U.S. Media Consumption Approaching Zero Sum Game

source: eMarketer

Up to this point, U.S. consumer media consumption has not literally been a zero sum game, as total hours of consumption have grown, even as new media formats have emerged.

Though multitasking has resulted in growing amounts of media consumption by U.S. adults, there will come a point where additional media consumption is not possible because people need to work, eat, sleep and commute to work.

We might be nearing that point, where growth will stop and gains by one type of media will have to come at the expense of others.

On average, U.S. residents interact with media for 12 hours, 5 minutes each day.

But the daily total is expected to grow by just three minutes between 2016 and 2018. That is going to intensify competition between media formats, since, in a zero sum game, a contestant can win only if another contestant loses.

Will a 3rd Mobile Operator Ever Try to Attack the Philippines Mobile Market?

Reasonable people--not to mention communications regulators--might well agree that duopolies, though better than monopolies--do not always deliver the benefits of competition in a robust way. That is not to say there is no competition: typically there is rather serious competition.

There simply is not the degree of disruption that happens when a third strong player enters a market.

So it is that some question the wisdom of San Miguel Corp. selling its spectrum assets to Philippine Long Distance Telephone Co. and Globe Telecom, the two dominant providers in the Philippines telecom market.

The deal raises more than $1 billion for San Miguel, and both PLDT and Globe acquired half of the assets.

The two operators, which together have a 99 percent market share of mobile connections, will pay a total of PHP52.8 billion ($1.13 billion) for assets including 700MHz spectrum.

Though San Miguel had tried to launch its own mobile business, it eventually decided to sell its spectrum assets to the two dominant providers, after failing to secure a needed operating  partner. In that regard, San Miguel had negotiated for a year with Telstra, but could not reach an agreement.

The Foundation for Economic Freedom  has urged the Philippine Competition Commission (PCC) to review the deal.

“The PCC should take into account that it is mandated by Republic Act No. 10667 or the Philippine Competition Act to implement the national competition  policy and prohibit anti-competitive agreements, abuse of dominant position, and merger or acquisition agreements that substantially prevent, restrict or lessen competition in the market,” FEF said.

About 20 MHz of 700-MHz spectrum apparently will be returned to the government for eventual auction, to encourage market entry by a third competitor.

That might not be so easy. Japan and South Korea also have been trying to encourage a third provider to enter their mobile markets, and have been repeatedly unsuccessful. One might guess that potential entrants see little chance of significantly cutting into the market share of the leaders in those markets.

That appears to have been the case in the Philippines as well.

IoT Forecasts are Wrong, History Suggests

All present “Internet of Things” forecasts are likely to be wrong, and wrong on the high side, especially in the early years. That simply is the pattern when new technologies and markets emerge. 

Almost always, when new technology is adopted, expectations are too high for the early deployments, but often too low in the later years.

There is a chance the forecasts will be correct in terms of magnitude, but wrong in terms of timing. 

A complicating matter is that different definitions are used, either inflating or deflating the estimates. Some of the confusion is understandable. The broad notion of devices connected to the Internet makes sense.

But some major categories of devices fitting that definition by excluded, to avoid confusion. Internet-connected phones, PCs and tablets are generally excluded. Mostly everything else is included.

Even so, the number of product categories and functions is diverse enough to confuse most of us, most of the time, about where the growth exists.

Eventually, we will reach some common understanding. But possibly not soon.

Present estimates of IoT deployment vary widely, in part because definitions vary.

There might be 35 billion to 50 billion IoT devices in use by 2020. But the higher estimate often includes smartphones, tablets and personal computers (devices that many do not consider IoT devices).

If that is the case, even the more-conservative forecasts--all other trends developing as forecast--are too high, because they include many billions of "non-IoT" devices. And even if the forecasts prove correct in terms of magnitude, they are likely to prove wrong in terms of timing.

The market will take far longer to develop, than many seem to anticipate.

source: Business Insider, devices in billions

source: IoT Analytics

Precisely which segments will develop first, and substantially, is a big unknown. Some seem to believe consumer wearables or connected home appliances will lead; others think business devices will drive most of the adoption. Yet others think "government-mandated" apps, devices and connections will lead.

By some estimates, the industrial IoT might already have largely arrived. The bad news for industrial IoT proponents is that, if that is correct, industrial IoT growth will not be so robust as many expect, and most of the deployments will happen in the consumer appliances area. That largely is driven by home automation or home security apps.

source: The Linley Group  

Others think the volume of deployments will be by businesses and governments (“smart city” apps, broadly defined).

source: Business Insider, devices in billions

Virtualized Networks Will Disrupt Supplier Business Models

The shift to virtualized networks, as you would expect, will disrupt the telecom infrastructure supplier market. That pattern already is happening in the data center market as well, as open source, virtualized and “do it yourself” approaches to data center infrastructure have taken hold.  

"Part of the challenge for the vendors is that it certainly upset the vendor business model, because instead of buying boxes we were now going to buy software and buy it in smaller chunks, and we've been vocal about having open source play a key role in the ecosystem," says Krish Prabhu, AT&T CTO.

More is coming. The Telecom Infra Project, initiated by Facebook but now supported by a number of leading telecom infrastructure suppliers, also is working to essentially commoditize hardware and create more functionality on an open and “computing-style model.”  

The project aims to to “develop new technologies and approaches to building and deploying telecom network infrastructure,” according to Jay Parikh, Facebook global head of engineering and infrastructure.

Facebook, Intel, and Nokia have pledged to contribute an initial suite of reference designs, while other members such as operators Deutsche Telekom and SK Telecom will help define and deploy the technology as it fits their needs, said Parikh.

Telecom Infra Project  members will work together to contribute designs in three areas including  access, backhaul, and core and management.

Significantly, the effort will apply Open Compute Project models of openness and disaggregation as methods of spurring innovation. In other words, in addition to relying on open source, the Project also will rely on use of standard, “commodity” hardware.

“In what is a traditionally closed system, component pieces will be unbundled, affording operators more flexibility in building networks,” Parikh says.

The net result is that telecom networks will cost less in the future. Not only are service providers moving to adopt virtualized approaches to network gear, with firms such as Facebook pushing that model, but rival platforms, including cable TV networks and coming fixed wireless and mobile networks already are suggesting that lower-cost access models are possible.

The AT&T  Domain 2.0 program, based on use of software-defined networks (SDN) and network functions virtualization (NFV), is part of that shift.

India Authorizes MVNOs, Will New Business Models Emerge?

Allowing operation of  mobile virtual network operators in the Indian mobile market will be a game changer, says Ravi Shankar Prasad, Communications, and IT minister.

Others are not so sure, given the intensely-competitive nature of the Indian mobile market and the entry of Reliance Jio into the market.

Perhaps paradoxically, the Telecommunications Regulatory Authority of India believes the new MVNOs will primarily focus on services for customers in rural areas, since that is an underserved niche.

Much could depend on the full details of the enabling regulations, which appear to allow a significant amount of owned facilities, though MVNOs will not be allowed to be assigned spectrum by the underlying carriers or build or least their own “core network” facilities.

It is not immediately clear whether MVNOs will be allowed to separately acquire spectrum.

The definitions will matter.

In any scenario, it appears India could be part of a new  trend for MVNO business models.

Traditionally, MVNOs have rented virtually everything they need from an underlying carrier, without building their own facilities or acquiring spectrum.

But new possibilities are emerging as cable TV operators, for example, explore “Wi-Fi first” models that are a blend of rented capacity and owned infrastructure.

So the interesting angle in India will be whether new forms of wholesale services and owned facilities will emerge.

For example, would a fiber connection from a village to the furthest optical node operated by an existing facilities-based mobile operator be considered “core” or facilities allowed under the rules for MVNOs?

That, of course, assumes MVNOs can own their towers, radios and associated infrastructure, something that typically is not part of the MVNO licensing regime in other countries. But such nuances would not be new.

As in the past, the difference between resellers and MVNOs was sometimes hard to define with precision. In some cases, the distinction turned on such nuances as whether the MVNO had its own billing system, while a reseller used the underlying carrier’s billing system.

So, too, might the difference between an MVNO and a facilities-based mobile operator become a bit more porous.

Mobile "Is Not Yet" a Functional Substitute for Fixed; Emphasis on "Not Yet"

Sometimes the key phrase in any sentence is “not yet,” as in the observation by Strategy Analytics that “mobile broadband is not yet replacing fixed services.”

"The reality is, fixed broadband is continuing to grow in the US, and not being replaced by mobile broadband as some have reported," said Jason Blackwell, Strategy Analytics director.

Some parsing clearly is called for. Some of us would say we are not aware of any analyst or researcher actually claiming that mobile Internet access is substantially or completely displacing fixed connections in the U.S. market.

Unlike the case with voice services, there has not been widespread substitution of mobile for fixed access, taking the form of customers terminating fixed connections and substituting mobile connections, though there has been speculation about what “could” happen in the future.

But most observers consistently say mobile is not a substitute for fixed Internet access. In fact, some observers only suggest that could happen in the future.

The point is that virtually nobody argues that mobile broadband access “already” displaces any substantial amount of demand in the U.S. market, in the same sense that voice lines have literally been abandoned in favor of mobile voice.

But it would be correct to argue that “both and” was the intermediate stage in the voice replacement process: most people added mobile, but kept fixed line services.

Only over a process of decades did a growing percentage of people actually conclude that keeping a fixed line did not make sense. Several market changes drove the sentiment shift. First, once every adult in a family or household had a mobile subscription, the question of keeping a voice line became a real viable choice.

Also, only after the big change to “unlimited domestic” calling (no long distance charges) did mobile actually become a preferable option to fixed voice, allowing full functionality at lower prices. That process also took some time.

Too, the need to keep a fixed voice line for dial-up access disappeared, as separate high speed access connections became the substitute product for dial-up Internet access.

Nobody argues such a change already has happened in the U.S. Internet access business, only that it could happen, and that platform shifts to 5G networks, millimeter spectrum, virtualized networks and small cells, for example, will make wireless access a functional substitute in the future.

When and if such a transition begins to happen, it is likely to follow the same route as did the shift to mobile voice. In the interim “use both” will be the intermediate stage, since the price per bit and speed comparisons will not be fully equivalent.

Potentially, as more users have experience with both services, and if the packaging makes the products functional substitutes in a speed and usage allowance sense, some users will begin to shift, literally dropping the fixed connection.

Outside the United States and the “developed” world,  the choices are profoundly different.

In developing markets, substitution is a reality, though not in the sense of “replacement of a fixed connection by a mobile connection.”

Because of the unavailability of any fixed connections, most Internet users rely on mobile, not fixed connections.

The point: In virtually all developing nations, mobile is a substitute for fixed line access, as all data on mobile and fixed Internet access show.

source: Ovum

source: ITU

source: ITU

To be sure, the claim that mobile is, or is not, a functional substitute for fixed access becomes a public issue where mergers are proposed, leading market contestants to make one or the other argument. That is polemics, not analysis.

To the extent that Wi-Fi, though an untethered service, is a fixed form of access, not a “mobile” form, the argument is raised by cable operators and others who argue that dense Wi-Fi hotspot networks can underpin a significant part of the network access solution for some mobile operations and business models.

The Strategy Analytics report on U.S. Internet access methods, which points out that “cable operators added 3.3 million new subscribers in the 12 months from April 2015 through March 2016, helping drive total fixed broadband household penetration to nearly 80 percent.”

The study also points out that cable's broadband market share has increased to more than 62 percent.

Perhaps that is context for the assertion that “some” have claimed mobile, in the U.S. market, “already” is a functional and widespread substitute for fixed access.

To my knowledge, virtually nobody ever has made that claim, other than to say one could make that choice, in some instances. One could do so, though relatively few have done so.

Mobile Now is the Leading Media Platform Across Much of Asia

If you are familiar with the traditional indexes of TV usage, measured in hours per day of use, you might be struck by the similar role mobile apps and web access now play.

Across a wide range of countries, daily engagement with mobile apps and web ranges between three and four hours each day, for customers who have access to the Internet from their phones.

In Brazil, engagement is about 4.5 hours each day.

In Malaysia, engagement lasts nearly four hours per day, with users in Thailand, Indonesia and the Philippines not far behind.

In India, daily mobile Internet use occupies nearly 3.5 hours.

Basically, people in many nations now spend more time interacting with mobile online content than they do watching television.

source: Global Web Index

That is one major reason why most observers expect a continued migration of advertiser spending to mobile media. Eventually, advertisers go "where the eyeballs are," or where the consumer attention exists. 

Without question, digital platforms now already has become the dominant media platform in many countries in Asia.

Depending on how one measures usage, mobile engagement is either smaller or larger than time spent watching TV.