How Will Users Rank Speed and Cost When Comparing Wi-Fi and LTE Access?

With the caveat that "averages" typically conceal as much as they reveal, where it comes to Internet metrics, Long Term Evolution mobile networks, on a global basis, now offer "average speeds" faster than Wi-Fi, according to Open Signal.

That might explain recent data suggesting that reliance on LTE access has caused a decline in Wi-Fi access in South Korea, for example, where "average" LTE speeds are close to 19 Mbps. 

Speed was one reason many users started using Wi-Fi instead of 3G. But price is the other key variable. Using Wi-Fi usually occurs with no incremental cost, and without usage against a cap. 

If Wi-Fi experience starts to be perceived as slower than mobile access, users will rethink their behavior, at least to some extent. And that will set up an interesting test: to what extent will users use mobile access, instead of Wi-Fi, even if it "costs more," because LTE offers a better experience?

"Wi-Fi Only" Remains Only an Idea for Mobile Service Providers Out of Region

If a mobile service provider wants to expand out of region, it might try to acquire spectrum and build a network, when that is possible. In other cases, the preferred path is to acquire an in-country mobile operation.

When that is deemed unfeasible, sometimes a mobile virtual network operator strategy can work. If that is not possible, there are some incremental approaches a mobile service provider might still consider, though generally not in the "access" area.

As Wi-Fi coverage continues to improve, service providers and entrepreneurs will be looking for ways to use Wi-Fi only as the access scheme. So far, that seems a rather-distant possibility, though.

Perhaps it is not literally true that the distinction between licensed and unlicensed spectrum is now essentially irrelevant, a relic of the analog era of communications, as U.S. Federal Communications Commission Chairman Tom Wheeler says.

But many would agree there is much truth to Wheeler’s contention that “in 2014, licensed and unlicensed spectrum are more complementary than competitive.” But partial truth is not full truth. There is a difference between “Wi-Fi sometimes,” “Wi-Fi first” and “Wi-Fi exclusively.”

Mobile service providers now are quite comfortable with “Wi-Fi sometimes” as a basic part of their mobile data access strategy. A few challengers are trying the “Wi-Fi first” approach, defaulting back to mobile network access when Wi-Fi is not available.

“Wi-Fi exclusively” remains an option yet to become viable. That could well change, someday.

But much more effective access to spectrum, some improvements in access network platform cost, and a likely shift to devices and applications other than real-time voice, will likely be required to make the “Wi-Fi only” approach viable on a widespread and sustainable basis.

For the moment, Wi-Fi still is useful primarily to supplement and complement primary mobile access.

Though a few service providers rely on Wi-Fi as a major supplemental access method, and a few have tried to go “Wi-Fi first,” nobody really has tried to create a mobile service operation based exclusively on Wi-Fi access, which probably tells us it is not really feasible, at least not yet.

That will not stop entrepreneurs from revisiting the potential, especially as ISPs work to build ubiquitous consumer Wi-Fi networks that partition access on home networks, with a protected customer account and then a public shared portion of the access network.

Orange is testing whether its new Horizons business unit can create new out-of-market business ventures especially e-commerce and content businesses, and where feasible, possibly mobile virtual network operator operations.

Some think the biggest strategic move could eventually be an effort to try the “Wi-Fi only” approach, based on public Wi-Fi, in at least a test market. So far, Orange Horizons has not said anything in public about such a breakthrough approach to access.

Sooner or later, one might predict, a major mobile service provider, or a major application provider, will try to launch a “Wi-Fi only” service.

FCC Chair Says Internet Domain Interconnection Not on the Immediate Agenda

Though the U.S. Federal Communications Commission intends to rework its network neutrality regulations, it apparently has no appetite--and arguably no authority--for venturing beyond consumer high speed access to look at carrier interconnection as network neutrality issue, as Netflix CEO Reed Hastings has advocated.

That is “not a network neutrality issue,” said FCC Chairman Tom Wheeler, apparently referring to Internet domain peering or transit agreements.

"Peering and interconnection are not under consideration in the ‘open Internet’ proceeding, but we are monitoring  the issues involved to see if any action is needed in any other context,” the agency said.

Carrier interconnection is covered under common carrier rules, while enhanced services are outside the FCC’s Title II jurisdiction.

But it is possible the FCC might try to reclassify Internet domain connections as common carrier operations in the future.

Such moves would have unknown and possibly unsettling implications for Internet services and apps in general. over the longer term, though some common carrier regulation of Internet domain interconnection would not be problematic.

And though video streaming suppliers and their transport providers might welcome such common carrier rules, which would give them “mandatory” interconnection rights, it isn’t so clear that such interconnection would necessarily also include “settlement free” or other business practices unrelated to traffic volume.

In principle, the FCC could mandate that all interconnection occur without regard to cost, and be conducted on a “zero rating” basis, as European regulators are proposing for mobile international roaming, at least within the European Union.

Whether that is politically feasible, or wise, might be the issue.

In principal, networks that terminate traffic on behalf of originating carriers are compensated for the costs of doing so. Were streaming domains to interconnect with "eyeball networks" operated by retail consumer Internet access providers, the consumer ISPs would be terminating huge amounts of traffic sent to them by Netflix and other streaming providers, and might reasonably demand payment for such termination services. 

Consumer Demand for Mobile Live TV is Clear

Will linear TV eventually move to non-linear formats? Many believe it will. Significantly, for mobile service providers, one might also argue that the shift to non-linear television formats is especially suited for mobile delivery.

If consumer demand shifts to non-linear modes, then existing consumer behavior suggests mobile delivery will be key.

Mobile video consumption is growing so fast, it could make up half of all online video consumption by 2016, according to Ooyala.

Year over year, share of time spent watching videos on tablets and mobile devices has increased 719 percent since the fourth quarter of 2011, and 160 percent year-over-year since the fourth quarter of 2012.

Separately, Ofcom, the United Kingdom regulator, has found that 69 percent of tablet owners watch video on their devices. Some 32 percent of tablet owners reported watching U.K. or international news, 27 percent sports news and 19 percent local news.

About 29 percent reported watching TV shows, Ofcom reports.

On smartphones, 28 percent watching U.K. and  international news, 25 percent watch sports news and 21 percent watch regional or local news.

That should provide AT&T, Verizon and other mobile service providers with reason to believe they eventually will be able to grow new revenue streams directly related to mobile video entertainment, but also be in position to protect themselves against potential losses in the linear video entertainment business.

The point is that those behaviors suggest existing demand for tablet and mobile phone live TV.

Where once mobile viewing was mostly of short-form video, now long-form content viewing also is growing. About 53 percent of global user mobile viewing time was of video longer than 30 minutes length.

Tablet users spent 35 percent of their mobile viewing time watching video longer than 30 minutes, says Ooyala.

Mobile viewers spent 31 percent of their viewing time engaged with content longer than an hour in length. Tablet viewers spend 19 percent of untethered viewing time watching content at least an hour in length.

Significantly, for would-be suppliers of mobile live TV programming, mobile viewers watched an average of more than 42 minutes of live video per play streamed over the top on connected TVs, and nearly 35 minutes per play on PCs.

That is significant as it shows existing demand for live TV, not just pre-recorded material such as movies or short videos.

Based on average time per play, live streaming video consumption is nearly two times greater than video on demand on tablets. That is another way of noting demand for live TV, as opposed to pre-recorded video.

“Viewers are especially engaged with live sports on mobile, watching three times more live

sports video than video on demand,” Ooyala says.

Arecent Ooyala survey of online video publishers and broadcasters found 99 percent rating the ability to deliver video to mobile and tablet devices as “critical” or “important.”

Quad Play Moves in Europe Driven by Shrinking Market

Vodafone’s recent moves to acquire cable operations Kabel Deutschland and Ono in Spain are a clear sign of the next escalation in product bundling. 

The acquisitions also indicate how competitive communications markets are in Europe, where total service provider revenues are dropping.

In competitive markets, where incumbents and multiple attackers each have substantial market share, it is unusual for any single service provider to have much more than 20 percent to 33 percent share.

Under such conditions, any single contestant might face the danger of stranded network assets as high as 80 percent, and commonly 66 percent. In other words, a service provider might have built network passing nearly 100 percent of locations, but generates revenue from a fraction of those homes.

There is much less risk when a competitor is able to use wholesale assets, but even then, competition tends to drive prices lower, affecting both gross revenue and profit margins.

Product bundling has a number of attractive features. Discrete prices are obscured, making it harder for consumers to focus on the prices of each product component. That tends to help blunt price-focused comparisons.

Consumers get an overall discount by buying in volume. Also, customer churn is reduced.

The quad play also allows contestants to take market share from other providers, though.

BT hopes the creation of a new quadruple play offer including Long Term Evolution mobile services, fixed network voice, video entertainment and high speed access will boost revenue per account and slow fixed network voice line churn rates.

About 60 percent of U.K. consumers buy a bundle of some sort, often the two-product bundle of fixed network voice and high speed access, according to Ofcom, the U.K. communications regulator. Some 27 percent of U.K. households buying a bundle purchase the voice-plus-broadband package.

About 21 percent buy a triple play package including video entertainment as well as voice and high speed access.

Just three percent buy a quad play package, and those customers largely are Virgin Media (Liberty Global) customers, it appears. And that is the attraction for BT. Very low adoption of quad play packages suggests most of the market still is available.

Between 2008 and 2012, fixed network call volumes have fallen 27 percent, according to Ofcom, with no real expectation the decline can be arrested. In fact, even mobile call volumes dipped in 2011 and 2012 as well.

In fact, it might be that 2010 was the peak year for mobile minutes of use, as 2000 was the peak year for U.S. access lines in service.

By some estimates, usage of fixed network voice has fallen as much as 50 percent in just the last six years, and might dip as much as 66 percent by 2020, representing a revenue loss of perhaps £600 million, according to the Financial Times.

If the quad play slows erosion of fixed lines, BT preserves some revenue it otherwise would have lost and gains additional time to grow the value of substitute businesses.

According to Chris Adams, Ofcom Head of Market Intelligence for Telecoms and Networks, the story for U.K. telecom includes declining revenues, lower call volume and fewer fixed lines in service.

Total telecom revenue fell 1.8 percent in 2012, for example. But that has been the trend since at least 2007.

Also, the cost of a mobile-originated call now is lower than the cost of a fixed network originated call, which will drive more traffic to mobile, and off the fixed network.

Overall, the move to quad play offers is simple enough: if BT is going to have fewer customers, it has to sell more products to a smaller base of users.