TV is Turning Out to be Quite a Srtategic Asset for Telcos

There's a good reason why Vodafone bought Kabel Deutschland, and might be considering additional purchases of video subscription service assets in the United Kingdom: video services are among the areas where telco market share is growing.

And while profit margins at smaller providers will be slim to non-existent, larger telcos likely are seeing profit margins in the 20-percent range. 

Video also has emerged as a core application complementing a broadband access service. According to Bernstein Research, where U.S. cable TV and satellite TV providers are losing customers, U.S. telcos are gaining them.

Would You Rather Be HBO or Netflix?

HBO generated $1.8 billion in operating profit in 2013, propelled by revenue growth of four percent (to reach $4.9 billion). 



Netflix's revenue rose 21 percent in 2013 to $4.37 billion and $228 million in operating income. 



Netflix is growing faster, and already generates more gross revenue than HBO, though HBO has much higher profit margins. 



You might argue Netflix is more exposed to a slowdown in growth, as it will have to increase spending on original content. 

Verizon to offer $100 for New Lines in February

One big question observers have had about the escalating mobile marketing wars in the U.S. market is whether Verizon Wireless would have to respond. It appears that is happening, on at least a limited basis. 



Verizon will offer $100 for new lines from Feb. 7, 2014 to Feb. 28, 2014, on a two-year contract plan. 



What remains to be seen is how the offers and counter-offers develop over time, with or without any merger between Sprint and T-Mobile US. 

50% LTE Coverage in Africa by 2018

Though 2G and 3G likely will continue to represent the mobile networks most consumers connect to, by end-2018, half the African population will be covered by Long Term Evolution networks, according to ABI Research.

African LTE mobile subscriptions will grow at a 128 percent compound annual growth rate to surpass 50 million subscribers at the end of 2018, ABI Research forecasts.

“LTE handset shipments will increase by 75 percent annually on average in the next five years,” said Jake Saunders, ABI Research VP and practice director. “Given the poor fixed-line infrastructure, people will depend on the wireless network for Internet access.”

LTE base stations will grow at a compound annual growth rate of 40 percent over the next five years, ABI Research forecasts.

However, LTE network population coverage will be far from homogenous across the region, with a few countries such as Angola and Namibia nearing the halfway point already while wealthier nations like Botswana and Gabon have yet to deploy the advanced technology.

“Part of the underlying reason for this digital divide is the different types of initiatives driving LTE roll-out,” said Ying Kang Tan, ABI Research research associate. “We expect wholesale or shared networks such as the joint venture between the Rwandan government and Korea Telecom and the public-private partnership proposed by the Kenyan government to spur LTE deployment.

 Projected 2018 Network Subscriptions by Type of Network

source: Ericsson

We Should Know in a Few Weeks if Sprint Really is Going to Launch a Takeover Bid for T-Mobile US

SoftBank and Sprint reportedly will have to decide over the next few weeks whether to launch a bid to acquire T-Mobile US.

The argument essentially has to be that the U.S. market is becoming a duopoly, a condition that historically has resulted in high prices and low innovation in the U.S. mobile market, and that only a stronger number three provider (Sprint fortified by T-Mobile US) can check the growing market power of Verizon Wireless and AT&T Mobility.

U.S. regulators and antitrust officials likely already have signaled to Sprint a continuing belief that the U.S. mobile market already is too concentrated. Indeed, Sprint itself argued against the AT&T acquisition of T-Mobile US, on the grounds that competition would be harmed if the number of national providers dropped from four to three, the step it now might propose.

“Removing T-Mobile from the market would substantially reduce the likelihood of market disruption by a maverick,” Sprint said in a 2011 filing asking the FCC to block AT&T’s proposed purchase of T-Mobile. “T-Mobile, as one of only four national carriers, provides a critical constraint on AT&T’s consumer retail prices.”

Son and Hesse argued a combined entity will be a “super maverick” in the mold of T-Mobile US. On the other hand, regulators also might view a resurgent T-Mobile US as evidence that competition is increasing.

T-Mobile US has reversed a nearly decade-long slide in subscribers, and in 2013 had the second-highest net subscriber gains in the U.S industry, adding 2.1 net new customers over the last three quarters, compared to net additions of 4.1 million at Verizon Wireless and 1.8 million at AT&T Mobility, Bloomberg notes.

Arguments can be made, either way, that competition will be most effectively promoted if four carriers remain in the market, or if Sprint and T-Mobile US combine. The former argument will rely on empirical evidence of what T-Mobile US is doing; the latter on economies of scale that might be needed if a larger Sprint plus T-Mobile US wants to disrupt industry prices and packaging more than at present.

Where to Share Spectrum Might be the Issue, Not Sharing as Such

To say communications spectrum policy is contentious is an understatement, and contention exists over the concept of “shared spectrum” as well.

The notion is that instead of the traditional method of reallocating spectrum, namely compensating licensed users to clear blocks of spectrum for supplemental auction, it might be less costly and get new communications spectrum to market faster if licensed users and commercial users share spectrum.

Put simply, incumbent mobile service providers probably have good reasons to oppose the concept, while challengers likely have good reasons to support the concept.

“The burden of proof should be on those who argue for spectrum exclusivity over sharing,” argues Kevin Werbach, Wharton School, University of Pennsylvania associate professor of Legal Studies and Business Ethics, and founder of the Supernova Group, a technology consulting firm.

“Both licensed and unlicensed spectrum provides significant value to consumers,” argues Dr. George Ford, Phoenix Center for Advanced Legal & Economic Public Policy Studies chief economist. That said, Ford is skeptical about the economics of shared spectrum, as an exclusive method of allocating a scarce resource.

“The allocation decision should be made based on which licensing approach is expected to generate the greatest value for the spectrum being allocated,” Ford argues.

One key contextual issue is where additional spectrum will be needed, what applications will need to be supported and whether spectrum sharing is suited to new uses and business models, compared to the traditional mobile business model.

“Shared spectrum is largely for low-power uses only,” Ford argues. “Sharing spectrum that covers greater distances per unit of power—like the TV broadcasting spectrum—is counterproductive and economically senseless.”

But some might also note the biggest potential use of new spectrum and networks is for high bandwidth but low power applications, precisely the places that a shared spectrum approach would make most sense.

The legacy use of Wi-Fi provides a useful model. Where traditional mobile networks logically have been optimized for mobility over wide areas, making low-power licensed spectrum a logical choice, tomorrow’s networks might well be built around low power, local access. And that is precisely the area where shared spectrum might make lots of sense.

There might be less disagreement than first appears.

Even if Gigabit Connections are Available, Will Most Consumers Buy 100 Mbps?

Whether the typical consumer will buy a gigabit service, by about 2020, is not so clear. What is more clear is that such speeds will be generally available to most U.S. consumers, by about that point.

Perhaps the bigger question is what gigabit services will cost in 2020. Generally speaking, the trend in the U.S market has been for average speeds to grow, at about a 50 percent a year clip, while absolute prices remain roughly stable, while premium services have been priced higher.

The issue is whether a gigabit service will remain the premium offering in 2020. Some predict that half of U.S. households will be buying 100 Mbps in 2020, for example.

The other complication is that broadband speeds keep changing, so the product a consumer bought in 1998 is different from 2008 and will be different from what is purchased in 2018.

In 2002, only about 10 percent of U.S. households were buying broadband service. Back then, where a dial-up connection might have cost about $20 a month, a then-current broadband connection would have cost much more. Some of us were buying 756 kbps connections for $100 a month, back then, for example.

So one might argue either that monthly prices will remain roughly constant, while speeds grow, or that prices will grow as speeds increase. The “natural limit” would seem to be Google Fiber’s gigabit for $70 a month price point. It is hard to see triple-digit broadband prices for gigabit services in 2020, if $70 or $80 a month is the current price of a gigabit connection.

Back when modems operated at 56 kbps, Netflix took a look at Moore’s Law and plotted what that would mean for bandwidth, over time.

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO.“If you drag it out to 2021, we will all have a gigabit to the home.”

                           

source: ITU

source: ITU

source: stopthecap