That means mobile service providers potentially could be disrupted, as Google Fiber now is disrupting consumer expectations of fixed network services.

Fixed network Internet service providers, whether they will admit it or not, are feeling a disruptive challenge from Google Fiber, simply because Google Fiber is resetting consumer expectations about what a state of the art Internet access service looks like.

All prior offers are challenged on both the value and price front, by Google Fiber’s $70 a month 1 Gbps symmetrical service, which provides two to three orders of magnitude more bandwidth in the downstream direction, and three orders of magnitude more bandwidth upstream, than other offers, at prices that are close to what users already pay for vastly slower services.

Users Willing to Pay for Faster Internet Access, Global Study Finds

A global survey of mobile users by Accenture finds that the speed of mobile Internet connection was important to 97 percent of all respondents. That is not too surprising, given the overwhelming prevalence of 2G and 3G network connections globally.

About 78 percent of respondents said there is some room for improvement in mobile Internet access speeds. For ISPs, the equally important finding was that 63 percent of all respondents said they would pay additional monthly fees for mobile Internet service.

But there is a caveat: that willingness to pay is based on the assumption that the new service is an order of magnitude (10 times) faster than their current connection.

For mobile service providers hoping to monetize their Long Term Evolution investments, that is good news. Sort of. It depends on where a service provider is operating.

In mature (developed nations) markets, the willingness to pay extra for 4G is lower (57 percent of all respondents in these markets), except in Italy (71 percent) and Finland (70 percent)

In emerging markets, three-quarters (76 percent) of mobile Internet users would pay more for 4G; customers in Brazil and Russia (83 percent in each country) are willing to pay more.

The more important issue, though, is not what people say they might do, or will do. What matters is what they actually do.

On that score, one might argue that even if consumers in developed markets are not so apparently willing to pay more for 4G, many likely are paying more, if only because of the well-known observation that users of faster networks consume more data.

According to Federal Communications Commission data, users of satellite Internet access services, which arguably face the toughest bandwidth challenges, consume orders of magnitude less data than users of digital subscriber line, cable modem or fiber to home networks.

Currently, a 4G connection generates 19 times more traffic than a non-4G connection, Cisco notes. In part, that is because many 4G connections are used for residential broadband routers and laptops, which have a higher average usage.

But the other issue is simply that when users have access to faster networks, they consume more data. A smart phone on a 4G network is likely to generate 50 percent more traffic than the same model smartphone on a 3G or 3.5G network, Cisco says.

The survey also showed that almost all respondents (96 percent) said the quality of network is important, closely followed by its area of coverage (95 percent).

About 94 percent of respondents said the cost of data is slightly less important than quality, coverage, or connection speed, and even less, 89 percent, cited customer service as being important.    

Accenture’s Mobile Web Watch 2013 study surveyed nearly 31,000 consumers in 26 countries.

Global Mobile Devices and Connections by 2G, 3G and 4G

Although 4G connections represent only 0.9 percent of mobile connections today, they already account for 14 percent of mobile data traffic, according to Cisco.  In 2017, 4G will represent 10 percent of connections, but 45 percent of total traffic, Cisco estimates.

4G will be 10 Percent of Connections and 45 Percent of Traffic in 2017

Apple to Launch iTunes Radio

Apple is launching “iTunes Radio,” a free Internet radio service featuring over 200 stations and an incredible catalog of music from the iTunes Store, available in the fall of 2013.

“Featured Stations” curated by Apple and genre-focused stations that are personalized will evolve based on the music users play and download. To begin with, iTunes Radio will base its personalization experience on user listening history and past purchases from iTunes.

In addition, if you’re listening to a song you like from iTunes Radio or your music library you will be able to have a station built around those songs.

Users will be able to create and customize stations based on artists, songs, or genres.

Rwanda LTE Coming by Government-KT Corp. Joint Venture

Rwanda is building a new fourth generation Long Term Evolution network in a 25-year joint venture with KT Corporation of South Korea. KT Corp. is contributing $140 million in investment. 

The Rwandan government is contributing 3,000 kilometers of long haul optical fiber, spectrum and a wholesale-only operator licence. Additional financing will be added in the form of debt and vendor financing. 

The project aims to provide LTE broadband coverage to 95 percent of Rwanda’s 12 million population within the three years.

More than half the population of Rwanda now uses mobile phones. There were in March 2013 about 6,039,615 mobile subscribers, representing a penetration rate of about 57 percent.

The country's largest mobile company, MTN Rwanda lost 2,088 subscribers between the same periods, according to RURA with 3,452,182 active lines down from 3,454,270 in January.

With over 3.4 million subscribers, MTN remains the dominant player controlling more than half of the total market share with Tigo in second spot. 

The newest entrant, Airtel Rwanda, boasts a rise in subscriber base of 781,162 in March from 570,739 in January 2013. 

Rwanda’s mobile penetration at the start of 2012 was about 40 percent (4.3 million people), with Internet access penetration at seven percent, according to the Rwanda Utilities Regulatory Agency. By the end of 2012, mobile adoption had grown to about 5.7 million people.

MTN and Tigo’s networks each reach more than 98 percent of the population, whereas Airtel’s population coverage currently stands at 15 percent.

MTN group is Africa’s largest telecommunications operator with more than 130 million cellular subscribers in the region and in the Middle East.