Facebook Will be ain Internet Access Platfom Enabler or Supplier

Does Facebook’s mission of connecting the world extend beyond social applications and messaging? It is hard to come to any conclusion but that Facebook does see physical connections as part of its eventual portfolio.

First off, Facebook is starting a new business unit to build “new hardware products to advance our mission of connecting the world,” says Mark Zuckerberg, Facebook CEO.

Also, Facebook's 10-year roadmap clearly indicates that a variety of access platforms are planned, ranging from unmanned aerial vehicles to satellites to lasers to “terrestrial solutions” and “telco infrastructure.”

That does not necessarily mean Facebook everywhere and always--or even primarily--will operate as an Internet access provider. There may well be cases where that happens, but a range of roles--wholesale, backhaul, access platforms or networking gear--are conceivable.

Some will not be happy about that roadmap, but Facebook’s initiatives in the data center networking space already show some of the likely approaches the firm will take.

By commercializing open source servers and creating new data center architectures, Facebook is showing a way for cloud operations to be created and run at lower cost.

But that also means Facebook has become a “competitor,” if indirectly, to suppliers of server hardware, software and platforms. It might be more accurate to say Facebook allows data center operators to build their own servers, instead of buying them from commercial suppliers.

In other cases, Facebook is likely to become a significant supplier of Internet backhaul, wholesale services or perhaps even retail services in some cases, if partners do not come to the table with business models that rapidly and affordably supply Internet access in hard-to-reach or hard-to-serve areas, at retail prices all consumers--everywhere--can afford.

In Africa, Facebook supplies its own satellite access, because other providers do not do so at prices Facebook finds compelling. The unmanned aerial vehicle and fixed wireless networks Facebook also is developing provider other examples of the emphasis on lower-cost Internet access.

It is not clear that Facebook prefers to operate as a retail Internet access provider. It might well prefer to work with retail ISPs as a platform or backhaul provider. But the movement into connectivity” goes well beyond present roles as a major supplier of social networking and messaging platforms.

U.S. Streaming TV Viewers Spend 42% of Their Time Using Streaming Services

U.S. consumers who use streaming services now spend about 42 percent of their television time watching such services, rather than linear TV, a study sponsored by Adobe and conducted by the Diffusion Group has found.

Of that time, 65 percent is spent watching subscription video-on-demand content, 30 percent  is spent watching free streaming services, while five percent is spent watching transactional streaming services (video on demand).

Some 82 percent of adult video streamers subscribe to some type of online subscription video service.

Netflix is used by 70 percent of adult video streamers, followed by Amazon Prime at 33 percent and Hulu Plus at 21 percent.

Some 88 percent of adult video streamers use free online video services. YouTube is by far the most popular free online video service, and is used by 83 percent of adult video streamers, followed by Hulu at 23 percent and Crackle at 19 percent.

"Telecommunications" Will be a Commodity LIke Sugar; Big Changes Necessary

It has been a tough couple of decades for much of what we used to know as the “telecommunications” industry, but it is likely to get much tougher. Several cases in point:

• With the death of monopoly regulation, profit margin is being wrung out of the business
• The Internet has become the biggest part of the “next generation network”
• Wi-Fi now is becoming the biggest part of the “access network”
• Value is migrating up the stack to “application layer”
• App layer will relatively easily move “down the stack” to vertically integrate experience

None of those trends are helpful to traditional “telecom” providers. That, in turn, is why some believe “telecom” industry incumbents should not be more-heavily regulated. The basic thesis: it does not make sense to place more burdens on a declining industry, and that is what legacy “telecommunications” happens to be.

“Wi-Fi has long since passed cellular as the dominant connection platform,” says Craig Moffett, partner at MoffettNathanson. “We’re going to move to a model where cellular is going to be what you roll onto when you have to.”

Says Moffett: “We’re going to think about Wi-Fi as the first network and cellular as the second network, rather than the other way around.”

If you think about Uber, it is a way of unleashing latent resources using a new business model. The analogy to Wi-Fi is fairly clear, as well. As Wi-Fi has become a major method of offloading mobile network traffic, so Wi-Fi is emerging as a new platform for supporting untethered communications that have a mobile component.

The other angle is that value always has resided in the applications people want to use, not the access method. Under monopoly regulation, people purchased the ability to make calls. Access was necessary to enable that value.

That remains the case. People want to use apps, and therefore need Internet access. In one sense, it is not as though value is migrating to the “application layer.” Value always resides in the application layer.

All the other layers enable the app layer. With the rise of IP networks, with access separated from apps, the sources of value simply become transparent, where they once were hidden.

In other words,  access is becoming commoditized in a new way because the apps and access are separate products for the first time.

We sometimes speak of “value shifting up to the application layer” in the new ecosystem. In truth, value always resided in the app layer.

It is simply that, under monopoly regulation, the access providers also had a monopoly on the valued app (voice).

“If you understand that Apple and Google want to control your experience of the cloud, you can understand why they would like to ‘uberize’ the entire wireless space so their brand dominates your cloud experience,” says Francis McInernery, partner at North River Ventures.

That is why “low cost” now matters so much in the access business. Though a reasonable strategy for a tier-one provider is to own some of the valued apps supplied over the access networks, access itself is becoming a commodity.

And that means the business model has to evolve towards “much lower costs.”

One knows that is true, experientially, when users understand they can switch between access platforms without endangering “experience.” That is the definition of a commodity: a product that has ample substitutes with fully-functional qualities (sugar, flour, gasoline, electricity), leading to easy substitution and hence, lower value, leading to lower prices.

To anticipate an objection, long haul transport is is one sense, not a full commodity. Capacity across the Atlantic cannot easily be a functional substitute for capacity across the Pacific, or between points within any single region.

Access networks still are geographically distinct, and thus "capacity" is not, strictly speaking, a commodity in the sense that buying trans-Atlantic capacity solves a trans-Pacific capacity problem.

But within any local area, the access function is much more susceptible to substitution. People can buy or use mobile, fixed network, cable TV, independent ISP or Wi-Fi access from multiple suppliers, with roughly equivalent experience.

Managed Voice over Wi-Fi Should Improve ARPU, Study Suggests

It stands to reason that a voice over Wi-Fi (offload) would boost profit margins for any mobile carrier voice service, at least marginally, as the carrier benefits from a lower cost per bit profile, as access is shifted to the fixed network.

A new analysis by ACG Research suggests that is the case.Looking at a business case for a developed country service provider with mature VoLTE penetration, ACG Research suggests managed Wi-Fi voice quality also helps, as it encourages users to make heavier use of voice over Wi-Fi mechanisms.

The results suggest that average revenue per user is maximized when the quality of VoWi-Fi is high (resulting in increased usage) and data offload is easily available (resulting in lower cost per bit).

In the first scenario, the service provider’s network features 10 percent use of untrusted VoWi-Fi and no use of trusted Wi-Fi.

This results in a low adoption of VoWi-Fi due to quality and user experience issues.

In the second scenario, the service provider’s network uses 30 percent trusted VoWi-Fi and seven percent untrusted VoWi-Fi, resulting in VoWi-Fi penetration that is higher than VoLTE.

This combination delivers $19.91 billion EBITDA (24 percent higher as compared to the first scenario) and a monthly APPU of $19.91 (35.5 percent higher as compared to the first scenario) with both ramping to Year five.

As VoWi-Fi grows the cost per voice minute drops, reaching a value of $0.0072. In the first scenario the service provider’s network is dominated by VoLTE penetration, resulting in the cost per voice minute being 19.5 percent higher than the second scenario.

EU Files Antitrust Charges Against Google

The European Union has opened an antitrust action against Google, formally charging Google with abusing the dominant position of its Android mobile operating system.

European Union antitrust regulators argue that by requiring mobile phone manufacturers to pre-install Google Search and the Google Chrome browser, the U.S. company was denying consumers a wider choice of mobile apps and stifling innovation.

The Commission also alleges that Google has breached EU antitrust rules by preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code.

Also at issue are Google’s alleged practices giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google search on their devices.

Google is already facing EU charges over the promotion of its shopping service in Internet searches at the expense of rival services.

To some, the action is reminiscent of similar charges against Microsoft. In 2003, the EU ordered Microsoft to offer both a version of Windows without Windows Media Player, as well as supplying the information necessary for competing networking software to interact fully with Windows desktops and servers.

In March 2004, the EU ordered Microsoft to pay €497 million ($794 million or £381 million), the largest fine ever handed out by the EU at the time.

Telefonica Looks for Other O2 Options in United Kingdom

source: Informa

It is starting to appear that regulators will not allow the proposed merger of Three and O2 in the United Kingdom, a prospect that now has Telefonica looking at other options  for its U.K. business.

Among the other options conceivable in the event of a merger denial are selling to another buyer or spinning O2 off as an independent company.

And some speculate that Liberty Global, owner of the Virgin Media cable TV assets in the United Kingdom, will be interested.

Any successful acquisition by Liberty Global would be a further move by major cable TV operators into the core mobile services business.

In the Netherlands, Liberty Global already is working with Vodafone to sell mobile services to its cable TV customer base. In the United States,

Comcast now says it will bid on 600 MHz mobile spectrum, while Comcast and other cable TV companies already have the right to resell Verizon Wireless services, with the eventual option to create a mobile virtual network operator business that uses wholesale Verizon assets to create a branded retail operation.

The switch in plans by Telefonica shows the big role regulators now are playing in global communication and Internet ecosystem markets.

In recent days, regulators have been active shaping communications markets, creating network neutrality rules that boost or limit business models, changing spectrum licensing rules in ways that permit more intensive use of existing licensed spectrum and freeing up more spectrum for use both licensed and license exempt.

But antitrust regulators also appear to be taking a more prominent role, essentially killing mergers that would have directly affected mobile market structures in the United States and European Union, while preparing to stop a big merger in the U.K. mobile market.

And antitrust investigations directly affecting software suppliers are underway in the European Community.

Actions by private actors matter, but so do ground rules set by regulators that directly affect market structures and potential costs and opportunities within various portions of the broader Internet ecosysetm.

T-Mobile US Gains Most Subscribers in 4Q 2015, But Market Becomign a Zero Sum Game

In a saturated but competitive market, nearly all account gains necessarily must come in the form of taking market share from another supplier, and the U.S. mobile market illustrates the trend. In other words, the U.S. market is becoming nearly a zero sum game.

By 2014, use of mobile phones had reached 110 percent in the U.S. market. And though half of the leading four carriers gained net accounts, while the other half lost net accounts, the big change might be that the majors are gaining subs at the expense of smaller providers.

source: Strategy Analytics

In the fourth quarter of 2015, AT&T had a net loss of six percent, Verizon had a net loss of three percent, Sprint had a net gain of three percent and T-Mobile US had a net gain of about 24 percent.

Other carriers had a net loss of 15 percent.

The analysis by Consumer Intelligence Research Partners shows that among customers that activated a phone in the quarter (approximately 12 percent of the U.S. market), T-Mobile US grew its customer base 42 percent (net 24 percent) at the expense of other carriers, as did Sprint, which gained a net three percent.

source: Consumer Intelligence Research Partners