Universal Internet Access, Globally, Within a Decade, Not Only is Possible; It is a Near Certainty

If you have a long enough memory, and think about what you have seen, you’ve learned at least a modicum of circumspection often is in order when assessing what “can” and “cannot,” what “should” and what “should not” be done.

You might think it is impossible that U.S. consumers someday will rather routinely be connected to the Internet at 1 Gbps. You might think it is unlikely that within about a decade, the 60 percent of people in developing regions will have routine access to the Internet at more than dial-up speeds.

But history suggests both will happen, as incomprehensible as it seems. Despite all the obvious obstacles--people cannot afford terminals, or access fees, are not literate, live too far away from backhaul facilities and Internet points of presence--universal Internet access will happen globally, and speeds will rather routinely be in in the gigabit range in the United States.

Some will loudly maintain U.S. ISPs are too greedy, too stupid, too mendacious to pull this off, or look at the difficulties in developing regions and conclude that infrastructure is too expensive and demand is too low.

Such conclusions are unwarranted, and have proven quite wrong, in similar instances, in the immediate past.

One would have to look back to the 1980s, when similar concerns would rightly have been voiced about how difficult it would be to provide basic voice communications to people--billions who had never made a phone call--around the world.

Then something unexpected happened. Around 2003, mobile penetration hit an inflection point in the developing world. Today, the lowest mobile phone adoption you are generally likely to find is in the 70-percent range. The exceptions are Myanmar, one of the least developed markets, and North Korea.

But Myanmar recently has licensed two new mobile service providers. And adoption is growing fast in Africa, one of the last continental-sized markets where mobile penetration has been lower than average.

The big point is that an apparently unsolvable problem--how to get communications to people who never could make a phone call--is close to being solved, completely. That’s a big policy problem that is solved, and was done by the normal operations of humans and companies operating in markets.

Internet access is the present challenge, and one might argue the barriers are higher. Efforts for decades have attempted to create a “$100 computer” that people in developing regions could use. None of those non-governmental organization efforts have succeeded.

But now we have commercial tablets and smartphones that are doing the job. So that problem has receded. Now the challenge is making Internet access available and affordable. That remains a problem, but not an insurmountable problem.

Most expect the same mobile networks that have enabled voice communications will enable widespread Internet communications as well, augmented in important ways by fixed or possibly other forms of access in some cases.

Nor will it take that long. The widespread adoption of mobile communications took a decade. It won’t take longer than that to achieve widespread Internet access, either. We are solving the terminal and access network problems.

People themselves will conclude they want and need the Internet, creating the demand.

To be sure, one might have wondered whether people would spend a rather high percentage of annual income to acquire phones and use them. They have.

Speeds are a subtended issue. But even in the U.S. market, where complaints abound, the history of speed increases shows a minimum doubling about every five years, and an order of magnitude increase in speeds (up to two orders or magnitude) about every decade.

To be sure, there is a difference between the typical speed tier a consumer buys, and what ISPs make available, but either way the growth is palpable.

Though it might seem improbable that typical purchased speeds could reach the gigabit level by 2020, that is indeed likely, based strictly on past precedent.

In August 2000, only 4.4 percent of U.S. households had a home broadband connection, while  41.5 percent of households had dial-up access.

A decade later, dial-up subscribers declined to 2.8 percent of households in 2010, and 68.2 percent of households subscribed to broadband service.

In other words, from 2000 to 2012, the typical purchased access connection grew by about two to three orders of magnitude.

As crazy as it seems, Internet access, and the quality of access, is a solvable problem, globally. Internet adoption rates offer hope: reasonable hope, that past trends will continue.

Not Every "On Demand" Video Entertainment Format Works

TV viewing is fragmented, including growing use of non-traditional displays including tablets,

smartphones and PCs. 

But revenue magnitudes are not so fragmented. The video subscription business represents something on the order of $90 billion annually. Netflix will earn something more than $4 billion in 2014, by way of comparison.

But there are some video products that never have gotten much traction, video on demand being one of them. According to an analysis by Parks Associates, about 74 percent of video subscription customers never purchase anything from the VOD catalog. So perhaps 26 percent of subscription TV customers buy VOD content.

At those purchase rates, VOD is less popular than traditional “premium” channels such as HBO, which tends to be purchased by about 30 percent of homes buying a traditional video subscription.

By way of comparison, use of online streaming services is quite widespread, likely being used by 35 percent of video subscription customers. By the end of 2014, some predict Netflix along might reach subscriber adoption at 39 million U.S. households. That would put Netflix adoption at more than 40 percent of U.S. video subscription homes, in all likelihood.

video subscription business represents something on the order of $90 billion annually. Netflix will earn something more than $4 billion in 2014, by way of comparison. The traditional video on demand business might represent $1.5 billion, after decades of availability.

Soon, Even People Without Your Email Address Will be Able to Email Some of You!

All communication technologies can be useful or annoying; it just comes with the territory. Consider the integration of Google+ Gmail.

As part of an upgrade to Gmail, allowing contact information to be automatically updated using Google+, Gmail soon will suggest your Google+ connections as recipients when you are composing a new email.

That might be useful when you actually have forgotten to get the email address of someone who want to communicate with, and email is the context you already are using. The “problem” might be that Google+ contacts also can send you email without knowing your email address.

Whether that is a good thing or not will depend on the context as well. As somebody who gets thousands of emails every day, I probably do not relish the thought of more messages. But that is not how many users will view the new feature.

It might be helpful to have one more shortcut for sending a message, especially when you are not responding to an inbound message.

Apparently, your email address isn't visible to a Google+ connection unless you send that person an email, and likewise, that person’s email address isn’t visible to you unless they send you an email.

Also, emailing Google+ connections also takes advantage of Gmail's new inbox categories.

When someone in your circles emails you, the email will appear in the “Primary” category. But if you don't have them in your circles, it will be filtered into the “Social category” (if enabled) and they'll only be able start another conversation with you if you respond or add them to your circles.

Of course, you also have some options to enable the feature or restrict it entirely.

Video Subscription Market Appears to Grow, Despite Smaller Customer Base

Most of the money being made in video entertainment continues to be made by providers of traditional forms of media, despite the growth of over the top and online alternatives.

That remains true even as users of traditional products slowly shift away towards new formats.

Most surveys likely would show that younger consumers buy video subscription services at lower rates than older consumers.

Though the actual amount of revenue lost to cord cutters (people who drop existing subscriptions), cord thinners (people downgrading levels of service) or cord cheaters (people supplementing a video subscription with an over the top service) remains rather negligible, the arguably bigger problem is cord avoiders.

Cord avoiders are people who never have bought a video subscription and do not see any reason to do so, as those sorts of non-customers are concentrated among younger consumers starting their own households.

The reason is that some incremental revenue pressure from what still remains a one percent a year attrition is less important, long term, than a change in consumer demand for the product.

In the near term, service providers likely can find ways to maintain higher revenues on slightly smaller customer bases.

By 2017, Infonetics Research expects the global subscription TV market to grow to $270 billion, at a 2012 to 2017 compound annual growth rate of about five percent. U.S. traditional video subscription revenue might grow at a slower two percent annual rate from 2013 to 2017.

Alternative forms of video consumption will grow faster, but the revenue magnitudes will be quite different. video subscription business represents something on the order of $90 billion annually. Netflix will earn something more than $4 billion in 2014, by way of comparison.

O2 is Getting Out of Branded Mobile Wallet Business

O2 Wallet was among the earliest branded mobile wallet offers available to consumers in Western Europe. But O2 now has decided to shutter O2 Wallet, citing unspecified changes in the market.

Given delays in growth of the near field communications market, namely a critical mass of handsets and terminals, plus retailer support, the O2 Wallet was designed to work without requiring use of NFC. 

But a viable wallet effort requires scale, something most other competing ventures also are struggling to create. Starbucks, using its captive customer base, had immediate scale. 

And Square, which has focused instead on mobile retailer terminal services allowing smaller merchants to take credit card and debit card payments using a smartphone, or tablet, have thrived because the infrastructure is largely in place.

All a retailer must do is supply a compliant smartphone or tablet device, and have Internet access, to use Square. That sidesteps the scale problem. 

The scale is provided by consumers who are used to using credit cards and debit cards to pay for purchases in retail environments; by merchants who already have incentives to take such payments; and by low-cost terminals people know how to use. 

O2 simply has run into the scale issue, head on. 

Seattle's Gigabit Squared Fails: Sustainability Remains an Issue for Muni Access Networks

Seattle's Gigabit Squared network appears to have failed, illustrating a recurring problem with all municipal or joint venture Internet access efforts, namely creation of sustainable revenue models. 

Gigabit Squared had hoped to use municipal dark fiber as the backbone for a gigabit access network in parts of Seattle. But the effort seems to have foundered for financial reasons, even before any construction began.

How Big a Revenue Stream Will Connected Cars Generate for Mobile Service Providers?

There’s an obvious reason why the “Internet of Things” and “machine-to-machine” services get so much attention from mobile service providers: once the industry has sold at least one mobile phone connection to just about every person, “line growth” has to shift to other “connectable devices,” especially those performing best with a full-time, dedicated connection.

Tablets, personal hotspots and game players are among the logical candidates for additional connections after the phone.

But vehicles are interesting for any number of reasons. For starters, vehicles always have been important media consumption platforms (radio, satellite radio). But with navigation and vehicle diagnostics assuming higher profiles, there are additional reasons for people to want Internet communications and content in their vehicles: cars are an excellent platform for mobile Internet and apps.

By some estimates, by about 2018 there could be 60 million connected cars globally using connected car services. In a mobile communications business with billions of users, that might not sound like much.

But those connected vehicles might create a new business collectively representing perhaps $51 billion in annual revenue.

Research firm SBD estimates the overall connected car market will be three times larger in 2018 than it was in 2012.

About 61 percent of projected 2018 global revenue will be generated from in-vehicle services, such as traffic information, call center support and web-based entertainment. In other words, apps and services will generate the majority of global revenue.

Hardware will generate about 17 percent of global revenue. Some 11 percent will be earned by providers of telematics services, such as customer relationship management, SBD predicts.

Connectivity will represent about 10 percent of total global connected car revenue of $40 billion to $50 billion.

Vehicle Internet connections alone then might be $4 billion to $5 billion by 2018. And the unknowable question is how much other revenue mobile service providers might be able to generate if they participate as equity owners in the apps and services that actually will generate most of the revenue.

The other angle is that in some instances, the mobile handset will be docked to the vehicle, becoming the access and application processor. That means there is potential indirect revenue to be earned, as well as account stickiness features, if the user finds the mobile handset also powers in-vehicle apps and communications, even when an additional “line” is not sold.

Such tethering is in many ways the faster way to gain market share (either for the vehicle manufacturer or access provider), since many of the details of negotiating operating agreements and adding new vehicle electronics are minimized.

Embedding offers integration advantages, but costs more, and will take time.