Australia Orders 9.4% Lower Wholesale Acess Prices for Copper Network

The Australian Competition and Consumer Commission has ordered a 9.4 percent decrease in wholesale access prices on the Telstra copper access network, beginning on No. 1, 2015, and continuing until June 30, 2019.

That decrease, despite fewer customers on the network, incorporates other changing input prices.

Downward pressures come largely from lower expenditures, falling cost of capital and impact of migration of users to the National Broadband Network.

These more than offset upward pressures from a shrinking fixed line market due to consumers moving away from fixed line services and to mobile services, ACCC Chairman Rod Sims said.

The ACCC noted, however, that fewer customers on the copper network will mean higher costs to serve the remaining customers.

That is a generic issue for many fixed network operators. 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. The business will have become unprofitable long before then. Some might argue the business already is unprofitable, if allocated overhead is included. Others would argue the business is slightly profitable, but getting worse as more customers churn off the network.

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 mobile is generating an increasing share of earnings.

Comcast Continues to Grow Bandwidth at Moore's Law Rates

As crazy as it seems, U.S. Internet service provider Comcast, now the biggest supplier in that market, has doubled the capacity of its network every 18 months.

In other words, Comcast has  increased capacity precisely at the rate one would expect if access bandwidth operated according to Moore’s Law.

U.S. telcos have generally not been able to increase speed at such rates. That, in large part, might account for Comcast’s leadership of the Internet access market.

That said, across the whole market, access bandwidth has grown at rates very close to what one would expect if Internet access were governed by Moore’s Law.

source: IP Carrier

Structural Separation or Facilities-Based Competition?

Creating more fixed network services competition--leading to consumer benefits--is never easy. High fixed costs, heavy capital investment and a plethora of competing delivery platforms are ever-present realities.

Where policymakers believe there is little practical opportunity for rival facilities-based networks to emerge, structural separation remains one of the few potential avenues for change.

Structural separation--breaking an incumbent telco into a wholesale unit and a retail unit--has in the past been a way policymakers attempt to create competition and foster investment in the Internet access market at the same time.

That is the actual policy in Australia, New Zealand and Singapore.

The argument has been that multiple facilities-based approaches are inefficient and a waste of capital. That might often be the case, especially in regions where there is no facilities-based cable TV industry that already offers a facilities-based alternative to incumbent telcos.

That is a tough matter, politically speaking. Few incumbent service providers ever have been willing to submit to such separattion policies. 

SingTel was willing to do so in order to obtain freedom to grow internationally, in new lines of business. Telstra, after much struggle, agreed to surrender its monopoly in exchange for assets and freedom in the mobile arena.

The former Telecom New Zealand simply seems to have been motivated by a belief that it would do better if separate retail and wholesale companies (Chorus becoming the wholesale company) were created.

On the other hand, some would argue that more interesting amounts of competition and innovation come when competition takes the form of  facilities-based rivalry. But that largely hinges on pre-existing and substantial investment by cable TV operators.

The reason is simple: when every retail provider uses the same network, the amount of innovation and pricing is limited. Compare that to a situation where two to three access networks exist, and the managers of each network look for all sorts of ways to create distinctiveness.

As many executives would say, an entity relying on wholesale access cannot control its costs.

The new wrinkle, at least in U.S. markets, is the emergence of third-party Internet service providers such Google Fiber and other independent ISPs. That emergence, in turn, appears partly fueled by a change in local government thinking and policy.

For decades, the objective, in substantial part, had been the ability to wring revenues from access provider operations, in the form of franchise and other fees.

Today, the thinking seems more focused on creating infrastructure that supports economic development (which, in turn, leads to higher tax revenue).

The change means municipalities generally are willing to forsake franchise fee revenue to gain state-of-the-art Internet access facilities, and also are willing to substantially improve the speed and efficiency of other key rules such as issuance of permits.

Where policymakers believe it will be possible to encourage facilities-based investment and competition, what happens at the municipal level might well be far more important than what happens at the level of national policy.

National policy still matters, and can be decisive in situations where “only one network” is the expected outcome. How much fiber-to-home progress is possible might hang in the balance.

source:Light Reading

AT&T Voice over Wi-Fi: Feature, Not a Service

A waiver granted by the U.S. Federal Communications Commission to AT&T now allows the firm to offer Wi-Fi calling. The business model is not yet fully visible, as the service has not yet been fully launched.

The context is that Apple’s iPhone, since iOS 8, has supported voice calling using Wi-Fi connections. But full value also requires that the service interwork seamlessly with carrier voice. Until now, that has not been possible.

The new feature illustrates the challenge of voice business models. At least so far, voice calling using Wi-Fi is mostly a capability, not a direct revenue driver for AT&T.

As with use of Wi-Fi for Internet access, the feature might be most useful, in the U.S. mobile market, for callers in areas where indoor mobile signal is weak and Wi-Fi signals are strong.

Though some tier-one service providers have launched their own voice over IP services, they arguably have gained little traction, compared to the third party app and service providers.

In a broad sense, the notion that access providers could compete successfully with over the top providers in voice has proven incorrect.

VoIP has mostly shrunk the retail revenue opportunity for voice, and shifted demand to third parties, and away from carriers.

Eventually, the feature might have greater indirect revenue implications, however.

As one or more cable TV operators enter the mobile market, they are expected to lean on their own hotspot networks and Wi-Fi for network infrastructure.

In that case, voice over Wi-Fi will help the overall business model, offloading demand from mobile to the fixed network.

That could have direct financial implications. To the extent that cable TV companies rely on wholesale access provided by other mobile operators, offload to Wi-Fi will mean lower payments to the wholesale services provider.

Bonding of Mobile and Wi-Fi Spectrum is a Land Grab

Wi-Fi interests worry about interference issues as new protocols are developed for bonding mobile and Wi-Fi resources. “Playing nice” always is a legitimate matter for users of shared spectrum.

As always, there are commercial advantages and interests at stake as well. “It’s a land grab,” said Roger Entner, Recon Analytics principal. “Are the cable guys blocking or are the mobile operators responding to future spectrum shortages?”

Maybe some element of each is at work.  

Cable operators see their huge networks of public hotspots as an asset to be monetized. Dense networks of hotspots can support a mobile business plan. Those same networks can drive wholesale capacity businesses as well.

As mobile and Wi-Fi bonding becomes possible, and assuming interference and access rules are respected, the wholesale opportunity arguably diminishes.

Mobile operators have their own incentives. Wi-Fi offload already is an essential part of network operations. Wi-Fi bonding would make the process more seamless, and might even create some new revenue opportunities.

Among the available strategies for dealing with emerging new competition is to get regulatory bodies involved. Keeping innovations from being deployed, if nothing else, allows more time for some contestants to get their commercial offers ready for mass deployment.

“Wait for standards” is one argument sometimes made, as part of that strategy. But competitors often want to seize business advantage now, rather than waiting.

Every technology standard has commercial implications. Every change in network capabilities has potential business model impact, both within and between industry segments or value chain participants.

There are, and will be, many legitimate technology issues to be addressed as various new forms of spectrum sharing are developed and deployed. There will be lots of sparring about the “right framework” and “right policy.”

But contestants are not unmindful of their commercial interests. It is a land grab.

Google Wants Faster Mobile Web

Google’s core business model is enhanced when everybody uses the Internet, and when the Internet can be experienced “faster.” Most of what Google has done in the access area relates directly to those two interests.

Google now is launching a new open source content initiative intended to speed up performance of the mobile web.

Accelerated Mobile Pages aims to dramatically improve the performance of the mobile web, allowing rich content to load instantaneously.

The other objective is allowing the same code to work across multiple platforms and devices so that content can appear everywhere in an instant, no matter what type of phone, tablet or mobile device you’re using.

The project relies on AMP HTML, a new open framework built entirely out of existing web technologies, which allows websites to build light-weight web pages.

Over time we anticipate that other Google products such as Google News will also integrate AMP HTML pages. Nearly 30 publishers globally have agreed to support the framework.

Mobile Media Usage is Saturating

No market ever grows to the sky, and growth rates for any popular service or product slow as most people already have bought.

So it is not surprising that mobile media growth rates are slowing considerably. Non-voice time spent on tablets and mobile phones will grow just 11.3 percent in 2015 to two hours and 54 minutes, according to eMarketer.

That slowing trend has been underway since 2012.

In 2016, growth of time spent on mobile will fall into the single digits, with U.S. adults spending an average of three hours and eight minutes per day on mobile devices, excluding voice activities.

“As the data shows, a large majority of American adults are already using mobile devices,” said eMarketer forecasting director Monica Peart. “This means there will be fewer new smartphone and tablet users added each year.

“Also, the number of activities currently possible on mobile devices limits the amount of time a user can spend per day. For these reasons, growth in the amount of time spent on mobile devices will slow down significantly,” Pearl said.

Much of the growth in time spent on mobile devices will come from people spending more time within apps.

In 2015, U.S. smartphone and tablet users will spend an average of three hours and five minutes a day using mobile apps, up from two hours 51 minutes in 2014.

By 2016, mobile device users will spend three hours 15 minutes per day using apps.

Time spent on mobile browser activities will hold steady at 51 minutes in 2015 and 2016.