Google Wi-Fi Passport: One More Way Google is Enabling Internet Access

Google Wi-Fi Passport is a new Android app that allows people in Djakarta, Indonesia to get access to participating Wi-Fi hotspots. Users buy credits to use Wi-Fi Passport from online payment system Mogplay.

Vouchers are sold at retail outlets in Djkarta.

It is one more way Google is expanding the ways people can get online, aside from becoming an Internet service provider itself, as Google does in Kansas City, Kan. Kansas City, Mo., Austin, Texas and Provo, Utah, offering Google Fiber, or by providing Wi-Fi access at Starbucks coffee shops.

Beyond that, Google has experimented with providing Wi-Fi access in some parts of U.S. cities as well, and also is exploring non-traditional forms of access as part of Project Loon.

Few companies whose business model is based on advertising ever have made such investments in getting everybody online, at the fastest speeds possible. 

The only other real example is AOL, whose original revenue model was based substantially on access revenues, even though it has transitioned largely to an advertising model at present.

Can You Really Compete with "Free?"

In some ways, piracy of movie or TV content is a bit akin to problems communications service providers have, namely “how to compete with free products.” And as is the case in the communications industry, the impact is complex.

In part, free alternatives cannibalize existing “for fee” products. On the other hand, such free alternatives probably also stimulate sales of “for fee” products as well.

That is not to say there are no revenue losses, or that content products are completely the same same as communication products, in terms of demand environment. Movie and content products are not “real time,” where communications products often are.

Movie and other video content products often have “release windows” that stagger availability on different platforms. Most communication products are simultaneous, not sequential, so the abiltiy to differentiate audiences is vastly less.

Still, there are some similar principles. There are “see now” versions of movie products, “see on smaller screen” versions, “own and rent” versions, “see later” versions and “see in specialized environment” versions (airline pay per view, hotel pay per view).

In the communications business, there are professional, high end videoconferencing products and experiences as well as Google Hangouts, PSTN calls and Skype calls.

Users have text messaging as well as instant messaging and email, with different user experience and “real time” aspects. Also, fixed network and mobile service providers increasingly also are service suppliers in the video entertainment business, able to fill multiple roles in the content distribution process, with different usage segments.

The point is that though “competing with free” is not fun or as lucrative as when such free products were not available, competition is possible.

At least some researchers believe movie studios indeed compete  with “free” (pirated) versions of their content through product differentiation and customer segmentation.

In other words, to some significant extent, television broadcast of a movie does not reduce DVD sales, suggesting the TV viewing and DVD viewing market segments are distinct. And, in fact a study suggests even piracy of movie content still being shown in theaters does not depress later DVD sales. At least in part, movie piracy stimulates demand for later DVD sales.

That is not to say such piracy does not reduce box office revenues, only to say such piracy could, among other things, also stimulate later sales.

Online piracy undoubtedly cannibalizes some content sales or rentals. What is not so clear is how extensive such losses might be, nor does piracy necessarily entail only “losses.” In fact, for lesser-known movie titles, piracy might actually help drive sales and rentals, At least that is what another study suggests.

The evidence is what happens to DVD sales, one week after a movie is shown on television networks. Sales climb. That is, at least in part, the effect of content sharing commonly called piracy: it stimulates downstream demand, even if it cannibalizes some amount of theatrical release revenue.

Content industry executives are not likely to change their thinking based on one or two studies.

In 2010, the Government Accountability Office examined piracy in the film industry and could  not substantiate the level of losses claimed by industry executives.

Additionally, a study published in 2012 by researchers at Wellesley College and the University of Minnesota found no link between the emergence of BitTorrent and declining box office revenues in the U.S.

The point is that competing with free is a complex process, with both revenue losses and gains possible.

Comcast Tests Demand for Antenna Basic Plus HBO

As far as I can remember, HBO always has been sold on a “sell through” basis, meaning, you had to buy “basic cable” first before being “eligible” to buy HBO.

I can’t remember whether it has been possible in the past to buy “antenna basic” and then buy HBO, and seem to recall that an “expanded basic” was the threshold.

So Comcast’s new “Internet Plus” package is a bit of a departure. It bundles Internet access, plus “antenna basic” and then HBO, for a standard price of $70 a month after an introductory period at $40 a month.

This is not a “precipitating” or watershed event, but is part of the steady “drip, drip, drip” of smaller changes that are pointing to a streaming future.

On Fiber or Copper Access Connections, Heavy Users are Just Heavy Users

Given that a small single-digit percentage of consumers consume perhaps 80 percent of all ISP bandwidth, and that most consumers use more bandwidth when they use faster access services, it might seem axiomatic that customers on optical fiber connections would use more data than consumers on copper-based connections.

That is the case, data from Ofcom, the U.K. communications regulator, suggests. What might be more surprising is that heavy users, on either optical or copper access connections, do not consume vastly-different amounts of data.

Ofcom data suggests heavy users on optical access networks might consume about 1 Gbyte a day more than heavy users on copper access connections. 

But the 90 percent of other users have consumption patterns that are much less disparate. To wit, 90 percent of customers on optical connections use 665 Mb a day, while 90 percent of customers on copper connections consume 465 Mb a day, a difference of just about 100 Mb a day. 

The point is that heavy users behave pretty much the same way on optical or copper access networks: they consume 80 percent of total data used by all customers. 

Increase Access Speed 1 Mbps, Consumption Grows by 1 Gbyte

Ironically, as Internet service providers boost access speeds on their networks, they virtually automatically increase the amount of bandwidth users consume, as this data provided by Ofcom , the United Kingdom communications regulator, clearly shows. 

Note that the relationship is linear. As a rule of thumb, every increase of 1 Mbps in access speed leads to more than 1 Gbyte of data consumption by an average user.

Designers of highway systems around major urban areas are familiar enough with the process. Highways are built to alleviate congestion. But the existence of highways generates more traffic. So congestion never really improves. 

Anybody getting the picture of a gerbil on a treadmill?

Ethernet Delivers Most of the Bandwidth, Special Access Makes More Money

With the caveat that “bandwidth” is not the same as “lines” or “revenue,” business Ethernet bandwidth passed the volume of legacy TDM bandwidth in 2012, says Vertical Systems Group.

“Propelled by purchases of 1 Gbps and 10+ Gbps services, Carrier Ethernet will contribute more than 75 percent of total global business bandwidth by 2017,” says Rosemary Cochran, Vertical Systems Group principal.

By some estimates, the U.S. special access market (T1 connections, for example) generates $12 billion to $18 billion in annual revenue for service providers, with the overwhelming amount earned by AT&T and Verizon Communications.

As more incumbent and competitive service providers alike expand their respective wide area and metro Ethernet service portfolios, Insight Research argues the market will grow from $4 billion in annual revenues in 2011 to nearly $11.1 billion by 2016.

In other words, as often is the case for IP-based services, bandwidth consumed generates less revenue per bit than legacy services.

New Report Confirms: Investment or Competition is a Real Issue for Access Networks

The latest Ofcom report on U.K. broadband infrastructure illustrates the inherent tension between promoting investment in next generation networks and fostering robust competition between suppliers of such services.

Put simply, there often, if not always, is a tension between policies that promote competition and policies that create incentives for investment.

In addition, different nations have historical differences on the supply side that create different outcomes on the demand side.

For reasons having to do with widespread facilities-based cable TV networks being deployed, competition in the United States, for example, is inter-platform (between cable and telco networks), where in Europe, because of less-prevalent cable TV deployment, competition has been intra-platform, based on competitor wholesale access to the telephone network.

Ofcom notes that infrastructure-based competition between local incumbent telcos and local cable companies lead to early investment in faster access networks.

By way of contrast, in Europe fixed-infrastructure competition is less common, so regulators have required that incumbent telcos provide wholesale access to their networks, fostering competition but also creating negative incentives for investment in faster networks.

Ofcom also argues that retail pricing policies have differing impact on demand, though some might attribute much of the difference to supply constraints, in particular the longer average loop length in the United States, compared to Europe.

Ofcom argues that speed-tiered pricing in the U.S. market accounts for the much-larger proportion of fixed broadband connections are at speeds of 2Mbps or less, compared to Europe. In other words, supply shapes demand. Because higher speed tiers cost more, people buy more of the slower tiers of service.

Others might argue demand is limited by supply, in the sense that longer loops limit maximum speed, so speed tiers do not limit demand, physical limitations of the network limit uptake of services faster than 2 Mbps.

IDATE, for example, says 21 percent of fixed broadband connections in the United States at the end of 2012 were at a headline speed of 2Mbps or less, compared to just eight percent of connections across the UK, France, Italy, Germany and Spain.

Generally speaking, 2 Mbps is a hard limit on speed at about 5.1 kilofeet. The "average" loop length in the United States is about 4.25 kfeet, meaning half are longer than 4.25 kfeet. Lots of long loops mean lots of lines that are not capable of speeds much faster than a few megabits per second, on all-copper loops.

That will start to fade, as a limitation, as more networks are reinforced with optical fiber. Newer versions of digital subscriber line technology really do help, but loop length has to be controlled.