MIMO and Small Cells Can Only Do So Much: More Spectrum is Needed

If you assume demand for mobile Internet access bandwidth is going to keep growing in excess of 50 percent a year, as it presently is doing (Cisco predicts bandwidth consumption in Asia will grow at 58 percent annual rates through 2019), then supply also has to be increased.

If you also assume the percentage of higher-performance smartphones will keep growing, then you also must account for much-heavier bandwidth demand. A feature phone tends to use about 22 MB a month. A smartphone tends to use 819 MB each month, while a smartphone used on a 4G network will tend to consume 2,000 MB a month, according to Cisco.

As smartphone adoption grows, so will the percentage of phone customers regularly using mobile data. That also applies to use of smartphones on 4G networks or 3G networks, compared to 2G networks. People consume more data on faster networks

It also follows that significant additional capacity will have to be supplied.

Traditionally, there are three ways to do so. Regulators can allocate more spectrum. Operators can move to smaller cells or use more-efficient antenna technologies, to reach the so-called “Shannon limit (the theoretical maximum efficiency of any communications channel.”

Use of Multiple Input Multiple Output (MIMO) antennas might jokingly be said to prove “Shannon was wrong.” He was not wrong, but the point is that after MIMO--and massive MIMO--are applied, service providers will have wrung as much as possible out of antenna technology.

That will leave new spectrum and smaller cells are the remaining technology tools to boost usable bandwidth (one can think of many ways to provide consumer incentives that reduce demand, but those are not technology tools).

Operators can control network architectures. They cannot control spectrum allocation.

Brookings

Brookings

Is Google Fiber an Existential Threat? How Much Can it Do with 30% Coverage of the U.S. Market?

Is Google Fiber an existential threat to either telcos or cable TV? That might seem an overblown threat. “Existential” implies a threat to existence.

To the extent there is legitimate danger, it comes not from massive losses of telco or cable TV market share and gross revenue (though that might well happen), but “only” from a sustained dip in profit margins caused by the new competition.

In other words, assuming Google Fiber currently is sustainable itself (earning a positive rate of return), the issue is whether the competition tips either telco or cable TV profit margins below the 20-percent level, towards zero.

Nor does Google Fiber have to do all the work.

Other trends work in that direction, namely declining demand for fixed network voice and declining demand for linear video, in addition to the obvious new pressure on high speed access pricing and profit margins.

The challenge Google Fiber represents is that cable TV and telco competitors have to increase capital investment while simultaneously risking zero net increase in revenue, or even actual declines in revenue. More spending to earn less revenue, in other words.

Simply, a market rate of a gigabit for $70 a month resets consumer expectations enough to destroy existing pricing-value relationships upon which current cable TV and telco business models are built.

In other words, it is not necessary that Google Fiber, or any other competitor in the high speed access market, reduce telco or cable TV market share far below current levels.

All Google Fiber and others must do is attack profit margins. Cable TV gross margin is typically somewhere in the low 20s and net margins are maybe in the 10 percent to 11 percent range.

AT&T has net margin in the five percent range.  Other telcos might have net margins in the six-percent range, with Verizon somewhat higher, at perhaps seven to eight percent.

The competition “merely” needs to reinforce existing revenue and cost trends in ways that undermine the sustainability of cable and telco business models, especially the net margin performance.

You might well argue that is why the leaders of the cable TV industry “must” get into the mobility business, or telcos “must” get into the Internet of Things business. There is simply going to be increased pressure on gross revenue and profit margins in the fixed network business.

Given existing trends--shrinking voice and slow diminution of linear video revenue--all that has to happen is enough market share pressure and share gains by the new competitors to tip the cable TV and telco business model towards zero.

To be sure, we are likely five to 10 years away from any such scenario, as Google Fiber coverage remains relatively limited, compared to the larger telcos and cable TV companies (though far beyond what most independent ISPs could sustain).

The issue is how much coverage Google Fiber would have to attain, on a national basis, to become a significant and material force on pricing in most of the market, and whether Google Fiber decides to continue pushing in that direction.

So far, Google Fiber has avoided the “NFL cities,” targeting second-tier cities instead. Whether Google Fiber can exert national market power without significant footprint in the biggest markets is an important issue.

Some have estimated the cost of a truly-nationwide network at perhaps $140 billion. But keep in mind that no other service provider serves more than about 30 percent of all U.S. homes. Whether Google Fiber would be permitted to exceed roughly that coverage, and whether it wants to, are key issues.

At least in an environment where Internet access is considered a “common carrier” service, one has to believe that the government would not let even a Google Fiber exceed about 30 percent coverage of all U.S. homes. No other service provider is allowed to do so.

So if I am thinking about how to maximize the Google Fiber market impact, I would focus on how to wring the greatest effect from operations that never will exceed coverage of more than 30 percent of U.S. households.

Reliance Jio Plans Big Push into Fixed Services

Reliance Jio, about to launch a major challenge in the Indian mobile communications business, also hopes to enter the fixed network business as well, as a cable TV operator. In June 2016, Reliance Jio Media Pvt. Ltd, a subsidiary of Reliance Jio, received approval to launch a pan-India cable TV company.

That would be an expensive, time-consuming and daunting exercise under the best of conditions. So it is not surprising that Reliance Jio would consider growth by partnership and acquisition.

The company is said to be in talks with a number of cable TV operators, particularly in large and densely packed cities, such as Mumbai and Bangalore, to supply the platform. At the moment, cable TV operators represent about 100 million connected homes.

As in the past in other markets, Reliance Jio might discover it will have to upgrade the cable TV facilities, both in terms of reliability (network uptime) as well as ability to support two-way operations.

source: Business Standard

Google Fiber Formally Asks 3 More Cities to Work on Qualifying for Google Fiber

Google Fiber says it has  invited Oklahoma City, Okla., Jacksonville, Fla. and Tampa, Fla. to explore bringing Google Fiber to their communities, as it did in September, inviting officials in Irvine, Calif., Louisville and San Diego to work with Google on a standard checklist of items Google Fiber uses to assess market viability.

That normally includes a detailed study of matters that affect construction, such as local topography, housing density, and the condition of existing infrastructure.

Cities also must complete a checklist of items—such as providing a map of utility lines—that Google Fiber insists are prerequisites.

Those of you familiar with the history of the U.S. competitive local exchange carrier business will see the pattern here. Many U.S. CLECs, exploring communities where it was favorable to commence operations, also stayed away from the major metro areas (“NFL cities”) and instead picked tier two cities.

The same logic appears to make sense for Google Fiber.

source: Google Fiber blog

What is Harder than Being an Indian Mobile Operator?

It might be easier to thread a camel through the eye of a needle than to succeed wildly and easily in the Indian mobile communications market. It would not be unusual in any big market for four providers to control 95 percent share of the mobile services market.

In India, though four providers have about 70 percent share, five providers have 86 percent share, while six providers have 93 percent share. Structurally, the Indian mobile market is more fragmented than most.

source: Datareign

For reasons I do not claim to understand, mobile operator infrastructure costs some 30 percent more than global averages, says Rajan Mathews, Cellular Operators Association of India director general.

That is not all. Spectrum prices range from 30 percent to 35 percent higher than global averages as well.

And Indian mobile operators labor with less spectrum. “Every mobile operator in India has, on average, 12 MHz to 15 MHz of spectrum,” said Mathews. “Globally, every operator has 45 MHz to 50 MHz.”

There other important observation is that the Indian government has an interest in the mobile business that arguably is more concentrated than regulators elsewhere might have.

In developed markets, there are five access networks, including landline, satellite, cable TV, government networks and mobile. “India has one network: the mobile network,” says Mathews.

There are other implications. “The government has a proprietary interest, so spectrum is going to be licensed,” says Mathews. “The network is a sovereign national imperative as we are the only network in town.”

"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.