Carrier-Grade Wi-Fi Might Have Greatest Revenue Value as Wholesale Platform

Extensive “carrrier grade” public hotspot networks now are seen as providing substantial value for mobile and fixed network operators, but the perception of value is shaped by the legacy strengths and weaknesses of the contenders.

It easily can be argued that wholesale access and data offload will provide the most-concrete value, for some time, and perhaps over the longer term as well. The former generates new revenue, the latter offers cost reduction.

Excluding wholesale and offload, survey respondents to a Maravedis survey indicate that carrier-grade Wi-Fi has the biggest immediate potential for advertising revenue, followed by access fees.

Over time, location based services and video content are seen as bigger revenue opportunities. Support for carrier voice seems to be a widespread expectation, but the relatively low expectations for revenue might flow from several obvious aspects of the voice business model.

First, voice is driving a declining amount of revenue, so voice over Wi-Fi might not actually boost revenue for many, if any, contestants. On the other hand, cost reduction, especially for mobile virtual network operators, is a more-tangible possible benefit.

In fact, churn reduction might be the most-direct form of benefit, the survey, sponsored by the Wireless Broadband Alliance, suggests.

As Access Speeds Climb, Middle Mile, in Many Cases, Remains the Chokepoint

Revenue scale, or market potential, has been, and likely always will be a major issue for Internet service providers in areas with low population density, especially when population areas are highly isolated.

That basic problem exists for remote villages across South and Southeast Asia, Africa and elsewhere, including remote locations scattered across many parts of the Americas.

Bandwidth availability, at lower cost, essentially is a barbell, concentrated at the in-home or in-building level on one end, and then the major wide area network backbones on the other end.

In the middle are the access and regional networks, where ability to share costs is lower, and where free to low-cost local distribution (Wi-Fi, Bluetooth) is not possible. 

Those issues will not change fundamentally as Internet service providers ramp up local access network speeds.

EPB in Chattanooga, for example, says it eventually will offer 10 Gbps over its network, something the DOCSIS 3.1 protocol already incorporates as well. That suggests we are heading for eventual local access bandwidths up to 10 Gbps.

While that might allow a greater match between access and in-building distribution speeds, and where it is possible for backbone capacity on the major routes to scale rather gracefully, the middle mile, where business models are stretched, will become even more stretched.

As always, any significant bandwidth change anywhere in the end-to-end chain has repercussions in the rest of the network.

In-home or in-office distribution has not been a major issue for many decades, as local distribution tends to be the part of the network with the greatest capacity and the lowest cost to supply.

Backbone wide area network bandwidth on the major routes, historically, has been easier to supply, as the costs are shared very broadly across the complete set of potential customers. And sharing means lower cost.

All that means the access, middle mile and regional networks will continue to face upgrade issues, as we might well assume that local distribution within a premises or building will not be an issue, while the cost of adding lots of capacity to wide area networks is relatively simple.

As always, the access plant --with the least possibilities for sharing--is where the majority of cost lies.

Middle mile communications network costs are similar to costs faced in the airline industry, where the big city hubs are most efficient, and small towns the most-costly type of facilities.

The same economic problem exists in both industries: some lower-density locations represent difficult business models, since the destinations lack user scale, and therefore revenue scale.

Is Post-PC Era of Computing Now Creating "Post-PC" Device Profiles?

Tablet shipments (perhaps not directly “sales”) declined seven percent, year over year, in the second quarter of 2015, according to the latest analysis by IDC.

Tablet shipments of 44.7 million units also represented a decline of nearly four percent sequentially.That might indicate a faster rate of decline in the recent quarters.

Perhaps the "post-PC era" really means post-PC, with tablets being a form factor derivative of PCs, or acting as PC substitutes.

Perhaps smartphones really are the emerging example of human interaction with computing in the post-PC era of computing. Eventually, a wide range of devices and sensors likely will tell the story, with "cloud computing" enabling connectivity as a core feature of a modern appliance.

"Beyond the decline, we're seeing a profound shift in the vendor landscape as the top two vendors, Apple and Samsung, lose share in the overall market," said Jean Philippe Bouchard, IDC Research Director for Tablets.

Top Five Worldwide Tablet Vendors - Preliminary Results for the Second Quarter of 2015 (Shipments in millions)

Vendor	2Q15 Unit Shipments	2Q15 Market Share	2Q14 Unit Shipments	2Q14 Market Share	Year-Over-Year Growth
1. Apple	10.9	24.5%	13.3	27.7%	-17.9%
2. Samsung	7.6	17.0%	8.6	18.0%	-12.0%
3. Lenovo	2.5	5.7%	2.4	4.9%	6.8%
4. Huawei*	1.6	3.7%	0.8	1.7%	103.6%
4. LG Electronics*	1.6	3.6%	0.5	1.0%	246.4%
Others	20.4	45.6%	22.4	46.7%	-9.3%
Total	44.7	100.0%	48.0	100.0%	-7.0%

Source: IDC Worldwide Quarterly Tablet Tracker, July 29, 2015

Intermodal Competition and Investment for Europe?

Quite often, when an executive says something “cannot be done,” what they really are saying is that “my firm, with its present business model and cost structure, technology base and intellectual property assets, cannot do it.”

Some other entity, with a different set of assets, business model and assets, might well be able to figure out how to do something others consider “impossible.”

Looking at communications policy in the European Commission region Strand Consult owner John Strand notes there is a fundamental institutional conflict between the  the Directorate General for Competition (DG Comp) and the Directorate General for Communications Networks, Content & Technology (DG Connect), in terms of fundamental approaches to promoting a sustainable long term competitive environment that also provides incentives for robust investment.

Strand has argued before that current policy is not working, in that regard.

He further argues that while one agency attempts to foster investments, the other deters them.

DG Connect, he argues, “in many ways has a realistic view of the challenges in the EU and the solutions.”

In practice, that means DG Connect is in favor of supplier consolidation, while DG Comp is not in favor of consolidation.

Perhaps there ultimately will be resolution by another means. Without suggesting that all markets globally are the same, since they increasingly are divergent, it is possible the EC could see more investment and more competition irrespective of the efforts of the two regulatory bodies, though Strand believes a resolution of the conflicting policies would be better.

We can disagree about the proper balance of incentives and controls to achieve the goals of robust investment and equally robust competition.

But as a simple historical matter, the cable TV industry, operating outside the common carrier framework, created the basis for robust facilities-based competition, “outside” the purview of the traditional “telecom” ecosystem.

That might yet be a direction within some parts of the EC as well, as Liberty Global pursues a greater role in communications, on its own facilities, not purchased wholesale from a former incumbent telco.

The potential, in other words, is for greater investment--and competition--provided across industry boundaries, instead of within them.

That sometimes has been called an intermodal approach, rather than an intramodal approach. Liberty Media is on the cusp of  bringing intermodal competition to the EC.

Verizon to Sell "HBO Now" Streaming Video Service

Verizon Communications will sell the Home Box Office “Now” streaming service as part of a new marketing deal.

HBO’s Internet-only service will be made available to more than 100 million Verizon Wireless customers as well as Verizon Communications fixed network customers who buy high speed access but not linear version of HBO or linear video service.

HBO content will also be coming soon to Verizon’s upcoming mobile video platform, Go90.

HBO Now costs $14.99 a month, after a 30-day no-charge introductory period.

The deal is an example of how some observers and providers hope the over the top business will develop, namely with large linear video distributors also emerging as key distribution partners for over the top versions of today’s linear channels.

Hybrid Business Model Favored by TV Distributors (No Surprise)

TV operators and content owners say they favor a hybrid business model approach (subscription plus pay per view) to over the top content delivery, says MPP Global. Some 60 percent of surveyed distributors say they prefer the hybrid OTT model, also used by Amazon Prime and Hulu.

The hybrid model has already been adopted internationally by Amazon for its Amazon Instant Video service, as well as by Hulu for its online streaming service in the United States.

Many consumers no longer want “all you can eat” packages but instead prefer tailored and personalized bundles of content and channels they have hand-picked, MPP Global says.

Among the popular options are “skinny” TV packages that cost less.

Some distributors also are experimenting with limited-time passes. Sky, for example, offers passes for a day, a week or month for its OTT platform, Now TV.

Hybrid models have appeal because they offer a glide path from linear TV to over the top consumption; unlimited access to buying of specific items; as well as access durations shorter than the traditional month-at-a-time pattern.

At a high level, the hybrid approach will make sense since it offers the hope of a gradual, not too disruptive switch from linear to on-demand packages and business models.

Historically, hybrid models have been highly successful, allowing legacy providers to adapt gradually to a new replacement technology platform.

Global Mobile Adoption to Pass 100% Globally by End of 2015

You might argue it is a good thing that global mobile adoption will pass 100 percent of earth's population by the end of 2015. In one sense, it is a positive milestone.

In another sense, it points to market saturation, and the end of the ability to drive revenue growth by adding human accounts. Once everybody has at least one active phone and account, growth comes partly by convincing people to connect additional devices and use more services.

Eventually, the industry encounters the paucity of truly-huge basic demand, however. Though "everybody" might want to talk, send messages and use the Internet, the clearly-understood and truly-big demand for products beyond that is limited.

That is why so much activity in the fixed network market over the past decade has been "selling more things to fewer customers." The same dynamic will develop in the mobile business, assuming competition remains a key market reality.

Global mobile subscribers reached 7.1 billion so far in 2015, up from just seven million in 1989, and will surpass the number of people on earth by the end of the year, says TeleGeography.

As has been the case for some years, Asia has the greatest number of subscribers, with 3.7 billion. Also, as has been the recent trend, Asia represents the subscriber growth driver, globally.

Between the first quarter of 2014 and the same quarter of 2015, Asia added 194 million new accounts, representing more than 60 percent of net new accounts globally.

But saturation looms. Although more than 270 million people in the region do not have a mobile phone, that could, at present rates, reach nearly zero within two years.

The immediate revenue growth driver now becomes  mobile Internet services. In that regard, India is key. Some 90 percent of Indian mobile subscribers use 2G networks.

Africa also represents growth. Mobile adoption there is 81 percent, while 2G remains the dominant platform, used by 75 percent of the continent’s 912 million subscribers.

 Mobile Subscribers by Region, Q1 2015, source TeleGeography

European mobile adoption stands at 138 percent, representing one billion accounts. But the actual number of mobile subscribers actually fell by six million over the last year.

North American wireless penetration is expected to reach 100 percent.

The point is that mobile services will reach saturation within the next few years, with revenue growth driven by mobile Internet access.

The big challenge beyond that is how to fuel growth when mobile Internet reaches saturation.

Mobile service providers globally are turning their sights to services used by sensors and controllers.

Having first exhausted markets for mobile voice, then messaging, and now focusing on mobile Internet access, future growth in services for humans might be quite difficult.

Telemetry is the next big potential growth driver.