High Speed Access Up, Video Flat, Voice Down in U.S. Fixed Network Business

It is easy enough to describe the fundamental trends in the U.S. fixed network consumer services business. People are adding high speed access accounts. The linear video business is flat. The voice business is shrinking.

But there are market share shifts as well. Cable companies are winning virtually all the net new accounts in Internet access and video categories.

Leichtman Research Group says the the 17 largest cable and telephone providers in the United States, representing about 95 percent of the market, acquired nearly 1.1 million net additional high speed Internet access subscribers in the first quarter of  2016.

The 13 largest pay-TV providers, representing about 95% of the market, added about 10,000 net video subscribers in the first quarter of  2016, compared to a gain of about 170,000 subscribers in the first quarter of 2015. Most of the suppliers now are counting both linear and OTT accounts in those totals, it should be noted.

The only question in the fixed network voice business is how fast lines are being abandoned.

source: Statista

	Subscribers at End of 1Q 2016	Net Adds in 1Q 2016
Cable Companies
Comcast	23,767,000	438,000
Time Warner Cable	13,640,000	327,000
Charter	5,727,000	155,000
Cablevision	2,828,000	19,000
Suddenlink	1,253,000	30,000
Mediacom	1,114,000	29,000
WOW (WideOpenWest)	722,300	9,800
Cable ONE	508,424	7,183
Other Major Private Cable Companies*	6,775,000	50,000
Total Top Cable	56,334,724	1,064,983
Phone Companies
AT&T	15,764,000	(14,000)
Verizon	9,218,000	(10,000)
CenturyLink	6,056,000	8,000
Frontier^	2,468,600	24,600
Windstream	1,092,000	(3,100)
FairPoint	311,323	193
Cincinnati Bell	292,400	5,000
Total Top Phone Companies	35,202,323	10,693

Cloud Workloads to Nearly Triple in 5 Years

The cloud computing “wars” are “entering a new phase,” with good implications for Amazon.com and bad implications for Oracle, SAP and other traditional IT vendors, including Cisco, JP Morgan analysts Mark Murphy, Doug Anmuth, Sterling Auty, Rod Hall, and Philip Cusick said in a research note.

The authors base their work on a survey they conducted of 207 chief information officers at companies with a budget of $600 million or more annually, making it in their view a unique window into the preferences and intentions of “large Enterprises.”

One of the main takeaways is that use of the public cloud is set to rise dramatically. CIOs report that 16.2 percent of workloads are currently running in the public cloud, and that in five years 41.3 percent of workloads will run in a public cloud. That represents nearly a tripling of cloud workloads.

This suggests at least a 20 percent compound annual growth rate for public cloud workloads over the next five years.

source: Barrons

The analysts said budget pressures have large firms focusing technology spending on cloud services.

The accelerated move to the cloud, and in particular the rapid rise of Amazon’s AWS cloud service among large corporations, signals a “changing of the guard” in enterprise IT, suggesting that “threats to traditional, on-premise IT infrastructure vendors are serious,” the report said.

It said Microsoft still holds a commanding lead in the IT market for large businesses, but AWS, which has long been popular with smaller firms, is making significant inroads.

The findings are based on a survey of 207 CIOs with an average annual IT budget per firm of $600 million, together representing some $126 billion in enterprise IT spending every year.

IT budgets at these firms are set to grow in 2016  by only 2.8 percent, compared to more typical annual growth rates of three percent to four percent.

The largest firms, with annual IT budgets of more than $2 billion, plan to hike spending by less than one percent.

AT&T Acuires QuickPlay Media OTT Platform

AT&T is acquiring Quickplay Media, a platform for over-the-top (OTT) video and “TV Everywhere services” that AT&T already uses.

Quickplay’s platform currently supports AT&T’s U-verse “TV Everywhere” offering and will support the streaming offers “DirecTV Now,” “DirecTV Mobile” and “DirecTV Preview” that AT&T plans to introduce later in 2016.

The new plans will let viewers stream DirecTV content over the Internet to virtually any device.

The reason for the acquisition: OTT video is predicted to grow much faster than linear video.

source: IHS Infonetics Research

19% of Internet Users Experienced an Internet Security Breach, Causing Less Use of the Internet

About 19 percent of surveyed Internet-using U.S. households (some 19 million households, potentially) report they have been affected by an online security breach, identity theft, or similar malicious activity during the 12 months prior to a July 2015 survey conducted by the National Telecommunications and Information Administration.

Security breaches appear to be more common among the most intensive Internet-using households. While nine percent of online households that used just one type of computing device (either a desktop, laptop, tablet, Internet-connected mobile phone, wearable device, or TV-connected device) reported security breaches, 31 percent of those using at least five different types of devices suffered this experience.

These concerns are prompting some Americans to limit their online activity, according to data collected for NTIA in July 2015 by the U.S. Census Bureau. This survey included several privacy and security questions, which were asked of more than 41,000 households that reported having at least one Internet user.

Households Reporting Online Security Breaches by Number of Different Types of Devices Used,

source: NTIA

About 22 percent of Internet-using households that used a mobile data plan to go online outside the home experienced an online security breach, compared with 11 percent of those not using data plans while outside the home.

And it appears that security concerns are negatively affecting willingness to use the Internet. Some 45 percent of online households reported that these concerns stopped them from conducting financial transactions, buying goods or services, posting on social networks, or expressing opinions on controversial or political issues via the Internet.

Online Activities Avoided Due to Privacy or Security Concerns

source: NTIA

From "Convergence" to "OTT"

Most ideas and concepts have currency in a particular context and time. The use, or passing from use, of any such terms generally means that a specific big change has become routine, part of the background, and the new reality.

Convergence, for example, was a big idea in the 1990s. One almost never hears the term used, in the 2010s. Some 20 years ago, the big idea was that an era of application-specific networks was ending. All networks were “converging” on multi-purpose platforms that could deliver any media type.

The term also was used to describe the rise of multi-function devices able to display many media types, or to describe the the ability of applications to interact with each other.

At this point, we simply assume that is the case. On a more-granular level, it is hard to remember that “smartphone” and “Wi-Fi hotspots” once were “hyped” terms in the past.

source: Innovative Communications blog

At this point, all the “convergence” items are simply part of the existing fabric of networks, devices and apps. What was less well widely understood 20 years ago was the fundamental change in business models, however.

It now is clear that convergence was less important than another fundamental change, namely the separation of application creation, ownership and delivery from the actual “network” layer.

In the “non-converged” world, all networks were application specific, and that also meant that the network owner created, packaged and sold the apps the network supported.

That now is broken. While any network owner can create some managed apps and services (carrier voice, carrier messaging, linear TV and Internet access provide examples), most apps now are created and delivered independent of the access network.

In other words, no business relationship has to exist between any “Internet” app and any access network. That is why the term “over the top” has resonance with access provider executives, not “convergence.”

Convergence no longer matters. OTT does.

Are Internet Access Prices High or Low, in Developed Countries?

One rather frequently hears assertions that U.S. Internet access prices are “too high,” or “the highest in the world,” or “among the highest in the world.”

As often is the case with statistics, “truth” and “facts” diverge. The problems start with price levels across countries. It would be easy to make a case that prices for virtually any product or service are “high” in the most-developed countries, compared to prices for those same products in a developing country.

That is why global comparisons require normalizing prices.

There are a couple of standard ways of doing so. “Purchasing power parity” is one such technique. Expressing the “price” of any product in relation to household income, or per capita income, is another way of doing so.

Using such mechanisms, it is clear that prices can be “high” in developed countries even if “cost” is low, in terms of the percentage of income required to buy a product.

In other words, the “cost” to buy mobile or Internet services in developed countries actually is quite low.

source: ITU

source: ITU

There is a further complication when assessing price and cost as a function of “people” rather than household income, since households vary in size, from place to place.

In other words, price per person can vary with the number of persons per household, the number of people using a product, or the degree of sharing possible with any product. “Price” or “cost” also can vary based on the ways people buy those products (which plans are most often purchased, for example), as there are any number of ways a “bulk discount” can be applied, such family plans.

source: The Web Index

The point is that although retail prices in developed nations can be “high,” the actual cost, as a function of overall price levels and compared to income, typically is quite low, where it comes to either mobile or Internet access services.

Nor do such metrics always include a “quality” dimension. Value is determined not only by retail price, or price as a function of income, but also by the speeds and other attributes of usage plans. Price per megabit, in other words, also matters.

Paradoxically, "price" can be high, while "cost" is quite low.

Expect Disruptions in Access Network Business Model, Technology

Though the impact might be seen only over the course of a decade, we cannot now discount the possibility of disruptive innovations in the access business. Think about Google Fiber, unmanned aerial vehicles being developed by Facebook and Google, Google’s Project Loon.

In the data center design area, Facebook’s Open Compute Project aims to spread open source data center architectures.  

The main point is that our traditional assumptions about the costs and features of an access network, not to mention our understanding of “who” operates the access network, could change radically over the next decade.

At stake are many truisms about possible market structures, not simply the cost and features of access. Also at question: the role of the access function within the ecosystem.

Though access will continue to reside at a specific layer of the protocol stack, it is not so clear that the role necessarily must be fulfilled by particular entities that traditionally have provided that function.

In other words, it no longer is a given that telcos, cable TV companies and others necessarily will have the same degree of activity or influence over the access function, in the future.

Consider “Open/R,” a routing protocol created by Facebook that ultimately will be made available as an open source tool

Open/R “has evolved into a platform that allows us to rapidly prototype and deploy new applications in the network,” Facebook now says.

“An Open/R network can easily add an application on top of routing that measures the utilization of network links, a move that could lead to computing bandwidth allocation,” Facebook says. “It could add MPLS (multi-protocol label switching) for quick movement of data over adjoining segments without looking up long network addresses.”

“Facebook's Open/R routing platform allows a combination of centralized and distributed control working together with the aim of establishing more self-governing networks that will self-allocate traffic and route it to the Internet with a minimum of supervision,” the company says Petr Lapukhov, Facebook network engineer.

“Being able to iterate quickly is central to our ability to improve the speed, efficiency, and quality of internet connectivity around the world,” said Lapukhov.