Must ISPs "Upgrade or Die?"

"You upgrade or you die" is the catchy sub-title to a new report by GigU on the state of gigabit Internet access in the United States.

“We have made enormous progress,” the report suggests. “Scores of American communities” are building such networks. Moreover, “in a radical change ove rthe past 12 months, multiple service providers are initiating their own efforts.”

The “upgrade or you die” sub-title explains GigU’s view of competitive dynamics, where Google Fiber and municipal or other public-private testbeds have changed the competitive context.

The report also notes that progress towards gigabit access is not at a point where progress is “inevitable or irreversible.”

“We admit we’re not really sure that it is a case of upgrade or die for every telco or cable company,” the authors say. That likely is correct. In many markets, customers might not wish to buy gigabit services, at current or projected future price levels, compared to offers of 100 Mbps or 300 Mbps at lower price points.

Indeed, that is a current bet many cable companies are making, essentially gambling that, in the near term, the practical difference in end user experience between 100 Mbps or 300 Mbps and 1 Gbps is relatively slight.

But some extrapolation of Internet access speed trends since the days of dial-up access would suggest gigabit access will indeed be quite typical at some point. The issue is “when?”

By some reasonable extrapolation, it has been possible to suggest that 100 Mbps would be a typical access speed in the U.S. market by 2020, as crazy as that might have seemed 10 years ago, or even five years ago.

In 2002, it is hard to remember, only about 10 percent of U.S. households were buying broadband service. A decade later, virtually all Internet-using households were buying broadband access service.

Researchers at Technology Futures continue to suggest that 100 Mbps will be a common access speed for U.S. households by 2020, for example.

The new issue is how common gigabit access will be.

A reasonable forecast would have about half of U.S. broadband access users buying 100 Mbps connections--or faster--by about 2020.

About 10 percent will be buying 50 Mbps connections.

Nearly 24 percent will still be buying 24 Mbps service.

In 2009, Technology Futures predicted that, in 2015, about 20 percent of U.S. households would be buying access at 100 Mbps, about 20 percent at 50 Mbps, and something more than 20 percent will be buying service at about 24 Mbps.

That might have seemed a bold forecast back in 2009, but Technology Futures uses a rather common method of technology forecasting that has proven useful. In fact, Technology Futures has been relatively accurate about access speeds for a couple of decades, at least.

The 2009 forecast by Technology Futures furthermore seems to be a reasonable approximation of reality. Technology Futures had expected that roughly 20 percent of U.S. households would be buying 1.5 Mbps service by about 2010, another 20 percent would be buying 24 Mbps service, while 40 percent of U.S. households would be buying 6 Mbps service.

The Technology Futures estimates of 2009 seem to match other data reasonably well. An Akamai study suggested that typical U.S. access speeds. were about 4 Mbps, on average, in 2010,

Moore's Law, in fact, fairly well describes the growth of Internet access speeds in the U.S. market, since the time of dial-up access.

The point is simple enough: if Internet access bandwidth doubles every year, it is only a matter of time before 1 Gbps is a standard access offering. There will be a lag between the leading edge adopters and mainstream adopters.

But the more important point might be that mainstream users will, over time, have access to hundreds of megabits per second, where they now buy scores of megabits per second.  

Connected Car: Built in Versus Docking

According to the AutoTECHCAST findings, nearly two-thirds of car owners (65%) say they want built-in connectivity, compared to slightly more than one third (35%) who prefer brought-in connectivity using their smart phone.

That reminds me of the days of dedicated "car phones." Maybe it will be different this time around. But why isn't it simpler to dock a smartphone?

More than half of car owners say they are less likely to buy a vehicle that uses a data plan/carrier different from their own, and 31 percent say they are "much less likely" to purchase the vehicle.

That's crazy. Just make it easy to dock a smartphone or other. On nectar device.

Boost Mobile (Sprint) Counters T-Mobile US Prepaid Promotion

Sprint is offering new and existing Boost Mobile customers prepaid plans with unlimited calling, text messaging and one gigabyte of data for $35 a month, an offer evidently meant to be a response to T-Mobile US promotions for prepaid users offering a gigabyte of data for $40 a month, as well as a $40 a month, 500-MB plan offered by AT&T.

The Bloomberg report also notes that Sprint also is cutting the cost and doubling the data for its more expensive prepaid plans, which were priced at $50 a month and $60 a month.

As is typical for mobile marketing wars, each offer touted by a key competitor is quickly matched, and that seems to be the case here.

As part of an Amazon Fire promotion, AT&T Mobility reportedly is offering customers a “nothing down” plan for buyers of the Amazon Fire phone, at present offered exclusively through AT&T.

The limited time offer requires that customers  sign up for a two-year service plan or buy the device using the “Next”  installment plan, paying $32.50 a month.

Observers might disagree about whether the move reflects the mobile marketing war currently underway in the U.S. mobile market or just an oversupply of devices that AT&T wishes to reduce.

Separately, T-Mobile US doubled the number of music streaming services customers can use under the “Music Freedom ” plan that does not count music streaming against the user mobile data usage cap.

The original plan included  iHeartRadio, iTunesRadio, Pandora, Rhapsody, Samsung Milk, Slacker and Spotify. The latest move adds AccuRadio, Black Planet, Grooveshark, Radio Paradise, Rdio and Songza.

Promotions are not unusual even in “normal” times. But the present mobile marketing war means an unusually high number of promotions, some large, some small, will be launched.

Most recently, T-Mobile US quadrupled the amount of customers can get on its Simple Starter  plan, for an additional fee of $5 a month. The basic plan, costing $40 a month, provides 500 MB of Long Tern Evolution network data. For $45 a month, users get 2 GB.

T-Mobile US also now allows Simple Choice family plans including as many as 10 lines, and separately launched a promotion that matches smartphone data allowances when a tablet is added to a plan.

Sprint earlier had expanded its shared data plans to as many as 10 lines, doubled the amount of data included as part of such plans and set pricing that undercuts similar AT&T and Verizon plans.

Sprint also adjusted the single-line plan, setting $60 a month pricing for he tunlimited data plan.

Unlike family share plans offered by AT&T and Verizon Wireless, in which members draw from the same pool of data, each plan T-Mobile line has its own dedicated pool of data.

Under conditions where retail plans are changing so fast, a simple “no down payment” feature might not be viewed as that big a deal. Even under “normal” competitive conditions, that might not be so big a change.

Against the backdrop of a fierce mobile marketing war, every “little” promotion might have more significance.

Much of the recent activity has focused on the prepaid, or value segment of the market, in part because the major national service providers have been taking share from the independent prepaid brands.

Also, T-Mobile’s MetroPCS acquisition was an effort to bolster T-Mobile’s position in the faster-growing prepaid segment of the business.

source: Arstechnica

In fact, the prepaid customer segments are a the center of marketing campaigns launched by T-Mobile US and Sprint.

T-Mobile US arguably has been picking up tablet accounts and single-line phone accounts, weighted towards the value end of the market.

In the second quarter, T -Mobile US booked virtually all net new prepaid account growth in the U.S. market, for example.

T-Mobile US now also has increased by 2 GB Long Term Evolution usage buckets for customers of its “Simple Starter” plans.

T-Mobile US now provides “Simple Starter” plan customers to quadruple their data to a full 2 GB of LTE data, for just $5 per month. That plan was launched in May 2014 as an entry-level solution with unlimited talk and text, and 500 MB of LTE data for just $40, starting in September 3, 2014.

The move allows T-Mobile US to improve the value of its entry-level offer.

Sprint, likewise, has launched new plans aimed at single-line customers, as well as a shared data plan that features double the usage bucket as comparable plans from AT&T and Verizon, for example.

Other carriers also are attacking at the value end of the market.

Cricket Wireless (owned by AT&T) is offering former T-Mobile and Metro PCS customers who switch to Cricket Wireless a $100 bill credit, available from Aug. 24 to Oct. 19, 2014, at Cricket stores nationwide and online.  

There is no limit on the number of lines a customer can switch to Cricket, receiving a $100 bill credit for each line transferred.

Cricket’s new offer is one more way AT&T can fight back against attacks on the value end of the market from T-Mobile US or Sprint.

Promotions will be launched for the higher value shared data plans that represent multi-line accounts as well.

Still, at the moment, it is tablet additions and phone accounts in the value segment that have been the focus of marketing attacks initiated by T-Mobile US.

Sprint arguably is the carrier with the broadest attack on shared data plan accounts that are, by definition, multi-line accounts.

Thailand Incumbent Telcos Face Revenue Shortfall

New Thailand Information and Telecommunications Minister Pornchai Rujiprapa said his priority will be finding new revenue for his two state telcos, CAT Telecom and TOT Corporation, which are facing a cash crunch.

Nearly everywhere,  it seems, Telco revenue models are threatened.

What's More Important: Bigger Buckets or Lead App Plans?

It isn’t yet clear whether various U.S. mobile service provider promotions that provide more mobile Internet access for the same, or lower prices, or new “lead app” packages will have greater long-term impact.

On one hand, bigger usage buckets for the same, or lower price, might make mobile Internet access a more-potent competitor to fixed access, over time.

On the other hand, “lead app” packages might lead to creation of new customer segments in the same way that the ability to buy single TV programs or channels could reshape customer segments in the video entertainment business.

Whether “more for less” or “buy only what you want” will have bigger impact long term.

T-Mobile US or Sprint adding more gigabytes to Internet usage buckets are an example of the former. Virgin Mobile Custom is an example of the latter.

It might be tempting to argue that “more for less” is the more-important trend.

But in the content consumption realm, the “buy only what you want” feature might be equally important. The issue is whether it will be as important in developed country markets as it could be in developing countries.

As content unbundling represents the big potential change in the video entertainment business, so content “unbundling” might be important for many mobile users or accounts.

The Virgin Mobile Custom plan allows account owners to control and limit usage by users on the plan, a feature deemed helpful to parents.

Virgin Mobile Custom allows account holders to activate up to five lines for as little as $6.98 per line per month.

The “Base” plan comes with 20 texts and 20 voice minutes, while the “Unlimited” plan for $35 provides unlimited talk and text.

The interesting parts of the plan are the ways account holders can customize usage.

After purchasing the basic level of service, customers can buy unlimited texting for $10 or  unlimited voice for $18 a month.

Customers also can add unlimited access to specific social apps such as Facebook,Twitter, Instagram, Pinterest or  Pandora for $5 a month.

Another option provides 30 minutes of international calling to specific countries, and can be added on a recurring or non-recurring basis.

On the other hand, it can be argued that, if usage buckets offer more value for less money, there is no need for special “lead app” plans.

The main app class where that might not be the case is entertainment video, where moderate to heavy usage would potentially be a burden for all but fully unlimited plans.

Rural Areas Might Gain 36 Times More Bandwidth While Urban Areas Get 1,000 Times More

Making new spectrum available for Internet access arguably is more important in rural and hard-to-reach areas than it is in high-demand urban areas. The reason is that key methods for increasing the use of bandwidth (smaller cells) are often unavailable.

Some might argue that, as a generic, 10 times improvement might be gotten by adding new spectrum; 10 times a contribution from redesigning denser networks; and then 10 times from other sources of advantage, such as better modulation or coding, better radios and use of hybrid networks.

Others might argue that as much as half the advantage could come from denser, small cell networks, and far less a contribution from adding new spectrum.

One way of putting matters is that a 1,000-fold improvement in available bandwidth would come from access to three times more spectrum, six times more efficiency and 56 times denser networks.

And if that is true, you glimpse the problem. Adding more spectrum provides three times the advantage. Use of small cell architectures could provide 56 times the capacity boost.

But the tools available in rural areas might include only the three times boost from new spectrum and the six-fold improvement from coding methods, air interfaces or network management.

Most of the upside comes from small cell approaches that are unsuited to rural areas, and also often  impossible or highly impractical solutions in rural areas. For starters, backhaul facilities do not exist, and would be financially tough to add.

Any way one looks at the matter, it will remain difficult to provide as much bandwidth in rural areas, as affordably as it can be provided in urban areas.

If one assumes that Internet service providers eventually must supply 1,000 times more bandwidth than they do today, “how” to do so is a key question.

Today’s answers suggest a combination of approaches must be taken, ranging from adding new spectrum to creating smaller cell networks, gaining more efficiencies from offloading or using more-efficient radio technologies and coding methods.

Different solutions will be possible in dense areas than rural areas; developed and developing markets; regions where there is lots of backhaul compared to regions where backhaul does not exist, or is expensive.

You can see the potential challenge in rural areas, or areas where backhaul options are limited. Most of the gain (56 times) comes from a denser network with small cells. That does little good in a rural area, and depends on plentiful backhaul networks.

That leaves only the three times advantage from availability of new spectrum, and the six-fold improvement, or at least up to six-fold improvement, from all other efficiencies.

All together, that implies that the advantage in available bandwidth to be gained in urban and dense areas is 1,000 times, but in rural areas could be only 36 times, assuming 300 percent more available spectrum, and the same efficiencies in both rural and urban markets.  

Backhaul turns out to be a very big deal.

Sometimes Disruption Requires Big Firms

We have a notion that big changes in techology and capabilities are fostered primarily by small firms and teams of innovators. Often, that is correct. 

Sometimes, though, innovation requires action by big, wealthy firms. Only a big firm such as Apple likely could have changed the way mobile devices are brought to market by cellular communications firms. 

Likewise, sometimes firms have to be able to invest quite a lot in regulatory changes. That appears to be the case for delivery drones. The Federal Aviation Administration will have to be convinced that use of drones for all sorts of purposes is safe. 

No small firm will be able to supply the evidence or push through big changes in policy.