Mobile Ad Blocking is a Growing Problem Because Users Want to Save Money on Data Costs

Mobile ad blocking is a business model problem, one might argue, not so much because ads are so intrusive, but because ads represent so much bandwidth overhead, especially in markets where mobile plans can cost as much as 4.4 percent of per-person gross national income, and data charges are extra.

Fixed network Internet access can cost as much as 21 percent to 29 percent of per-person GNI in developing nations, and as much as 98 percent of GNI per capita in the least developed nations.

By 2014, mobile service cost an average to 5.6 percent of GNI per capita  in developing countries. In the less developed countries, mobile costs 14 percent of GNI, per capita.

In the developed countries, mobile service costs about  1.4 percent of GNI per person.

Under those sorts of conditions, users have ample incentive to block ads that represent significant costs.

source: ITU

source: ITU

When Will ISPs Reach Same Conclusions PC Suppliers Did?

Computer suppliers long ago learned that marketing focused on “speeds and feeds” was not especially helpful. Internet service providers eventually will likely come to the same conclusion, though perhaps not soon.

The reason is simply a mismatch between a typical user’s ability to perceive or use most higher-speed connections, with one clear exception.

ISPs believe they gain marketing traction when able to advertise higher speeds than other providers. Whether the higher speeds make a difference, in terms of individual user experience is the issue.

Beyond a fairly low level, higher speed does not improve any single user’s experience.

In general, 10 Mbps appears to be the tipping point beyond which most consumers rate their broadband experience as “good,” Ofcom says. That threshold also tends to be the ceiling for experience. Beyond 10 Mbps, app experience does not improve.

There is one exception to that rule. Multi-user households, especially those using lots of higher-definition video, do benefit to the extent that aggregate bandwidth better ensures a minimum of 10 Mbps for every user, at peak usage periods.

“A minimum of 10 Mbps is required by the typical household,” according to Ofcom, the U.K. communications regulator.

The “average” fixed network download speed is 28 Mbps, according to Ofcom, and 83 percent of U.K. households can buy service between 30 Mbps and 300 Mbps.

The other issue is that, for a growing range of apps--especially cloud-based apps--latency matters as much as speed.

It is a truism that availability and uptake are correlated. That is to say, higher speeds, and higher uptake of higher speeds, are correlated. Likewise, higher speeds are correlated with higher data consumption.

Households with connections above 40 Mbps are consuming significantly more data, Ofcom notes.

Previously, data use was relatively flat above 10 Mbps. “This change indicates that consumers who particularly value and use their superfast broadband services are now opting for higher-speed packages,” says Ofcom.

That correlation is nuanced. As Ofcom notes, people who consume more video are going to buy higher-speed packages that also come with higher usage allotments.

The proportion of video traffic delivered over fixed broadband networks in 2015 has risen to about 65 percent, up from 48 percent of total traffic in 2014.

The other issues are that, at higher access speeds, more data is consumed in any given unit of time.

Also, a more-pleasant experience will create an incentive for users to spend more time engaging with Internet apps and services.

Ofcom also notes that in-home networks now are a significant experience issue. In fact, the quality of home-network connections plays some role in over 75 percent of households with poorly performing broadband connections.

The quality of home-network connections is responsible for more than 25 percent of the connection problems in 20 percent of households with a poorly performing broadband connection, Ofcom notes.

But the “assembled” nature of ad-supported apps also plays a part in experience.

Many popular websites and services use advertising. In many cases, advertising represents as much as 99 percent of total consumed bandwidth, Ofcom says.

LIghtSquared Cleared to Emerge from Bankruptcy

LIghtSquared has received U.S. Federal Communications Commission approval to transfer spectrum licenses to a new entity, allowing the company to plan for emergence from Chapter 11 bankruptcy.

Under new leadership, including Ivan Seidenberg, the incoming company’s new chairman of the board, the new LightSquared will be able to resume its efforts to build a national Long Term Evolution (LTE ) fourth generation network using former satellite spectrum in the “L band.”

LightSquared ran into a regulatory buzz saw when GPS interests complained about interference with GPS devices in neighboring frequencies. LightSquared has a license in the 1525 MHz to 1559 MHz band, while GPS devices operate in the 1559 MHz to 1591 MHz region.

LightSquared will have up to 40 megahertz of spectrum to support its national network.

The company originally filed for bankruptcy protection in May 2012. GPS users complained that the network would interfere with equipment that requires precise location data.

Ironically, some might note that GPS interference with LightSquared was demonstrably greater than LightSquared interference in the GPS bands.

In principle, Lightsquared and GPS will now have to reach a deal that would satisfy both while leaving consumers much better off.

Title II Common Carrier Regulation is "Inept" Says Martin Geddes

The wrong analogies and metaphors, as consultant Martin Geddes points out, can be hazardous, even if the right metaphor can help clarify the logic of a position. Consider “paid prioritization,” one aspect of “network neutrality” that is controversial.

Geddes attended the District of Columbia court hearing on the Federal Communications Commission's "Open Internet" rules, commonly referred to as the imposition of Title II common carrier regulation.

Asks Geddes; “The existence of 'fast lanes' must mean everything else becomes a 'slow(er) lane'. Is this a good or bad thing?”

“We already have ubiquitous and uncontroversial paid peering,” Geddes notes. Apparently one justice also asked questions by way of analogy. “The railroads were at liberty to charge for refrigerated containers for goods that needed special handling, so it seems ‘utterly reasonable’ that ISP should be able to do the same,” Geddes reports.

Indeed, "users who create a cost should bear that cost,” a line of reasoning that also bears on the matter of metered usage, one might argue.

“All other transport businesses have tiered services that align price and cost to timeliness of delivery,” Geddes notes.  “The FCC is pushing a hypothetical ‘dread’ which has absolutely no factual substance behind it, and has lost tremendous credibility as a regulator as a result.”

“Banning a market for quality is an anti-innovation policy,” says Geddes. “It creates a distortion by preventing rational resource pricing through market mechanisms. A simple general rule on equal access to paid priority is plenty enough.”

“The Title II reclassification is an attempt to constrain ISP power, but is a politically, technically and economically inept one,” Geddes argues. His reflections on the D.C. court hearing are here.  

D.C. Circuit Court Hears Arguments on FCC "Internet Access is a Common Carrier Service" Ruling

The D.C. Circuit has held oral arguments about the legality of the Federal Communications Commission's  Open Internet Order.

As always, observers try to infer what justices are thinking by their line of questioning. And, predictably, both supporters and detractors heard questioning they believe supports their favored outcomes.

The justices “generally agreed that they are governed by the Supreme Court's holding in Brand X,” said Phoenix Center President Lawrence J. Spiwak, though granting that the FCC has wide latitude to interpret how Brand X should apply, Spiwak said.

That said, the court appeared skeptical of the FCC's reclassification of wireless broadband as a Title II common carrier service due to FCC's gerrymandering of the definition of the term "public switched telephone network," Spiwak said.

The court also seemed concerned over the lack of public notice of the legal theory the Commission used to reclassify mobile broadband. “As such, there is a better chance of the court overturning FCC on this issue,” said Spiwak. 

Others believe common carrier regulation will be upheld.  

Assuming the court upholds the FCC's decision to reclassify broadband as a Title II common carrier service, the court did not appear convinced that the FCC's application of Title II was entirely legitimate, Spiwak said.

The court seemed to have two significant concerns with the Commission's actions.

First, while the FCC stated that it was not classifying terminating access as a Title II service, the Commission nonetheless was regulating terminating access as a common carrier service. As such, this outcome runs directly contrary to the court's holding in Verizon.

Second, assuming terminating access is a Title II service, then the FCC's paid prioritization rule violates basic principles of ratemaking because it both requires a confiscatory price of "zero" under Section 201 (even though edge providers impose a cost on the network) and prevents "reasonable" discrimination as expressly permitted by Section 202."

Either way, one might argue, there is room for the Title II rules to be overturned.

U.S. Mobile Data Prices Have Room to Fall Much More, Sprint Exec Says

Lower prices are a persistent concern of executives in any part of the telecom business, as much as lower prices stimulate usage. The issue is how much lower retail prices can go, in any market segment, before sustainability becomes a key issue.

Sprint Corp. Chief Financial Officer Tarek Robbiati thinks U.S. mobile data prices  have room to fall further. Noting that U.S. average revenues per user are “very, very high,” Robbiti argued there is room for mobile data prices to fall further. “There is headroom," Robbiati said.

In a perhaps worrying statement, Robbiati noted that "in Hong Kong you can get very, very decent 4G data packages on 4G networks for less than $5, which is extraordinary.

"This is real priced-based competition, we haven't felt it here yet," he said.

U.K. Data Consumption Up 40% in One Year

Over the past year, the average amount of data consumption by U.K. fixed network Internet access consumers has increased to 82 GBytes a month, an average increase of over 40 percent over last-year levels, Ofcom reports.

Video entertainment represents about 65 percent of the usage, Ofcom estimates.

Customers with broadband connections faster than 40 Mbps are driving the increase in monthly data use, with an average increase of around 47 percent, Ofcom reports.

More than 66 percent of the adult population now has a smartphone, up by 27 percentage points since 2012. That, plus increased 3G and 4G network coverage has resulted in consumption of about  870 MB of data per month, an increase of 64 percent since 2014.

Still, fixed network data consumption is about two orders of magnitude higher than mobile usage. Video and web browsing account for more than 80 percent of overall data use on mobile networks.