Like it or Not, Future of Competitive Business Services is Based on Facilities

It will not come as any surprise that competitive access services providers argue incumbent telcos still have market power. That is the argument that motivates the Federal Communications Commission to protect wholesale access for firms with little to no willingness or ability to build their own access facilities.

Since roughly 2002, though, the FCC has made clear its preference for facilities-based competition in the local loop, something cable TV companies, Google Fiber and now a growing number of independent Internet service providers are doing, especially in the arguably harder business case of consumer customers.

Some ISPs serving enterprise customers in urban cores use wireless access rather than digging trenches, so that provides yet another model for investment in access facilities.

Some have estimated that Google Fiber’s first gigabit access network in Kansas City (Missouri and Kansas) cost about $563 per location. With more experience, Google Fiber undoubtedly will drive those costs lower.  

Customer acquisition and customer premises add more costs, but you get the point: building gigabit Internet access plant using fiber to the location does not cost as much as it used to.

Not every service provider--in fact, very few, historically--wants to build such plant. There are many reasons, among them the danger of creating stranded assets if a customer disconnects. In cases where a customer account lifecycle is three years, that is a problem.

In other cases, capital cannot easily be raised to do so. And while enterprises often are very happy to buy gigabit IP connections, many smaller businesses still buy legacy T1 and DS3 connections.

In fact, cable TV operators are gearing up for a major assault on enterprise and mid-size business customers, proving that a facilities-based approach is possible. It just is not possible for every contender in a market.

Cable TV firms have been aggressively targeting the small and medium-sized business with growing success, and generating at least $10 billion in revenue annually and growing in excess of 20 percent annually.

Enterprise services are the next big evolution.

Not all business models, consumer or business-focused, work forever. The FCC wants facilities-based competition. Not every contestant will benefit. But a growing number of initiatives by facilities-based providers show what can be done.

Across Southeast Asia, Mobile Data is the Incremental Revenue Opportunity

source: Ericsson

Between 2015 and 2021, mobile subscriptions will grow at a compound annual growth rate (CAGR) of four percent, reaching around 1.3 billion subscriptions by the end of the period. 

The reason for the moderate rate of growth is that adoption across most of the region already is at 100 percent.

In practice, that tends to mean use by people ranges far upwards of 50 percent, as many customers use multiple accounts multiple subscriber identity modules.

That rather slow rate of growth attests to widespread mobile usage across the region.

Revenue growth, on the other hand, is going to come from incremental sales of mobile Internet subscriptions, even if room remains for adding new accounts.

Mature markets such as Australia and Singapore, where LTE is widely available, have a very high mobile broadband penetration, already exceeding 90 percent.

Developing market mobile Internet penetration is 25 percent. That, obviously, is where the revenue growth opportunity lies.

source: Wearesocial.net 

Trade Finance Using Social Media to Assess Creditworthiness

Connecting small business owners and entrepreneurs with trade finance is the mission Rwandan company Kountable accomplishes using mobile phones and a method of assessing creditworthiness using social networks. The whole point is fast and accurate due diligence on ability to repay a loan.

Launched in May 2015, deals ranging from as low as US$2500 and as high as $500,000 have been facilitated, says Chris Hale, Kountable CEO.

Kountable is not a loan originator, however. It provides assistance to lenders and borrowers. Basically, Kountable reduces risk when a supplier and financing entity agree to enable delivery of  goods to a merchant.

“We help you purchase raw materials, stock or inventory and get paid by your end client so you don’t have to worry about funding these purchases as part of your transaction,” says Hale.

“We are focused on business finance needs that require short term support which does not exceed one year and though there are no limits on how much, we want to benefit as many businesses as possible so we want to keep the bulk given to each business within the range that we have handled in the past ($2500-500,000),” Hale says.

Kountable measures creditworthiness by evaluating an entrepreneur’s social capital—their network of contacts and relationships. In cases where an applicant does not actively use social networks, a score can be constructed from email data.

The scoring alogorithm, as with any other method, assumes that one’s past business relations, activities and behavior tend to predict future behavior.

Ideally, though, an applicant’s kScore is generated by measuring the activity and size of social networks (social networking sites) as well as phone and text messaging contacts and email profiles.

Based on an algorithm that looks at several dimensions of all that data, applicants are scored with a numerical value between 500 and 1000 that is a proxy for creditworthiness based on social capital.

The company says it can make a credit score in five to 10 working days.

Kountable works to raise funds in the United States for such entrepreneurs using the kScore, offering lower rates than otherwise would be available.

The Kountable business model is a two-percent-per-month financing fee on the value of loans made by third parties.

The significance is that, since about 1995, private activities have vastly surpassed the value of official development assistance as sources of capital inputs in developing countries. Kountable is part of that trend.

source: World Bank

U.S. Internet Access Costs 0.4% of Gross National Income Per Capita

International comparisons always are difficult. National domestic product or income, currency exchange rates, population size, country size, household size and size of rural population all make a difference.

In the developed world overall, Internet access costs about 1.7 percent of gross national income per capita, according tot he International Telecommunications Union.

On that score, U.S. Internet access costs 0.4 percent of GNI per capita, about third best in the world.

1. Macao China -- .2% of GNI per capita

2. Kuwait -- .4%

3. United States -- .4%

4. Switzerland -- .6%

5. Luxembourg -- .6%

6. Andorra -- .6%

7. United Kingdom -- .7%

8. Japan -- .7%

9. Norway -- .7%

10. Hong Kong -- .7%

As with all cross-country comparisons, one has to adjust for conditions on the ground.

SingTel and SoftBank Best Exemplify Hybrid Business Strategy

SingTel and SoftBank are perhaps the best examples of business strategies that blend traditional communications businesses with newer digital content and application revenues.

It is sometimes hard to understand the strategy, but even harder to execute. In some cases, telcos might hope to create captive services. That is the strategy for mobile entertainment services, for example, where a mobile service provider directly owns a streaming media service.

In addition to direct revenues, indirect monetization from advertising might be possible.

One other angle is to partner with young Internet companies that eventually can emerge as key drivers of direct and indirect revenue. In such cases, a mix of revenue models could emerge. In some cases, perhaps equity value is created. 

In other cases, it is conceivable that capacity and transport revenues are earned. In yet other cases the value is indirect.

Singtel's regional network of telecom alliances, covering a total of some 570 million subscribers, has already attracted taxi-hailing app GrabTaxi, which recently agreed to give users in Thailand, the Philippines and Indonesia the option of paying their fares using the Singtel mobile wallet service, for example.

source: EIN News

Does it Matter Which Ecosystem Participant Provides Zero-Rated Mobile Data Access?

Is zero rating of mobile data usage a violation of network netrality norms or only a marketing tactic? MIcrosoft India thinks it simply is a value of adding value for buyers of Lumina smartphones.

Microsoft India plans to sponsor 4G mobile data access for Bharti Airtel customers who buy Lumia 4G smartphones, though the deal is not finalized. As presently envisioned, buyers of Lumia devices will get use of twice as much data.

Airtel 4G customers purchasing the Lumia 950 or 950 XL will get free data bundled with the devices, as well as the  Lumia 550. 

Some would argue there is no difference between this proposed practice and the well-established practice whereby buyers of Kindle content can have that content delivered over some mobile networks without incurring any usage of a mobile data plan.

Nor, in principle, is this any different from promotions offered rather routinely by mobile service providers, where bonus data is provided for purchase of some plans, or for customers who switch from another provider.

In principle, does it matter whether it is an advertiser, a device supplier, an app provider or a mobile service provider that offers "no incremental charge" mobile data access?

Netflix Programming Exclusivity Works, Survey Finds

Access to original programming is a key method by which networks attempt to gain distinctiveness in a competitive market. And there is at least some evidence that the tactic works.

A survey conducted by RBC Capital Markets found that original content affected the buy decision for 49 percent of respondents.

More than 25 percent of respondents said that having access to original content convinced them a great deal, or a good amount, to subscribe to Netflix.

Original programming, as a strategy, really helps Netflix, as it does other networks.