Verizon Holds Overall Title of "Fastest U.S. LTE Network," AT&T Has Fastest 3G

Mobile Internet access is a highly-contingent matter, and varies as much between individual cell sites as between carriers.

That noted, a new study of mobile Internet access speeds among the largest four U.S. mobile providers found that Verizon has the “fastest 4G network” on an overall national basis, based on its performance in 16 of 30 cities, but all of the suburban and rural areas where tests were conducted.

In various areas another carrier can have the fastest network on 4G or 3G networks. AT&T, for example, has the fastest 3G network, nationally.

T-Mobile US performed best in Northwest and second best at Southwest locations, at least in urban areas.  

Altice Wants to Consolidate and Lead French Mobile Market

Altice, owner of Numericable-SFR, has made a US$11 billion offer to buy Bouygues Telecom, a deal that would combine the second-largest and third-largest French mobile service providers to create a new market leader.  

A successful deal also would reduce the number of leading mobile service providers, a move many believe would be helpful for suppliers, as many believe similar consolidation moves in Austria, Germany and Ireland that reduce the number of leading providers are helpful.

Regulatory clearance is likely to be a key issue. The French government already has said it opposes the deal.

Voice Won't be a Big Deal for 5G

Mobile signal strength, like Wi-Fi signal strength, have become bigger issues as frequencies in use have climbed from the hundreds of megahertz ranges up into the gigabit ranges.

That problem expresses itself both in terms of indoor and outdoor coverage issues, though the indoor issues arguably are the toughest problems to solve.

Some might, in retrospect, bemoan the fact that newer protocols such as Long Term Evolution were not built, from the inception, to gracefully support voice. That is a reasonable criticism, in retrospect.

The defense is that, at the time the standards were developed, the crucial and critical deficiencies of mobile networks were the ability to support higher speed Internet access. As always, there was not unlimited time to create a standard, and get it into commercial deployment.

Though that doubtless will change with 5G (voice and messaging will not be an afterthought),  one surmises from most of the verbiage that voice and messaging, though parts of the standard, are not by any means the key problems to be solved.

Bandwidth, latency, application support and the core network features all seem to be much bigger issues than ensuring that voice and messaging “works.”

Small cells will help. So will bonding to fixed network bandwidth (Wi-Fi). But voice performance still will not be a huge issue for 5G. The function has to be supported, to be sure. But it might not get as much attention as you might previously have thought.

Verizon Might Have Zero Copper Network Revenue in a Decade

Once upon a time, most telcos had similar strategies.

Verizon might have operations spanning 150 countries, but its revenue is highly concentrated in the U.S. mobile business. By 2016, the mobile business is likely to account for 85 percent of Verizon earnings (EBITDA).

In 2014, mobile contributed 70 percent of revenue, so that expectation is not out of line. In the first quarter of 2015, mobility contributed $22.3 billion in revenue and $10 billion in earnings. The fixed segment generated $9.5 billion in revenue and $2.2 billion in earnings (EBITDA).

Most observers might say future growth almost certainly  has to come from mobile services, given Verizon’s present revenue profile and company strategy. The bigger issue is whether international expansion might one day be necessary.

Right now, that might be unappetizing, for a number of reasons, including the need to pay down debt incurred when Verizon Communications acquired the Vodafone stake in Verizon Wireless.

The other issue is the sheer importance of Verizon maintaining or even increasing its market share and profits in the U.S. mobile business (including moves into mobile entertainment video).

In that respect, Verizon’s strategy contrasts with AT&T and CenturyLink, the second and third largest legacy telecom providers. AT&T already has committed to an international growth strategy, while CenturyLink has a U.S. wireline focus.

One might argue there are no strategies without risk. Verizon’s principal risk is that it is focusing on the U.S. mobile market.

The extent to which that affects the performance of the fixed network operations is unclear. The domestic portion of fixed network revenues grew more than 10 percent, but global enterprise dropped six percent and global wholesale dipped nearly four percent.

That might not be out of line with many peers, which also are seeing declining revenues from legacy services.  

In the past, Verizon executives have attributed such declines to slower public segment spending and cost optimization in the private sector. But new services related to cloud computing and IP communications are growing.

Verizon’s strategy is a bit unusual in a broader market that is moving to reliance on a mix of fixed and mobile assets in the consumer segment. When only 15 percent of earnings are derived from all fixed network operations, a reasonable executive will look for ways to build on mobile, especially if the fixed network cost per passing and stranded asset problems continue to grow.

In its key U.S. business, Verizon’s revenue from fixed network operations is declining.

Increases or declines of any quantity at a 10-percent rate are serious matters. If anything grows at 10 percent annually, it doubles in 10 years. If something declines at a 10-percent annual rate, it disappears in 10 years.

It’s something to ponder seriously: Sowmyanarayan Sampath, Verizon Communications SVP of transformation says Verizon’s copper-based revenue is declining eight percent to 10 percent a year.

At that rate, the revenue stream disappears in a decade.

ISPs Cannot Escape "Dumb Pipe"

The constant concern on the part of Internet service providers that they might be relegated to low value, low margin “dumb pipe” status is understandable, but in some ways curious.

For the most part, that separation of applications from access was decided the day Internet Protocol became “the” major protocol for communications globally. As this chart by Telstra illustrates, the “network” (transport and access) is separated from the apps enterprises and consumers want to use.

That is not to say every valuable app is an “Internet” app. Many important managed services continue to be offered, ranging from carrier voice and messaging to video entertainment and other private and specialized networks.

Still, for the most part, modern IP networks necessarily separate apps from access. Functionally, that makes the whole network a dumb pipe. That is how the protocol works.

For that reason, it is virtually impossible for any communications services provider to avoid operating as a dumb pipe, for a goodly portion of its business. In fact, to the extent that an ISP makes money serving consumers, it is, by definition, doing so as a dumb pipe provider.

That is not to say the "only" function is that of a dumb pipe. But it is the fastest-growing portion of the revenue stream. And the "managed services" are receding, in virtually all developed markets.

Virgin Media Launches Commercail 152 Mbps Service in U.K.

Virgin Media launched commercial 152 Mbps Internet access service to 150,000 Manchester homes and businesses in the United Kingdom, after having invested £75 million.

As part of the new construction, Virgin Media coverage of Manchester has increased to  450,000 premises.

Part of “Project Lightning”, Virgin plans to upgrade internet access speeds for four million locations over the next five years.

The upgrade is part of a strategy to maintain absolute leadership, in terms of delivered bandwidth, over all other fixed network providers in the U.K. market, something U.S. cable operators also are doing.

Comcast, the largest U.S. Internet service provider, is upgrading all 21 million of its locations to symmetrical gigabit service, with completion early in 2016.

In addition, Comcast also is prepared to offer 2 Gbps service to about 85 percent of those 21 million locations.

44% of U.S. Homes are Mobile Only: Why That is a Problem for Mobile

About 44 percent of U.S. households now are “mobile only,” meaning the households do not buy fixed network voice services, according to the CTIA. The prior year, about 39 percent of U.S. homes reported not buying fixed network voice services.

You might argue that is a good sign for mobile service providers. But other data points to a troubling sign of market maturation. The number of homes willing to substitute mobile for fixed service is shrinking.

Average revenue per user is declining, and has been dropping since a 2012 peak.

Also, in 2014, for the first time, U.S. mobile revenues dropped.

To be sure, that is something of a statistical artifact, as U.S. service providers are booking more device revenue, and losing recurring service revenues, as part of the shift to device installment plans.

On that basis, revenue in 2014 continued to grow. Of course, that makes a greater proportion of service provider revenue "variable," and dependent on consumer willingness to upgrade devices frequently and buy top of the line devices. 
But service provider revenues are likely to be as subject to long term decline in the U.S. market as in other markets where declines are happening already, or are projected to happen within the next few years.

Some might argue that is a cyclical development. Others might simply point out that as penetration has reached 110 percent, most people who want to use the service already do so.

That five percent increase in the fixed network abandonment rate might be important. At a five-percent annual decline rate, the whole business disappears in about two decades.

Sprint, for example, recently asked the Federal Communications Commission for permission to shut down its long distance voice operations, entirely, by September 2015.

The problem appears to be that the business costs more than it generates in revenues.

Verizon’s revenue from fixed network operations also is declining sharply, for example.

Increases or declines of any quantity at a 10-percent rate are serious matters.

Sowmyanarayan Sampath, Verizon Communications SVP of transformation says Verizon’s copper-based revenue is declining eight percent to 10 percent a year.

At that rate, the revenue stream disappears in a decade. So far, mobile substitution has not advanced at those rates.

It always is possible that service providers will manage to create substitute products that slow the rate of decline. And, at least for a time, substitution rates could decline as the remaining customers should be those for whom the product remains relevant.

But you might argue that where mobile operators at one time might have cheered mobile substitution, they now have bigger problems, namely the maturation of the foundation products for the mobile revenue stream.