Rate of Return Regulation Now Drives Cost in Electrical Utility Business

If you have been in the telecom business for some decades--long enough to remember rate of return regulation--you know how different the business is today.

Some might start wondering whether a shake-up is needed in the electrical utility business that--even decades ago--was widely considered more stodgy than telecom.

Utilities still operate under rate of return regulations, meaning if they invest a dollar, they are guaranteed to earn more than a dollar on the investment.   

Rate of return regulation historically did not promote innovation in the telecom business, and did next to nothing to restrain spending or prices. Some might now be seeing similar problems in the electrical utility business, which despite all efforts has not yet been subjected more to market forces.

Families in New York are paying 40 percent more for electricity than they were a decade ago, the Wall Street Journal reports.  Meanwhile, the cost of the main fuel used to generate electricity in the state—natural gas—has plunged 39 percent.

Prices have not fallen because of rate of return regulations, in essence.

If you are a veteran of the telecom business, you know all about that.

Republic Wireless Wants to Pay You for Data You Don't Use

Republic Wireless is taking a different approach to data plan capacity not used in any single billing period. “What if you could get paid back each month for whatever cell data you didn’t use?” Republic Wireless Labs now says.  “Like, in money. Actual dollars credited back to your account.”

“If you signed up and were selected for Lab 1: Maestro, then having total control over your plan and the ability to get paid back for what you don’t use is exactly what you’ll be helping us test and figure out, this May,” said Republic Wireless. “What if you had total control over your plans and could appropriately size them for what best fits your needs?”

The issue Republic Wireless is tackling is generalized unease over prices and value.

“Our members want access to LTE coverage, but only four percent were willing to pay extra for an LTE plan,” Republic Wireless said. “On average, every single smartphone user is overpaying about $16/month for service they never use.”

10 Gbps Per User? Yes, Say 5G Backers

If fifth generation mobile networks supply 10 Gbps of bandwidth for every user or device, then even using all other available techniques--multiple input, multiple output radios, directional and phased array antennas, beamforming, ultra-dense small cell networks, better semiconductor technology, signal polarization and dynamic spectrum access--lot of new spectrum will be required.

Early discussion of which bands in the millimeter wave band (3 GHz to 300 GHz) will happen at this year’s World Radiocommunications Conference.

To give you some idea of what eventually will happen, the regional allocation for mobile services now is about 500 MHz, in total. For 5G, allocations are expected to be in the 10 GHz range. In other words, two orders of magnitude more bandwidth is expected to be allocated, but most of the growth will come from use of small cell architectures.

Some think as much as two orders of magnitude effective spectrum use will come from small cell architectures, about 20 times improvement from additional spectrum and maybe twice as much effective use will come from all the improvements made possible by Moore’s Law.

But there is lots of room for surprise. Some think the present limit of about two bits per Hertz of bandwidth could grow to 10 bits per Hertz or even 30 bits per Hertz, effectively. That would be a stunning advance, indeed.

   source: Keysight Technologies

In that regard, Ofcom, the U.K. communications regulator, has identified the millimeter wave bands it believes are best for fifth generation (5G) networks, and especially suitable for early discussion at the upcoming World Radio Conference.

“Our preliminary view is that the frequency bands 10.125 to 10.225; 10.475 to 10.575 GHz; 31.8 to  33.4 GHz; 40.5 to 43.5 GHz; 45.5 to 48.9 GHz and 66 to 71 GHz should be considered for study under a focussed agenda item on 5G mobile broadband for WRC-19,” Ofcom said.

At the moment, Ofcom says, there is general consensus that immediate efforts should be focused on additional spectrum below 100 GHz. Satellite interests generally argued that new allocations should be made at above 30 GHz, to avoid interference with existing satellite operations.

“We think these bands may be relatively straightforward to make available in the UK

compared to other options within the range 6 to 100 GHz...and could have potential for being harmonised and developed for future 5G use globally,” Ofcom said.

Spectrum adjacent to these bands, such as around 10 GHz, 43.5 to 45.5 GHz and 71 to 76 GHz and 81 to 86 GHz also are worth examining, Ofcom said.

To give you some idea of how much spectrum might be feasible, consider that Ofcom said

“it is particularly difficult to identify bandwidths of least 1 GHz below 30 GHz taking

account of incumbent use of these bands.” In other words, Ofcom is looking, ideally, at allocations of at least 1,000 MHz per band.  

Ofcom also points out that several different technology solutions will help enable use of spectrum above 6 GHz to enable 5G.

Those solutions include  massive multiple input, multiple output radios, directional and phased array antennas, beamforming, ultra-dense small cell networks, better semiconductor technology, signal polarization and dynamic spectrum access.

source: Ofcom

Commercial Project Loon Service in 2015 or 2016?

Some time in 2015 or 2016, if all goes according to plan, Google believes it will be able to create a continuous, 50-mile-wide ring of Internet service around the globe, initially focusing on potential customers across southern Africa, southern Australia, New Zealand and southern Latin America, and supplied by Project Loon, the constellation of planned unmanned balloons.  

The general plan seems to be to pioneer LTE service acorss relatively sparse areas before expanding to more-populous areas.

Google estimates the cost of coverage to be an order of magnitude less than building a network of cell towers to provide equivalent coverage.

Although Project Loon initially tested Wi-Fi as the communications protocol, it has since switched to Long Term Evolution, making mobile service providers logical partners.

Google says it can now deliver data at 5 Mbps to mobile phones, or 22 Mbps to fixed antennas.

Regulators Cannot See the Future, But Still Have to Try

Regulators cannot foresee the future: they have to do the best they can, without knowing how the economic context surrounding the industries they regulate will change.

So it is not surprising that it sometimes is said that regulators are “behind the market,” or “behind the technology,” no matter how hard they try to stay current.

A couple of recent developments illustrate the problem. In the U.S. market, where Comcast wants to acquire Time Warner Cable, Comcast has proposed concessions to keep its video market share at 30 percent, the traditional level of market share beyond which market concentration and antitrust issues are raised.

Some argue that is the wrong test. Combining the nation’s two largest cable and Internet providers would create a company with 57 percent share of the market for high speed access service, now defined by the FCC as 25 Mbps or higher.

That matters because the linear video business widely is viewed to be under threat, while high speed access has emerged as the key or strategic service for any access provider.

In other words, if the video business is declining, it makes little sense to worry too much about market share in that business. If, on the other hand, high speed access now is the crucial service, it makes lots of sense to watch market share developments for that product.

To be sure, “defining the market” always is a key premise and assumption. In this case, one might argue it is video, voice, Internet access or triple play services that constitute the relevant market. Some might argue the market is “fixed network” services only, while others might look at all providers--whether mobile or fixed.

Regulators have been surprised before by fundamental changes in markets. In the period leading up to passage of the Telecommunications Act of 1996, the thinking was that the relevant market was fixed network voice.

Within four years, the voice market peaked, and has declined steadily ever since. Instead, it was the Internet, and services, business models and apps based on the Internet, that has become strategic.

To a significant extent, U.S. antitrust regulators have to make choices about what drives future competition: video or high speed access?

European Union regulators face a related problem: namely perceived Google dominance of the search market, and possibly the mobile operating system market as well.

Some of us would say Google’s search market share is a  trailing indicator, not a leading indicator.

In other words, as was the case earlier when Microsoft was similarly investigated and fined, action assumed a linear continuation of alleged market dominance, instead of a market that already was peaking and headed for massive change.

In other words, a shift is likely already to be underway, rendering the danger of Google antitrust danger quite moot.

Whether the relationship was causal or simply correlated, the decade-ago investigation by the EU of Microsoft’s similar antitrust threat coincided with the emergence of a new era of computing, and computing industry leadership.

The problem faced by regulators and business leaders often is that strategies deemed vital at one moment in time can seem almost irrelevant a decade later.

Consider the launch of the Android mobile operating system by Google, seen in 2005 as an insurance policy against complete dominance in the mobile realm by Microsoft, with the danger that could pose for Google apps on mobile devices.

That was before the emergence of the Apple iPhone. A decade later, the strategic rationale arguably no longer has such potency. For starters, Microsoft Mobile is not a huge factor. Nor has Android proved to be the boon many might have expected. Android doesn’t directly generate revenue for Google, and “forked” versions of Android even are proving to be the foundation for new rival ecosystems (Amazon now, and possibly Microsoft and others in the future).

The Telecommunications Act of 1996 likewise was the first major revision of the Communications Act of 1934. Aiming to introduce competition in the telecommunications market, the Act focused on enabling voice competition.

More than a decade later, it is clear what really happened. Voice was about to reach its peak of adoption in 2000, to begin a steady decline. The Internet, meanwhile, emerged as the vital source of telecommunications-delivered applications and value.

The Act made sense at the time. But policymakers could not have foreseen the maturation of voice and its replacement by Internet apps as the source of innovation and growth.  

It is very hard to make the right strategic decisions today, and have them remain relevant after a decade. Both the Telecommunications Act of 1996 and launch of Android were aimed at problems that did not materialize, or arose from unexpected directions.

Google Project Loon Now Can Mass Produce Internet Balloons: Launch Coming?

Google "Project Loon," the anticipated effort to launch a constellation of unmanned balloons able to provide Internet access across the global south, now is able to mass produce the balloons in a matter of hours, where it once took three to four days to make a single balloon. 

That sounds like Porject Loon getting ready to launch a full constellation. 

With a few new low earth orbit satellite constellations also preparing to launch in coming years, competition in the Internet access business is heating up in a profound way, posing a challenge to mobile operators who once were thought to be the logical suppliers of Internet access across much of the global south. 

Still, Project Loon appears to be testing the use of mobile Long Term Evolution cell towers for backhaul. At the very least, Project Loon, in a commercial phase, could be a wholesale customer for many mobile service providers across the global south. 

Conversely, Project Loon could be a wholesale provider to mobile service providers, who would use the constellation to provide branded retail Internet access service. 

Android, Telecom Act of 1996 Were Misplaced, as it Turns Out

The problem faced by regulators and business leaders often is that strategies deemed vital at one moment in time can seem almost irrelevant a decade later.

Consider the launch of the Android mobile operating system by Google, seen in 2005 as an insurance policy against complete dominance in the mobile realm by Microsoft, with the danger that could pose for Google apps on mobile devices.

That was before the emergence of the Apple iPhone. A decade later, the strategic rationale arguably no longer has such potency. For starters, Microsoft Mobile is not a huge factor. Nor has Android proved to be the boon many might have expected. Android doesn’t directly generate revenue for Google, and “forked” versions of Android even are proving to be the foundation for new rival ecosystems (Amazon now, and possibly Microsoft and others in the future).

The Telecommunications Act of 1996 likewise was the first major revision of the Communications Act of 1934. Aiming to introduce competition in the telecommunications market, the Act focused on enabling voice competition.

More than a decade later, it is clear what really happened. Voice was about to reach its peak of adoption in 2000, to begin a steady decline. The Internet, meanwhile, emerged as the vital source of telecommunications-delivered applications and value.

The Act made sense at the time. But policymakers could not have foreseen the maturation of voice and its replacement by Internet apps as the source of innovation and growth.  

It is very hard to make the right strategic decisions today, and have them remain relevant after a decade. Both the Telecommunications Act of 1996 and launch of Android were aimed at problems that did not materialize, or arose from unexpected directions.