"Dig Once" is More Useful to Some Than to Others

In principle, it is helpful to some communications service providers when conduit suitable for installing new optical fiber cable already is in place. That is the attraction of “dig once” policies that install conduit whenever other construction projects are undertaken.

That is the thinking behind a ”dig once bill introduced in the U.S. Congress. Of course, the measure balances “more” value for future potential Internet service or app providers and less value for users of federal highways, since the cost of installing the conduit means “less highway.”

That will be deemed a reasonable tradeoff in many instances, with the greatest value if the conduit is laid along important and recognized routes useful for path-diverse long haul transport, or passing population centers or other sites where close access to long haul facilities is useful.

The conduit will have less value if it merely is installed along existing long-haul routes where conduit already exists, or where there is little incremental demand that cannot be met by already-installed cables.

“Who” benefits also will be an issue. Incumbent suppliers of capacity--with no capacity constraints--on those routes will not necessarily welcome potential new competition. Potential new suppliers will get the advantage.

Chorus to Outsource Network Management to Alcatel-Lucent

New Zealand wholesale network operator Chorus has awarded Alcatel-Lucent a five-year managed services contract covering 24/7 monitoring of the operator's nationwide wholesale copper network.

Under the agreement, Alcatel-Lucent will provide real-time monitoring and analysis services from a new network operation center in Hamilton working with an additional NOC in Bangalore, India to provide monitoring aimed at preventing faults, improving network availability and ensuring continuous service quality of the copper network.

The contract is part of a long-standing trend in telecommunications, where service providers outsource network management functions to third parties, or actually divest assets such as networks of cell towers, or, in the case of Telecom New Zealand, the entire network.

That throws light on an old question (largely rhetorical) about what the typical telecom operator’s core competence might be. It remains hard to answer with precision. The question concerns not merely “what things do you believe you are good at” but ideally “what is the distinguishing core competence, not possessed by those who compete against you?”

Few are able to boil the answer down to a single, unitary and fundamental core competence. Perhaps there is not a unitary answer, in most cases. But few executives historically would have omitted “we know how to build and run big communications networks” from a short list of “things we are really good at.”

Telcos historically might be deemed to be good at such functions. But the issue is whether such skills constitute a “uniquely important” competence that other competitors cannot match. Perhaps it is too difficult for any firm to say there actually is one single “core” advantage others cannot duplicate.

Some might indeed say it has been “we can run a network” that is core. Others might say it is “ownership of spectrum licenses,” scale or capital resources that are close to being the unique assets. Some might argue it is knowledge and scale of the regulatory apparatus.

But that’s the difficulty of the exercise: not listing many attributes that are helpful, but the salient and distinguishing advantage others cannot copy. Perhaps nothing, anymore, provides that sort of a “moat” against competitors.

Recent history, with massive global adoption of Internet Protocol, encouragement of competition and growing access to spectrum, might suggest any historic advantages are systematically being stripped away. That, after all, is what the goal of competitive policies has been.

Perhaps about all one can say is that there is one attribute some members of a class tend to possess. In the U.S. market, perhaps only AT&T and Verizon might be said to possess a sometimes overwhelming regulatory apparatus. That is not to say Comcast, Sprint, T-Mobile US and Charter Communications do not have such an apparatus, simply that it might not be a distinguishing and unique advantage.

In fact, recent developments suggest even that advantage, if it can be said to be a core competence, is as much an advantage as it once was. In recent days, it can be noted that few key policy battles have actually been won by “telcos,” when opposed by “Internet app providers.”

That might not be the case elsewhere. In Europe, India and elsewhere, for example, telcos seem to retain the old advantages.

So the frightening prospect for most telcos, strategically, is that they are moving to a business environment where every believed source of advantage diminishes to the point where there might someday be no core competence; no characteristic that is unique.

Firms operating without such characteristics will nearly always fail. One different way of asking the core competence question is to ask “what do customers believe you are uniquely good at?”

The ability to answer clearly will be an important test of how things are going, in the future.

T-Mobile US Adds 2.3 Million Net New Customers

T-Mobile US third quarter 2015 results continued a recent streak of subscriber, revenue and earnings growth.

T-Mobile US added 2.3 million total net customers, grew service revenue 11 percent and “adjusted earnings” 42 percent, quarter over quarter. T-Mobile’s total revenues for the third quarter of 2015 grew by 6.8% year-over-year

T-Mobile US added 2.3 million total net adds, the 10th consecutive quarter when T-Mobile US added more than one million net new accounts.

Of the total net adds, 1.1 million were branded postpaid net adds, of which 843,000 were branded postpaid phone net adds. T-Mobile US also added 595,000 branded prepaid accounts.

Verizon added 430,000 net accounts during the same quarter, while AT&T lost 333,000 postpaid accounts.  

European Parliament Sets Network Neutrality Rules

The European Parliament has ratified net neutrality rules applying across the European Union. Blocking of lawful apps has been an issue.  

In 2012, the Body of European Regulators of Electronic Communications (BEREC) reported that between 21 percent and 36 percent of Internet access subscribers were affected by blocking or throttling depending on the type of application.

The new rules forbid blocking or throttling of lawful online content, applications and services, on mobile or fixed networks. That will have possible implications for Skype, Facetime or other apps sometimes blocked by ISPs. Nor will it be lawful to charge a fee to “unblock” those apps.

No traffic can be prioritized, whether on a paid or unpaid basis. At the same time, equal treatment allows reasonable day-to-day traffic management according to justified technical requirements, and which must be independent of the origin or destination of the traffic and of any commercial considerations.

The rules also clarify the conditions under which “Internet” and “managed services” can be offered.

Basically, managed services only might be offered where and if sufficient capacity for internet access remains available.

The rules forbid any special treatment of different classes of Internet traffic except for “reasonable traffic management” to optimize overall transmission quality.

Reasonable traffic management therefore cannot be used to discriminate against specific categories of content or services such as peer-to-peer (P2P) traffic.

The legislation allows operators, under very strict conditions, to take action in the network that may affect certain types of traffic in order to mitigate the effects of congestion. Such measures are only permitted if congestion is "exceptional" or "temporary", and provided all traffic of the same category is treated alike.

Zero rating, also called sponsored connectivity, is a commercial practice used by some providers of internet access, especially mobile operators, not to count the data volume of particular applications or services against the user's limited monthly data volume. Zero rating is not forbidden, but must comply with the other provisions of the rules, in particular those on non-discriminatory traffic management.

The rules on net neutrality will apply starting 30 April 2016.

European Parliament Approves End to Mobile Roaming Charges

The European Parliament has ratified an end to wholesale mobile roaming charges by June 2017 and also set net neutrality  rules for the first time in EU law.

For consumers, the new rules mean that, starting 15 June 2017, EU mobile customers will pay home rates for voice, texting and mobile data when traveling within the EU, subject to a fair use cap that is not yet defined.

Since the EU took action in 2007, prices that consumers pay for roaming across calls, texting and data have decreased by over 80 percent.

Data roaming is now up to 91 percent cheaper compared to 2007, with perhaps predictable results:  the volume of the data roaming market has grown by 630 percent.

Current Revenue Opportunities Dictate AT&T, Verizon Linear Video Strategies

It might not have seemed obvious, a few years ago, what stance either AT&T or Verizon "should" take towards future video entertainment strategy. Both firms had modest share of the linear video business, even if video was an essential ingredient for the triple play anchor service.

Today, AT&T and Verizon are taking different tacks to video entertainment. AT&T has made a bigger commitment to linear video. Verizon is emphasizing mobile video.

To be sure, there are some commonalities. AT&T believes its ability to bundle video entertainment, on a national basis, will help it sell and retain mobile accounts that also are sold nationwide. 

Verizon, on the other hand, had a smaller fixed network footprint to begin with, and concluded for several reasons that the better bet was to "go mobile," since perhaps 85 percent of total Verizon revenue is generated by mobile services. 

Aside from other considerations, the DirecTV acquisition was immediatly accretive for AT&T in terms of free cash flow. That is an important consideration for a firm committed to continual dividend payments and dividend increases. 

Long term, neither firm believes linear video will continue to be as big a business, or have the profit margins, as at present. 

In the near term and medium term, however, linear and other forms of video entertainment often are seen as essential products to support the fixed network business case, which no longer can be supported by voice, Internet access as a stand-alone product, or a dual-play voice-plus-Internet-access approach. 

Some have argued AT&T would have been better served had it not acquired DirecTV.  The thinking there is that the capital could have been deployed in Internet access facilities. Whatever the merits of those arguments, there would have been no immediate lift in free cash flow or revenue magnitude, had that choice been made. 

source: Market Realist

Does 25 Mbps Change Anything?

With one obvious possible exception--doling out of federal funds to support high speed access in rural and underserved areas--what is the impact of the Federal Communications Commission’s change in definition of “broadband” from 4 Mbps (downstream) to 25 Mbps?

Record keeping obviously changes. When the next report appears, many service providers will no longer be said to be providing “high speed access,” their services being defined out of existence.

Many more residents will said to be “lacking” such access. That, of course, is the purpose: creating a gap; a problem to be fixed. And the shift could be as high as 90 percent, using the latest Akamai study results.

Akamai also says U.S. “adoption rates for 25 Mbps broadband remain fairly low nationwide, with 46 states seeing levels below 10 percent.” That’s the magnitude of the likely reporting change.

It matters “what” is being measured, of course. What likely matters more are Internet service provider investment decisions about what is required in each market to remain competitive. And those decisions are not necessarily related to definitional changes.

Google Fiber, many would argue, is largely responsible for the widespread shift in thinking about headline speeds, shifting the marketing battle to “gigabit” levels, even if most consumers, given a choice, seem to be opting for speeds ranging from 40 Mbps to 100 Mbps, even when they could buy a gigabit service.

As often happens, the market and the technology is moving faster than the definitions or regulations. Cable TV companies, Verizon and many independent ISPs already have eclipsed the new FCC definition, and had done so before implementation of the new minimums.  

source: PC magazine

Cable TV companies also, by virtue of their use of hybrid fiber coax networks, had generally surpassed all but the fiber to home providers in terms of Internet speed. That largely accounts for the slower speeds notched by CenturyLink and AT&T, for example.

In 2015, according to Ookla tests conducted by PC magazine, only Verizon was among the top providers of Internet access in the U.S. market. Obviously, where Google Fiber operates, it has been the provider of the fastest service, by an order of magnitude.

That should continue to be the case, even where Comcast and other competitors boost speeds. The reason is that Google Fiber sells just one service--at a gigabit--where the other providers tend to offer multiple tiers of service, including services ranging from 50 Mbps to hundreds of megabits, in addition to the headline gigabit services.

That essentially means all consumers buying from Google Fiber are taking the gigabit service. Only some of the customers of other ISPs offering gigabit services will buy the fastest service.

Average global speeds in the first quarter of 2015 were about 5 Mbps, said Akamai. But global  peak speeds were about 32 Mbps.

In the second quarter of 2015, average global speed was still about 5.1 Mbps, while peak speeds

globally were still at 32.5 Mbps.

So it matters which figure is cited and used. In U.S. cities, Akamai says average speeds were between 14 Mbps and 19 Mbps, while peak speeds ranged from 62 Mbps to 73 Mbps. That also is true at the state level, according to Akamai.

source: NCTA

You can agree--and most will--that higher speeds are a good thing, and that bumping up a standard to a minimum of 25 Mbps only reflects reality. In fact, that is the case, many would argue, even if “average” and “peak” speeds diverge.

Traditionally, long access loops have been an inhibitor. But investment in optical fiber networks has been ramping up. Comcast, especially, will have the greatests immediate impact, as it will upgrade virtually 100 percent of its consumer locations to 1 Gbps in 2016, with some 85 percent of locations capable of buying a 2-Gbps service.

AT&T likewise has committed to a big upgrade across its footprint as part of its Project VIP, something CenturyLink also is doing, introducing faster speeds and gigabit access in metro areas.

That refers to the supply situation. The other element is the demand. According to the FCC, consumers are upgrading speeds at about a 20-percent annual rate, as well.

The point is that there arguably has been remarkably little impact from the definitional change. For starters, the definition simply raised the minimum to a level many suppliers already were meeting or beating, especially in the case of cable TV operators who are the majority suppliers in the U.S. market.

At the same time, competition from the likes of Google Fiber definitely has encouraged cable and telco suppliers to boost speeds. That, and not a definitional change, is what is driving investment.