Net Neutrality Rules Will Pass Today

The unknowns are the precise details, and even those won't be available for a few weeks. The rules would not take effect until 30 days after publication. 

Then there will be a short stay of the rules, as lawsuits are filed. Then, in all likelihood, the rules will take effect until the lawsuits are heard and decided. 

How much uncertainty will be created in the U.S. telecommunications business is an issue. 

Despite Robust Mobile Revenue Growth, Axiata Profit Drops 80%

An eight-year robust revenue growth streak has ended abruptly at mobile services supplier Axiata. The issue now is whether the dip is cyclical or structural.

In many key respects, Axiata Group now faces business issues identical to those faced by other mobile service providers, namely robust growth in mobile data revenues, offset by losses of voice and text messaging revenue.

But slower economic growth, foreign exchange issues and investments played a role in Axiata 2014 results as well.

Not even robust mobile data revenue growth of 50 percent was enough to overcome business headwinds faced by Malaysia-based Axiata Group in 2014, which had a full-year 7.9 percent decline in net profit on a 1.9 percent growth in revenue, where the target had been 10 percent.

Axiata has an 84-percent dividend payout ratio, so any dip in revenue has key implications for profits.

Total data revenue grew 31.5 percent year over year.

Slow economic growth, currency issues and heavy capital investment were noted as reasons for the results, which were a reversal after about eight years of strong revenue growth.

Smart was the best performer with revenue growth of 36 percent and  60.5 percent earnings growth. Though voice  revenue grew 19 percent, data grew 135 percent. Performance also was strong at the Robi, Dialog and Idea units, though 44 percent of revenue is earned at Celcom and 35 percent at XL.

source: Axiata

Axiata's Malaysian mobile subsidiary Celcom fell 12 percent and revenue declined 3.5 percent.  

In Indonesia, XL Axiata increased its revenue by 10 percent to 23.6 trillion rupiah ($1.8 billion).

Axiata also recorded a strong performance at its Sri Lanka, Bangladesh and Cambodian subsidiaries, and solid contributions from its affiliates in India (Idea Cellular) and Singapore (M1).

Cablevision Makes "Big Shift:" Now is a Connectivity Company, not a "TV" Company

Cablevision Systems Corp. now says its most important product is Internet connectivity. The corollary is that, at some point, “I would suggest that we'll probably be agnostic about the video and not about the connectivity,” said James Dolan, Cablevision Systems Corp. CEO.

In other words, Cablevision has become more agnostic about linear video and over the top streamed video. Cablevision also is clear that high speed access is the foundation of the coming business.

“Connectivity has surpassed video as the primary product for a company like ours,” said James Dolan, Cablevision Systems Corp. CEO. “The consumer values the connectivity product more than they do the video product at this point.”

That is a “big shift,” said Dolan. If given a choice of linear video or Internet access, consumers “almost overwhelmingly will take the data product.”

And though it remains to be seen whether the current vision is the ultimate vision, Cablevision does not currently seen its Freewheel Wi-Fi- based phone service as a competitor to mobile service.

“We're not chasing the cellular markets to be a mobile phone provider,” said Dolan. “That's just not what the strategy for this product is about.”

And we should assume other products based on Wi-Fi access--inside and outside the home--are coming.

“There are products and services that will go along with that strategic position,” said Dolan. “The first of which you've just seen, which is Freewheel, but there will be others.”

“Wi-Fi is a critical part of our product strategy and one of our most important strategic assets,” said Dolan.

There are several important insights here. First, Cablevision sees itself as a connectivity company, not a video services provider.

Also, Wi-Fi is seen as a key building block for new services, beginning with a new Wi-Fi-based phone service, but likely to be followed with a mobile video consumption service.

Finally, Cablevision finally has launched a service it first envisioned in the late 1980s, namely an untethered communications service distinct from what we now know as “mobile phone service.”

An Illustration of Scale Benefits in Mobile

   U.S. Mobile Capex, Compared to Revenue source: TMF Associates

​Historically, North American mobile operators have invested twice as much capital per subscription as their global counterparts, according to analysts at ABI Research.

For 2015, ABI Research forecasts North America capital investment per subscription to be US$63. In comparison, Western European operators will invest US$34.

On the other hand, an argument can be made that U.S. mobile capex actually has been declining, on a per-account basis, for quite some time.

“In absolute terms, network investment has fallen quite sharply since 2004, and only rebounded partially in 2010 and 2011,” according to TMF Associates. “As a percentage of revenues, capex has fallen even further, and has roughly halved in the last decade.”

North American mobile operators invest 39 percent of capital on radio access networks. About 26 percent is targeted at in-building access.

ABI Research predicts North American and global mobile capital investment per subscription will decline, however, after a peak at US$224 billion in 2017.

The perhaps-key implication is that capital investment, as a percentage of revenue, is dropping, likely representing better efficiency because of scale.

      

Big Data is at Heart of Internet of Things

It is likely that big data, one of the big “hype” concepts just a few years ago, will find practical application as an integral part of developing Internet of Things and machine-to-machine applications that essentially gather data and then analyze it for application in real time, or near real time, to control the operation of devices, people and systems.

“IoT isn’t just about gathering data; it’s about using it to make better decisions — that’s the value of IoT, Verizon argues. “Regardless of whether the output is manual or highly automated, analysis of the data must be integrated into business processes. If the data is not actionable, by you or a third party, it’s not IoT.”

India Eliminates Fixed LIne Termination Rates, Cuts Mobile Termination 30%

Indian regulator TRAI has eliminated fixed line termination rates and cut mobile termination charges by around 30 percent. Notably, the reason for the fixed line termination charges for landline calls is that the fixed line voice business is in decline.

TRAI hopes the end of the 0.20 rupee ($0.003) termination rate for both landline-to-landline and landline-to-mobile calls will stimulate usage and subscriptions, and also lead to more investment in fixed networks.

TRAI also expects to reduce mobile network interconnection charges from 0.20 rupees to 0.14 rupees. That move is intended to stimulate mobile calling.

Those changes in the Indian market are not unusual. U.S. fixed network voice lines have been dropping since 2000. Globally, fixed voice lines have been dropping since about 2006.

Comcast's Next High-Growth Rate Business Will be Mobile

One way of illustrating the potential value of Comcast’s entry into the mobile business can be gleaned from looking at current revenue contributors, with their growth rates.

Of total 2014 Comcast revenue of $68.8 billion, $44.1 billion, or 64 percent, was generated by the cable communications business. Operating cash flow contribution from the cable communications segment was about six percent.

About 37 percent of revenue was generated by the NBCUniversal segment, which grew about 7.5 percent, overall. Operating cash flow from NBCUniversal was about 18 percent.

The main point is that gross revenue and operating cash flow from cable communications is tough, from a growth standpoint.

The consumer part of the cable communications business (triple play services) is growing primarily because of high speed access.

Video revenue for 2014 was up about one percent. Voice revenue was static at about 0.4 percent growth. High speed access was where the gains primarily were made, with growth of 9.5 percent.

Business services contribute about nine percent of cable communications segment volume, at about $4 billion in 2014. But business services grew at a 22 percent rate in 2014. In fact, it might be correct to say the newest product segments in the cable communications segment (business services in general, and mid-market services in particular) have the highest growth rates.

Comcast estimates it has reached about 25 percent penetration of the small business addressable market, but only about five percent of the addressable mid-market opportunity, according to Neil Smit Comcast Cable president and CEO.

So mid-market revenue “is growing at a increasing rate relative to SMB,” said Smit.

In 2013, Comcast “had literally zero penetration in the mid sized sector,” said Michael Angelakis, Comcast vice chairman and CFO.

The point is that Comcast has seen the fastest growth rates for successive new products.

That suggests the possible upside from Comcast adding a whole new product line in mobile services, especially if Comcast can position the service first as a way for Comcast customers to view their content, but then secondarily as a way to use voice, messaging and mobile Internet access.

Commenting on capital investments Comcast has made in Wi-Fi infrastructure, the emphasis has been on support for the video business.

“The real goal has been that our customers can access their video any time anywhere whether in the home or outside the home,” said Michael Angelakis, Comcast vice chairman and CFO. “If Wi-Fi can also develop into a different type of service then that’s an added benefit to the Wi-Fi investment.”

But Comcast’s Wi-Fi network now includes 8.3 million hotspots, said Brian Roberts, Comcast Chairman and CEO. “We think we are working on how we monetize that asset and bring it to market.”

“As you know we have MVNO relationships with Sprint and Verizon,” Roberts said, hinting at ways mobile service could be offered, but with much traffic offloaded to the Comcast fixed Wi-Fi network.

Adding mobile service would not only allow Comcast to offer a full quadruple play, but also would add a brand new product line with proven customer demand, but allow use of the new Wi-Fi hotspot network to lower costs.