India Mobile Voice, Data Prices Climbing

After increasing data tariffs for prepaid customers in Delhi, Bharti Airtel and Idea Cellular have now hiked charges for their postpaid users by around 20 percent.

The largest three mobile operators--Airtel, Idea and Vodafone--earlier had raised prepaid data plan prices  for 2G and 3G services in Delhi by up to 47 percent.

There arguably are a few reasons why prices are climbing. For starters, mobile operators have had to spend money acquiring or reacquiring their spectrum licenses. New fourth generation networks are being built, and data pricing, in general, tends to lag usage.

Also, the growth driver, going forward, is mobile Internet, not voice. There are tradeoffs, to be sure. Raising the price of any desired product, under most circumstances, leads to lower demand.

So, ironically, higher prices mean slower adoption of mobile Internet access, to some extent.

That might not be the most-significant driver, however. As wholesale tariffs for voice roaming prices must be lowered, by order of the Indian government, lost expected retail revenue has to be recouped, some way, as well.

Most observers also expect slightly higher voice prices overall, partly to compensate for lower roaming revenues, partly to recover spectrum and new network costs.

source: Capgemini

Two Cows: All You Need to Know about "Economics"

A humorous look at economic thought, using two cows.  

Iliad Reports Strong Profits, Market Share, Margin

Illustrating the principle that scale matters in the telecom business, Iliad reported consolidated revenues up by seven percent to €2.2 billion in its first half of 2015, with mobile segment revenues up more than 18 percent, while fixed segment revenues climbed half a percent.

Iliad says its share of the mobile business rose to 16 percent, after adding a net 820,000 new subscribers in the first half of the year, with earnings (EBITDA) up 16 percent to €725 million.

Iliad said its EBITDA margin advanced by 270 basis points to 33.6 percent. “This strong rise in profitability was driven by favorable developments in the Mobile business and the economies of scale achieved in terms of the Group's fixed cost base.”

Iliad now has 10.9 million mobile subscribers, and has exceeded its original expectations for market share, on that metric.

source: Iliad

Though hopeful that the marketing war ignited by Free Mobile is drawing to a close, executives in the French mobile industry are generally unwilling to say the mobile marketing wars have ended. On the other hand, the disruptive level of competition has moderated.

That can be seen in average revenue per user and earnings that seem to have stabilized at SFR and Numericable, while Orange likewise has been seeing higher revenues and nearly flat earnings.

U.S. Fixed Network Revenue Declined 50% Between 2002 and 2013

During the 11-year period between 2002 and 2013, By 2013, U.S. fixed network provider gross and net revenue both had fallen by more than 50 percent compared to 2002.

Growth of the mobile business replaced those lost revenues, as did growth by acquisition for the largest providers.

In 2002, U.S. telecommunications industry gross revenues were $385 billion (including cable and satellite TV), and its net revenues (after interconnection costs, program content, and handset subsidies) were $315 billion.

In 2013, gross revenues were $455 billion and net revenue was about $333 billion. Mobility accounts for most of the growth.

AT&T (the former SBC) and Verizon arguably also grew through acquisition, more than by organic growth.

Deloitte University Press

Valuation "Envy" and Importance of Content Businesses for Telcos

Some executives might be forgiven a bit of envy where it comes to valuations. Access providers might envy the higher valuations of media properties, while media executives might envy the valuations given to technology firms.

Among the reasons for the difference in valuations is scarcity. Technology firms often create uniqueness hard to replicate, while media firms do so with exclusive content.

That explains why most major video suppliers try to acquire exclusive rights to some content. At the same time, that also means the value of bundles will remain substantially intact. If content is fragmented, then aggregating content will generally create value.

The point is that video entertainment, and all content businesses, are valued differently than “access” businesses that more or less sell “commodity” network access.

source: IATI

source: IATI

source: Gridley & Co.

source: Market Realist

Fiber to Home Has Been the Superior Access Network for Nearly 4 Decades: Still Doesn't Always Win

Some believe hybrid fiber coax networks will not be able to deliver gigabit speeds, or even 100 Mbps, symmetrically.

Others might argue those claims are correct, in one sense: since HFC networks are designed to be asymmetrical, even at bandwidths that do hit a gigabit per customer location, HFC does not deliver bandwidth symmetrically.

Some might argue that is not the point. The claims about symmetrical bandwidth are largely correct, but irrelevant. After all, the claim of technological superiority of fiber to the home has been made for three decades, going on four decades.

But that is not the point. The point is which platform helps an ISP best match the twin goals of being the low cost provider of the services customers want to buy, with suitable profit margins.

The fundamental test is going to be whether HFC, fiber to the home or some other platform, in the relevant time period (a decade or more) best matches market cost, revenue and performance requirements.

In markets where HFC is widespread, such as the United States, the formal technological superiority of fiber to the home has not clearly helped most of its practitioners to dominate the supposedly inferior HFC platform in terms of market share or profitability.

So far,  as a business platform, HFC has more than held its own. In fact, as Comcast is the largest U.S. Internet service provider, and since cable TV has the largest market share in most local markets, with the overwhelming majority of net new additions, the technical merits of the platform--however one wishes to evaluate them--do not seem to matter.

What has mattered is the ability to translate platform features into revenue, market share and profit. On that score, cable has outperformed nearly all telcos.

The new wrinkle, as fiber to home physical media costs have declined, is whether new providers, with different cost structures or business models, can use FTTH to support their business models, typically based solely on selling Internet access; sometimes Internet access and entertainment video, and sometimes a triple play.

That applies to Google Fiber and the dozens of gigabit fiber operations springing up around the United States, for example.

The cost of physical media and construction are important parts of a cost model. But, so far, physical media cost arguably has not determined business success.

India Public Wi-Fi Initiatives Grow

Public Wi-Fi is assuming a bigger role in Internet access in cities in India.

The government of India has said it will create facilities offering public Wi-Fi in 2,500 cities and towns across the country over three years, with the network built and operated by state-owned Bharat Sanchar Nigam Ltd (BSNL).

The city of Delhi also separately is working on a municipal Wi-Fi plan of its own, that might use a freemium business model.

For its part, Bharti Airtel Limited (Airtel) announced that Uber riders across India will be able to pay for their trips using Airtel Money, the firm’s mobile wallet service. As part of that plan, Uber vehicles will be outfitted with Airtel 4G connections, offering free Wi-Fi inside Uber vehicles.

The government of Bihar, meanwhile, plans to offer free Wi-Fi at all colleges within the state.

Though an introductory no-charge promotion is expected for the BSNL service, it will be “for fee,” analogous to the model of many prior municipal broadband efforts or the amenity Wi-Fi offered by firms such as Boingo.

The initial phases of service are expected to start with government buildings and other anchor institutions such as colleges, in Kolkata, Chennai, Lucknow, Dehradun, Hyderabad, Varanasi, Bhopal, Jaipur, Patna, Indore, Chandigarh and Ludhiana.

At least in part, the networks are viewed as a possible way to support BSNL mobile operations, which have lost market share to rivals.

Usage allowances and minimum speeds remain a bit fluid.