70% Improvement in Mobile Network App Performance is Possible,Study Finds

Mobile networks can be optimized for app performance, a test by XL Axiata, Ericsson and Facebook has found.

The resultant optimizations improved app coverage by up to 70 percent, according to Internet.org.

The number of connections completed within three seconds improved up to 70 percent.

Time to content improved up to 70 percent and upload time improved up to 50 percent. In the radio access network, problems were found with parameter settings and capacity bottlenecks. 

“For example, the higher-end smartphone took significantly longer than the lower-end smartphone to upload photographs, which was due to a parameter settings issue,” Internet.org says. 

To remedy that problem, Ericsson and XL Axiata performed optimizations of coverage, uplink performance parameters and RAN capacity parameters. DNS servers also were an issue. XL Axiata’s DNS servers experienced a high processing load, and measurements revealed that this had a significant impact on user quality of experience.

Results showed that objects, such as photographs, might download in 0.5 to 3 seconds, while DNS resolution could skyrocket to 10 to 35 seconds.

This delay would render the user experience so bad that the app would appear to be not working.

To remedy that problem, XL Axiata reconfigured its servers, changed parameter tunings and performed some capacity upgrades, according to Internet.orgContent delivery networks also had impact on user experience. 

Looking at the worst 10 percent of samples, the local servers, which processed 16 percent of data, had a time to content of three seconds, while more distant servers had a time to content of up to 20 seconds.

In response, Facebook redirected traffic to different servers that were closer and had better connectivity to XL Axiata’s network. In stationary rural tests on the worst 10 percent of scenarios, time to content was lowered from nine seconds to 2.8 seconds on the lower-end smartphone.

The final results of the combined changes to the RAN, DNS and CDN showed app coverage improvements of 40 to 70 percent. Within that scope, time to content improved up to by 80 percent, while upload time improved by up to 50 percent.

Illiad Ends Bid to Buy T-Mobile US

In the continuing saga of “who will buy T-Mobile US,” France’s ended its long-shot effort to buy T-Mobile US from Deutsche Telekom, apparently after Deutsche Telekom board members “refused to entertain its new offer.”

That clears the way for an expected bid by Dish Network sometime in early 2015, many predict. The reason for the expected delay is that spectrum auctions to be held in late 2014 might put a higher value on Dish Network spectrum holdings, allowing Dish Network to benefit from a higher equity value when and if it makes a bid to buy T-Mobile US.
 
Buying T-Mobile would allow Dish to offer entertainment video, high-speed Internet and mobile  voice service across the country nationwide.

Dish Network’s strategy is in one way the mirror image of what AT&T is attempting with its purchase of DirecTV.

Where Dish Network is a satellite video provider trying to create a national triple play, AT&T will try to add a national video entertainment offer to its national mobile network, creating a similar triple play.
 
T-Mobile US serves approximately 47 million subscribers, generating revenues of over $24 billion with a current market value of close to $25 billion.

But the real prize is the means for Dish Network to fulfill conditions of its spectrum licenses, which require building of an actual transmission network, without which Dish Network loses its licenses, and the equity value the licenses represent.

Should Dish Network make such a successful bid, and should AT&T’s bid to buy DirecTV be approved, we also would see the end of the U.S. satellite entertainment business as an independent segment of the U.S. consumer services business.

What Accounts for High LTE Adoption in U.S. Market?

Ironically, “receiving party pays,” a billing practice distinct from “calling party pays,” might have created the incentive for larger usage buckets in the U.S. market, moves that in turn might have contributed directly to higher rates of use of all mobile services, including voice, text messaging and mobile Internet access.

“Receiving party pays” tends to discourage users from keeping their devices powered up, since they pay for all received calls and messages, and cannot control them. On the other hand, that policy creates the incentive for service providers to create large usage buckets that alleviate user concern about such inbound traffic.

Also, the U.S. market historically has been based on postpaid, rather than prepaid retail plans. That encourages customers to use what they already have paid for, rather than restrict usage because they pay by the minute or byte.

One direct result is higher usage and lower retail fees, the GSMA argues.

The typical North American mobile user consumes 629 minutes of voice a month, compared to 334 minutes in the Asia-Pacific region and 151 in Europe, according to GSMA.

U.S. mobile consumers send or receive 467 text messages a month, compared to 122 a month in Germany, 188 a month in the United Kingdom and 199 per month in Italy.

At the same time, shared data plans have encouraged consumers to connect a broad range of data-intensive devices, including dongles, laptops and tablets. with increased data traffic leading consumers towards more expensive data plans. In turn, this generates higher average revenue per account.

It isn’t clear that those usage patterns are a result of LTE availability, or whether LTE adoption is a result of high demand for bandwidth. The former might suggest that making LTE available causes people to use more data. The latter might suggest LTE is simply a response to high demand.

The correlation (or causation, to some extent) matters when policymakers consider the role of LTE as an economic tool, or service providers look to boost use of mobile Internet access services.

Does LTE availability “cause” more data usage, or does more data usage require LTE?

Spectrum Futures 2014

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LTE adoption so far has been uneven globally, but probably for reasons related to market dynamics in each country or region. In other words, it is not so clear that introducing LTE necessarily changes the demand curve for mobile Internet access.

On the demand front, U.S. operators decided not to charge even a slight premium for LTE access, compared to 3G. So pricing might matter.

At the same time, consumer unhappiness with performance of the Apple iPhone on 3G networks quickly convinced mobile service providers to boost performance of the access networks.

Sprint, on the other hand, charged a $10 a month premium for users of tis WiMAX 4G network. That probably retarded adoption.

At the same time, high use of streaming video in the U.S. market aguably created more need for bandwidth, at a time when spectrum was released to market to support LTE networks.

At the same time, Sprint’s WiMAX offer also meant that other service providers were “behind” in the marketing of fourth generation network services, and had to catch up.

The first commercial 4G-LTE network was launched in the region in the third quarter of 2010.

But Sprint had launched its WiMAX 4G network in 2008, reaching a relative handful of cities by 2009 and widespread service in 2010. So many would argue Sprint squandered a two-year headstart on the first LTE or 4G network.

In the meantime, rival carriers also boosted the speeds of their 3G networks. In some cases, 3G networks offered access speeds equal to, or greater than, WiMAX.

By the end of 2013, the United States had 85 million 4G mobile connections, making it the world’s single largest 4G market. Japan ranked second with 44 million accounts. South Korea had 29 million accounts.

Total mobile connections (SIM cards) in the region stood at 341 million at the end of 2013, excluding M2M connections. However, the number of unique mobile subscribers (individuals) was significantly lower at 250 million, reflecting the high levels of multiple SIM and device ownership in the region.

4G accounted for approximately one in four of the total mobile connections in North America in 2013, the highest proportion of any global region.

Close to 97 per cent of the entire population in North America lived within the coverage range of 4G networks at the end of 2013, also one of the highest levels globally.

Build-out of 4G networks has occurred at a more rapid rate than the earlier move to 3G. It took around four years for 3G coverage to reach 95 percent of the population, 4G took just two and a half years.

Some might say that is because of the prominent role now played by Internet apps and access in driving the overall value proposition for use of smartphones. And U.S. adoption of smartphones is high.

North America had the highest levels of smartphone adoption of any region at the end of 2013, with smartphones accounting for 60 percent of total connections.

The point is that a confluence of factors likely accounts for high Long Term Evolution adoption in the U.S.market.

Quadruple Play Strategy Nears End in U.S. Market

The ability to create a quadruple play network based on ownership of both mobile and fixed assets is a key objective of several tier-one service providers in Western European markets.

The basic approach is for a mobile service providers to buy out-of-region fixed network assets to create a quadruple play offer including mobile services, entertainment TV, fixed Internet access and fixed network voice. 

Vodafone’s moves to acquire cable operations Kabel Deutschland and Ono in Spain provide an example. 

BT offers a mirror image of Vodafone’s moves, as the former fixed network provider now 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. 

Though 60 percent of U.K. consumers buy a bundle of some sort, the “typical” bundle is a dual-play 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.

It is not as easy to create such a quadruple play offer in the U.S. market, though. For starters, U.S. regulators would not allow AT&T or Verizon to acquire significantly greater fixed network assets.

Nor would either be allowed to buy more mobile market share from the other two big national providers, Sprint or T-Mobile US. 

That is one reason AT&T is attempting to buy DirecTV, the biggest U.S. satellite entertainment video provider. It is among the few ways AT&T can increase its quadruple play profile without running afoul of regulator opposition to additional market share in the mobile or fixed network businesses.

The point is that although additional asset purchases by Western European mobile or telco service providers remains possible, the largest U.S. providers now have essentially reached their limits.

AT&T and Verizon will not be allowed to grow much larger, in terms of subscribers served on their respective mobile and fixed networks. 

Sprint and T-Mobile US have been barred from merging, and neither has the capital to buy significant fixed network assets, even if they had the appetite. 

Changes for Sprint and T-Mobile US will involve potential action by new firms such as Comcast and Dish Network.

Future Verizon and AT&T growth will have to come from international asset acquisition or major moves into new lines of business using existing assets. 

That is why there is such high interest in the Internet of Things and machine-to-machine businesses. 

The quadruple play strategy has almost run its course for AT&T and Verizon, though there is room for Sprint and T-Mobile US to make changes. 

Spectrum Futures 2014

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Verizon Gets 69% of Revenue from Mobile; So What About Fixed Network?

In the second quarter of 2014, Verizon generated $31.5 billion in sales. About 69 percent of that was earned by the mobile segment of the business. Fixed network operations now account for 31 percent of revenue.

Verizon had operating income profit margin was 32.5 percent in its mobile segment. In the fixed network segment,  Verizon profit margin on an operating basis was less than three percent, for an overall blended margin of about 14 percent.

Moreover, revenue growth now is driven by the mobile segment of the business, which grew 7.5 percent year over year, even if fixed network revenues grew four percent, year over year, while consumer revenues grew 5.3 percent.

That should raise some obvious--if difficult--questions.

One might argue that since Verizon’s overall results clearly are driven by the mobile segment, which is nearly 70 percent of the whole business, what happens in the fixed segment of the business is important, but not the driver of revenues and profit.

Another thought might occur: why shouldn’t Verizon exit the fixed segment and simply concentrate on the mobile segment?

Some might say that is not a realistic option, since Verizon likely could not find a buyer for all of its fixed network business, even if some parts conceivably could be sold.

The other constraint is that Verizon earns a disproportionate portion of is fixed network earnings from services provided over the fixed network to business customers.

Some $5.9 billion of $9.8 billion in fixed network revenues were earned by sales to business customers, while some $3.9 billion was earned by sales of consumer services.

So even if Verizon was able to sell its fixed network business, to exit the consumer fixed network business, doing so might endanger the nearly $6 billion Verizon earns from business customers.

So aside from the fact that Verizon in all likelihood might not be able to sell its fixed network business, even if it wanted to, doing so would forfeit nearly $6 billion of important business customer revenues as well.

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At the same time, there arguably are important strategic advantages for Verizon as an owner of fixed assets. To some extent, Verizon benefits in the area of backhaul, where it can rely on its own network, rather than leasing such access.

Verizon also can offload some amount of mobile traffic to its own fixed network. To be sure, Verizon does not benefit as much as AT&T might, given the relatively smaller fixed network footprint Verizon enjoys.

Beyond that, if the fundamental product sold by many telcos is the quadruple play, then the fixed network is necessary because it suppliers two or more of the components of the bundle.

Internet of Things Will Create World's Largest Device Market

“The Internet of Things will be the largest device market in the world,” Business Insider predicts.  “We estimate that by 2019 it will be more than double the size of the smartphone, PC, tablet, connected car, and the wearable market combined.”

And each of those constituent market segments--such as the connected car market--could be substantial for Internet service providers.

AT&T expects meaningful subscriber growth for its connected car services in the next three to five years, and already supplies connections for almost two million vehicles already.

About 500,000 accounts were added in the third quarter of 2014.

In 2015, AT&T expects to serve nearly half of new mobile-connected U.S. passenger vehicles and also expects to serve more than 10 million vehicles by the end of 2017.

AT&T expects revenues from its connected cars to be driven initially by wholesale customer relationships with auto manufacturers, with the opportunity to develop a direct retail relationship with drivers.

Wholesale average monthly revenue per subscriber, paid for by auto manufacturers, is expected to be in the low single digits and retail ARPU, paid for by the car owners, is expected to be similar to that of a tablet on an AT&T Mobile Share Value Plan, or about $10 a month.

The market for cumulative mobile machine-to-machine (M2M) connections will rise from about 110 million connections in 2011 to approximately 365 million connections by 2016, according to ABI Research.

This represents a compounded annual growth rate of roughly 27 percent by 2016 and translates to about $35 billion in connectivity services revenue.

The two largest cellular M2M market segments over the forecast period, by revenue, will be automotive telematics and smart energy, ABI Research estimates.

Automotive telematics, including factory-installed systems such as GM’s OnStar service, aftermarket services such as usage-based insurance, and fleet management systems, will together represent more than $15.5 billion in 2016, ABI Research estimates.

Meanwhile, smart energy, specifically cellular connectivity to smart meters and data concentrators, will represent more than $7.5 billion in 2016.

Device shipments will reach 6.7 billion in 2019 for a five-year CAGR of 61 percent, according to Business Insider. Revenue from hardware sales will be only $50 billion or eight percent of the total revenue from IoT-specific efforts.

The IoT will result in $1.7 trillion in value added to the global economy in 2019, based on  hardware, software, installation costs, management services, and economic value added from realized IoT efficiency.

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The enterprise sector will lead IoT investments, accounting for 46 percent of device shipments this year, but that share will decline as the government and home sectors gain momentum. By 2019, government will be the leading sector for IoT device shipments, Business Insider predicts.

Nobody knows for sure, yet, how big IoT will be, and how much revenue mobile service providers, among others, might stand to make. But estimates suggest IoT is a “billions of dollars” sized mobile access services opportunity.

EC Deregulates Fixed Network Voice Because Voice is "Going Away"

One of the key characteristics of competition in any market directly affected by the Internet, and that is most markets, is that old boundaries become quite porous. Where it might once have been possible to clearly define “who our competitors are,” that is tougher in Internet-affected markets.

“Telcos” now routinely compete not only with other fixed network providers, but also mobile service providers, cable TV companies, DirecTV, Skype, Google and WhatsApp. Sometime relatively soon, some telcos will compete with Facebook as well.

Some telcos compete with Netflix and YouTube as well, the simple reason being that, over time, effective substitutes become more prevalent.

There are important regulatory implications, since communications regulators always have a dual role.

Among the most-important considerations for any regulatory body is the fundamental health of the industries regulated, the counterpoint to promoting and protecting consumer welfare and interests.

And there is room to argue that the fundamental health of the communications services industry is an open question, under dynamic conditions. Why as the European Commission deregulated fixed network voice services?

It isn’t just that plenty of competition exists. The EC also is facing declining revenues for the whole industry. Sooner or later, that means less ability to invest in the next generation of facilities.

To reiterate, EC regulators have twin objectives. They must protect consumers and promote consumer welfare. But EC regulators also must try to ensure the fundamental ability of the industry to keep investing.

It might not be easy to balance the twin objectives. But maintaining balance arguably is harder under conditions when end user demand is shifting, undermining industry revenue streams.

To be sure, regulators have the obligation of protecting consumer welfare. But they also have the obligation to ensure the industry supplying communications remains viable and healthy.

That is a point recently reiterated by the European Commission's Digital Agenda staff.

“Regulation must be targeted and balanced in a way that addresses the true obstacles to effective competition in the sector: an excessive regulatory burden on operators would stifle investment and innovation,” a Commission paper argues.

“Too little regulation” also can be a problem, if it limits competition. “Regulation must promote...efficient investment and innovation in the interest of end users,” the staff paper argues.

Also, a  “dynamic and forward-looking” approach that recognizes evolving market conditions also is necessary, the paper

In other words, markets might be effectively competitive, without additional regulation. Barriers to entry might likewise disappear over time, either for technological reasons or because earlier policies have succeeded.

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Intermodal competition, as when facilities-based cable TV providers or independent Internet service providers enter a market are able to compete with telcos, can change competitive dynamics as well. In other words, effective competition can exist even when formal regulatory mechanisms are not in place.

Convergence of previously distinct markets also could increase competition. Also, end user demand changes over time.

That is why the EC recently decided to deregulate voice services within the European community.