Gigabit Upgrades Have Almost Nothing to Do with End User Need

It might still be true that most users do not actually “need” gigabit access, as many, including Comcast, argued in 2013. It might still be true that most users will see little actual improvement in most of their experiences, after buying a gigabit service.

But “need” is not always the driver. “Perception” and “marketing” also are reasons to widely supply gigabit connections. That is, in large part, why Comcast now is upgrading virtually 100 percent of its 21 million U.S. access locations to a gigabit, by the end of the first quarter of 2016, and a substantial proportion of sites in 2015.

Perception is why Comcast is upgrading perhaps 85 percent of all its locations to 2 Gbps, on the same time frame. Perception still is a concrete driver of business strategy. Actual end user need has almost nothing to do with the gigabit and 2-Gbps upgrades.

At the moment, access at speeds above 10 Mbps to 12 Mbps per user have almost no positive impact on experience.

Ozone Aims for Wi-Fi Coverage Across India

Not often is Wi-Fi access thought to be a significant access mechanism for smartphone users in India. Ozone Networks wants to change that.

Ozone Networks will allow mobile phone users to connect to any of their free Wi-Fi hotspots automatically, through an app, which will show free zones in any area.

Ozone is India's largest public Wi-Fi provider. "The app will make public Wi-Fi ubiquitous and seamless for customers and manual log-ins every time will not be required any more to access high-speed Wi-Fi at all our locations," said Pallab Mitra, chief operating officer at Ozone Networks.

Ozone Networks says it will "deploy Wi-Fi all over the country," says Sanjeev Bobby Sarin. "We are targeting 700-900 million people who cannot afford broadband on their own.”

Ozone has already deployed 6,500 access points, including 1,500 public hotspots in 26 different cities and aims to reach one million hotspots by 2020.

Dish Network "Is Going to be a Wireless Company"

“We are going to be a wireless company,” said Charlie Ergen, Dish Network CEO and chairman. Ergen didn’t specify precisely what form that might take, but the notable take-away was that Ergen did appear to commit to entering the business.

All options--wholesale and retail--presumably remain open.

With the caveat that one never can predict what might happen, and that some moves suggesting Dish Network will launch a new mobile service also improve the chances Dish Network will have an option to sell its spectrum at a large profit, Dish Network seems to be preparing for an operational launch of a new mobile service.

“We are preparing for something big,” Yahoo reports. “We have reinvented ourselves in the past and we are preparing to do it again.”

As some have suggested would be the logical approach, Dish Network might be preparing for an approach to mobile that is “video heavy.” Though it is not the only mobile company aiming at a functional triple play or quadruple play, Dish Network also reportedly says the new direction will

be something that “changes entertainment forever.”

Dish Network CEO and Chairman Charlie Ergen has in the past said that if he were launching a video entertainment business today, he might not use satellites for delivery. Also, the recent launch of Sling TV further indicates Ergen’s belief that a shift to over the top distribution is coming.

“The technology is changing,” said Ergen. Over the next three to five years the important change will be “the cloud,” not just mobile or video. Of course, to some extent, references to “Internet of Things” have become almost standard boilerplate for any executives in the communications business.

Still, even in the early stages, Dish is likely to lean on its video assets in crafting an approach to a mobile market that is quite competitive. More than offering a triple play (voice, video, data) or quadruple play (voice, video, data, mobile), Dish Network will have to create a new niche in the mobile business.

Do Spectrum Set Asides Really Work?

It arguably has been quite some time since spectrum auction policies favoring small business or other groups have had any strategic impact.

In fact, over decades, policies favoring small bidders mostly enrich the small bidders, who are able to sell their spectrum at a profit, or create smaller mobile businesses later sold to larger players.

T-Mobile, Sprint and some others argue that spectrum set-asides in the upcoming 600-Mhz spectrum auctions should be created. While that arguably would benefit the carriers able to qualify for spectrum at lower costs, some might question the long term benefit provided by such spectrum set aside policies.

Such policies rather obviously raise costs for winning bidders who are not able to qualify for the set asides. Canada, for example, held a 2008 auction in which 44 percent of the available spectrum was set aside for new entrants.

Some of the same questions were raised about spectrum set asides in Austria.  

While the auction achieved its goal of creating a handful of new firms, none of them has won more than 2.5 percent of the national market, and several have suffered financial distress. T-Mobile US and Sprint might argue they are better positioned to use the spectrum, and that arguably makes sense.

Some might argue that while access to new spectrum, especially in bands offering propagation advantages, helps both T-Mobile US and Sprint, which have relatively little spectrum of that sort, compared to AT&T and Verizon.

New spectrum might help T-Mobile US more than Sprint, which actually owns lots of spectrum, if not so much in the sub-1 GHZ range.

But some will continue to ask whether such set aside policies actually work, in the sense of promoting long term and sustainable competition in mobile markets.

Ban Zero Rating? Why Not Ban Value?

Opposed to zero rating of application usage? For consistency’s sake, why not also oppose all platforms --and they are quite common--bringing together consumers and producers?

Why not oppose all network effects? Zero rating is an example of a “platform” and also an example of a “two-sided market.”

Why not oppose all ad-supported media and applications? All ad-supported applications and media have suppliers subsidizing consumer usage.

In quite a large number of cases, network effect (the network gains more value as the number of users or nodes grows) also is a characteristic of platforms and two-sided markets. Zero rating is directly related to network effects.

Shopping malls and eBay are platforms, bringing together groups of users and suppliers. Credit cards are such platforms, linking consumers and merchants. Google, Facebook and Yelp are platforms. Zero rating is a platform.

Newspapers and magazines, TV and radio networks, all are based on two-sided market, platform economics and suppliers defraying consumption costs for consumers.  

Health maintenance organizations and computer operating systems also serve what economists call two-sided markets or two-sided networks. Few of those networks ever are completely inclusive: they serve the members of the network (both on consumer and health provider sides).

Two-sided markets are quite common, in other words, and quite helpful.

Newspapers, for instance, join subscribers and advertisers; HMOs link patients to a web of health care providers, and health providers to patients. Operating systems connect computer users and application developers.

Zero rating is an example of a two-sided market. Banning zero rating is harmful for potential participants--consumers and suppliers.

Mobile Attackers Eventually Will Balance Share Gains, Profits

There are some continuing parallels between the U.S. and French mobile markets, with a one perhaps surprising twist. In both markets an attacker is shaking up pricing and perceptions of value, and at least so far making steady market share gains.

Free Mobile has gotten 15 percent market share in just three years, for example, and T-Mobile US leads the market in net additions of postpaid accounts. Likewise, Free Mobile has lead the French market in net account additions in 2014.

At a high level, and perhaps despite expectations, the respective markets have maintained their overall direction: slight revenue declines in France, slight revenue gains in the United States, but relatively flat in either case.

Another difference is that Iliad, owner of the Free Mobile service in France, seems to be closer to an expected phase where it starts to shift towards enhancing profit margins, rather than emphasizing subscriber growth, at the expense of profits. T-Mobile US still has not reached that point.

To be sure, Free Mobile continues to have a goal of reaching 25 percent market share in both its mobile and fixed network segments, long term. But Iliad also is aiming for 40 percent cash flow margin by 2020.

So the tactical issues increasingly will include balancing the desire for continued market share gains and the drive to boost profit margins.

T-Mobile US, at least so far, seems on track to continue favoring subscriber growth over margins, as will Sprint.

Sometimes a Technology-Driven Shift is So Great, Nobody Can Survive It

It is a misreading of history to argue that any company--AOL included--flubbed or missed out on the dial-up to broadband transition. In fact, no company that was a leader or at least a participant in dial-up access has really thrived in the broadband era.

You might remember that dial-up Internet access was pioneered largely by small, independent Internet service providers. AOL and EarthLink were among the firms that eventually got scale in the dial-up business.

No major telcos or cable TV companies were pioneers in the dial-up business. When the business shifted, the profit margin for dial-up went upside down, and advantage went to facilities-based network owners.

Recall that dial-up Internet access, as a value-added service, was built literally on “no incremental cost” access to often unlimited use local access. Dial-up ISPs were able to build a business because they did not have to pay for the actual use of access facilities.

When broadband came, everything shifted. All of a sudden, to sell broadband at retail, ISPs had to buy capability at wholesale. That took most of the profit margin out of the business, and accounts for the demise of most independent dial-up ISPs.

The point is that managerial brilliance was of no avail when the business model collapsed.