Industry Volatility is High, Getting Higher

There are periods when communications policy is fairly static, and other times when major change erupts. The same holds for spectrum policy. And it might be fair to say a new period of heightened change is coming.

That holds the potential for huge changes in market structure, contestants and changes in retail offers and rates, across fixed and mobile segments.

Consider what is happening, or could happen, in the mobile services arena, regarding spectrum access. Some have noted that auctions for licensed mobile spectrum are sort of at an end, after the incentive auction for 600-MHz spectrum.

So scarcity could become a bigger issue. That might be why mobile service providers are working so strenuously on integrating LTE with Wi-Fi for access, for example.

If providers think licensed spectrum really will be hard to come by in the future, then ways to maximize what they mostly already have could take on new importance.

So what does that mean? Clearly, the value of using unlicensed spectrum becomes even more valuable to a firm fundamentally based on use of licensed spectrum. As many would note, Wi-Fi already represents more bandwidth than all mobile spectrum put together.

Ironically, it is not clear what greater availability of license-exempt spectrum will mean for the strategies of various contestants.

On one hand, much more license-exempt spectrum reduces the scarcity value of licensed spectrum. That should have positive implications for app, device and service providers who can expect they can get to market at lower costs, where access is concerned.

That likewise suggests licensed spectrum could, in some ways, become less valuable, or at least less a barrier to market entry by new providers.

On the other hand, as the need to support more mobile video becomes a fundamental requirement, access to much more unlicensed spectrum will be essential. So the release of more license-exempt spectrum will help mobile service providers. Indeed, it likely is essential.

Also, ironically, more license-exempt spectrum, available only “best effort,” could reinforce the quality advantage traditionally claimed for licensed spectrum.

Strategically, ownership of fixed network assets, or access to them, also becomes more valuable to any mobile Internet access provider, if the capital and operating costs are be “right sized.”

It is getting harder and harder to wring profits out of triple-play fixed network assets, as valuable as fixed network capacity is as the essential precursor to Wi-Fi abundance.

According to the International Telecommunications Union, the business case for fiber to the home or fiber to the curb is feasible in less than half of all locations globally.

The point is that all the activity you now are hearing about in the spectrum area, plus conflicts over Internet app and access policy, plus potential emergence of new access providers, is a reflection of the tumult that now is breaking out globally.

It is not simply regulatory activity that is at a high level, but also business models and technology that are changing very rapidly.

There are times when volatility in the broader telecom industry is low. This is not one of those times.

In U.S. Market, Use of OTT Video Streaming is Nearly Ubiquitous

In 2015,  181 million people in the United States will watch video using an app or website that provides streaming content over the Internet and bypasses traditional distribution, according to eMarketer.

That means 90 percent of digital video viewers are watching OTT streaming video. Virtually of those viewers watch YouTube.

The YouTube audience will reach 170.7 million monthly video viewers n 2015, eMarketer estimates, or 94.3 percent of all OTT video service users.

As you would guess, there is not much room for YouTube to grow its user base.

That is not the case for other streaming providers. Netflix, for example, will grow its U.S. audience by more than 20 percent in 2015 to 114.3 million, or 63 percent of OTT viewers.

Netflix will be viewed by nearly 72 percent of all OTT viewers by about 2019.

Hulu will reach 82.2 million people by 2019, eMarketer estimates.

Amazon’s video streaming service will reach 88.6 million OTT video viewers by 2020.

No Mobile Roaming Charges in EU by 2017, With Some Exceptions

The European Union is moving towards an end to mobile data roaming charges by 2017. Or maybe not. A new document suggests some fair use rules will be permissible.

Such policies, originally developed for “unlimited” Internet access plans, impose additional charges or limit access in some ways once a threshold of unusually-high usage is reached.

So even if most users will not ever encounter the fair use rules, it is not going to be literally correct that “no roaming charges” ever can be levied within the EU.

“Retail roaming surcharges in the European Union will be abolished as of 15 June 2017,” the document states. “However, the compromise defines two situations when the application of surcharges is still authorised, subject to specific criteria.”

“Roaming providers will be able to apply a 'fair use policy' to prevent abusive or anomalous usage of regulated retail roaming services,” the document says. “Once the fair use policy has been exceeded, a surcharge may be applied.”

Also, “where roaming providers will not be able to recover overall costs of providing regulated roaming services from overall revenues of providing such services, they, subject to the authorisation by the national regulatory authority, may apply a surcharge, but only to the extent necessary to recover those costs,” the new rules will stipulate.

So, generally speaking, roaming charges within the EU will end. But unusually-heavy usage might still trigger roaming costs. And in some instances, carriers will be able to apply surcharges to cover actual roaming costs.

Facebook Teams with Eutelsat for Internet Access to Sub-Saharan Africa

Even if Facebook recently seemed to deemphasize satellite Internet in favor of unmanned aerial vehicles, it now has inked a deal with Eutelsat to directly provide Internet access to parts of sub-Saharan Africa.

Eutelsat said it had signed a "multi-year" pact with Facebook to provide Internet access using “the entire broadband payload on the future AMOS-6 satellite," with the service expected to go live in the second half of next year.

It isn’t immediately clear what the business model will be, or what roles Facebook might play. But it seems likely Facebook will primarily act as a backhaul supplier, working with local partners for access.

Business Model Still is a Problem for Hotspot 2.0 (Passport)

Hotspot 2.0 deployment remains slow, according to researchers at ABI Research. Lack of a clear and compelling business model likely is the problem.

“Operators, however, still lack the tools to generate revenue streams from this technology,” said Ahmed Ali, ABI Research analyst.

The other issue is that it remains unclear which access suppliers will gain most. In addition to Hotspot 2.0, also called Passpoint, mobile carriers and their suppliers are working on several other ways of bonding mobile spectrum to Wi-Fi, potentially making use of Passpoint less compelling or useful.

Passpoint still would be useful for providers of public hotspot service such as Boingo, or cable TV operators operating large public hotspot networks.

Still, an eventual move into mobility services by some large cable TV operators would raise the issue of relative importance.  Passpoint still makes sense for providing seamless

access to hotspot services.

But interworking with mobility services could well represent a parallel and equally-important capability.

Some mobile operators that have deployed the technology in countries such as the United States, the United Kingdom, Australia, South Africa and Hong Kong, have launched the service with VoLTE side by side, aiming for a complete seamless voice experience.

Finding a business model is not new for Wi-Fi: that problem has been present since the inception. Up to this point, some Internet service providers who have deployed large networks of Wi-Fi hotspots have used an indirect business model.

Access to the Wi-Fi networks essentially is an amenity that adds value to the fixed or mobile access service the ISP sells. A few companies have created “for-fee” hotspot services sold mostly to business users.

Passpoint or other methods of bonding mobile and Wi-Fi services will face similar issues. The capability is likely to be monetized indirectly, as a feature that adds value to an access service.

Globally, there will be nearly 341 million public Wi-Fi hotspots by 2018, up from 48 million hotspots in 2014, a sevenfold increase, according to a study conducted by iPass Inc. and Maravedis and Rethink.

Perhaps six million of those 341 million public hotspot locations will support Hotspot 2.0 features by about 2020, according to ABI Research.

Some service providers in 2014 expected substantial growth of their deployments.

source: IHS Infonetics

Europe will have the greatest number of hotspots, with 115 million hotspots by 2018, with North America a close second, with 109 million hotspots, according to Cisco.

Globally, Wi-Fi connection speeds originated from dual-mode mobile devices will nearly double by 2019, according to Cisco.

The average Wi-Fi network connection speed (10.6 Mbps in 2014) will exceed 18.5 Mbps in 2019. North America will experience the highest Wi-Fi speeds, of 29 Mbps, by 2019

Hot Spot 2.0, also called Wi-Fi Certified Passpoint, is a standard for public Wi-Fi hotspots that enables seamless roaming among Wi-Fi networks and between Wi-Fi and mobile networks.

Developed by the Wi-Fi Alliance and the Wireless Broadband Association, the intent is to  to enable seamless hand-off of traffic  without requiring additional user sign-on and authentication.

Merger to Create Stronger Number-One Mobile Operator in Pakistan

Pakistani mobile operators Mobilink and Warid Telecom have reportedly agreed to merge their operations, creating a new firm with the largest customer market share in the Pakistan market.

Part of the thinking apparently is to bolster both 3G and 4G operations, as Warid is 4G-only while Mobilink is 3G-only, according to Telecomasia. That is important for a couple of erasons.

Smartphone usage in Pakistan--and therefore the need for bandwidth--is growing. At present, smartphone usage in Pakistan is above 31 percent, and growing steadily.

The deal also better positions the new entity against both of the rising carriers, Telenor and ZONG.

Telenor, which is gaining market share, along with ZONG, has the highest share of data accounts, but only operates a 3G network. Telenor has no 4G assets, yet. 

The merger also will allow Mobilink to compete head to head with ZONG in 4G. ZONG and Warid are the only providers operating 4G networks.

3G/4G Subscribers
Operator	Technology	2014-15	Jul-15	Aug-15
CMPak (ZONG)	3G	2,898,094	3,094,684	3,452,634
	4G	105,128	132,502	169,435
Mobilink	3G	3,656,345	3,956,653	4,031,096
Telenor	3G	4,162,616	4,695,904	5,091,114
Ufone	3G	2,570,283	2,613,066	2,881,504
Warid	LTE	106,211	121,602	139,897
Total		13,498,677	14,614,411	15,765,680

source: PTA

But there likely are additional reasons for the merger. Mobilink and Warid have lost market share to Telenor and ZONG since 2013.

ZONG is the fastest growing mobile operator in Pakistan and is strong in urban areas.

source: techjuice

source: techjuice

Smartphone usage in Pakistan has been climbing steadily since at least 2013 as well, making 3G and 4G assets more important.

source: phoneworld

OTT Voice, Messaging Actually Could Shrink Mobile Revenue 30% to 50% in India

Mobile service providers in the hyper-competitive Indian market, who earn nearly 80 percent of total revenue from voice, warn that they could lose perhaps 30 percent to 50 percent of current revenue from OTT voice and messaging competition.

You might argue that is simply a typical warning from incumbent service providers facing new competition, intended to buttress the argument for industry protection.

As valid as that observation might be, it also would be valid to note that voice revenue declines of at least that magnitude already have happened in many mature markets.

In the U.S. fixed network business, for example, revenue dropped 50 percent between 2002 and 2013.

Other products also have seen that magnitude of decline. In 1997, half of total telecom provider revenue was earned from long distance services in the U.S. market.

By 2007, mobility services had replaced long distance, which dropped more than 50 percent from 1997 levels.

Between 2001 and 2011, looking at consumer spending on communications, mobility spending grew from 25 percent to 48 percent of total spending. Other components obviously decreased by precisely the percentage mobility spending grew.

The point is that, even if one believes such claims of financial damage are a normal part of industry jockeying for position, there is good historical reason to believe revenue declines of that magnitude are quite within the realm of possibility.