Suddenlink Will Spend Just $200 Per Passing to Get to a Gigabit

Suddenlink, the fifth-largest U.S. cable TV operator with about 1.15 million subscribers, says it will pass about 85 percent of all its locations with gigabit high speed access by the end of 2017.

Suddenlink will do so in stages, initially focusing on boosting speeds across the board. “Once fully phased in, the plan calls for our flagship Internet speed to increase from 15 to 200 Mbps and our top Internet speed to increase from over 100 Mbps to 1 Gbps in a vast majority of our markets,” said Jerry Kent, Suddenlink chairman and CEO. “We expect to complete these enhancements in a phased, market-by-market approach, focusing first on our largest and most competitive markets.”

“In 2014 and the first quarter of 2015, we completed the initial phases of Operation GigaSpeed in 37 markets, which serve approximately 57% of our residential high-speed Internet customers,” said Kent. “Those investments allowed us to increase the flagship Internet speed from 15 Mbps to 50 Mbps and to increase our top Internet speed to up to 150 Mbps to 300 Mbps in those markets.”

"Starting in the second half of 2014 and extending through 2017, we expect to invest up to $230 million of capital expenditures to significantly enhance our Internet speeds in markets serving 94 percent of our high-speed Internet customers and ultimately position our network to offer speeds of up to 1 gigabit per second ("Gbps") in markets serving nearly 85% of our high-speed Internet customers," said Kent.

So do the math: that works out to $200 per customer. If you want to know about the cost advantage cable operators have, using hybrid fiber coax, that’s quantifiable answer.

No U.S. telco can match that cost per passing to get to a gigabit.

Comcast Gigabit Upgrade Plan Sheds Light on Network Economics

Comcast’s plan to offer all its consumer customers gigabit speeds over hybrid fiber coax networks has strategic implications for cable operators, compared to most telcos and other independent Internet service providers using either fiber to neighborhood or fiber to home networks.

At the risk of seeming overly bearish about prospects for fixed network telcos, consider one key difference between the hybrid fiber and copper networks used by both telcos and cable companies, in recent decades.

Assuming a typical 500-home serving area from a single optical node, Comcast uses a fiber to neighborhood design that is structurally similar to the fiber to neighborhood design favored by AT&T, for example.

A typical fiber to the node architecture might have a single optical node serving a “few hundred” homes, making it roughly comparable to Comcast’s access network, in terms of use of optical fiber for transport and then copper for distribution to customer locations.

The difference in end user capacity is related to the differences between coaxial cable and twisted pair copper in terms of bandwidth, plus the difference between cable “broadband” and telco “baseband” modulation methods.

The differences are huge, allowing Comcast to upgrade with slight, if any changes, to the distribution plant, and upgrading to a gigabit by switching to new modems. A telco fiber to neighborhood network cannot upgrade that much by switching out customer premises gear.

So cable has a clear advantage, in terms of scaling investment to reach higher bandwidth.

Of course, the alternative is to replace the hybrid network with an all-fiber approach. Comcast itself has chosen to do so for about 85 percent of its customers who might prefer to buy a symmetrical 2 Gbps connection instead of 1 Gbps.

Verizon Communications, where it has installed FiOS, could, in principle, upgrade to a gigabit by swapping CPE and some optical node elements. Verizon has not said it will do so, but could, as market needs require.

As always, the business model is decisive. Verizon has to weigh the additional capital investment with the expected financial return. Verizon business planners might be seeing a tough case for such an upgrade, much as Verizon and others have struggled historically with the business case for fiber to the home, as well.

5G will Not Only Build on 4G, But on Cloud Computing, Virtualization and Big Data

As radical as it might seem, fifth generation mobile networks now have a design goal of eradicating the difference between access speed between fixed and mobile networks. Equally important, 5G thinking includes one millisecond end to end latency that will force a rethink of how all networks are designed and where computing activities occur.

Those requirements show how hard it will be to clearly delineate “cloud computing” from “big data” from “access networks” and “computing architecture.”

LIkewise, it will be hard to separate “fixed” from “mobile” access or “network functions virtualization” and “software defined networks” from “networks” in general.

Every one of those "silos" of thinking and practice will have to be integrated to achieve 5G objctives. At the same time, though much work lies ahead, it is possible to argue that 5G will be built on existing trends, and extrapolate logically from those trends. It is not so simple as saying "5G will be built on 4G."

It is more accurate to say that, if 5G objectives are met, 5G will be built on a variety of present trends, including cloud computing, big data, fast backhaul and fixed-mobile integration.

With the caveat that we might be overly aggressive in terms of our expectations for fifth generation mobile networks, a new International Telecommunications Union group  looking at 5G fixed infrastructure shows just how much might be changing.

ITU has established a new Focus Group to identify the fixed network requirements for 5G.

The ITU notes that its IMT 2020 program already envisions “wireless communication to match the speed and reliability achieved by fibre-optic infrastructure.”

As others note, the next generation of potential apps will require extremely low latency--with a goal of one millisecond, end to end latency as the 5G design goal.

“One-millisecond end-to-end latency is necessary for technical systems to replicate natural human interaction with our environment, a goal that experts say should be within reach of future networks,” the ITU said.

“Air interfaces and radio access networks are progressing rapidly, but there is a need to devote more attention to the networking aspects of IMT-2020,” said ITU Secretary-General Houlin Zhao.

“Today’s network architectures cannot support the envisaged capabilities of IMT-2020 systems,” said Chaesub Lee, ITU Telecommunication Standardization Bureau director.

Macrocell Leader Crown Castle Wants to Lead in Small Cells as Well

Crown Castle International Corp. (the mobile tower company)  is buying Quanta Fiber Networks (a metro fiber services provider), and the stated rationale is to bolster Crown Castle’s position in the small cell services market.

Quanta Fiber Networks owns or has rights to nearly 10,000 miles of fiber in major metropolitan markets across the United States, including Los Angeles, Philadelphia, Chicago, Atlanta, Silicon Valley, and northern New Jersey, with approximately 60 percent of Sunesys' fiber miles located in the top 10 basic trading areas ("BTAs") that arguably are top candidates for small cell networks of some size.

The acquisition of Sunesys will bolster Crown Castle's position in small cell networks by more than doubling Crown Castle's fiber footprint available for small cell deployments and expanding Crown Castle's presence in many of the top U.S. metropolitan markets.

Today, Crown Castle owns or has rights to approximately 7,000 miles of fiber supporting approximately 14,000 nodes, which contribute seven percent to each of Crown Castle's site rental revenues and site rental gross margin.

After the deal, Crown Castle will own or have rights to more than 16,000 miles of fiber suitable for supporting its small cell efforts.

That is the same sort of thinking driving Comcast’s thinking--and that of other cable TV networks--about potential uses for existing cable TV networks. Ask yourself which operators, in major markets, have dense optical fiber networks and high bandwidth nearly everywhere in a city, able to leverage those networks to support lower cost backhaul to large networks of small cells where backhaul costs are really crucial.

Looked at that way, Crown Castle will be aiming at high-density downtown areas, where cable will have the advantage outside the downtown cores.

Both strategies aim to repurpose existing assets in new ways.

Does TRAI Know Something the Rest of Us Do Not?

The Telecom Regulatory Authority of India (TRAI) has recommended that mobile virtual network operators (MVNOs) be made lawful in India. Many would note that would add yet more competition to what some would say is the most competitive mobile market in Asia.

And some observers might note that competition in India is not lacking, with some areas having seven to 11 facilities-based contestants.

Nor is it entirely clear, from the outside, what the thinking is. Perhaps there is a notion that new or niche providers could arise,as any MVNO enabling rules would allow other firms not in the mobile business to become mobile service providers.

TRAI knows full well that Indian mobile and telecom providers have not expanded so quickly in rural areas because the business model is very difficult where monthly average revenue of less than $2 a month is a common expectation.

Perhaps the thinking is to encourage cable TV operators to leverage their fixed line assets for backhaul, allowing creation of a positive business case where it does not presently exist.

Well-known brands are possible new contenders, especially in the largest urban markets, where available infrastructure and the chance to create niche products is greatest.

Observers might reasonably suggest India mobile markets are so competitive there is no room for additional retailers.

That might be quite correct for standard prepaid mobile services that sell to everyone within reach of the network.

But in other countries, MVNOs based on language, for example, have proven successful. That could well be the case in the Indian mobile market.

The recommendation goes to the Department of Telecommunications, which makes the final decision. If approved, the new rules could enable market entry by new providers in the communications business, such as cable TV operators or big brands with other assets (customers, widely used apps, distribution networks).

TRAI has recommended 10-year periods for the licenses, which could be reviewed after three to four years.

MVNOs would be required to pay government license fees and spectrum usage charges (a percentage of gross revenue) at the same rates as paid by telecom operators.

Up to this point, some marketing and branding efforts somewhat similar to an MVNO business model have been tried in India, largely without success. But TRAI understands its markets as well as any entity can. So one must assume there is a perception that under-utilized assets can be brought to bear.

Reliance Jio Hopes to Disrupt India Mobile Market

Reliance Jio Infocomm, a challenger in the Indian mobile market,  will begin offering mobile services in five Indian cities by June 2015, with a full country roll-out throughout the rest of 2015.

As you would expect, Reliance Jio Infocomm will focus first on large urban centers, including New Delhi, Mumbai, Ahmedabad, Lucknow, and Nagpur.

As an upstart, Reliance Jio will focus on the next generation of networks and services--fourth generation--in an effort to quickly climb the market share ranks. In part, that is because its spectrum is suited for 4G, and in part because 4G is an easy story to tell.

In some ways, Reliance Jio might remind some of SoftBank. In fact, Reliance Jio might not initially have wanted to both with voice, focusing instead on data services and apps. Voice is viewed as a transition strategy, giving Reliance Jio time to flesh out its “data first” strategy.

Reliance Jio also recently launched its first of several expected 4G applications, Jio Chat, a messaging application that is up against WhatsApp. Though Jio Chat does not strictly require 4G capabilities, it will be part of an application-focused service heavy on e-commerce and other apps for news, games, social and cloud storage.

The Reliance Industries is building on assets including Infotel Broadband, which had won spectrum to launch such services across India, plus spectrum purchased in the recent spectrum auctions.

The company plans to start services in 900 towns initially, according to plan. A company must roll out services across 90 percent of the metropolitan areas where it has won spectrum in an auction and 50 percent of rural areas within five years of receiving spectrum, according to the Telecom Regulatory Authority of India.

Reliance Jio has pan-India 20 megahertz (MHz) under the 2,300MHz broadband wireless access spectrum in 22 circles and 5-7MHz spectrum under the 1,800MHz band in 14 circles.

Debt burdens now will be an issue as firms divert free cash flow to paying interest and amortization on money borrowed to pay for their spectrum winnings. In fact, strategic and tactical issues during the auction might have contributed to the high prices paid for spectrum during the auction.  

Many therefore expect a wave of consolidation, at some point, that would likely reduce the number of leading suppliers from about eight to five.

Be Clear: Nobody Gets Paid for Anything When Inrternet.org is Used

Some of you likely have been wondering about Internet.org business policies--including the matter of who might pay for mobile bandwidth consumed as part of the Internet.org inititive--might exist.

Perhaps surprisingly, according to Chris Daniels, Internet.org VP, nobody is getting paid for anything as part of the Internet.org inititive.

App providers to not pay anybody to be part of the program, Internet.org does not pay any mobile service providers who participate, mobile service providers do not pay Internet.org, and the apps are available for no incremental cost to end users.

“Facebook or the developers aren't paying the operators for the data,” said Daniels. “And developers aren't paying us to be part of this program. It's free.”

“For an operator, this is a customer-acquisition tool,” said Daniels. “ It's an expense that they will take in order to bring more people onto the Internet.”

And Daniels insists the amount of incremental data usage is quite light. “The data that flows is very very light and not expensive for Reliance Communications or any of our partners,” said Daniels of its India operations.

Basically, mobile service providers and app providers are acting here on clear assumptions that everybody wins if costs do not get in the way. Over time, people who do not use the Internet will come to see the value, and eventually pay for mobile Internet access.

App providers will win as hundreds of millions of regular new users for their apps are created. People get all the benefits of the Internet one normally would expect.

And still, people complain.

Among the complaints is the limitation on bandwidth-intensive app features such as video or images.

But that just makes sense. “It needs to work for, be financially sustainable for, operators,” said Daniels. “And so, the basic services are more text-based.”

Keeping end user costs quite low is an essential requirement for bringing Internet access to hundreds of millions of new users on a sustainable basis. Internet.org helps do that, in a significant way.

Naysayers can say all they want. Internet.org helps get hundreds of millions of people exposed to the Internet, and will lead to sustainable use over time.

"When people use free basic services, more of them then decide to pay to access the broader Internet and this enables operators to keep offering these basic services for free. It is not sustainable to offer the whole Internet for free," said Mark Zuckerberg, Facebook CEO.