Tuesday, March 8, 2016

"Wireless Substitution" for Video and High Speed Access is Coming

“Wireless substitution,” defined as customers choosing to buy mobile service as a full substitute for fixed network voice, is a well-established trend in the U.S. and other markets.

So the obvious question is whether wireless substitution could happen for other fixed network services, such as entertainment video and even high speed Internet access.

With the arrival of fifth generation networks, and some innovations in both rating and offload, that could become a commercial reality for the first time.

And that will have implications for service providers, consumers, devices and network platform choices.

Ask Verizon. “5G has the capability to be a substitute for broadband into the home with a fixed wireless solution,” said Fran Shammo, Verizon Communications EVP. “The question is can you deploy that technology and actually make money at a price that the consumer would pay?

“If you think about 5G, 1 gig into the home it is a substitute product for (fixed network) broadband,” said Shammo.

One reason that will likely be the case is that consumer preferences, network architectures, traffic offloading and new spectrum will allow mobile service providers to consider new offers never practical before.

Efficiency, and therefore mobile data costs, provide one example. “So if you think about CDMA to LTE, we got about a four to five time cost reduction,” Shammo said. “You're looking at the same magnitude, maybe even slightly higher going from LTE video delivery to 5G video delivery.”

The rest of the business model has to be proven, of course. But the main point is that 5G will allow mobile service providers to consider wireless substitution for fixed network video entertainment and high speed access as never before.

And that almost assures us that wireless will be a bigger factor in access network revenues, going forward.

Access Providers Cannot Get Away from Dumb Pipe Function

You know a market is changing when you begin to struggle with definitions. In many markets (Europe and North America), for example, it is less accurate than ever to talk about “telcos” when “cable TV companies” have so much “telecom” market share.

Likewise, it is clumsy to refer to cable TV companies that way when they actually are “telcos.”

People come up with “catchy” new phrases that capture some of the dynamics, but little of the revenue dynamics. Digital lifestyle enabler is one such term. The use of the phrase tends to connote that access providers are “evolving” beyond access (bit pipes, dumb pipes or some other similar designation) and becoming digital services providers.

That sounds good, even if it does not generally match revenue sources so well at the moment. Some of us would argue that the “dumb pipes” versus “digital services provider” debate is misplaced.

For starters, it is unlikely ever to be the case that any access provider actually earns more money from “services” or “content” or “apps” than it does from connectivity (access). And that is not necessarily a problem.  

A cable TV executive might describe the long-term strategy as a mix of services, ranging from “dumb pipe” (best effort Internet access) to Ethernet access for businesses, plus video entertainment and voice “managed services.”

In other words, both dumb pipe and services are foundations of the business model. But dumb pipe is not to be casually dismissed. In the full protocol stack, access and transport are at the bottom, apps at the top.

Access and transport are the unique roles provided by former telcos, cable TV companies, satellite broadband, metro fiber and many other types of specialized communications service providers.

An access provider cannot avoid offering access and transport without abandoning its role in the protocol stack. But neither are access providers precluded from assuming other roles.

As a cable TV exec might say, “you have to own some of what you deliver.”

That’s why all debates about “dumb pipe” or “app provider” roles essentially are wrong when they assume either one or the other roles must be dominant. The future is “both.” But access is the unique role. Any access provider that neglects the “access function” eventually will falter.

Access (dumb pipe is another word for access) is the unique role in the protocol stack. But it is unlikely to ever be the "sole" role or function.

Monday, March 7, 2016

India Mobile Data Margin Pressure is Growing

Margin pressure in the India mobile data services business already is escalating, even before Reliance Jio has launched full commercial launch of its 4G services.

Analysts at Morgan Stanley therefore have "cut our industry revenue growth forecast by three percent for fiscal years 2016 to 2018, and expect the industry revenue between fiscal 2015 and 2020 to grow at a seven percent compound annual growth rate versus eight percent previously."

As is often the pattern elsewhere, usage is growing faster than revenue . The report by Morgan Stanley said despite double-digit data volume growth, data revenues are now growing in the higher single-digits.

Sharing Will Help Fix Spectrum Scarcity Problem

India faces a variety of institutional and business barriers to more-rapid deployment of Internet access services, some of them related to business models and the cost of building networks to serve customers with average spending of about US$2 a month. But regulations, taxes and zoning arguably play a significant role.


One might argue that making lots more spectrum available, free or cheap, would dramatically change the cost side of business models. That tends not to happen in India, since the economic rent from leasing spectrum is seen as so lucrative for units of government.


Spectrum sharing might be one way to reconcile both objectives: better business models for Internet service providers; faster deployment and lower prices for consumers and yet incremental revenue for governments.


The broad movement is to free up licensed but unused spectrum in an efficient way (enabling sharing), as the traditional methods (clearing users and then relicensing) take too long and cost too much.

The reality is that most licensed spectrum is not used, most of the time. Some licensed spectrum seems never to be used at all. That is quite inefficient, at a time when useful communications spectrum is required for all manner of Internet apps.

Sample Spectrum Occupancy Report: Each band averaged over six locations. National Science Foundation: M.A.McHenry Shared Spectrum Co - Click for full sized image

Saturday, March 5, 2016

U.S. Moving Ahead on 28 GHz for Mobile Uses

Most spectrum actually does not get used, most of the time. Hence the new emphasis on sharing of existing spectrum. That takes a variety of forms.

New methods for allowing mobile networks native access to Wi-Fi, as well as sharing of other spectrum bands between licensed and commercial users, provide examples of the trend.

In other cases, sharing between commercial users is the task.

Even if the recent World Radiocommunications Conference did not allocate 28 GHz for 5G mobile use, the United States Federal Communications Commission is moving ahead to allow use of that band for mobile networks.


As with some other bands of spectrum, there are sharing and interference protection issues, as satellite operators use portions of the 28 GHz band. Methods for enabling sharing of other bands, including 5 GHz (mobile and Wi-Fi) and 3.5 GHz (licensed and commercial users) also are being developed.


The broad movement is to free up licensed but unused spectrum in an efficient way (enabling sharing), as the traditional methods (clearing users and then relicensing) take too long and cost too much.

Friday, March 4, 2016

Google Fiber Vdeo Take Rates Modest, So Far

Not that it matters too much at the moment, but Google Fiber does not seem to be getting many video subscribers, according to Craig Moffett, MoffettNathanson analyst. The primary impact is to limit Google Fiber revenue per account, as high speed access only tends to generate about $70 a month, where video plus Internet tends to generate $130 a month gross revenue.


Over the long term, that difference in average revenue per account could be quite important, for obvious reasons: getting nearly double the revenue per account generally matters quite a lot for any ISP or triple play provider.


According to Moffett, Google Fiber ended 2015 with about 53,000 video subs.


At the end of 2014, Google Fiber had 12,659 video subscribers.


In Google Fiber’s most-mature market, Kansas City, Kan., video adoption is about 23 percent, a reasonable enough rate of adoption.


In Kansas City, Mo., video adoption is about 17 percent.


In Provo, Utah, a newer market, Google Fiber has achieved eight percent.


More important, arguably, is high speed access adoption, which one suspects is quite a lot higher than video adoption. In 2014, Google Fiber Internet access adoption had hit levels as high as 75 percent, for example.

Another survey showed 20 percent adoption after a year’s worth of marketing, figures that compare well with Verizon’s take rates for FiOS after a year’s worth of marketing. On that glide path, it would be reasonable to estimate that, over a few years, Google Fiber would get 30 percent to 40 percent adoption. Some might argue Google Fiber could do even better than that.  

CenturyLink to Launch Own Video Streaming Service

CenturyLink is testing it own streaming video service in four markets. As planned, the service will allow CenturyLink to expand the number of locations within its fixed network footprint where it can offer entertainment TV services.

At the moment, Prism TV, the CenturyLink linear video service, has limited reach. CenturyLink Prism TV passed 3.2 million homes in 2015.

Prism Stream will work on high speed Internet access lines supporting just 10 Mbps, instead of the 25 Mbps otherwise required for Prism TV.

CenturyLink provides high speed access to well in excess of six million homes across its footprint, and passes more than 22.2 million homes in total.

Prism Stream might mean an additional 12 percent of potential buyers will be able to use Prism Stream, where only about 7.6 percent can buy Prism TV, at least according to 2014 statistics.

CenturyLink Download Speed
Percent of People Able to Buy
Down >768k Up >200k
15.6%
Down >3M Up >768k
14.5%
Download > 768k
15.6%
Download > 1.5M
15.4%
Download > 3M
14.6%
Download > 6M
13.5%
Download > 10M
12.3%
Download > 25M
7.6%
Download > 50M
0.1%
Download > 100M
0.1%
Download > 1G
0.1%

source: Broadband Map

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