How Much Danger Does Google Pose to Other ISPs?

After Google Fiber, the notion that a major app provider might actually become an Internet service provider is no longer a possibility, but is a reality. The only issue now is how far that might extend, and which other firms might decide to do something similar.

Facebook appears likely to emerge as a satellite-based Internet service provider in Africa. And both Google and Facebook now own assets that produce unmanned aerial vehicles that could be used to supply Internet access.

Google is testing balloon-based Internet access for rural Australia, a test being conducted in conjunction with Telstra, existing Internet service providers have to be thinking about how far Google, Facebook and others might be looking at the ISP business.

Add to the that the fact that Amazon already is a specialized type of mobile virtual network operator, using AT&T’s mobile network to deliver content to Kindle devices.

There has been speculation that Apple might someday want to do something similar, perhaps becoming a provider of services that connect to any available mobile network network, something that has become a feature of the iPad.

Given the fact that, by perhaps 2020, 80 percent of all Internet access globally will use a smartphone, one has to wonder when that might become a focus for one or more application providers.

GoogleNet is Google’s vision to offer global, near-free Internet-access, mobile connectivity, and Internet-of-Things connectivity using a global, largely-wireless, Android-based, “GoogleNet,” according to Scott Cleland, of Precursor, a site with an admittedly “anti-Google” orientation.

Critics argue Google is following a business strategy of identifying markets with a valuable stream of consumer data, then creating an "open" or "free" product to induce adoption and “undermine the business model of existing market participants,” according to Fairsearch.org, an entity funded by Google competitors.

Once it gains dominance, Google then “closes” the market and excludes competitors, Fairsearch argues.

One does not have to accept the premise of the argument to agree that something important has happened. Google effectively disintermediates and commoditizes the direct relationships Internet or communications or entertainment suppliers have with their customers.

And telcos, cable companies and Internet service providers might have to worry more than they used to about Google. Initially, one might argue, Google was about businesses built on bits in virtual worlds. That is no small matter, as Google arguably has created rival communication products that displace products supplied by communications companies.

But Google now is moving into different realms, including “atoms in the physical world.” including Google Fiber, an Internet service provider operation that competes directly with cable TV company and telco high speed access and video entertainment products.

Beyond that, Google has invested in, and is testing, high-­altitude Wi-Fi balloons, and unmanned aerial aircraft that might also be used to support Internet access.

All of that, building on earlier Google investments, creates at least the potential for a “global Internet access” capability that would disintermediate other existing Internet service providers, as Google Fiber does in a growing number of U.S. cities.

Google bought Skybox Imaging (satellite technology) and plans to spend $1-3 billion on “180 small, high capacity satellites at lower altitudes than traditional satellites” to enable two-way Internet access.

Google also bought Titan Aerospace, a supplier of solar-powered, high-flying drones. Project Loon likewise is testing use of balloons for Internet access, most recently inking a deal to test them to provide Internet access in Australia, working with Telstra.

Google also operates its own global undersea network, including investments in four cable systems.

The issue is how widely Google’s ambitions might extend.

“It Can’t be Done”

Some of the most-dangerous statements an experienced and knowledgeable executive ever can make is that something “cannot be done,” or that a new way of doing something is underpowered, under-featured and essentially a non-serious approach to solving a problem.

If confronted with a requirement to support huge amounts of bandwidth, hundreds of times to perhaps 1,000 times greater than anything yet seen, it might seem obvious that only fixed networks will be able to handle the load.

That is why Marcus Weldon, Bell Labs President and Alcatel-Lucent CTO believes sophisticated core and fixed networks are essential, and that explorations of Internet access networks using unmanned aerial vehicles or balloons are unsophisticated approaches little better than “toys,” compared to the best of today’s telecom networks.

The phrase "toy networks" as applied to new Internet access platforms such as balloons or unmanned aerial vehicles reflects a perhaps-understandable reaction to new networks that lack the sophistication of the existing and future networks envisioned by the telecom industry.

But it is profoundly dangerous to underestimate the threat posed by such underpowered or feature-deficient new approaches. You might recall that the same sort of sentiment was uttered about voice over Internet Protocol.

Disruptive innovation, a term coined by Harvard Business School Professor Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

Such innovations might reasonably be derided by existing suppliers as “not very good” products with limited feature sets, unstable quality and some restrictions on ease of use. Skype initially could only be used by people communicating using personal computers, for example.

Microwave Communications Corp. (MCI) originally competed with AT&T for long-distance voice calls using a microwave network that likewise was deemed less reliable than AT&T’s own network.

Wi-Fi hotspots originally were hard to find, sometimes difficult to log on to, and obviously did not have the ubiquity of mobile Internet access or the speed of an at-home Internet access service.

Netflix originally required mailing of DVDs to view content (it was not “on demand”), and could not be viewed on demand, on a variety of devices.

What happens, over time, is that disruptive attacks gradually “move up the stack” in terms of features and quality of service, eventually competing head to head with the incumbents.

If you live long enough, you might see many examples of such derision.

I can remember being at a meeting at the headquarters of the National Cable Television Association, in the earlier days of high definition television discussions, where it was proposed that a full HDTV signal could be squeezed from about 45 Mbps of raw bandwidth to the 6-MHz channelization used by the North American television industry.

The room essentially exploded, as the attendees, mostly vice presidents of engineering from the largest cable TV and broadcast firms, disagreed with the sheer physics of the proposal. Later, the executive who suggested HDTV in 6 MHz was indeed possible talked with his firm’s engineering vice president, about the the science, to reaffirm that such a thing actually could be done. “Are you sure about this?” was the question, given the magnitude of opposition.

To make a longer story short, it did prove feasible to compress a full HDTV signal into just 6 MHz of bandwidth, making for a much-easier financial transition to full HDTV broadcasting, as well as an ability for cable TV operators to support the new format.

Similarly, when the U.S. cable TV industry began to ask for analog optical transmission systems capable of carrying 20 channels of standard definition video without complicated channel-by-channel coding and decoding, a distinguished engineer from Bell Laboratories privately assured me that such a thing was in fact not possible, and that people who claimed it was possible were simply wrong.

To make a longer story short, it did indeed prove possible to take a full complement of analog video signals (40 channels, as it turned out), convert the full set of broadband signals to analog optical format, and deliver them over distances useful for cable TV purposes.

On another occasion, the vice president of one of the world’s biggest suppliers of equipment said privately that “digital subscriber line does not work” as a platform for high speed Internet access, even at relatively low speeds. Ultimately, that also proved incorrect. Over time, DSL performance was not only proven to be commercially viable, but also delivered much-faster speeds, over longer distances, as experience was gained.

The point is that when a smart, experienced, thoroughly-knowledgeable executive says that something “cannot be done,” one has to translate. What the statement means is only that, at a given point in time, before the application of effort and ingenuity, a given entity has not been able to do something.

That does not actually mean something literally “cannot be done.” Quite often, formerly impossible things actually are made possible, after dedicated investigation and development.

That sort of thing happens often enough that statements deriding novel approaches to solving problems should not be lightly dismissed. New platforms and approaches often do appear to be “toys” at first. But that is not where developments remain for all time.

Executives generally truly believe disruptive new platforms and approaches are unsatisfactory substitutes for higher-performance solutions. That often is quite true, at first. But substitute products often do not remain fixed at such levels. They often improve to the point that, eventually, the new approach is a workable solution for a wider range of applications and customer use cases.

 
Having lived long enough to see the “smart guys” proven quite wrong, I am careful never to argue something really cannot be done. Sometimes, somebody, or another company, is able to do so, even when a reasonable, smart, experienced practitioner “knows” it cannot be done.

45% of Service Providers Now Offer Managed Services

More than 45 percent of communications service providers surveyed on behalf of Allot Communications now sell managed services for enterprises and small and mid-sized business customers ranging from basic email and storage to fully-fledged unified communications, customer relationship management and enterprise resource planning solutions, Allot says.  

Microsoft Office 365 is the most prevalent office suite, sold by a third of all service providers surveyed.

About 23 percent of respondents offer quality of service solutions for mission-critical applications and 32 percent sell cloud-based security services.

QoS management is more common when service providers are selling unified communications, Office and Microsoft Lync.

Allot argues that such cloud services are important for telcos because the opportunity is so large, and telcos need distinctiveness to compete with market leaders Google, IBM, Microsoft and Amazon. Cloud services are projected by Infonetics Research to be a $200 billion revenue business by 2018.  

A change seems to have happened, though. Where initially it was small businesses and smaller organizations that were most likely to buy a cloud-based managed service, the “threshold for an enterprise to source cloud apps has dropped,” said Yaniv Sulkes, Allot Communications AVP.

“In many cases, even large enterprises dind it advantageous to source from thje cloud, rather than hosting themselves,” said Sulkes. “Organizations with 5,000 to 20,000 employees now use cloud-based Salesforce.”

"Mobile Eats the World"

The phrase “software eats the world,” coined by venture capitalist Marc Andreessen in 2011, might have an analogy: mobile eats the world. Already, mobile devices (smartphones and tablets) represent about half the value of consumer electronics sales.

Andreessen’s 2011 quip was meant to illustrate the principle that “we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.”

The newer adage--”mobile eats the world”--is meant to illustrate the growing shift of human activity from tethered to untethered devices. “There is no point in drawing a distinction between the future of technology and the future of mobile:they are the same,” says Benedict Evans, also a venture capitalist.

By 2020, Evans argues, the number of people using the Internet, and the number of people using smartphones, will be identical. By about 2017, the percentage of people “not using the Internet” will be identical to the percentage of people “not using smartphones.”

By 2020, 80 percent of everyone on the planet will be using a smartphone, Evans predicts. Every year, at least 7.5 trillion messages are sent by people using mobile networks.In 2010, the U.S. telecommunications industry along employed about 900,000 people.

WhatsApp now supports at least 7.2 trillion messages a year. WhatsApp employs 30 engineers. That shows the relative advantage software firms have in cost structure, compared to capital-intensive industries such as telecommunications, that supply similar services.

Benedict Evans - Mobile Is Eating the World

People Spend 40% of Waking Hours Communicating or Consuming Media

Benedict Evans - Mobile Is Eating the World

If it seems that everyone you know is staring at a mobile screen during the day, that is because they are. 

During most parts of the day, 40 percent of all U.S. consumers are interacting with media and content or communicating, according to . 

In the evening hours, that percentage can rise to 70 percent, according to venture capitalist Benedict Evans.

U.S. consumers spend about three hours a day interacting with their mobile devices, about two hours and 48 minutes watching TV, according to the US Bureau of Labor Statistics. 

In other words, the number one screen, for content consumption,  is the mobile phone.

The television, which once was known as the “first screen,” and the personal computer, once known as the “second screen,” now have yielded their positions. Mobile has become--in terms of engagement time--the first screen. 

TVs possibly are the second screen, while PCs and tablets are the third screens.

In fact, U.S. consumers now spend more time on smartphones than PCs.

There also is a virtual certainty that people are looking at their mobile screens even when in front of the TV, so engagement with TV content arguably is dropping. According to Flurry, time spent on mobile devices grew by 9.3 percent in the past nine months.

Declining Voice, Texting Revenues Pressure Mobile Ops in South Asia, SE Asia

Declining voice and text messaging revenues, plus huge investments in next generation networks will put extreme pressure on South Asia and Southeast Asia mobile service provider cash flow, resulting in minimal or negative free cash flow, Fitch Ratings said in November 2014.

“Revenue growth will be limited to low-to-mid single digit percentages as fast-growing data services offset declines in traditional voice and SMS revenues,” Fitch Ratings said.

Mobile service providers in the Philippines, Sri Lanka and Thailand plan to invest 25 percent to 30 percent of their revenue to build new networks or acquire new spectrum.

In Singapore, the issue is dividends, as service providers there plan to distribute 80 percent to 100 percent of net income to shareholders in the form of dividends.

Overall, the noteworthy observation is that mobile service providers in South Asia and Southeast Asia face the same sorts of problems as service providers in developed regions: cannibalization of voice, text messaging and international revenues, as well as competition.

90% Adoption of Mobile by 2020, Globally

It often is helpful to note problems the world has solved. 

So it is that Ericsson now predicts 90 percent of people aged six years and over will use mobile phones by 2020, when the number of smartphone subscriptions is set to reach 6.1 billion. 

It will have taken a couple of decades, but we will fundamentally have solved the problem of providing voice and text communications to everyone.

The new challenge is to build on those accomplishments by providing Internet access and apps to everyone. The Ericsson report suggests we are well on the way. The number of mobile broadband subscriptions grew 30 percent year over year, reaching 2.5 billion accounts.

Some 65 percent to 70 percent of all mobile phones sold in the third quarter of 2014 were smartphones. That has contributed to 60 percent growth in mobile data traffic during the 12 months since the third quarter of 2013.

Notably, subscribers in Asia Pacific, the Middle East and Africa are exchanging their basic phones for smartphones. By 2020, global mobile broadband subscriptions are predicted to

reach 8.4 billion. at which point mobile high speed access will account for 90 percent of global high speed access accounts.

As a direct result, network traffic will primarily be generated by smartphones, as total monthly smartphone traffic over mobile networks will increase around 800 percent between 2014 and 2020.

Video is the largest and fastest growing segment of mobile data traffic, expected to grow by

45 percent annually through to 2020, by which time it is forecast to account for around

55 percent of all global mobile data traffic.

Social networking will drive 15 percent of total traffic. Web browsing will represent about five percent of total traffic.