Tuesday, November 18, 2014

Norwegian Regulators Oppose App Zero Rating

Zero rating of any apps is a violation of network neutrality, according to Frode Sørensen, senior advisor at the Norwegian Post and Telecommunications Authority. "Internet users are entitled to an Internet connection that is free of discrimination with regard to type of application, service or content or based on sender or receiver address."

As with most aspects of network neutrality, the issue is complex and confusing, in part because bumper sticker slogans (“treat all bits alike;” “protect the Internet”) so often are used to simplify the argument in ways that can distort understanding.

The problem is that zero rating is a relatively common way of favoring consumption of some products, at the expense of others. When a value-added tax is not levied on many types of food and beverage, exported goods, donated goods sold by charity shops, equipment for the disabled, prescription medications, water and sewage services, books and other printed publications, children's clothing, and financial services, that is clearly “discriminatory,” but also furthers some valuable social objectives.

So yes, zero rating is unfair to the apps not being offered on a zero rated basis. But such favoritism can also be a good thing.

Ignore for the moment the issue of paid prioritization as used by content delivery networks.

Sørensen argues that even offering free use of some apps (zero rating), without requiring purchase of a data plan, is “discriminatory.” Some will argue that offering free access to some apps is a reasonable way to acquaint poor Internet non-users with some of the value offered by the Internet and its apps, and has potential to help connect billions of new users by creating demand for using the Internet.

As do most observers, Sørensen explicitly notes that traffic grooming is a necessary part of network management. In fact, outright blocking of access might sometimes be necessary, and in fact happens all the time when networks become congested. The only issue is whether reasonable steps can be taken--or ought to be taken--to manage congestion at peak hours.

“The goal of net neutrality is not that all traffic should be handled identically, which would never be possible in practice,” Sørensen notes.

The hard part, in that sense, is reconciling Internet openness and issues such as congestion.

Zero rating of apps “would constitute a violation of the guidelines,” Sørensen says. By the same logic, offering toll-free phone calls also violates the open nature of the telephone network, even if it provides direct value to consumers.

Protecting Internet openness for its users is a worthy and important goal. But keep in mind that zero rating typically applies to “non-subscribers” or “non-users,” and is an effort to connect those who cannot afford to use the Internet, even if in initially limited ways.

“Openness” might mean one set of things to people who use it. “Access” is the issue for those who cannot afford to use it. As always, there are contradictory goals for Internet policy, as for communications policy in a larger sense.

Competition is good, but so is investment, and the two goals ultimately are inversely related. “Equality” and “access” are in some ways also inversely related, in many markets where people can barely afford food and water. Providing wider access might require unequal treatment.

Many would agree that “the user decides” what they want to do when on the Internet. For those not able to use the Internet, offering some access, to some apps, also allows them to decide, with some obvious constraints. But that is true for all users, since not all Internet apps are available to all, at least not without payment of some kind.

Monday, November 17, 2014

Mobile, Video Subscription Satisfaction is "Neutral" But Low

Sometimes, a satisfaction score just above “neutral” is a good thing.

A new survey of consumer satisfaction with various products and industries by YouGov contains a couple of findings that mirror other studies of consumer satisfaction with cable TV and mobile service: both those industries rank at the very bottom of satisfaction ratings.

That is not as bad as it sounds, though not by any means “good.” YouGov uses a 200-point scale, with +100 the highest and -100 the lowest, with a neutral score being zero. Cable and satellite TV scored 13, while mobile services scored 21. So both industries are slightly above “neutral.”

And that might be an improvement of sorts. Perhaps U.S. consumers do not “love” mobile or video service, but they are at least neutral, in this instance.

You might think consumer satisfaction with social media apps such as Twitter, Facebook and LinkedIn would be dramatically higher than for Internet service providers, cable TV companies or telcos.

After all, those these service provider industries traditionally rank at the bottom of satisfaction ratings produced by the American Consumer Satisfaction Index.

But you would be wrong. At least according to ACSI rankings, consumers are less satisfied with the popular social media apps than they are with fixed telephone service and mobile phone service.

On average, those social media apps get higher satisfaction ratings than video entertainment providers and significantly higher satisfaction ratings than Internet service providers. ISPs scored 63, while video services ranked collectively as a 65 for satisfaction.

Time Warner Cable scored an even-worse 60, while Comcast scored 63. AT&T U-verse and DirecTV both scored a 69.

In 2014, Twitter got a score of 69, Facebook earns a score of 67 and LinkedIn has a ranking of 67 as well.

In other words, according to the ACSI ranking, consumers are only about as satisfied with Twitter, Facebook and LinkedIn as they are with their ISPs and video providers. That puts satisfaction with those social media apps near the bottom of all industry rankings.

Among search engines, Google got a high score of 80. Bing and MSN both scored 73.

Major news portals earned an average score of 74.

Perhaps the most surprising finding is that the leading social media apps do not score much higher than ISPs or video entertainment providers, which have been ranked at the bottom of satisfaction rankings.

The top social apps can be used for no incremental cost, where Internet access service and video entertainment are significant cost items.

And one might draw a couple of  conclusions. Consumers are relatively unhappy, but continue to buy because they need the products. Also, consumers are unhappy and feel they have no workable alternatives that are sustainably better than the others.

Also, there are differences between providers in the same categories. Verizon FiOS, for example, garnered much higher scores than most other ISPs in the ACSI study.  


source: YouGov

Google, Telstra Testing Balloon-Based Internet Access

Google has partnered with Telstra to test a balloon-based Internet access service in Australia.  

Google will supply the balloon platform, while Telstra supplies the spectrum. In the trial, 20 balloons will be launched in western Queensland, aiming to deliver  Internet services to consumers in remote areas of Australia.
The Project Loon balloons feature antennas that can broadcast fourth generation Long Term Evolution mobile services, which allow the balloons to provide as much as 42 Mbps to a ground antenna and 15 Mbps to a handset.

Separately, Facebook’s Internet.org initiative appears on the brink of becoming an ISP serving Africa, according to the Telegraph.

As rumored, Internet.org could contrat with U.K.-headquartered satellite provider Avanti, which owns two broadband satellites positioned over Africa, plans to launch two more in the next three years to increase capacity and coverage.

Zuckerberg reportedly tried to entice mobile service providers to do so, but was rebuffed.

Telstra, apparently, does that think that a wise approach.

And there lies a conundrum often faced by incumbent service providers, namely whether to cooperate, or not, with a potential competitor.

Facebook has been open to partnerships with ISPs. But as with Google, Facebook does not appear to be willing to let partner opposition deter it from extending Internet access as widely as possible, as quickly as possible.

Facebook also has been looking at use of unmanned aircraft as a potential Internet access platform.

Is Facebook on Verge of Becoming an ISP?

Is Facebook about to become an Internet service provider, as Google has done? It seems increasingly likely, though the actual operations would be under the auspices of the Internet.org initiative, according to the Telegraph.

As rumored, Internet.org could contrat with U.K.-headquartered satellite provider Avanti, which owns two broadband satellites positioned over Africa, plans to launch two more in the next three years to increase capacity and coverage.

Zuckerberg reportedly tried to entice mobile service providers to do so, but was rebuffed. And there lies a conundrum. Facebook has been open to partnerships with ISPs. But as with Google, Facebook does not appear to be willing to let partner opposition deter it from extending Internet access as widely as possible, as quickly as possible.

Facebook also has been looking at use of unmanned aircraft as a potential Internet access platform.

Avanti supplies spot beam Ka-band service to sub-Saharan Africa, using a “HYLAS” (“Highly Adaptable Satellite”) bird built by Orbital Sciences Corp. A second satellite extends coverage in Africa, and also reaches the Caucasus and the Middle East. A third satellite covering Africa is expected to be launched in 2015.

The HYLAS satellites feature use of spot beams that can provide extra capacity within the coverage area of the spot beams. The HYLAS 2 satellite, for example,  features 24 active Ka-band user beams and six gateway beams intended to be used by national service providers as a single uplink/downlink connection. The HYLAS 4 satellite supports 66 spot beams, with a total capacity across all beams of 28 GHz.

The use of spot beams allows the satellites to achieve high spectrum efficiencies and high data rates, at the cost of coverage. By limiting coverage, the satellites are able to reuse frequency, much as a mobile network does.

In some ways, Facebook and Google becoming Internet service providers is an ironic development. As traditional vertically-integrated telcos now have partly become suppliers of loosely-coupled Internet apps owned by third parties, Google and Facebook now are becoming suppliers of access and apps, with at least some elements of vertical integration.

Saturday, November 15, 2014

In U.S. High Speed Access Market, Mobile has 33% Share

In the U.S. market, 43 percent of people who use the Internet buy cable TV high speed access, while 21 percent buy telco digital subscriber line services.

Some eight percent use fiber-to-home connections, while 4.6 use a satellite broadband connection.

In 2013, about 74 percent of U.S.households bought Internet access service, and 73 percent purchased a high speed access service, according to the U.S. Census Bureau.

Fully 33 percent of households used mobile broadband. 

The data show the lower-income households are more likely to use a “mobile-only” approach to Internet access, though the percentage of homes doing so is in single digits.

 source: U.S. Census Bureau

    

U.S. Linear Video Subscription Business Continues "Slow Leak"

Like a slow leak from a tire, U.S. linear video providers as a whole lost about two-tenths of one percent of the subscriber base, in the third quarter of 2014, according to Leichtman Research Group.

Cable TV companies lost about 439,000 net customers. Satellite providers lost 40,000 net customers, while AT&T and Verizon Communications gained 330,000 net customers. In other words, the market shrank, while market share shifted from cable and satellite to telcos.

The overall market shrinkage is quite small, but nevertheless represents the greatest net losses of any previous third quarter, with the satellite segment getting hit the hardest, according to Leichtman Research Group.

In fact, the top nine cable companies performed better, year over year. The cable companies lost about 440,000 video subscribers in the third quarter of  2014, compared to a loss of about 600,000 subscribers in the third quarter of 2013.

Satellite TV providers lost 40,000 subscribers in the third quarter, compared to a net gain of 174,000 subscribers in the third quarter of  2013.

The top telephone providers added 330,000 net video subscribers, down from 400,000 net additions in the same quarter of 2013.

Service Providers
Subscribers at
End of 3Q 2014
Net Adds in
3Q 2014
Cable Companies


Comcast
22,376,000
(81,000)
Time Warner
11,030,000
(182,000)
Charter
4,296,000
(24,000)
Cablevision
2,715,000
(56,000)
Suddenlink
1,171,000
2,200
Mediacom
900,000
(19,000)
Cable ONE
476,233
(14,076)
Other Cable Companies
6,505,000
(65,000)
Total Top Cable
49,469,233
(438,876)
Satellite TV Companies


DirecTV
20,203,000
(28,000)
DISH
14,041,000
(12,000)
Total DBS
34,244,000
(40,000)
Telephone Companies


AT&T U-verse
6,067,000
216,000
Verizon FiOS
5,533,000
114,000
Total Top Phone
11,600,000
330,000
Total Top Pay-TV Providers
95,313,233
(148,876)

                        Source: Leichtman Research Group, Inc.

Gigabit Network Investments Might Not Always Return Cost of Capital

Sometimes, service providers make strategic investments not strictly related to "return on invested capital." That might seem irrational. It is not.

Large or small, fixed network telcos continue to face very-tough decisions about high speed access. For several decades, telco planners have modeled financial returns from fiber-to-home projects and generally have faced a hard reality.

In most cases, though such investment often has to be justified for strategic reasons, the financial return often is difficult and tenuous. Verizon Communications, for example, has in the past argued that a significant portion of the return comes not from the ability to offer new services, but from reduced operating expenses.

One might conclude Verizon no longer believes the expected maintenance savings are as great as were originally expected. In 2010, Verizon’s suspended its FiOS program in major metro areas where it had not already begun construction. In 2014, Verizon executives said they would consider expanding FiOS deployments when doing so would recover the cost of capital committed to the effort.

In other words, FiOS probably does not return its cost of capital in many markets.

To be sure, there are other considerations. Verizon and AT&T now drive revenue growth from the mobile business, so returns on invested capital are much higher when available capital is invested in the mobile business.

In the first quarter of 2014, Verizon operating income for the mobile segment was an order of magnitude higher than for the fixed line business.

In the third quarter of 2014, mobile segment operating income margin was 31.9 percent and segment earnings (EBITDA) margin on service revenues was 49.5 percent.

Compare that performance with results from the fixed network segment.

Fixed network  operating income margin was 2.3 percent in the third quarter of 2014, up from 1.5 percent in third-quarter 2013. So mobile operating income margin was an order of magnitude higher than fixed network operating income margin.

Smaller telcos without mobile assets will not have the option of directly available capital to the mobile network.

So the decision about investing in fiber-to-home facilities remains a challenge. Cincinnati Bell, for example, sold its mobile business and half of its data center business to raise capital to build its “Fioptics”  fiber-to-home network.

Analyst Craig Moffett of Bernstein and Company estimated in 2009 that Verizon’s cost per subscriber was about $4,000, while estimating the expected revenue from a FiOS-connected household was just $3,200.

Though network element costs arguably have declined since then, the business case remains challenging. So why do telcos move ahead? There are strategic reasons. Unless a fixed network telco upgrades, it might be unable to compete with cable TV operators.

Simply, the investment in fiber-to-home has to be made so “you get to keep your business,” as one executive said. Strict return on capital considerations are secondary.

Sometimes a business decision has to be made for reasons other than strict return on invested capital grounds. Investment in gigabit networks would appear to be such a decision.



Source: Craig Moffett, Bernstein & Co.


Directv-Dish Merger Fails

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