Will Service Provider Costs Have to Decrease 40% by 2020?

There are several reasons why services delivered over fixed networks are going to face tougher competition from mobile services, ranging from orders of magnitude more mobile bandwidth to lower mobile network sunk costs to higher network utilization rates to changing end user demand.

Simply put, demand for consumer-focused mobile services now vastly outstrips demand for fixed network services.

According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons, globally. That abandonment of fixed network voice is occurring at the same time that mobile subscriptions have reached 98.6 percent.

To be sure, demand for fixed network Internet access grew, but slowly, in 2014. Fixed network Internet access subscriptions grew from 10.3 percent to 10.8 percent.

Also, relatively speaking, it is going to be easier to wring cost out of mobile platforms, compared to fixed platforms, in most markets.

Mobile networks cost less than fixed networks, and can be deployed and upgraded faster.

Though the pattern is by no means uniform globally, the cost of a mobile network, including spectrum purchases, is less than that of a comparable fixed network.

But mobile markets typically feature multiple mobile operators (three to five, for example) operating with their own facilities, while many fixed network markets feature only a single network operator, or possibly two, in some markets.

In addition, mobile network infrastructure costs are described in terms of costs to serve “people,” while fixed network costs are “per location.”

That makes direct comparisons somewhat more difficult. But a study of U.S infrastructure costs showed mobile or wireless networks were less costly than fixed networks when loop length requirements  were 12,000 feet, for example, when the comparison was a single new mobile network and a single new fixed network.

Total investment might differ if multiple mobile networks overbuild a single fixed network. In some cases, the total cost of all the mobile networks could be higher than that of a single fixed network.

Operating costs often also are lower for mobile than fixed networks, sometimes because the fixed networks have cost structures typical of former-monopoly providers, while mobile service providers often start with lower cost structures.

Also, as customers abandon the fixed network, more of the assets are stranded, and unable to generate a financial return. Rare is the cell tower that does not serve paying customers, or enough paying customers to earn an actual profit.  

And ability to reduce costs is going to be essential, if one believes, as does the International Telecommunications Union, that retail consumer communications service prices are going to drop by 40 percent by 2020.

To be sure, prices might not drop by 40 percent for every service, offered by every provider, in every market. Prices for fixed services might even rise, as consumers opt to buy more-expensive services running at higher speeds up to a gigabit per second in some markets, but easily to hundreds of megabits in more markets.

The analogy there is smartphone prices, which are higher than what consumers used to pay for feature phones.

Still, stranded assets and shifting demand are going to create increasing pressures for fixed network service providers. Mobile operators will not be exempt from the pricing pressures, either.

Some might already argue that many fixed network providers, and even some leading mobile providers, have business models that are going “upside down.”

U.S. Fixed Network Broadband is "Among Most Affordable" in the World, says ITU

From time to time, observers complain about the high price of fixed network Internet access, especially when prices climb. A typical line of argument is the retail price, expressed in dollars, compared to prices in other countries, also expressed in dollars.

Analysts who work across regions and nations globally know there are issues with such comparisons. To normalize “prices,” analysts often use purchasing power parity or measures that index communications spending to household income, for example.

Those methods often provide a more-realistic way of comparing prices, since they are expressed in terms that are normalized for purchasing power differences.

In that regard, an International Telecommunications Union report shows that U.S. fixed network broadband prices are exceedingly low, expressed as a percentage of gross national income per person. That is not the only way to compare prices across countries, but is instructive.

Using the per-capita GNI method, fixed network high speed access costs less than one percent of per-person GNI, making U.S. fixed network broadband services among the “most affordable” in the world.

source: ITU

In developed countries, the fixed-broadband basket has been relatively affordable for a number of years, but prices are no longer falling.

Between 2008 and 2013, the price of the fixed-broadband basket as a percentage of GNI per person fell from 2.3 percent to 1.4 percent. That figure remained unchanged in 2014.

While prices for fixed-broadband services are comparable in absolute U.S. dollar  terms across developed and developing countries, they remain much higher in terms of purchasing power parity values.

In 2014, fixed-broadband services in developed countries cost PPP$27, compared to PPP$65 in developing countries. This is not the case for fixed telephone and mobile prices, as prices expressed in purchasing power parity are almost the same in developed and developing regions.

source: ITU

No Network is "Always Best," But Mobile Comes Close, in Consumer Market

As a rule, no single access platform is “best” for every deployment scenario, even if mobile networks globally have proven to be the most-affordable for most people, most places.

Still, the relevance of satellite delivery, fixed wireless, specialized business networks and potentially new platforms (low earth orbit satellite constellations, balloons and drones) cannot be denied, even if it is likely most of those new solutions might wind up providing backhaul for mobile networks.

Sometimes the advantage of “specialized” networks comes from customer demand, at other times from the characteristics of the access platform.

Optical networks serving enterprises or satellite TV networks serving consumers in rural areas are examples of specialized demand or cost-optimized delivery.

Still, it is hard to discount the growing “primary” reliance on mobile networks for most consumer purposes. Since 2003, mobile network rural coverage had grown from a bit over 20 percent in 2003, in Africa, to as much as 84 percent by 2012.  

In other regions, such as Asia, rural coverage grew from 60 percent to 87 percent in Asia and from about 64 percent in North America to 96 percent. In Europe, rural coverage grew from about 90 percent to 97 percent.

In 2015, 73 percent of the world’s population is covered by 3G networks, one way of measuring potential Internet access coverage. The GSM Association estimates that 3G coverage will grow to 80 percent by 2020.

By 2020, some 60 percent of people will have 4G coverage.

Such forecasts are the reasons why some access or transport platforms can exist, even when mobile coverage becomes nearly ubiquitous. Mobile will not be the “best” network for all purposes, and will not be available in some geographies.

source: ITU

source: ITU

Mobile Data Services Now Drive Global Mobile Operator Revenue Growth

At least one global trend--adoption of mobile Internet access services--has sharpened over the last couple of years. On a global basis, adoption of mobile services has reached maturity, though growth lies ahead in some regions, especially Africa.

Other trends continue unabated. According to the International Telecommunications Union, fixed telephone subscriptions have declined from 15.2 to 14.5 per 100 persons. That abandonment of fixed network voice and growth of mobile  while mobile subscriptions have reached 98.6 percent.

Fixed network high speed access has grown slightly, from 10.3 to 10.8 per 100 inhabitants.

Growth in the penetration of active mobile-broadband subscriptions has, however, been very sharp, rising from 37.2 to an estimated 47.2 per 100 persons over the last twelve months alone.

Mobile broadband services, falling prices and the rapidly growing use of smartphones and tablets are driving that trend, the ITU says.  

Individual use of Internet and household access to it have continued their steady rates of growth, from 40.6 and 43.4 per cent, respectively, to 43.9 and 46.4 per cent at the global level.

One trend seems clear enough: “mobile broadband” is the way most people now are getting access to the Internet, globally.

source: ITU

Free Basics to be Offered by Airtel in 17 Countries in Africa

Facebook is partnering with India's Bharti Airtel to bring new services to 17 African countries as part of its “Free Basics” program. 

"In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate," said Mark Zuckerberg, Facebook CEO. "Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa." 

Free Basics will be offered to Airtel customers in Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.

Zuckerberg also noted that Facebook had partnered to launch a satellite to provide Internet coverage to remote areas of Sub-Saharan Africa starting in 2016.

It's a big day for connecting Africa. In South Africa earlier today, we announced with Airtel Africa that we will be bringing Internet.org free basic services to all 17 countries where they operate.Internet.org first launched in Zambia and today half of the 30 countries with Free Basics are in Africa.These new Internet.org launches will bring free services to Burkina Faso, Chad, Gabon, Madagascar, Niger, Nigeria, Republic of the Congo, Sierra Leone and Uganda.We also recently partnered to launch a satellite to provide internet coverage to remote areas of Sub-Saharan Africa starting in 2016. We've also partnered with the Praekelt Foundation to give developers the tools they need to build free basic services to reach people just coming online. Girl Effect is one of these services and in this video Elisha is using it as part of Free Basics in Kenya to access information to help empower girls to become leaders. Connecting people across the African continent is critical to our mission. We’re going to keep pushing forward to develop new ways to bring people online until the whole world is connected.
Posted by Mark Zuckerberg on Tuesday, November 17, 2015

Mobilink Merger with Warid Creates New Pakistan Mobile Market Leader

VimpelCom (operating as Mobilink) and Warid Telecom Pakistan will merge their Pakistan telecom businesses, creating the largest mobile company in Pakistan, with about 45 million customers.  

The companies believe the transaction will to lead to savings with a net present value of approximately US$500 million. The combined revenue of the companies for the 12 months ending in September 2015 was US$1.4 billion.

Warid’s Long Term Evolution 4G network will help the new company compete with Zong, the only other operator running an LTE network.

source: Apni Voice

source: Central Asian Cellular Forum

Internet Adoption is Not Simply a Case of Network Investment

Increasing use of the Internet in India will be driven by smartphone adoption, higher use of 3G and 4G networks, lower devices costs, more-affordable subscription prices and greater understanding of the value of Internet apps.

In other words, higher rates of Internet use will require investments and innovations both in the policy, business and technology realms. Networks reaching all potential users are necessary, but not sufficient.

Supplier business models arguably need to become more sustainable, consumers need to better understand the value of Internet apps and retail prices will need to be more affordable. And growth itself will cause new problems.

As has been the case recently, higher usage means more stress on networks, dropped calls being one clear example. That will be the case for Internet access quality of experience as well as usage climbs.

That will require more investment in spectrum and networks, which also means government policies that encourage investment will matter. And only government can release the additional required spectrum.

At the same time, consumers need to be convinced they need the Internet, and that is not universally the case, today.

By 2020, more than half of India’s people still will not regularly use the Internet, according to The Mobile Economy: India 2015 report. Most of the excluded population will live in rural areas.

The gender gap will remain, as well. Women in India are 36 percent less likely to own a mobile phone than men, which equates to 114 million Indian women.

Also, nearly 70 percent of the Indian population lives in villages, where network costs are higher than in urban areas, and sustainable business models are more much more difficult.

According to the Ministry of Communication and Information Technology, nearly 10 percent of Indian villages had no mobile coverage from any of India’s mobile operators as of March 2015.

A combination of a difficult terrain, characterised by mountains and sparsely populated farmlands, high energy costs and low income levels often makes it uneconomical for mobile operators to expand coverage to rural communities using conventional network deployment strategies.

A recent report by the GSMA analysed three broad strategies to address the coverage gap, namely network sharing, government support and alternative technologies (such as drones, balloons or satellites). The first two are particularly relevant to the Indian market, GSMA argues.

A study organized by a major mobile trade association might be expected to say that.

The cost of ownership of a mobile phone (which covers all the costs associated with both owning a phone and accessing mobile services) is a key factor in mobile internet adoption, particularly in India where nearly one-third of the population (360 million people) lives below the poverty line.

Data tariffs in India, at 0.5 to 0.7 cents per MB, are among the lowest in the world, but a significant proportion of the population is unable to afford this for regular internet use due to low disposable incomes.

A recent report by GSMA Intelligence found that many non-users lack awareness of Internet uses and available content. They do not feel the Internet is relevant or useful to them.

Creating awareness around the benefits of the internet and the availability of useful services covering a wide range of subjects, such as agriculture, education and healthcare, is crucial to bringing more people online.

Not coincidentally, that is why Facebook’s “Free Basics” program is viewed as so significant by Facebook and many others.

Most agree that mobile will be the primary Internet access platform in India. But that does not mean mobile will be the only platform. Fixed networks will have a role to play, both for access and backhaul, while new backhaul platforms might be more significant than some assume.