Project Loon Will Provide Wholesale Backhaul for Mobile Operators

Perhaps surprisingly, commercial service of a potential new fleet of tens of thousands of Google Loon balloons hinges on the willingness of mobile service providers across several continents to use the system for backhaul.

As currently envisioned, the system of free floating but somewhat steerable balloons would relay signals from mobile service provider cell sites, using Long Term Evolution 4G signals, directly to and from end user LTE mobile devices.

That means the balloons transmit in the the 2.2 GHz and 2.6 GHz LTE bands used in  those bands the United States, Europe and Asia, with expected new tests of the additional 700-MHz frequencies that will allow coverage from any single balloon to increase from about 40 kilometers to perhaps 160 kilometers.

The wholesale model now envisioned for any future Project Loon commercial service, making it an extension of mobile operator core infrastructure, is why mobile operators in New Zealand, Australia, Chile and Argentina have happened.

Though a somewhat complex undertaking, involving perhaps tens of thousands of balloons at full network deployment, it now is expected that hundreds of balloons will need to be launched every day to maintain the fleet, assuming a 100-day life cycle for each balloon.

Balloons stay in communication with Google, for tracking purposes, using the Iridium satellite network.

Crossing the earth at an altitude of around 60,000 feet, Project Loon is perhaps the best example of the “mesh style” also favored by new proposed fleets of low earth orbit satellite constellations.

In a perhaps-surprising development, Project Loon now appears to be a way for mobile satellite operators to extend mobile Internet access across both southern and northern hemispheres at lower cost than would have been the case using traditional macro cell sites.

And that makes Project Loon a tool for mobile operators to add hundreds of millions of new users before the new LEO constellations begin to launch.

35% of Global Service Providers Deploying NFV in 2015

Fully 35 percent of global service providers surveyed are planning to deploy network functions virtualization in 2015, said Michael Howard, senior research director for carrier networks at IHS.

“In fact, all major operators are either now deploying NFV or plan to within the next few years,” Howard said.

About 48 percent of carriers surveyed by IHS plan to evaluate NFV by the end of 2015, as well.

The top NFV use cases respondent carriers plan to deploy between 2015 and 2016 include virtual enterprise CPE (vE-CPE), service chaining and virtual network platform as a service (VNPaaS).

OTT Video Service Launches Escalate

Over the top video subscription service launches are becoming much more common. 

In November 2014, Rogers Communications and Shaw Communications jointly launched shomi, a Canadian subscription video on-demand (SVOD) OTT video service offering a mix of U.S.- and Canadian-produced content.

One month later, Bell Canada launched its own OTT SVOD service, CraveTV.  In December, U.S. satellite pay-TV provider DIRECTV launched Yaveo, a Spanish-language OTT video service, according to Parks Associates.

In January 2015 FOXTEL and content producer Seven West Media introduced Presto TV. The same month, Australian joint venture StreamCo unveiled its Stan SVOD streaming service. Netflix launched in Australia in March 2015.

Also in January, Star India released a beta version of Hotstar, an ad-supported video streaming service, while retailer Carrefour launched a new OTT video service in France.

In February 2015, Dish Network introduced Sling TV.

In March PlayStation Vue was launched by Sony and Nickelodeon premiered Noggin, a mobile-oriented subscription video service designed for children, while CONtv launched a comic book oriented service.

In April, HBO launched “HBO Now.”

SingTel, Sony, and Warner Bros. announced plans to create a new service, HOOQ, for the Asian market, including the Philippines, India, and Thailand.

Online retailer Overstock.com says it will launch a video service in the U.S. market in 2015.

InfiniTV is set to launch later in 2015 in Brazil, with both subscription and transactional options.

Samsung launched an OTT service in Brazil, Moony, that provides free and subscription-based access to linear TV channels.

All of that activity is one reason why global OTT video service subscription revenues will increase from nearly $9 billion in 2014 to over $19 billion in 2019, according to Parks Associates.

$19 Billion in Global OTT Video Revenue by 2019

Global OTT video service subscription revenues will increase from nearly $9 billion in 2014 to over $19 billion in 2019, according to Parks Associates.

Currently, 57 percent of U.S. broadband households subscribe to an OTT video service. Among European broadband households, 57 percent do so.

In the United Kingdom, 57 percent of broadband households buy an OTT video service.

in Spain, some 29 percent of broadband households buy an OTT video service, while in Germany 24 percent do so.

Those are measures of hybrid, or supplemental use, as most of those homes buy OTT and linear TV.

But Parks Associates also finds that in 2015, seven percent of all U.S. households, or 8.4 million households, subscribe to broadband and at least one OTT video service but do not subscribe to a linear TV service. That audience, many would argue, is the best market segment for OTT video services.

Such homes have the ability to buy OTT, and show by their behavior they do not value linear TV subscriptions.

In other Western European nations, about four percent of households buy broadband and OTT video, but not linear TV.

AT&T to Launch New Sponsored Data Program

Facebook and AT&T both see value in sponsored data, whether is advertisers, Internet service providers or app providers providing the zero rated use of mobile data.

AT&T reportedly is launching an ad-suported data consumption program giving subscribers free use of high speed access when they view ads, discover apps, or buy things from participating advertisers.

The “Data Perks” program will be available to AT&T post­paid customers who are signed up with a Mobile Share Value plan.

AT&T is launching the Data Perks program in partnership with the sponsored data monetization startup Aquto.

Brands participating in Data Perks include Hotel Tonight, Rosetta Stone, Fandango, and others. In all, some 30 brands will show interactive advertising to participating AT&T subscribers, the VentureBeat report suggests.

How Important are Tier One Service Provider "Venture Capital" Initiatives?

It always is possible that a great many venture capital investments will fail to earn a return. That is part of the process.

It likewise is possible to argue that telcos, cable companies and other Internet service providers should “stick to their knitting” and do what they do best, rather than diversifying into other lines of business.

But it also is possible to argue that unless telcos and cable TV companies engage in a serious pursuit of massive new revenue streams, they are destined to fail. The reason is simple enough: every large legacy revenue stream is declining, mature or soon to become mature and begin declining.

My own rule of thumb is that service providers must prepare to replace half their current revenue every 10 years.

Given that view, the only question is where to look, which bets have the highest potential return, and how much to spend in pursuit of the new opportunities. Whether venture funds created by a growing number of firms ever will have outsized return is unclear. But, one might argue, clarity always is unobtainable.

On the other hand, given the need for scale, one always can argue that venture funds generally cannot provide enough new revenue, fast enough, to meet the new growth requirements of a tier one service provider.

Near term, venture investments will not add to the bottom line fast enough. That might not suggest such investments are unwise. They might be a vital part of the revenue replacement process. But venture investing likely will not produce the revenue mass other tactics can.

That is why, whether creating venture funds or not, near term results will be gotten by acquiring already-sizable assets. Anything else simply does not move the needle.

In other words, any service provider needing to replace half its current revenue in 10 years, and perhaps every 10 years, has to look for big, proven businesses to acquire, even if such firms also are committed to innovation by the venture capital process.

That is why AT&T buying DirecTV, or mobile assets in Mexico, has more near term value than its venture fund efforts, such as the Otter Media joint venture between AT&T and Chernin Group.

Otter Group might eventually provide scale returns. but it cannot help AT&T in the near term. Comcast arguably has taken the biggest steps into “new lines of business,” when it purchased NBC Universal.

So far, no initiatives by other tier one providers in the U.S market have approached the “present revenue” scale of that move. Most other tier one service providers have taken the form of acquisitions that provide more bulk in existing lines of business.

Nor should that be unexpected. To the extent that the bundled triple play or quadruple play is the new “anchor offer” for many tier one service providers, nothing boosts present revenue so much as acquisitions of customer bases, domestically or internationally.

Discovering or creating huge new lines of business is mandatory, though. That is one reason why venture bets related to Internet of Things likely are fruitful. Even there, however, one would be safe to predict that many growth initiatives will be based on acquiring important assets in the IoT space, not developing them “in house.”

Marriott Zero Rates Netflix

The number of examples of “network neutrality” logic breaking down comes from Marriott. Starting initially at a handful of Marriott hotels, guests with Netflix accounts can watch their Netflix content directly from the televisions in their rooms, without buying the hotel Internet access.

Some people would say that is a clear example of sponsored data usage. To the extent that network neutrality is framed as “all bits and apps are treated alike,” it is hard to square this use case.

To be sure, many think sponsored data or sponsored apps are not a violation of the network neutrality framework, any more than “toll free calling,” coupons, Groupons or discounts and promotions in general are a problem.

But that’s part of the problem. Restricting consumer access features to “best effort only” does not allow for quality features some apps require, some customers might prefer and some ISPs might use to differentiate and innovate.

Only available at six hotels for now, with another six coming soon, Marriott plans to offer access in 100 properties by the end of 2015, and plans to support such access at nearly all of its 300 U.S. hotels should be on board by the end of 2016.