Can Regulators Impose Universal Service Obligations When There is No Dominant Service Provider?

Even before passage of the 1996 Telecommunications Act, “non-dominant” access providers had been using their rights to “cherry pick” where they build communications facilities for some time.

First “alternate access” providers got into business to provide high-bandwidth connections for business district enterprises and their designated long distance providers.  

After passage of the Telecommunications Act, competitive local exchange carriers used a combination of leased and owned facilities to provide voice and data services to business customers.

Then Google Fiber convinced city regulators that allowing Google Fiber to build gigabit access facilities neighborhood by neighborhood, and only where there was demand.

That might well be one reason why Verizon suddenly reversed course and decided to build FiOS in at least some neighborhoods in Boston, where it previously had held off from doing so.

Basically, “cherry picking” (selecting to serve only some customer locations) became lawful in an ever-widening number of cases. That new flexibility comes on top of the typical “ubiquitous build” required for the incumbent telcos and cable TV companies.

Eventually, harder questions will have to asked about how the social function of “universal service” is satisfied, when there is no dominant provider with monopoly profits to “tax” for such purposes. We already have taken a half step away from the notion. ISPs and competitive local exchange carriers other than the former incumbent telephone operator have no universal service obligations.

But what happens when the former incumbents are clearly not dominant, because they have lost so much market share?

Assuming some form of universal service requirement will be imposed, in some way, on service providers, the issue is how to apportion the cost among a range of providers, none of which truly is “dominant.”

It is not hard to imagine markets where three fixed networks and three mobile networks all provide high speed access, and eventually all six networks can offer gigabit service over at least significant portions of their coverage areas, and none is “dominant.”

Collecting the tax is not difficult. We already tax telecom bills. We already disburse funds, in rural areas. In urban areas, there has not traditionally been an issue. Eventually, there will be.

Sri Lanka Launches Smart City Project

Sri Lanka's central hill capital of Kandy will be developed as the first smart city on the island, Sri Lanka Minister of Town Planning and Water Resources Rauf Hakeem said.

Generally speaking a smart city could include intelligent management and monitoring of water, electrical systems and sanitation systems; public transportation or housing automation. Other smart city efforts focus on controlling or monitoring air pollution, street light system or promoting home automation systems.

source: Lamudi

Siemens also will be working on the smart cities project. That might include use of Siemens systems for smart power grids or energy-efficient buildings.

The Korean government signed a memorandum of understanding with Sri Lanka to participate in the planned $63.2 billion smart city development project.

Under the terms of the agreement, the Korean government plans to share its expertise in several issues including smart water management, intelligent transport systems and smart home systems such as home automation and digital parking systems.

The project is part of Sri Lanka’s plan to develop nine new towns in Colombo and its adjacent areas by 2030.

The plan is to develop nine new cities including one near an airport and other cities specialized in science, industries, tourism and logistics.

In Rural Asia, Internet Access Has to Be Marketed; It Does Not Sell Itself

source: Brookings

In both developed and emerging economies, people remain digitally unconnected for a variety of reasons.

In many cases, access networks literally are not present. In other cases, local-language services and content are unavailable.

Some potential users have poor computer skills or disabilities such as blindness.

In other cases, potential users simply do not understand the benefits, said Jay Chen, Huawei India CEO.

Also, Internet access “does not sell itself.” It “must be marketed.”

“There is an old saying about life insurance: that it isn’t bought, it’s sold, meaning few people want the product unless someone explicitly spells out its benefits,” said Chen. “Connectivity is like that with some populations.”

But connectivity, though necessary, is not sufficient to drive extensive adoption. “Huawei’s research also shows that the world’s most digitally connected countries aim to enhance user experience and stimulate demand, rather than focusing exclusively on providing cheaper connections,” said Chen.

Others note that digital illiteracy (people do not know how to use smartphones, computers), language barriers, literacy, taxes, fees, access prices and lack of perceived relevant content are barriers to wider use of the Internet, even if access facilities are not the issue.

That is another way of noting something very important about the Internet ecosystem. Access is necessary. But the reason access to the Internet is necessary is that people want to do things with apps, and use services.

And controversial though the practice remains, zero rating does work. In a number of countries, zero rating services have enabled people to get access to the Internet who otherwise had no access, a study by Brookings has found.

Globe found zero rating doubled Internet users and grew Globe Internet access customer base 25 percent.

In Paraguay, “the number of people using the internet by 50 percent over the course of the partnership and [an] increase [in the] daily data usage by more than 50 percent,” after zero rating of Internet Basics was introduced.

The number of Facebook users rose 154 percent in Nigeria, 85 percent in Ghana, and 50 percent in Kenya after Internet Basics was introduced.

For the continent of Africa as a whole, there was a reported 114 percent increase in Facebook users after the launch of zero rating , Brookings says.

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.