Internet.org Goes "Back to the Future" for App Development

Lots of steps can be taken to rapidly make Internet accessible to everyone. One step you do not hear much about is “bandwidth efficiency” or "coding efficiency" or perhaps even simplicity.

But you might have heard complaints about "bloatware" or "useless features" featured as pat

As part of its creation of an Internet.org platform open to all developers, the organization argues that “to sustainably deliver free basic internet services to people, we need to build apps that use data very efficiently,” Internet.org said.

And “efficiency” will run counter to some trends common to the visual web and app world. “Websites that require high-bandwidth will not be included,” Internet.org says. “Services should not use VoIP, video, file transfer, high resolution photos, or high volume of photos.”

That focus is based on a view that networks providing very low cost or free access will have bandwidth constraints.

Operators have made significant economic investments to bring the internet to people globally, and Internet.org needs to be sustainable for operators so that they can continue to invest in the infrastructure to maintain, improve and expand their networks.

Once upon a time, all coding operated in a constrained environment, where processing, memory and bandwidth were limited. Over time, that has ceased to be a key concern for most developers.

But apps intended for use by people who cannot pay much, using networks that are bandwidth challenged, benefit from efficient apps. It has been a long time since that mattered.

The irony is that Facebook is among the popular apps that use auto-play video that dramatically boosts the amount of bandwidth consumed for use of the app.

So the issue is "appropriate technology." Where it is necessary to scale back features, perhpas that will have to be done.

Internet Access Drove 86% of Comcast Net Adds in 1Q 2015

With the caveat that cable operations represent about 64 percent of Comcast revenue, revenue for Comcast access networks increased 6.3 percent to $11.4 billion in the first quarter of 2015 compared to $10.8 billion in the first quarter of 2014, driven by increases of 10.7 percent in high-speed Internet and 21.4 percent in business services.

Year over year, Comcast gained 407,000 high speed Internet access customers and 77,000 voice customers and lost 8,000 video customers.

About 37 percent of Comcast customers bought triple-play service. A third bought double-play services while 31 percent purchased only a single service from Comcast. In other words, about 70 percent of Comcast consumer accounts purchased a multi-service package.

About 70 percent of net product additions in the first quarter of 2015 were dual-play packages (two services), while Comcast lost about five percent net single-product accounts. Comcast had triple-play net gains of about 35 percent.

			Customers						Net Additions
(in thousands)			1Q14			1Q15			1Q14			1Q15
Video Customers			22,601			22,375			24			(8)
High-Speed Internet Customers			21,068			22,369			383			407
Voice Customers			10,865			11,270			142			77
Single Product Customers			8,605			8,399			(147)			(10)
Double Product Customers			8,656			8,890			116			140
Triple Product Customers			9,539			9,945			155			69
Customer Relationships			26,800			27,234			124			199

Operating cash flow for the Cable Communications segment increased 6.2 percent to $4.7 billion in the first quarter of 2015 compared to $4.4 billion in the first quarter of 2014, reflecting higher revenue, partially offset by a 6.3 percent increase in operating expenses primarily related to higher video programming costs, as well as an increase in advertising, marketing and promotion expenses, Comcast said.

The first quarter operating cash flow margin was 41 percent, consistent with the prior year period.

Google Fi Shows Value of Metered Pricing, Ironically

Google Fi might just have inadvertently managed to add some economic clarity to consumer bandwidth pricing, even if it is not so obvious.

Fi, the new Google mobile service in the U.S. market, provides unlimited domestic texting and voice usage, a rather standard policy now in the U.S. market. The major mobile providers now offer that feature routinely: domestic voice and texting now use “flat rate, all you can eat” retail pricing.

So you might argue there is little innovation on that front, for the moment, even if Google Fiber disrupted U.S. price-value metrics in the fixed network Internet access market.

Fi also charges for Internet access on the basis on usage: $10 per gigabyte consumed in a billing period. Again, that does not seem unusual. Virtually all major data plans are based on similar buckets of usage.

Where Fi is different is that, if a user does not consume it all, a rebate is paid back to the customer. That is the one area where Fi represents an innovation. The concept extends an idea T-Mobile US has put into place, namely allowing users to “roll over” data paid for in one billing period that is not used in that period.

AT&T has a modified plan that allows unused data allowances to roll over for one billing period.

Google Fi is the first to simply give the customer back his or her money when data allowances are not used.

The economic clarity is that a fundamental principle of economics is supply and demand equilibrium. In other words, a “fair price” (some might say the “right price”) for any product is the “market clearing price” where people want to produce as much as people want to consume.

In other words, when prices are at market clearing levels there are no shortages and no surpluses.

When prices are set “artificially” high or low, imbalances develop. In the water-scarce U.S. west, enforced low water prices encourage users to consume more when one would prefer conservation of the resource.

Capping apartment rents leads to lower than optimal production of new housing units, as pro-consumer as “rent ceilings” can appear.

Conversely, setting guaranteed high prices encourages overproduction.

So here’s where Fi might be profoundly important: by essentially operating on a “pay only for what you use” basis, Fi also is operating on a “metered usage” basis: consumption and price are in a linear relationship.

Contrast that with the way voice and text messaging now are handled: non-linear relationships between consumption and price. Why?

Supply and demand.

Voice and texting consume almost no bandwidth on networks, and people are demanding less of those products. There is, in other words, an oversupply of voice and text capacity, at the same time there is falling demand. Under such circumstances, offering “unlimited usage” causes no problems, since customers are self-limiting how much they want to use the resources.

Internet access providers have argued for decades that “unlimited usage” was a “right value-price” relationship when demand was low (early days of the Internet, using dial-up lines), and service providers were attempting to stoke usage (gain subscribers).

All that gets turned on its head after the visual web and high speed access develops. Then the value-price relationship is upset. There is too much demand when prices are set too low.

Metered pricing should lead to a better balance, even if, traditionally, many users and app providers have preferred unlimited usage.

And that is the presently-unique approach taken by Google Fi. Its “pay only for what you use” plans actually create incentives for users and suppliers. Users will pay more attention to their consumption, while suppliers will be able to benefit from additional units of consumption.

Ironically, either metered or unlimited plans can be “good for users and suppliers” under different circumstances. Unlimited plans can help grow demand for a new product, but also work when supply is abundant and demand is falling.

In other words, “unlimited” consumption plans work when new markets must be stimulated or older markets are naturally leading to declining demand.

Metered consumption might be the market clearing mechanism for established and strong markets.

In that respect, Fi might have the best approach.

Maybe U.S. Mobile Marketing War Mostly is Harming Prepaid Service Providers

When observers cannot agree what is happening in the mobile business you can surmise that something rather subtle is happening. So it is with the possible impact of marketing wars on U.S. mobile service providers, despite one or two uncontested observations.

There is disagreement about how the marketing war is affecting AT&T and Verizon. In fact, some might argue the impact on Verizon and AT&T so far has been quite slight. Churn rates for the two carriers are stable, average revenue per account is stable and gross revenue is up, though operating income dipped, year over year.

There is general agreement that T-Mobile US has gained, at least in terms of subscriber growth, while Sprint has suffered, in terms of subscriber count and average revenue per account.

But some would point to lower industry average revenue per account, which fell for a second straight quarter, to an average of $136/month, down from$141 in the fourth quarter.

The biggest drop happened at Sprint, where heavy promotions lead to a 14 percent dip, quarter over quarter, $132/month. But it is difficult to point to clear signs of serious financial damage at AT&T and Verizon.

One might argue it is “too early” to see the impact, but the marketing battles have been underway for more than a year. That should be enough time to discern impact, if there is any serious change.

Some might argue that most of what is happening, in terms of market share shifts, is that T-Mobile US is taking share from other prepaid services, not AT&T and Verizon.  

Voice Has 5 Years Left, as a $20 a Month Product, Cablevision Believes

Two on-going issues in the fixed network communications business were highlighted during the Charter Communications quarterly earnings report for the first quarter of 2015. The first is the reality of stranded assets--deployed access capital that does not earn a return.

“Our broadband penetration is now at over 40 percent of homes passed, and today at about 85 percent of our residential Internet customers subscribe to tiers that provide 60 megabits or more,” according to Tom Rutledge, Charter Communications CEO.

While the high percentage of customers buying service at a minimum of 85 Mbps is significant, the other salient fact is the roughly 60 percent of homes passed by the network that do not buy.

As a rough metric, that means the cost of the network “per customer” is more than double the cost of the network “per potential customer site.” That is a problem is every highly-competitive market.

One advantage mobile networks have, over fixed network, are the dimensions of the stranded asset problem. At an extreme, capital is not deployed where there are few potential customers. That is true for all networks.

But especially where potential customer concentrations are dense, mobile networks are less likely to strand capital.

The other issue illustrated is product maturity and decline. Asked about voice pricing, Rutledge acknowledged that prices are destined to decline further.

“Our view in the long run is that it has to go down,” said Rutledge. Today, fixed line voice priced at $20 a month is seen as providing value. “Will it be five years from now? Probably not,” said Rutledge.