Gigabit Value Really Driven by Multi-User, Multi-Device Households, Not "Speed" or "Capacity"?

Demand for gigabit and other high-bandwidth consumer Internet connections arguably is not driven by application or device need for such bandwidth, but by multiple users sharing a single connection.

In other words, “sharing” is the driver for higher-bandwidth connections, not particular application requirements. That might change in the future, as higher-definition video formats become common.

“Today, whereas a family with two teenagers may have 10 devices connected to the Internet, in 2022 this may well grow to 50 or more devices,” a report by the Organization for Economic Cooperation and Development says.

“Across the OECD area, for example, the number of connected devices in households may rise from an estimated 1.7 billion today to 14 billion by 2022,” the report argues.

Internet of Things will provide the greatest amount of device growth.

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.

Google Fiber asks, and tries to answer the question of What can you do with a gig?  For the foreseeable future, application bandwidth will not likely be the value driver. Instead, sharing bandwidth across a number of devices is the value.

As business special access value once was the ability to support multiple devices at lower costs than discrete connections, so the value of higher-bandwidth Internet seems to be the same sort of multiplexing.

Google suggests “streaming videos, movies, and TV shows” will happen with little to no delays or buffering” are among the reasons to buy a gigabit connection.  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, though clearly the key value proposition for most higher-bandwidth connections.

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.

So, one way or ther other, the primary end user benefit of gigabit and other higher-bandwidth connections simply seems to be support for multiple users and multiple devices, not any single application, as such.

source: OECD

Bidders File for U.S. 600-MHz Spectrum Auction

Some 104 entities have filed full or partial applications to the U.S. Federal Communications Commission indicating the firms have intention to bid in the forward auction of 600-MHz spectrum to be held this year.

Verizon, AT&T, Dish Network, T-Mobile US, Comcast and Liberty Global are among the entities who will be in position to bid. That list also tells one much about the future direction of U.S. mobile markets, as the list is lead not only by the largest U.S. mobile firms but includes the two largest U.S. cable TV firms (assuming the merger of Charter Communications and Time Warner Cable is approved).

Much is unclear, including the amount of spectrum that might eventually be available to acquire. The reason is that the two-state auction requires TV broadcaster willingness to sell spectrum licenses, and until that auction is completed nobody will know the amount of spectrum assets to be auctioned.

But estimates of 84 MHz up to about 100 MHz have been suggested as the amount of spectrum to be sold.

source: Hogan Lovells

T-Mobile US is expected to be a big winner in the reserve auction, which sets aside some spectrum for bidders who do not own much lower-frequency spectrum. The actual amount of the set-aside will hinge on the total amount of available spectrum.

AT&T and Verizon will not be able to bid for the set-aside spectrum, which could be as much as 30 Mhz, or little as 10 MHz, in areas where they hold licenses for more than 45 MHz of lower-band spectrum.

Contestant strategies might be more complex than is typical. Though bidders always have to weigh their spectrum needs with capital commitments. But capacity decisions are more complicated than usual.

Though the decision on where to bid, and how much to bid, will be driven by near-term requirements, the coming availability of additional assets (shared spectrum and millimeter wave spectrum), plus use of small cells and Wi-Fi, will shape thinking about what is possible, longer term.

The conventional wisdom is that, given a choice between adding new spectrum or adding more cell sites, a typical mobile service provider will spend less money acquiring spectrum than subdividing macrocell sites to increase density.

The new wrinkle is how overlaying small cells compares to the cost of buying new spectrum assets. Verizon has recently been arguing it will be cheaper, in many instances, to increase network density rather than buy new spectrum.

That would reverse conventional rules of thumb about the relative ways of adding capacity, where new spectrum typically costs less than redesigning a network for greater density, assuming the other alternatives (better air interfaces and modulation) are not immediately available.

New spectrum can take the form of buying new spectrum, or redeploying existing spectrum, as when older networks are decommissioned.

The tradeoffs are not easy to understand, as each particular scenario might depend on how well the new frequencies map with the existing network of cell sites. Buying spectrum might be more affordable, when it is possible.

But many would argue that, historically, most of the increase in mobile capacity has come from deploying more-dense networks. That works because using smaller cells allows intensive spectrum re-use.

What is not so clear is the cost of adding capacity using small cells, or buying new spectrum. It might well be the case that such choices are not possible, at the points in time when capacity must be added.

When that happens, the relative cost difference might not matter, as there is no practical alternative to sub-dividing existing macrocells.

source: Mindspeed Technologies  

Altice to Sell Gigabit Internet Access in France

Altice will supply gigabit (1 Gbps) services to customers of its SFR cable TV networks in France, pointing out one advantage of a facilities-based approach to the problem of creating and sustaining both competition and innovation in fixed Internet access networks.

The global telecom industry tends to frame the access problem in terms of fiber or copper, this fiber architecture versus the other. At a policy level, the thrust often is to ensure robust wholesale policies, allowing many competitors to use a single infrastructure.

That has worked to spur competition, but not so well to ensure innovation. In the mobile sphere, regulators in some countries might even argue that multiple facilities-based suppliers (three, for example) has failed to produce robust competition, even if investment seems not to be a crucial defect.

Cable TV networks are the wildcard. For such networks, the issue rarely (business services are the exception) is a matter of the amount of fiber in the network but the modulation method and the spectrum allocation.

Cable TV networks essentially use over the air frequencies and radio frequency transmission, but confined within a waveguide, so all the normal principles of frequency division apply.

One might argue the new way to frame fixed network next generation network issues does not evolve around choice of media, but simply any method to boost bandwidth into the hundreds of megabits per second up to gigabit range, with retail prices people are willing to pay.

Cable’s advantages, in that sense, are stunning. In the U.S. market, cable TV firms have been adding Internet access customers at a higher rate than telcos since 2008, and the rate of gains has escalated over time. In 2015, for the first time, cable TV added accounts and telco accounts actually shrank.

The numbers are nuanced to the extent that telcos are losing all-copper accounts while still adding fiber-based access accounts. But, on a net basis, the copper-based losses now are greater than the fiber-based gains.

Some believe the trend now will gain momentum.

The point is that, at least in the U.S. market, access media is no longer the key issue, in one sense. Cable TV firms are able to boost speeds into the gigabit range without abandoning the hybrid fiber coax access architecture.

Other fixed network providers--telcos, Google Fiber and other independent Internet service providers--have used fiber to the premises.

At some point, that is likely to be augmented by wireless access, as the heavy fixed costs of fiber to premises tend not to work so well in highly-competitive markets, especially markets where one of the networks (hybrid fiber coax) has clear capital cost advantages.

source: BTIG  

YouTube Joins T-Mobile "Binge On" Program, Ilustrates How an ISP Can Add Value to "Dumb Pipe"

Though there were initial complaints by YouTube that Netflix streams were being “throttled” in the same way that content provider video supplied as part of the T-Mobile US “Binge On” program, YouTube has decided to become part of Binge On.

T-Mobile US customers can watch Binge On video without incurring usage charges against their purchased mobile data plans.

T-Mobile US says Binge On partners supply about 70 percent of all video T-Mobile US customers watch on their phones and tablets each month.

Arguably, the new plan has encouraged customers to watch twice as much video each day, in longer and more frequent viewing sessions, than they did before the launch of Binge On.

One video provider has seen the number of active viewers spike 90 percent and watch-times nearly triple from customers with limited high-speed data plans, T-Mobile US says.

One might make several observations. By essentially zero rating Binge On video, T-Mobile US has removed a barrier to use of streaming apps and watching video from a mobile device connected to the mobile network. The resulting boost in usage is therefore not surprising.

And though it might not be so obvious, the Binge On program once again illustrates a key business model issue: an ISP’s primary role in the Internet ecosystem is that of access provider.

In other words, the unique function is providing access to apps. That does not mean the “only” or “sole” role is access, only that the unique, enduring value any ISP supplies is “access.” Keep that in mind whenever you hear executives talking about “dumb pipe,” or “commodity access” or any similar idea.

“Access” is the unchanging and unique role within the ecosystem, if not the “sole” or “only” role. T-Mobile US has made a feature and a benefit out of the way it provides Internet access.

That might not even be the way some app providers or regulators see matters, in this or other markets and countries, where the practice of zero rating might be banned.

But one might argue that app providers, consumers and T-Mobile US itself benefit from the practice. Oddly enough, one actually hears some opponents of such practices admitting that consumers benefit, but that we should not allow it, despite those benefits.

YouTube seems to have made a determination that participation outweighs some other potential concerns.

A service such as HBO, which has for many decades branded itself as a higher-quality service, where image quality, among other attributes is key, might not appreciate being part of a program that trades “no usage” fees for a limitation on resolution.

Content providers, it is quite clear, can choose not to participate, and provide images at any higher resolution that is technically feasible.

Perhaps the main point, however, is that we have in Binge On both a clear example of how an ISP can differentiate a “dumb pipe” function, as well as an example of why it literally is “impossible” for an ISP to avoid supplying “dumb pipe” access (it is U.S. law, where it comes to consumer Internet access) as a basic and foundational service.

The point is that it is fruitless to lament “being a dumb pipe.” Any consumer ISP is, by definition, a supplier of dumb pipe Internet access. But no ISP must "only” supply that end user value. Even when "dumb pipe" is a legal requirement, there are ways to enhance value and differentiate.

So far, Binge On is among the most successful differentiating moves any ISP has made. Some of us would argue Free Basics and other such programs are also prime examples.

Even where "dumb pipe" is a legal requirement, ISPs can find ways to provide genuine additional value. It is not easy. But it is not impossible, either.

Some would argue that is why it is important not to make unlawful other ways ISPs can innovate and provide consumer value, under a net neutrality framework intended to protect consumer access to all lawful apps and protection against predatory ISP behavior.

But innovation by an ISP is not, in and of itself, "predatory."

San Francisco Studies Cost of Municipal Fiber to Home Network

Though stating that “Internet access is available to most premises in San Francisco,” a consultant’s report to the city of San Francisco rightly suggests that “additional ISPs, whether public or private, would increase competition in the ISP marketplace.”

The study suggests a demand-driven buildout, where a city-owned network would be built incrementally, on the model of Google Fiber, might cost $393.7 million.

At an assumed market share of 30 percent of all ISP customers, and residential and commercial subscriber rates of $70 and $100 per month, respectively, revenues would not be sufficient to cover the $103.2 million in estimated annual debt service, capital and operating costs for 20 years until the initial construction debt is paid off.

A full-city, every location build would cost even more: $867.3 million.

Ongoing annual costs would be $231.7 million per year.

Assuming there are about 386,570 dwellings, and that all are occupied (actual occupancy is probably about 92 percent) and 32,360 business locations, a universe of about 418,930 locations must be passed by a ubiquitous network, the full cost of building the network, excluding drops and operating costs, is somewhere in excess of $2,000 per passing.

source: Budget and Legislative Analyst report

U.S. Cable TV Industry About to Become Even More Concentrated than U.S. Telco Segment

If the U.S. Federal Communications Commission approves the merger of Time Warner Cable and Charter Communications, consolidating the number-two and number-three U.S. cable operators, the U.S. cable TV industry will assume a market structure that closely mirrors that of the U.S. fixed network telecom industry.

That is to say, there will be a huge gap between the top-two providers, in each industry segment, and the rest of the providers.

The U.S. cable TV industry would be lead by Comcast, at more than 22 million accounts, followed by Charter-Time Warner with more than 16 million accounts.

Number three Cablevision Systems has nearly 2.6 million accounts. All the other providers have less than one million accounts each.

In the “former telco” fixed network segment, AT&T and then Verizon have about 66 percent of all accounts. Number three CenturyLink might have less than five percent of accounts, and all the others are smaller than that.

In other words, both cable TV and telco segments are lead by just two firms. In the cable TV segment, just two firms will control 77 percent of the accounts; in the telco segment just two firms will control 66 percent of accounts.

In other words, the cable TV segment will be even more concentrated than the telco segment.

source: Market Realist

How Important Will Facilities-Based High Speed Access Competition Become, in U.K. Market?

Some new developments in the U.K. high speed access infrastructure market illustrate the potential advantages of facilities-based competition in high speed access markets, as opposed to reliance on wholesale provided by a former incumbent supplier.

New players in the high speed access market will boost connections in the United Kingdom by 70 percent over the next five years, from almost nine million at the end of 2015 to more than 15.5 million by the end of 2020, IHS estimates, with much of that increase based on use of facilities-based alternatives to BT Openreach.

If there are 26.5 million U.K. households, that implies new providers will snare no less than 58 percent of U.K. households as customers. That might seem improbable. Assume Virgin Media remains a supplier to 20 percent of customers. 

That means cable TV and other retail providers using physically-separate networks from Openreach will represent 78 percent of the customer base, leaving just 22 percent for BT and all other Openreach wholesale customers.

It is not impossible, but perhaps neither is it the most-likely outcome.

source: Thinkbroadband

Also, there is the example of Virgin Media, which passes about 12.7 million homes--some 48 percent of U.K. households--and represents most of the base of customers for “30 Mbps or faster” connections. Virgin has about 20 percent of the installed base of connections.

If you accept the IHS forecast, and also assume the facilities-based new providers serve customers other than those served by cable TV, then potentially all U.K. homes would be reached either by physically-distinct cable TV or other facilities not provided by Openreach.

That seems unlikely. So some of us might argue the actual installed base of customers using wholesale competitors to Openreach is going to be smaller than IHS forecasts. And that assumes Virgin Media does not gain any more customers, which also seems unlikely.

It might be possible to argue that, already in 2016, facilities-based competitors serve as much as 82 percent of U.K. households. That clearly would be incorrect, as BT  itself claimed in 2013 some 38 percent of U.K. Internet access lines.

The logical way to explain CityFibre market share is to argue that it disproportionately serves business accounts, not consumer accounts. Perhaps as much as 30 percent of CityFibre retail provider customers are business accounts.

How ever much success facilities-based competitors--in addition to cable TV--will have in the U.K. market, it seems rather clear that business accounts will be a significant driver for facilities-based competitors to BT.

But it might be easy to overestimate prospects for the “alternate” network providers.

source: ISP Review