Zero Rating Facebook Lead to a Doubling of Mobile Internet Purchases in Philippines

Zero rating of content--allowing mobile users access to one or more Internet apps without requiring a mobile Internet subscription, is controversial in some quarters as a violation of network neutrality principles.

But zero rating works, as a way of introducing mobile users to the value of using the Internet, according to tests run by Globe Telecom in the Philippines.

The “Free Facebook” test, which offered all Globe mobile users access to Facebook, including those without a mobile data plan, ran from October 2013 to May 2014.

Over the course of the test, the number of data users on Globe’s network doubled, and the portion of Globe’s prepaid subscriber base who were active on mobile data expanded from 14 percent in September 2013 to 25 percent in November 2014, Facebook and Globe say.

In other words, the mobile Internet customer base nearly doubled.

Globe’s Free Facebook campaign (and similar internet outreach efforts by other players in the market), led to a six million increase in the number of active mobile internet users in the Philippines as a whole.

During the first phase of the trial, Globe’s user base increased by 17 percent. Along with continuing to use data, these users also shifted core telco spend over to Globe’s network, growing voice and text messaging revenues by five percent.

By the end of the first campaign, prepaid mobile data users grew from 4.8 million to 9.7 million, more than a two-fold increase.

After the test, Globe saw a 34 percent jump in average revenue per user, as customers converted to paid mobile service.

The percentage of Filipinos who access Facebook only from WiFi--and never from a mobile data network--decreased from 38 percent at the start of the Free Facebook campaign to 17 percent at the end of Free Facebook Phase two.

Comparing third quarter 2013 (pre-Free Facebook phase one) to the third quarter of 2014 (post-Free Facebook phase one) saw a 58 percent increase in mobile browsing revenue on Globe’s network.

Complain about zero rating if you desire. It worked to acquaint millions of Filipinos with the value of the Internet, and increased the number routinely using the Internet.

Does Net Neutrality Decision Illustrate New Balance of Political Power Within Ecosystem?

Some might take a cynical view of the Federal Communications Commission’s network neutrality rules, since politics matters in Washington, D.C., and matters greatly for the setting of communications policy.

To a great extent, politics also reflects perceived political power. So one might argue the perceived power of the ISPs has dropped, while the power of the app providers has grown.

In a way, this is the political analogy to the “content versus distribution” debate within the video ecosystem: who has more power within the ecosystem?

“What the net neutrality rules really demonstrate--and a little sooner that we are all comfortable with--is that a new status quo is emerging. And that status quo is Google, Netflix, Facebook et al,” writes Kieren McCarthy, of The Register.   

Others might note that executives from Google visited the White House once a week, on average, during the tenure of President Barack Obama.

Some might call that an exaggeration of the situation, but others might say there is great merit. Power within the Internet ecosystem has, for some time, shifted away from ISPs and access providers, and towards the app providers, in the same way one might argue power has shifted to content owners versus content distributors in the video ecosystem.

It perhaps is no coincidence that the video and content distributors (pipes and access) are one and the same. What seems most unique and valuable in video content or Internet ecosystems are apps and content, not access methods. In fact, people only want Internet access because they want to use the apps.

If you subscribe to the view that power matters, and gets expressed in politics and then FCC decisions, the net neutrality ruling will come as no surprise.

“The FCC hasn't suddenly discovered it must fight for the people's rights: it's simply realized that it's time to serve new masters,” said McCarthy. “The new rules are simply paving the way for the next generation of companies who will bend the market and government to their profit-making will – and be given the freedom to do so in the policies of today.”

McCarthy is blunt: “The people that will be most served by the rules are not consumers but large Internet companies.”

Google and Netflix didn't want interconnections between networks regulated, and so they were not regulated.  While the FCC sees future possible negative motives in the cable companies, it seems to think the opposite is true when it comes to the internet companies, McCarthy noted.

As McCarthy sees matters, one huge problem is that the FCC acted without knowledge. The agency’s "open internet" plan wanted Internet service providers to supply all information about network packet congestion including the source of it, its location, its size and so on. The actual order does not require such information. Why?

As the document notes, “we decline at this time to require disclosure of the source, location, timing, or duration of network congestion, noting that congestion may originate beyond the broadband provider’s network and the limitations of a broadband provider’s knowledge.”

In other words, congestion can happen for all sorts of reasons beyond an ISP’s control.

One might cynically say the FCC continues to “blame” ISPs for bottleneck or oligopoly practices, while it continues to see app firms as aggrieved parties.

The FCC is going to force cable companies to provide many more details over their internet offerings: everything from speeds, rates, restrictions and packet loss stats.

But the agency doesn't know how to. So it is asking its Consumer Advisory Committee to come up with a plan within six months.

The FCC is also going to be the place for disputes over how cable companies are ripping off consumers and internet companies on a "case-by-case basis." But it doesn't have such a facility, and has never really run one before so it will have to create and hire a new ombudsman, McCarthy says.

One might argue the Commission acted to prevent clear abuses of market power by cable companies. The issue is whether the Commission adopted remedies that are unnecessary, and ignored the growing power of app providers (edge providers) in the ecosystem.

The view seems to be that the ISPs are inherently monopolists, while app providers inherently are innovators posing no threat to Internet openness.

Google Fiber Salt Lake City Gigabit Network is in Design Phase

Salt Lake City is among the new U.S. metropolitan areas--including Atlanta, Charlotte, Nashville and Raleigh-Durham-- metro areas now in the design phase of Google Fiber’s gigabit Internet access service.

In a Competitive Market, the Low Cost Provider Wins

One business lesson I learned in the cable TV business decades ago was that,  “in a competitive market, the low cost provider wins.”

It also helps when a business can create or discover entirely new sources of revenue as well. But operating costs, profit margins and capital investment burdens, do matter as well.

Right now, U.S. mobile operators are feeling pressure on all those fronts. Several have made huge investments in new spectrum, and new auctions are coming. The industry is in the midst of a price war and new competition seems to be coming.

All that also has put pressure on equity values. By some estimates, U.S. mobile operator equity values have dropped $45 billion between November 2014 and March 2015.

It is probably coincidence that the cost of new spectrum purchased in the AWS-3 auction was about $43 billion. The bigger issue has been the warnings by AT&T and Verizon that profits will be challenged in the early quarters of 2015.

So the eventual winners will have found ways to create big new revenue streams, maintain profit margins and cut costs.

In the absence of consolidation by the top four national providers (regulators seem unwilling to approve), contestants have to cope by considering losing market share to protect margins or sacrificing margins to gain share.

Some think a four-provider market would become much more stable with two “premium” suppliers--AT&T and Verizon--and two “value” suppliers Sprint and T-Mobile US.

But at least some fear the mobile operators might never recover investment costs, as network upgrades and spectrum purchases escalate.

AT&T’s Domain 2.0 program is one way to attack capital and operating costs by virtualizing the network.

Telecom "Structural Decline" is Spreading

“Structural decline” of the market is not a phrase the provider of any good or service wants to hear.

Nevertheless, that is precisely what has happened in a number of segments of the communications business, including  long distance voice, business and consumer voice overall, mobile voice and mobile texting.

Now we can add linear video subscriptions to the list. The Cabletelevision Advertising Bureau estimates that about 40 percent of third and fourth quarter TV ratings declines can be attributed to over the top  subscription online video services.

Total TV viewing fell about 10 percent in the third quarter and about nine percent in the fourth quarter, according to an analysis of Nielsen data by Sanford C. Bernstein.

In the first quarter of 2015, so far, TV viewing appears to be down about 12 percent, according to Bernstein estimates.

“We believe the U.S. television industry is entering a period of prolonged structural decline, caused by a migration of viewers from ad-supported platforms to non-ad-supported, or less-ad-supported platforms,” wrote Bernstein analyst Todd Juenger.

The only “legacy” business that has not yet reached saturation, and begun to decline, is high speed Internet access. And some would argue that is because it is a “new” product line.

But high speed access will eventually become saturated as did the earlier products lines. That is why the search for big new revenue streams is so important, and why some believe industry regulation should aim to foster growth, not damp it down.

US Telecom Filed Lawsuit Challenging Net Neutrality Rules

The first of several lawsuits challenging the new Federal Communications Commission network neutrality rules has been filed, this one by the USTelecom, the trade group representing U.S. telcos. 

Broadcasters, TV White Spaces Supporters Disagree About Database "Problems"

Any database-driven approach to spectrum sharing will hinge on the accuracy of the databases, it goes without saying. Citing errors in the databases, the U.S. National Association of Broadcasters has asked for an immediate halt to TV white spaces operations in the United States.

The Wireless Innovation Alliance, which supports TV white spaces deployment, counters that NAB provided no evidence of interference, no evidence that any FCC requirement is not being met, and no instance of any harm to a broadcaster from the data-entry rules and processes it criticizes.

NAB alleges there is evidence of “false entries.”

“The current database design allows--and may encourage--users of TV white space devices (also known as TV Band Devices or TVBDs) to falsify information they are required to enter into the database when they register certain fixed and mobile devices,” NAB argues. “This information includes, among other things, the location information upon which the Commission premised the entire concept for spectrum sharing in the TV band.”

NAB says it has conducted multiple analyses of the TVWS database in 2014, and, that at various points, more than a third of the devices in the database contained “patently inaccurate” location information.

The Wireless Innovation Alliance counters that test entries are a necessary part of the verification process.

The "discrepancies" between location and address are not indications of a messy database, the Wireless Innovation Alliance says.  

The database contains two entries for each device: Its actual location and a contact record for the operator of the device.

The “location” is where the device is; the “address” could be where the responsible company can be contacted.

The skirmishing is not terribly unusual. Struggles over allocation of spectrum often pit broadcasters against communications interests or satellite interests against mobile interests.