Fixed Network Now Drives Just 7% of Verizon Operating Income

If you wanted a one-sentence description of how the U.S. fixed network business has been transformed over the last 15 years, here it is: “Wireline now accounts for less than 30 percent of Verizon’s total operating revenues, down from 60 percent in 2000, and less than seven percent of our operating income,” noted Verizon Communications CEO Lowell McAdam.

In the fiscal year ended December 31, 2014, Verizon generated $127.1 billion of total revenues.

Fully $87.6 billion revenues, 69 percent of total, came from the mobile segment.

Verizon generated $38.4 billion revenues, 30 percent of the total, from fixed networks. Verizon generated $18.0 billion (47 percent) from mass markets, $13.7 billion (36 percent)  from global enterprise, $6.2 billion (16 percent) from global wholesale, and $0.5 billion (one percent) from other operations.

source: Revenue and Profits

As often is the case, revenue contribution and profit contribution can vary. Fixed network operating income margin was 4.3 percent in first-quarter 2015, Verizon reported. In first-quarter 2015, mobile segment operating income margin was 35 percent.

source: Market Realist

Typical Uber Ride Generates 19 Cents of Earnings Before Interest, Taxes, Employee Compensation

You might have heard more than a few Uber drivers grumble about the 25 percent share of gross revenue Uber takes from each ride sold to a passenger.

In February 2016 Uber earned 19 cents per ride in the United States,  according to company documents.

Of the 25 percent share of a typical fare, most goes to antifraud efforts, credit-card processing, customer support, marketing, and software development.

That 19 cents estimate does not include such matters as interest, taxes, or equity-based compensation for employees.

Google Fiber Unveils New 25 Mbps Symmetrical Service in Kansas City, for $15 a Month

How much should 25 Mbps symmetrical service cost? $15 a month, Google Fiber essentially says, as it introduces a new “budget” plan for residents in Kansas City, Mo. and Kansas City, Kan. Google Fiber neighborhoods with low rates of Internet connectivity.

In some U.S. markets, 20 Mbps to 25 Mbps from a telco or cable TV company can cost $60 a month. 

The new Google Fiber plan is offered without any data caps, no application process or contracts and no equipment rental and no construction or installation fees.

Broadband plan coverage areas are determined using publicly available data from the U.S. Census and Federal Communications Commission (FCC).

The new service will be available in Kansas City starting May 19, 2016.

Ingenu Launches IoT Network in Dallas

Ingenu, a supplier of a machine-to-machine network platform, has launched in Dallas. The Machine Network is intended to provide Internet of Things (IoT) connectivity to the region and will cover approximately 2,116 square miles, serving a population of more than 4.4 million people.

The Machine Network is powered by Ingenu’s RPMA (Random Phase Multiple Access) technology, designed to provide robust, reliable connectivity for M2M apps.

Application development for the Machine Network is currently underway with partners such as Dallas-based, Plasma, said to be a leader in enterprise digital transformation and IoT.

Plasma is partnering with Ingenu to support various Smart Cities initiatives.

Plasma supplies an enterprise-grade IoT platform that allows rapid prototyping and deployment of IoT and mobile solutions, Ingenu says.

If you have been in the communications or computing business long enough, you know that not all proposed technology platforms and standards succeed in the market. But it always is hard to pick winners and losers early on in the development of any coming technology and business.

In fact, as sometimes is the case, the general shift from proprietary or special-purpose networks to general purpose networks also occurs at the same time as special-purpose networks also are proposed.

It is too early to have complete assurance of how the overall IoT market and business will develop, which industries will deploy first, which deployments will prove to add the most value, which firms will emerge as leaders in the various markets or which access networks will be significant.

source: The Connectivist

Facebook's 10-Year Roadmap Includes "Connectivity" as Among Top 3 Technology Directions

Here’s another illustration of growing changes in the Internet ecosystem that pose a huge challenge to incumbent access providers.

Facebook has released some details about its 10-year roadmap. On the agenda: virtual reality, artificial intelligence and “connectivity.”

Connectivity includes drones, satellites, terrestrial solutions, telco infrastructure.

A couple of key points: Internet access no longer is the exclusive province of telcos, cable TV, fixed wireless or satellite providers of Internet access. Many other entities, including ISP businesses set up by local government, independent ISPs and application provders, are going to bundle Internet access with their other products.

That is not so unusual. Broadcast TV, broadcast radio, linear video entertainment, fixed and mobile voice and text messaging are apps or services that bundle access as part of some other product.

When we say that content is going to a growing part of the access provider business, that is only a reflection of the broader historic reality for many managed services.

Over time, it is highly likely that content and apps will be bundled with access for consumption by consumer users and customers, as connectivity, storage, computing or other services often are bundled as part of specialized business customer networks.

Source: Facebook

The other observations are that participants within the Internet ecosystem often expand into adjacent roles within the ecosystem, while it also is proving to be easier to move “down the stack” than “up the stack.”

When access providers add managed services or Internet apps, or app providers add access, those are examples of firms taking on additional roles within the ecosystem.

When app or service providers become device suppliers, or device suppliers become access providers, those are additional examples of ecosystem participants moving into adjacencies.

When app or service providers build their own devices, those are examples of moves into adjacencies.

Sometimes the moves are driven by strategic reasons, such as maintaining or gaining dominance in a market segment.  In other cases the moves might simply reflect the ability to grow gross revenue or reduce costs.

Ericsson has built an interesting business operating service provider networks, for example, essentially allowing access service providers to outsource operations.

The long term implications for access providers are clear enough. Staying within the one assigned ecosystem role (access) is going to be difficult, or dangerous, as time passes and more suppliers in other parts of the ecosystem decide that access is something they should be providing.

Half of Free Basics Users Buy Mobile Internet Access Within 30 Days

Half of all “Free Basics” users buy a data plan from their mobile service provider within 30 days of trying Facebook's free service, said Emeka Afigbo, Facebook's manager for product partnerships for Middle East and Africa.

Mobile operators receive no compensation from Facebook or Internet.org, and give away mobile Internet access to Free Basics users.

The perceived--and apparently real--upside is the chance to acquaint new users to the value of mobile Internet access and key Internet apps themselves.

Free Basics is offered in 37 countries, though Egypt and India have banned the service.

Some 25 million people have used the service, with six million users added since January of 2016.

If the conversion rates everywhere were to reach levels in the Middle East and Africa, potentially 12 million new mobile Internet customers would have been added in developing nations since Free Basics launched.

But there is far to go. Free Basics now is available to 1.67 percent of the potential population of the target nations representing around 1.4 billion people.

Other ISPs might be interested in a graphic Facebook has released about its 10-year roadmap. On the agenda: virtual reality, artificial intelligence and “connectivity.”

Connectivity includes drones, satellites, terrestrial solutions, telco infrastructure.

Source: Facebook

What 4G Tells Us About Future of 5G

If our experience with 5G is anything like 4G, business model assumptions will include:

• Build it and they will come
• Cost to deliver a retail gigabyte to customers will drop
• Revenue for delivering a retail gigabyte will not increase
• Any new “killer app” will be discovered: we do not know what it is, yet
• “Dumb pipe” still will drive most of the growth, but managed services will drive most of the gross revenue (globally).

The mobile industry has tended to replace its network by a “next generation” network about every decade and nobody seems to think that will end.

Though the phrase “build it and they will come” (hope, in other words) is a discredited business model in many quarters in the wake of the Internet bubble around the turn of the century, it rather neatly captures actual reality in the mobile business.

Every next generation network has, in fact, created its own demand. So, in truth, a change in demand by consumers almost never is the actual business rationale for shifting to a next generation network. More often, next generation networks are preferred because they help mobile operators run networks that are more efficient, and therefore potentially more profitable.

The formal justification for building the next generation network often hinges on new revenue sources or ability to raise prices. Our experience with 3G and 4G is that this expectation was largely unfulfilled.

As a practical matter, whatever is possible as a matter of technology platform, prices have been falling, largely due to increased competition. So the expectation that a next generation network leads to an increase in retail prices per gigabyte is going to be dashed, if in fact anybody actually thinks that can happen. So revenue per delivered gigabyte will remain flat, or possibly even drop a bit.

But the supplier cost to deliver a gigabyte will drop with 5G, perhaps not by an order of magnitude, but by hundreds of percent. One might well argue the actual driver for 5G is benefits for suppliers, not end users, even if end users are going to experience more value.

That is what has happened for any number of earlier mobile technology innovations, including signaling systems, the switch from analog to digital switching, better air interfaces, better radios, faster backhaul, signal compression, processing and storage costs.

Many now say 5G will enable many new Internet of Things applications, though the emergence of alternate networks focusing on low-bandwidth, low power consumption networks designed to support sensors suggests IoT might be a significant new market, if not necessarily an application unique to the 5G network.

Other big new applications might yet emerge from 5G. But that was said about 3G, and did not happen until relatively late in the platform lifecycle. Internet access, and especially use of video has emerged as the “killer app” for 4G.

We cannot really predict what might emerge from 5G (even if hopes are pinned on IoT).

And even if it will make sense, and likely happen, that mobile operators actually create some new managed services delivered over 5G and 4G networks, most of the revenue, and the foundation of the business model--in terms of revenue--will still come from “dumb pipe” Internet access.

Managed services such as voice and text messaging still will be significant, and still drive most of the gross revenue in many markets.

But revenue growth will hinge on Internet access revenues. And that, by definition (because of current interpretations of network neutrality rules), means “dumb pipe.”

source: ITU