Africa Might be Among the Best Places for Fast Internet Access Growth

“Emerging markets” enjoyed quite a run in the equities markets over the last decade, but have sputtered of late over concern about the legitimate impact of U.S. interest rate policies. It is too early to say whether the big emerging markets equity run is over, or only taking a pause.

What seems clear, though, is that growth prospects in Africa now are higher than has been the case over much of the last couple of decades. In fact, growth prospects, and therefore prospects for broadband access and any other Internet-related business, have grown, according to Gartner analyst Richard Gordon.

Gordon provides as evidence the growth of inquiries from Gartner clients, which are up significantly over 2012 levels, he points out.

“Most African countries are growing at seven percent to nine percent” rates, he notes.

So despite the likelihood that interest in investing in emerging markets will face a key test over the next couple of years, Gordon suggests Africa might well be a bright spot.

That should be true for providers of Internet access as well.

Google Names Top U.S. "eCities"

Google has ranked communities in all 50 U.S. States for “eCity” awards that “recognize the digital capitals of each state,” Google says. “These cities’ businesses are using the web to find new customers, connect with existing customers and fuel their local economies.”

The research methodology used AdWords data, combined with the base of small businesses in an area, to develop an online index of Internet intensity among small businesses in each community.

"Net Neutrality" Will Kill the Teleconm Business

If you are the sort of person who enjoys deep thinking about the future of the telecom business, it always makes sense to listen to Martin Geddes. Here's a new presentation he's worked up. The formal topic was how to deal with over the top apps.

As has been the case recently, Martin's thinking about access as a trading space figure prominently into the analysis of what's wrong, and how to fix it. 

What I also found significant was Martin's thinking about what others might call value-based pricing. And that means "network neutrality," such as policies that forbid offering consumers class of service or quality of service mechanisms, will doom access providers to an unprofitable future. 

Meeting the OTT challenge from Martin Geddes

20% of U.S. Residents "Can't Get" Broadband, or "Don't Want to Buy It?"

"One in five Americans still don’t have broadband," a story headline says. Read the story. The writer does not say "one in five Americans cannot get broadband." The writer correctly says that one in five choose not to buy fixed network broadband. 

There's a difference--an important difference--between being unable to buy a product because it is not available, and not wanting to buy the product when it is available. 

The headline can easily be construed as arguing "people can't buy it, because it isn't available," which is an "access to broadband" problem.

If people choose not to buy broadband, those represent a different set of problems, ranging from indifference to lack of funds to lack of knowledge about how to benefit from the Internet or having some other means for getting access that makes more sense, in terms of value and price.

Very often, the people who write stories are not the people who write headlines. And, sometimes, headline writers appear to have missed the actual point a writer intended. 

One sees this often when people talk about, or write about, broadband access. Not being able to buy is one problem. Being able to buy, and choosing not to, is a different problem. 

In some cases, it is not even a "problem." At one home location for example, I voluntarily choose to use two mobile 4G connections instead of a fixed connection. There is no access problem. I could buy either a fast cable or a fast fiber-backed telco access service. I simply choose not to, because I have another solution that works.

Mobile Revenue: Voice 21%. Where's the Rest?

Mobile analyst Chetan Sharma has been looking at the next waves of mobile service provider revenues for some time, using the phrase "the fourth wave."

At present, perhaps 55 percent of revenue was contributed by voice services. Recently, data access has contributed 17 percent, and the over-the-top and digital services a mere three percent.

Over the next 10 years, Sharma expects those percentages to change dramatically. Mobile digital services other than access might grow to 30 percent of total revenue, while voice will represent less than 21 percent.

If mobile digital services are the single biggest category at 30 percent, the implication is that mobile Internet access will represent less than 30 percent of total revenue. 

One assumes that means about 49 percent of revenue will come from messaging revenues, mobile Internet access and handset revenues. 

The bad news is that it appears ecosystem participants other than mobile service providers will be positioned to earn much of the gross revenue from which mobile service providers collectively earn 30 percent. 

If you look at the way machine-to-machine, connected car, mobile payments, mobile banking and mobile commerce initiatives split revenue between app providers, merchants, clearinghouses and others, you might see the problem. 

To earn their 30 percent, mobile service providers will have to work with many other firms generating substantially bigger gross revenues. That assumption is based on the likelihood that telcos will supply some key enabling features to third parties who largely will operate the new mobile digital services. 

Wi-Fi is Valuable for a Service Provider, Just Hard to Quantify

The funny thing about the Wi-Fi "market" is the somewhat unusual size of hardware supplier and end user revenue magnitudes. 

In some ways, the Wi-Fi end user market is somewhat like the end user toaster market. 

Money is spent buying toasters. Electricity is consumed using toasters. 

But there is not much of a direct toaster usage revenue stream.

The Wi-Fi markets are similar, since the sales we can easily quantify are akin to "annual toaster sales," while usage is non-paid.

Of course, the value of Wi-Fi routers and network gear has a value far exceeding the value of network elements and routers sold. It just is hard to quantify, since nearly all Wi-Fi usage has no incremental cost of usage. 

By IDC's reckoning, the equipment supplier market is more than $4 billion annually. 

The market for Wi-Fi capable handsets is larger, at perhaps $30 billion to $40 billion annually. But neither of those sets of figures represents the value of Wi-Fi to application or Internet service providers. People don't buy Wi-Fi-capable handsets for the Wi-Fi, but for the full bundle of values a smart phone represents. 

Consulting firm Infonetics projects that dual-mode Wi-Fi handsets (required for some approaches to FMC) represent a market of approximately 591 million handsets in 2008-2010, growing from 119.5 to 288 million handsets (forecast as of July 2007).

For service providers, most of the benefits of Wi-Fi offload are indirect, coming in the form of reduced customer churn, increased customer satisfaction, some revenue lift and significant avoided capital cost.

Some have tried to model a direct revenue effect.

According to Cisco, a mobile service provider can offload data and voice traffic to the Wi-Fi network, freeing up possibly scarce spectrum and thereby avoiding some amount of network investment. 

If up to 50 percent of calls made on mobile devices are made on the business premises or at home, shifting those calls to Wi-Fi frees up spectrum for use by other customers and applications. 

Assume, for example, that you have an average per-family revenue of US$80 per month, and three phones sharing a pool of 700 minutes. 

With a dual-mode fee of $30 per home location, permitting free calls over Wi-Fi and assuming a reduction in minutes per plan of $20 per month (because at-home calls are now free over the Wi-Fi/broadband haul), the net increase in revenue per family is $10 or $2.50 per person (family plan of $80 + FMC family fee of $30 adjusted for the smaller 500 minutes program, which subtracts $20), Cisco argues.

Assume that 66 percent of total cellular minutes move to the free Wi-Fi calling technology and that the mobile service provider has freed up 231 minutes per month (66 percent x 50 percent x 700 minutes).

Not only has the service provider gained $10 per family per month in revenue, it also has  freed up enough spectrum to support approximately $42 worth of spectrum per month (assuming the new family also adopts the FMC solution).

This new capacity could translate into a $470 million opportunity over a million households.

For the consumer, the free "at home minutes" plus data access via Wi-Fi increase the value of the mobile dual-mode phone (which has Wi-Fi and cellular capability) even from service providers without 3G networks. And both consumers and businesses like putting a cap on total costs.

Informa U.K. researchers suggest a market for Wi-Fi offload services of between US$13 billion and US$37 billion by 2011, depending upon assumptions about the aggressiveness with which FMC services are promoted.

FMC's forecast number of subscribers reaches between 35 and 112 million consumers by that date. The enterprise forecast varies from 10-14 million subscribers by 2011. In other words, 20-27 percent of the revenue will be enterprise-based and enterprises will spend more on FMC per capita.

You can make your own judgments about whether selling Wi-Fi access will be a big deal or not. In the U.S market, Wi-Fi access simply comes as a feature with smart phones, so there is not direct revenue beyond some apportioned share of the basic data plan a smart phone user must pay.

Some us would be more comfortable with a non-direct revenue model lead by lower churn, higher customer satisfaction, capital investment savings and avoided demand on mobile network resources. 

The point is that it is easier to quantify the value of Wi-Fi network gear, routers and some contribution to value when Wi-Fi capability is built into a smart phone, than to quantify the value Wi-Fi represents for a mobile service provider. 

iCharts

Broadband Now IS Internet Access

Granted, there still are many places where broadband access is expensive, hard to get or even unavailable. Still, in many markets, broadband simply IS Internet access. In the United States, for example, 70 of homes with Internet access buy fixed network broadband service. Just three percent of homes buy fixed network dial-up access services. 

Quantifying the growing role of mobile broadband access is harder. For starters, mobile data access is widely consumed. Some 46 percent of U.S. residents have both a home broadband connection and a smart phone. 

About 24 percent of residents have a home broadband connection, but not a smart phone and some 10 percent have a smart phone, but not a home broadband connection. 

So some might say 10 percent of U.S. homes are relying on mobile access as their exclusive at-home form of Internet access. 

The remaining 20 percent of people have neither a home broadband connection nor a smart phone. 

Since 10 percent of U.S. residents do not have a broadband connection at home but own a smart phone, that implies 32 percent of non-broadband users use a smart phone, and presumably therefore mobile data, according to the Pew Internet and American Life Project.

Since 70 percent have traditional broadband, that means that 80 percent of U.S. residents have either a broadband connection, a smart phone, or both. You can make your own estimate of whether a 3G connection qualifies as broadband. 

In several years, when most people are using 4G, it might be more accurate to say that 80 percent of U.S. residents use broadband, if they use the Internet.