Will India Regulate OTT Voice and Messaging Under Common Carrier Rules?

The problem with network neutrality, many would argue, is that it is so hard to define with precision, perhaps impossible to enforce  and seemingly so malleable a concept that it goes beyond protecting consumer access to all lawful apps and impinges on what might be considered normal methods used by retailers to create promotions and value for their customers.

And, as always is the case, every instance of public policy setting has concrete implications for the fortunes of private companies operating under those rules, creating winners and losers.

One might argue that TRAI’s new interpretation of network neutrality rules, which barred sponsored data programs such as Free Basics, seen as harmful to Facebook, also benefitted Google.

Another set of potential moves by TRAI might help telcos protect their carrier voice and messaging businesses.

Reportedly, Telecom Regulatory Authority of India (TRAI) is considering a review of whether over the top apps such as WhatsApp and Skype should be regulated in the same way as carrier voice and messaging, applying common carrier rules to some unknown extent.

That obviously will benefit telcos and mobile operators in the short term, harm OTT app providers, raise prices for consumers and likely also increase regulatory revenues related to providing voice and messaging services.

An earlier TRAI white paper issued in March 2015 noted that OTT voice and messaging apps were cannibalizing telecom service provider revenues.

The new white paper could be the opening gambit that leads to a move to regulate OTT voice and messaging as common carrier voice is regulated.

That earlier report noted that voice calls on telecom networks are 12.5 times more expensive than those through OTT services, while carrier messaging rates are 16 times higher than OTT rates.

Whenever new telecom policy frameworks are considered, it is unavoidable that private interests are favored or harmed.

Barring sponsored data or common carrier regulation of OTT apps are no exceptions.

Video Business Change: Watch for Qualitative Changes

The U.S. linear subscription video business lost more than one million video customers

in 2015, about four times the level of 2014 losses, and the third year in a row that linear subscription TV losses have occurred, according to SNL Kagan.

The fourth quarter improved, with losses no worse than the fourth quarter of 2014. The industry dipped by 15,000 total customers in the fourth quarter.

Mostly, that is noise.

Some observers will suggest that performance reflects a high level of promotional activity on the part of suppliers. Others will conclude that the cord cutting trend has abated.

Not so. The big changes now are going to be qualitative, not quantitative, in the sense of subscriber counts. In other words, OTT suppliers will begin a long march to replicating most of the content richness linear services provide.

So the key changes will not so much be about subscriber gains or losses, but the change in the nature of the relative products. OTT will gain richness, while linear services will offer more-affordable packages with less content diversity.

Cable TV operators lost 599,000 net accounts in 2015, the first time in seven years that the cable TV industry lost fewer than one million accounts. Some will point to telco account losses as a large part of the reason for the limited cable TV losses.

The satellite providers lost 478,000 subscribers during the year, compared to a loss of 39,000 in 2014.

The telco segment ended 2015 essentially flat.

According to Leichtman Research, the big net change in 2015 was that cable TV providers did much better, telcos did much worse.

The top nine cable companies lost about 345,000 video subscribers in 2015, compared to a loss of about 1,215,000 subscribers in 2014.

Satellite TV providers added 86,000 subscribers in 2015 (including Dish Network OTT subscriptions). In 2014 the satellite providers gained 20,000 subscribers.

Excluding the Sling TV gains, DBS providers lost about 450,000 linear subscribers in 2015.

The top telephone providers lost 125,000 video subscribers in 2015, compared to a gain of about 1,050,000 net additions in 2014.

In the fourth quarter of  2015, the top linear TV providers added about 110,000 subscribers, more than the 90,000 added in the in fourth quarter of 2014.

The largest cable companies added about 125,000 subscribers in the quarter, the first quarter for net additions since the first quarter of 2008.

DirecTV net adds of 214,000 subscribers in the quarter were higher than in any quarter since the fourth quarter of 2010.

AT&T U-verse lost 240,000 subscribers in the quarter, compared to a gain of 73,000 subscribers in the same quarter of 2014.

It likely is unwise to assume that the shift to OTT entertainment video has slowed, even if Netflix and others have begun to reach saturation levels. But the bigger changes might come in the form of packaging and pricing, not subscription levels as such.

Look for OTT offers to proliferate, and gradually start to replicate more of the program diversity linear services represent. That is the growth pattern we have seen recently for any number of competitive services.

They start out on the low end of the value continuum, but are available at vastly-lower cost. Over time, value increases. That is going to be the pattern for OTT video as well.

Four or Three? French Mobile Operators Should Know Soon

Sometime in March 2016, Orange and Bouygues Telecom executives likely will make a decision about combining the two companies. Aside from the obvious details of valuation of the assets and governance issues, the firms will have decided on a regulatory strategy as well, likely including asset disposals to the remaining mobile carriers, Iliad Free and Numericable-SFR.

If the companies proceed, and if the French government approves the deal, Orange will be an even-stronger competitor in the French mobile market.

Importantly, the number of leading providers in the French market will be cut from four to three.

That is a notable change, as regulators globally disagree about the minimum number of suppliers required to maintain vigorous competition in any mobile market. French regulators seem to have shifted views, arguing that consolidation would be better, long term.

French regulators seem to be comfortable with three providers. European Commission regulators seem to prefer four.

In a direct sense, those views lean one way or the other on a key question: what is better, lower prices for consumers or stronger firms able to invest more?

French regulators seem to believe investment now is the bigger issue, so three providers is better, as fewer competitors likely means higher prices, and therefore more ability to invest in next-generation networks.

EC regulators seem more focused on the traditional concern, namely lower prices for consumers, at the risk of less investment.

source: Bloomberg

source: Telecompaper

IoT Could Bring IT Advantages to Another 80% of Firms

There is a very good reason why communications and information technology  industry executives believe the Internet of Things will be so consequential.

For starters, we are approaching the point where every person that wants a phone, equipped with Internet access service, already will buy such products.

Such a saturated market will force mobile operators to look for big new markets. And a logical big new market is IoT.

So connecting billions of sensors, and putting their information to work, will create a huge new market for connections.

And IoT could create big new enterprise markets, bringing some IT benefits to "physical" industries that have been reaped mostly by "digital product" industries.

If it is true that “physical” industries make up roughly 80 percent of the private sector, and if those industries have deployed information technology at rates less than seven times that of leading industries, then the Internet of Things could lead to an enormous change in communications and information technology markets.

In fact, some might go so far as to argue that the full benefits of the Internet, beyond older waves of computer technology, might be reaped for the first time by most businesses, as a direct result of IoT.

Machine-to-machine communications related to “Internet of Things” processes will account for roughly 35 percent to 47 percent of mobile data communications by 2030, argues Michael Mandel, Progressive Policy Institute chief economic strategist and a senior fellow at Wharton’s Mack Institute for Innovation Management.

By 2030, more than 1900 MHz of spectrum in the sub-mmW bands (three times the current availability) and at least 1.2 million cell sites (four times the current level) will be necessary, Mandel argues.

Though “causation” arguably is difficult to establish, digital industries have had triple the productivity growth of the physical industries in recent years.

For the 14-year period between 2000 and 2014, productivity growth for digital industries has averaged 2.8 percent per year, compared to 0.9 percent for the physical industries.

“Today, tech/telecom spending per worker in the digital industries is almost seven times that of the physical industries,” Mandel says.

source: TA Consulting

source: KEW Associates

source: KEW Associates

Satellite Industry Will Soon Experience Demise of its Key Revenue Source

Most of the time, the shift to "over the top" video entertainment is seen to be a problem for linear video subscription providers and programming networks.

But a shift from linear to OTT video also has huge implications for the satellite services industry as well.

To the extent that much of the global satellite industry relies on linear video for its revenue, the coming demise of linear TV, and its replacement by over the top video, is going to pose the same sorts of problems for satellite firms as was caused by the maturation of the voice business.

Some 78 percent of operator service revenues, in fact, are earned from delivering video entertainment, according to the Satellite Industry Association.

In any industry, it is a challenge to replace a maturing revenue source representing that much revenue. In fact, that is almost precisely the percentage of revenue (80 percent or more) once generated by voice services, by fixed and mobile service providers.

But that is the challenge relatively soon to be faced by the satellite services industry. With little doubt, the same sorts of arguments will be made. As fixed network providers detest the notion that they are a "dumb pipe," so satellite providers will protest the notion that they are simple "bent pipes."

Inevitably, we will hear arguments about how satellite providers can "move up the stack?" Increasingly, attention will turn to new revenue sources that can be discovered or created. 

Obviously, "mobile services" are going to occupy center stage. For that reason, mobile backhaul is inevitably going to be seen as fruitful.

source: Satellite Industry Association

Increasingly, Internet Access Speed Might Not Matter

There was a time when PC marketing was about processor speeds. No longer.

At some point, end user value could not be demonstrated as processors got faster.

We have not yet reached the point where Internet access will stop being about “speeds and feeds” and start being about “what can you do with it?”

But that time will come.

In fact, some of you might already not be “buying” the value proposition for ever-faster Internet access. In other words, value often now is not about speed, at all. For any single user, beyond a rather low threshold (somewhere between 10 Mbps and 20 Mbps), incremental increases in speed do not matter.

The value proposition arguably is better in multi-user households, but even there one might make the argument that a five-person household will not generally notice experience benefits beyond a connection supporting 100 Mbps (when contention is highest, each user theoretically can use 20 Mbps).

Google Fiber asks, and tries to answer the question of What can you do with a gig?  

Google suggests “streaming videos, movies, and TV shows” will happen with little to no delays or buffering.” Netflix Super HD video content is cited as an example of gigabit access connection value. But that feature also can be supported by 25 Mbps connections.

Google Fiber cites value for multi-user households, but again that is not exclusive to gigabit access speeds.

Video conferencing likewise is cited as an advantage. Again, that is not an advantage uniquely provided by a gigabit connection. Downloading and uploading of image content and game playing also are said to be advantages of a gigabit connection, but are not solely or uniquely provided by such connections.

In fact, some might argue the advantage has nothing to do with speed, but with the lack of a data cap. Some Internet service providers currently cap data downloads at 250 GB per month.

Even if most users never encounter any experience issues, that could be the advantage for very-heavy users, though.

The point is that high speed Internet access remains in much the same position as PC OEMs once were, focusing on “speed” as the marketing platform. The industry has not yet--but will--reach the point that most consumers understand “speed” is no longer a reason to switch providers.

Then the marketing platform will shift in ways more tangibly related to end user value. Latency performance might already be the most-important value for some users, not speed. The problem for most ISPs is that clearly superior latency performance is hard to prove.

Beyond a certain point, latency performance advantages are hard to achieve.  As a generalization, latency is in the 75 milliseconds to 140ms range, even for sites that use a content delivery network.

The key point is that most U.S. ISPs have latency far below 75 milliseconds. So the bottleneck is the servers on the remote end of the connection, not the access links as such.

source: Akamai

source: Ofcom

source: PC magazine  

U.S. Cable TV Companies Gain 106% of All New High Speed Access Accounts in 2015

U.S. cable TV companies now are grabbing all the high speed access net gains, data from Leichtman Research Group suggests.

The 17 largest cable and telephone Internet service providers acquired more than 3.1 million net subscribers in 2015. But cable TV firms gained 3.3 million accounts in 2015, some 106 percent of all additions.

The reason is that the largest telephone companies lost about 185,00 accounts in the year. For those of you interested in inflection points, that loss markets the first year that the telcos ever have lost high speed access accounts.

There is a caveat. AT&T and Verizon are gaining fiber-access accounts, adding 1,481,000 U-verse and FiOS subscribers in 2015.

But telcos have another problem: they are losing all-copper digital subscriber line accounts. In 2015, AT&T and Verizon lost 1,708,000 DSL subscribers.

That performance, one might note, points out a problem for telcos upgrading their networks. Quite often, next generation services and products essentially cannibalize existing products, with no significant net gain in revenue.

The top cable companies had gained 89 percent of all new accounts in 2014, and 82 percent of all new accounts in 2013.

ISPs	Subscribers at End of 2015	Net Adds in 2015
Cable Companies
Comcast	23,329,000	1,367,000
Time Warner Cable	13,313,000	1,060,000
Charter	5,572,000	497,000
Cablevision	2,809,000	49,000
Mediacom	1,085,000	72,000
WOW (WideOpenWest)	712,500	(15,300)
Cable ONE	501,241	12,787
Other Major Private Cable Companies*	7,945,000	260,900
Total Top Cable	55,266,741	3,303,387
Telephone Companies
AT&T	15,778,000	(250,000)
Verizon	9,228,000	23,000
CenturyLink	6,048,000	(34,000)
Frontier^	2,444,000	101,500
Windstream	1,095,100	(36,500)
FairPoint	311,130	(8,785)
Cincinnati Bell	287,400	17,500
Total Top Telephone Companies	35,191,630	(187,285)
Total Broadband	90,458,371	3,116,102