In Many Cases, Key Result of Gigabit Internet Access Will be Uptake of "Less Than Gigabit" Services

Gigabit internet access connections might seem a clear case of abundance way beyond a user’s ability to consume such bandwidth.

Nevertheless, Deloitte Global predicts that the number of gigabit per second Internet connections will climb to 10 million by the end of 2016, up an order of magnitude from the 2015 level.

About 70 percent of those connections will be bought by consumers, about 30 percent by businesses.

Greater availability and reasonable prices will drive adoption. Perhaps of equal importance is the prediction that, in 2016, some 250 million consumer locations will be able to buy gigabit connections, and will not.

By 2020, some 600 million subscribers may be on networks that offer a Gigabit tariff as of 2020, representing the majority of connected homes in the world, Deloitte says. Of those 600 million potential connections, between 50 and 100 million consumers might actually buy gigabit services (between five and 10 percent of the potential buyer base).

At the end of 2012, the average entry level price for gigabit service was over $400. By the third quarter of 2015, the average had fallen to under $200, and the cheapest package was priced at under $50, Deloitte says.

The likely result of all those gigabit offers will in many cases be that consumers opt to buy faster connections, but not at the full gigabit rates. Internet service providers that sell gigabit connections and no other speeds will see the highest adoption.

Telcos and cable TV companies that typically offer a range of speeds will probably find most consumers satisfied with speeds lower than a gigabit.

source: Deloitte

Shift Away from "Calling" Continues

Though, globally, mobile calling volumes continue to climb, developed market users often are using voice less, messaging more. Mobile voice volumes as measured in minutes have increased by 20 percent between 2012 and 2015, for example.

Deloitte Global, for example, predicts that, in 2016, 26 percent of smartphone users in developed markets will not make any traditional phone calls in a given week.

“They have not stopped communicating, but are rather substituting traditional voice calls for a combination of messaging (including SMS), voice and video services delivered over the top,” Deloitte Global says.

In 2015, some 22 percent of all smartphone users behaved that way, up from 11 percent in 2012.

The percentage of adults using instant messaging, for example,  more than doubled from 27 percent in 2012 to 59 percent in 2015.

source: Deloitte

New Networks Often Do Not Drive New Revenues

Incumbent telcos often face business model challenges when evaluating next generation network platforms. The biggest problem is that investments sometimes have to be justified on a number of drivers, since the incremental revenue is questionable.

Fixed network telcos, for example, have struggled to justify fiber to the home investments strictly on the basis of incremental revenue (linear video entertainment has been the one new revenue stream).

There is little advantage in the voice segment, and while FTTH or other fiber access networks underpin higher Internet access speeds, telcos generally have been unable to match the faster increases provided by cable TV operators.

Voice over LTE provides another example in the mobile business.

Deloitte Global predicts about 100 carriers worldwide will be offering at least one packet-based voice service at the end of 2016, double the amount year-on-year, and six times higher than at the beginning of 2015.

That will mean some 300 million customers will be using Voice over WiFi (VoWiFi) and Voice over LTE (VoLTE); double the number at the start of the year and five times higher than at the beginning of 2015.

So what is the upside?

“For most carriers launching VoLTE or VoWiFi in 2016, the primary motivation is likely to be to increase network capacity and extend the reach of their voice services,” says Deloitte.

Note what is not said: VoLTE and VoWiFi will drive higher revenues at a significant level. While eventually new revenues could emerge, that is for a later time.

What VoLTE offers, near term, is the ability to move voice calls off 2G and 3G networks and onto the LTE (4G) network.

The often lower frequency spectrum that is freed up can be reused for data services. So the benefit is indirect.

LTE is perhaps twice as bandwidth efficient as legacy voice, but that is a minor advantage in most cases, since voice occupies little bandwidth, and many users globally are shifting communications to text and social media.

Where it is possible to turn off a whole network, that also provides value. But, again, the benefits are indirect. VoLTE does not generally, at the moment, drive higher revenues.

source: Deloitte

Public Wi-Fi Will Help Some Rearrange Mobile Service Provider Markets

Disagreements about what network neutrality legitimately entails aside, trends in the Wi-Fi hotspot market are trending in the direction of quality assurance and “carrier grade” rather than “best effort,” a concept at the heart of the network neutrality debate.

“The Wi-Fi market is undergoing a major transformation driven by the introduction of carrier grade Wi-Fi networks which offer improved security, QoS (Quality of Service) and an enhanced user experience compared to best-efforts Wi-Fi,” say researchers at Juniper Research.

That change will affect business models in both the fixed and mobile domains, allowing some fixed network owners to create new revenue streams, while enabling lower-cost mobile business models.

Cable TV providers will be primary beneficiaries of both trends, while mobile operators largely will benefit from the latter trend.

Critical enablers of the carrier grade Wi-Fi capability and developing revenue streams and business models include IEEE 802.11 protocols such as 802.11ac;  the Wireless Broadband Association Next Generation Hotspot initiative;  and the Wi-Fi Alliance’s Passpoint (HotSpot 2.0 specifications) platform.

To the extent that carrier grade Wi-Fi becomes a viable substitute for mobile network access, it is likely that cable operators and fixed line telcos will be responsible for an increasing percentage of deployments, Juniper Research predicts. In at least one sense, that implies the function of the fixed network is backhaul for untethered and mobile services.

source: Juniper Research

Among the leading trends of the next five years, where it comes to Wi-Fi, aside from the trend towards quality-assured Wi-Fi, is the functional integration of Wi-Fi with other networks, which means that the Wi-Fi network can be controlled from the operator’s core network, Juniper Research notes.

Globally,  at least 33 percent of consumer at-home routers will be used as public Wi-Fi hotspots by 2017 and that the total installed base of such dual-use routers will reach 366 million by the end of 2020, Juniper Research argues.

Major broadband operators such as BT, UPC and Virgin Media in Europe and several of the biggest cable TV operators in the United States, such as Comcast and Cablevision, are leading adopters.

Free Mobile in France also has used such hotspots to contain its operating costs in the mobile business. By 2014 Free Mobile had put into place some four million hotspots. BT in the UK also has apidly extended its Wi-Fi coverage by using Homespots.

The bottom line is that the technology changes will create new business model and revenue opportunities for at least some new contestants in the mobile business. Cable TV providers will be the biggest winners, many would argue.

But mobile service providers also will be able to leverage the platform to contain their operating costs and capital investment demands.

In some markets, Wi-Fi hostspots will allow new entrants to rearrange mobile markets.

Sprint: Subs Up, Costs Down, Operating Profit Within Sight

Subscribers up, costs down, operational profit within sight. That’s the good story for Sprint.

As a result of accelerated cost reductions, Sprint has raised its guidance for fiscal year 2015 adjusted earnings from its previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion.

Sprint also is raising its guidance for fiscal year 2015 operating income from its previous expectation of an operating loss of $50 million to $250 million to operating income of $100 million to $300 million.

Sprint’s preliminary estimate for fiscal year 2016 adjusted earnings is $9.5 billion to $10 billion.

For its third fiscal quarter of 2015, Sprint reported growth in postpaid phone customers for the second consecutive quarter with the highest net additions in three years at 366,000, the lowest-ever postpaid churn for a third quarter at 1.62 percent, and the highest postpaid net ports on record.

The company also reported net operating revenue of $8.1 billion, an operating loss of $197 million, and adjusted EBITDA of $1.9 billion

Net operating revenues of $8.1 billion decreased 10 percent year-over-year, but stabilized over the last three quarters, and grew two percent sequentially, said Sprint.

Consolidated adjusted EBITDA of $1.9 billion improved from the prior year period, as expense reductions more than offset the decline in operating revenues.

Total expenses improved primarily because of lower cost of product expenses related to device leasing options for which the associated cost is recorded as depreciation expense, and $500 million of lower selling, general, and administrative expenses.

Big Shift in Technology Thinking at AT&T

The AT&T system used to develop and deploy its own technology (Bell Laboratories and Western Union). That began to change with the AT&T breakup in 1984, and today the tier one providers source their core technology from third-party suppliers.

That might change in the future, as virtualized networks are developed, running on common and commodity hardware, using more open approaches, and with a core commitment to develop strategic systems in a way that allows AT&T to survive even the bankruptcy of any key suppliers.

There are any number of implications for suppliers. An equally-important change is a shift back towards service provider knowledge of, creation of, and maintenance of, core technology services and systems.

We haven’t seen that since before 1984.

There are some logical shifts. Since all computing now is shifting to open, Internet Protocol based and cloud based delivery, so will AT&T evolve.

“AT&T services will increasingly become cloud-centric workloads,” the AT&T Domain 2.0 vision indicates. That means both infrastructure and services that are “used, provisioned, and orchestrated as is typical of cloud services in data centers.”

That implies virtualized networks, using white box equipment (merchant silicon) and services will increasingly become cloud-centric workloads.

That also requires “architecturally decoupling the network function, based in software,from the support infrastructure, based in hardware.” In other words, AT&T will use the same loose coupling also typical of the entire software ecosystem and application architecture.

Domain 2.0 seeks to follow agile development processes, and will avoid locking-in to a specific system architecture.

“To mitigate business risk, the company has developed business rules for second suppliers and evaluates the risk of doing business with suppliers should they go out of business,” AT&T says.

“AT&T expects to increase the depth of understanding of our core technologies held by our staff to the point that they can integrate, and even design the systems from scratch,” AT&T’s white paper says. “AT&T expects to develop key software resources in a way that they can be openly used, and cannot be lost through the acquisition or insolvency of a vendor partner.”

Those are big changes, indeed.

Good Intentions Not Enough for Satellite, Mobile, SMB Internet Access

Where it comes to subsidized Internet access by satellite, good intentions apparently are not enough. The U.K. government has spent The £60 million scheme to provide satellite Internet access to 300,000 locations.

So far, just 24 people have signed up for the service, provided by Avanti and BT, where the government pays for a arge part of the installation cost. Users pay the recurring service costs.

Apparently, just £8,000 of the subsidy funds have been spent,

The contract was between satellite company Avanti and BT.

The apparent lack of consumer interest in the program apparently is not unusual.

The government encountered similar problems with its SME broadband voucher scheme, intended to provide grants for faster web access of up to £3,000 in 2013, and with a mobile infrastructure program.

The government allocated £150 million to add new cell towers, but managed to erect just eight towers, out of a projected 600.