Common Carrier Regulation of Fixed High Speed Access Would Raise Taxes $90 a Year

Title II common carrier regulation of consumer Internet access--whatever else happens to pricing and investment in next generation networks--also will raise taxes for U.S. consumers.

The Progressive Policy Institute calculated that the average annual increase in state and local fees levied on U.S. fixed network users will be $67 each year, while mobile broadband taxes would grow $72 per line, per year.

The annual increase in federal fees per household will be roughly $17. That implies a potential higher cost of about $84 to $89 a year.

“When you add it all up, reclassification could add a whopping $15 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program,” the Progressive Policy Institute notes.

The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.

Those charges would occur because once Internet service providers are labeled “telecommunications providers” under Title II, their services become subject to both federal and state fees that apply to those services. The two main federal charges are an excise tax and a fee for “universal service.”

The bottom line is that annual residential fixed network high speed access costs would likely go up by $8 in Delaware to almost $148 in certain parts of Alaska, on an annual basis.  

The average fee for fixed network high speed access users would range from $51 to $83 per year.

Mobile phone bills would likely increase by at least that amount, as well.

The additional spending per household for fixed high speed access alone, attributable to the federal universal service program would amount to $2.014 billion (equal to $1.38 per month increase x 12 months x 121.7 million households).

U.S. Linear TV Viewing Drops 4.4% in a Year

Digital video viewing is up by double digits across key adult demographics, while viewing via a traditional TV screen is dropping, according to Nielsen’s new “Total Audience Report.”

The average U.S. adult spent four hours and 32 minutes watching live TV in the third quarter of 2014, down 4.4 percent from four hours and 44 minutes in 2013.

The amount of time spent on time-shifted viewing using a digital video recorder rose to 30 minutes, from 28 minutes in the third quarter of  2013.

Time spent using the Internet on a computer climbed to one hour and 6 minutes, up from one hour, the report noted.

Time spent watching video using a smartphone spiked to one hour and 33 minutes, from one hour and 10 minutes a year ago.

Digital-video usage overall rose 60 percent year over year, from six hours and 41 minutes in the third quarter of  2013 to 10 hours and 42 minutes in the third quarter of 2014.

Time spent watching Internet video was up 53 percent among adults 18 to 49 quarter over quarter, Nielsen reported.

Linear TV viewing for viewers 18 to 49 dropped three percent.

Among adults 25 to 54, viewership of digital content grew 62 percent,  while linear TV declined two percent.

Among adults 55 and older, digital viewing rose 55 percent while linear viewing was flat year-over-year.

Declining Demand a Problem for Growing Range of Telecom Products

The biggest problem arguably faced by the linear video subscription business is declining demand for the product, a trend that already has affected fixed network voice and mobile network text messaging.

New data from Bernstein Research shows TV audiences have continued to decline. And though one should not give too much credence to any one-week change, aggregate cable television audiences dropped eight percent Nov. 17 through 23 of 2014, while broadcast TV viewing dropped nine percent, according to Bernstein Research.

Aggregate audiences are also down over the third quarter of 2014, a possibly more-significant trend. Both cable TV and broadcast TV viewing dropped nine percent.

Children's programming fared even worse, with audiences falling 12 percent in a week, and 15 percent during the quarter, according to Bernstein.

The slipping viewership among young audiences may be because children's programming is particularly vulnerable to competition from streaming services like Netflix and Hulu, some argue.   

Nickelodeon viewership fell 25 percent and Disney Channel viewership fell 24 percent.

Thailand Proposes New Wholesale-Based Telecom Framework

source: ASEANBriefing

The Thai government now hopes to create a different wholesale infrastructure entity to support fixed and mobile telecommunications services in Thailand.

To be sure, wholesale infrastructure already is wholly-owned by the government.

Two firms--TOT and CAT--own facilities and issue concessions to private operators to use the assets.

In that framework, all retail providers compete without benefit or detriment of network asset ownership. 

Some might argue the new national network will allow faster investment in new facilities in some areas by increasing the expected financial return from investing in new assets.

But the change might be unsettling for TOT and CAT, the two Thai state-owned firms that formerly owned infrastructure. So far, it appears the new wholesale entity will control the wide area optical backbone and tower networks.

That might mean the existing fixed local access network might remain the province of TOT. Likewise, it is not yet clear whether CAT's gateway and international traffic functions will remain with CAT.

Much depends on which assets are transferred to the new wholesale entity, and how the terms, conditions and price of wholesale access are set. In what might be termed a "worse case" scenario, CAT and TOT both largely become retail operators rather than wholesale providers.

And, if so, how well might they handle the challenge? To the extent that new primarily retail function develops. do the firms possess the right mix of human and other assets to compete effectively as "virtual operators?"

The proposed “national backbone holding company” could inherit the 150,000 kilometers of optical fiber owned by state-owned operators TOT and CAT.

The new wholesale company might also incorporate about 50,000 km of optical fiber owned by private players and the Electricity Generating Authority of Thailand.

The holding company would have separate telecom tower and fiber optic network operations, and would presumably result in all retail providers in Thailand renting transport and access from the wholesale company.

Internet access in Thailand is about 29 percent, and an estimated 30,000 villages have no access to the Internet at all.

Sprint Gambles on Price Attack

T-Mobile US has proven one thing: an aggressive price attack can grow market share, add subscribers, gross revenue and cash flow. What has not yet happened is a longer term shift to actual operating profits.

Sprint seems to be gearing up for a similar strategy test, attempting to wrest price leadership away from T-Mobile US as it gambles on a pricing attack. Whether the strategy "works" in the short term is the issue, to say nothing of the longer-term merits.

Sprint reported a quarterly loss in the third quarter of 2014 of $765 million, compared to net income of $23 million in the second quarter of 2014 and net income of $383 million in the third quarter of 2013.

Now the issue what happens as Sprint has launched an aggressive price attack, offering new customers a permanent discount of half the monthly rates they now pay to Verizon Wireless or AT&T Mobility customers who switch to Sprint beginning Dec. 5, 2014.

The “Cut Your Bill in Half” offer provides unlimited talk and text to anywhere in the United States while customers are on the Sprint network, and the same mobile data allowance new customers now have at AT&T or Verizon, while permanently charging 50 percent of what new customers now are paying to AT&T or Verizon for mobile data service.

At this point, it seems impossible to figure out whether Sprint’s operating cash flow get worse, stabilizes or even improves, in the near term as a result of the new promotion, and other actions Sprint is taking, or might take.

Sprint obviously is banking on something similar to T-Mobile US experience after it launched its price attack. After bleeding customers for years, T-Mobile US began growing fast after it began its “Uncarrier” price war.

In its own third quarter 2014 earnings report, T-Mobile US reported a net gain of 1.2 million branded postpaid phone accounts, and mobile broadband net additions of 200,000. T-Mobile US also added wholesale and prepaid customers, for a total 2.3 million net adds for the quarter.

So gross revenue grew.  Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA, or cash flow), declined to $1.35 billion, down 7.2 percent sequentially and flat, year over year. And there lies the potential problem for both T-Mobile US  and Sprint: revenue, cash flow and subscriber gains at the expense of profit.

If Sprint can, over the next quarter, start to replicate that performance, it is conceivable revenue and cash flow grows, although profit margins could worsen, and Sprint could lose money.

Some might call that a race to the bottom. We will find out soon enough whether Sprint can emulate T-Mobile US and start adding customers, instead of losing them. The longer term issue--whether either firm can eventually shift to profitability--remains the bigger issue.

Customer Retention Drives Mobile Operator Interest in Carrier Wi-Fi

Customer retention likely is more important than traffic offload as a motivation for deploying carrier-owned Wi-Fi hotspots, a survey sponsored by the  Wireless Broadband Alliance, and conducted by Maravedis-Rethink has found.

Fully 70 percent of respondents said a key motivation for deploying carrier Wi-Fi was to improve customer experience, seen in turn as a way to increase subscriber retention.

Some 41 percent of respondents said improved customer experience was the single most important driver to invest in next generation hotspots, ahead of the value of offload.

In both 2013 and 2014, large venues such as stadiums and shopping malls were among the biggest drivers of traffic growth said over 50 percent of respondents, followed by travel hubs such as airports (cited by 48 percent) and connectivity on board transportation (41 percent).

The survey also found that Wi-Fi roaming will continue to be an important way to extend coverage, especially internationally.

In the 2013 survey, 30 percent of the hotspot operators also had roaming deals to supplement their networks, while in 2014, that percentage has risen to just over 50 percent.

Among those surveyed, there was a total base of over 2.8 million directly owned and managed hotspots, and an average of 42,000 locations. When roaming was included, the carriers could provide a total of 8.85 million locations between them, or an average of 193,000 each.

With regards to “next generation hotspot” (the WBA program for seamless authentication between Wi-Fi and carrier networks) deployments, about 44 percent of respondents expected to have deployed at least parts of the platform by the end of 2015.

By the end of 2016, another 31 percent of those with active plans for NGH expect to have NGH deployed.

Some 35 percent of respondents are charging for roaming access, or providing tools and platforms to enable such roaming.

The study included 210 respondents, or which 45 percent were mobile service providers.

The majority of the responses came from North America (39 percent) and Europe (26 percent), followed by Asia-Pacific (19 percent).

U.S. Consumer Spending on Mobility Up 49%, High Speed Access Up 80% Since 2007

Spending on mobile phone service has grown 49 percent since 2007, an analysis by the Wall Street Journal of U.S. Labor Department data shows.

The analysis of 2013 out-of-pocket spending for the middle 60 percent of the population by income (households earning between about $18,000 and $95,000 a year, before taxes) also shows that spending on high speed access has grown by more than 80 percent since 2007.

In 2013, high speed access spending by the studied households made up about 0.8 percent of spending for middle income households, up from 0.4 percent in 2007. It is worth noting that the cost of high speed access in the United States represents less than one percent of income.

In other countries in the Americas, mobile service costs between five percent and 15 percent of income. Of course, much depends on what sorts of plans are compared, as prepaid accounts and postpaid accounts are not comparable, within or between nations, in terms of price or performance.

Prices per person in developed regions might represent half a percent to two percent of income, depending on the type of plan analyzed.  

Globally, mobile service costs can be as high as 15 percent per person in developing regions, while a bit less than five percent per person in developed regions.  

Over that same period, spending on fixed network phone service declined 31 percent.

Spending on cable and satellite television is up 24 percent from 2007, the study also found.