AT&T Will Likely Have to Boost FTTH Investments to Meet FCC Requirements

At some point soon, AT&T likely will have to hike spending on fiber to home passings if it is to satisfy a Federal Communications Commission condition that is part of the FCC's approval of AT&T’s purchase of DirecTV.

The approval includes a requirement for AT&T to add 12.5 million fiber to premise locations and 13 million fixed wireless connections.

The fiber to customer deployments are supposed to happen over a four-year period, including about one million by the end of 2016.

Some question whether that is going to happen, and how soon, given fixed network capital investment of about $2 billion a year at the moment.

In addition to boosting capital spending, AT&T might be banking on the ability to build more affordably than was the case when Verizon Communications installed most of its fiber to home networks.

Indeed, Verizon’s unexpected decision to deploy FiOS in at least some neighborhoods in Boston suggests something has changed in the perceived business model.

Perhaps one key element is the difference between cost to “pass a location” and “cost to connect a customer.” AT&T could pass many more homes than it “connects,” as perhaps half the total cost of activating a customer is related to installing drops and network interface units for each paying customer.

The amount of deployed capital therefore includes a fixed element (fiber pass a location) and a variable component (cost to activate a location).

Forced to predict, some of us would argue that many more passings will be covered than “connected,” as initial take rates for consumer optical fiber connections can be as low as 20 percent in the first year.

So, of 100 locations passed, about 20 will require additional capital to activate. Assuming new deployments are targeted neighborhood by neighborhood, where propensity to buy is the highest, the amount of stranded capital is reduced.

Back in 2008, it might have cost $3,800 just to pass a location. Now it might cost $600 or less per passing. But you can see the reason for skepticism in some quarters.

It might cost $600 million to pass a million homes, at $600 per passing. At $500 per passing, it still costs $500 million to pass a million homes.

Using the $500 per passing figure, AT&T would have to invest at least $1 billion in capital to pass two million homes. On an annual fixed network capital budget of $2 billion, that suggests AT&T might be able to add about two million passings a year.

That works out to a total of about eight million over four years, short of the total of 12.5 over four years.

So, yes, one might argue, capital investment would have to climb beyond $2 billion a year to satisfy the FCC requirements.

App Store, Google Play to Boost App Provider Revenue Share to 85%

source: Nielsen

Driven by marketing concerns, both App Store and Google Play are poised to raise the share of revenue going to their app store partners. Apple plans to boost app provider share of revenue from 70 percent to 85 percent, if an app can maintain a subscription from a customer for at least a year.

Google Play also is said to be planning an increase in app provider share up to 85 percent.

Apple’s move seems driven, in part, by a new focus on growing subscription revenues. Google likely is moving more to keep pace with the App Store. Both, in doing so, will strengthen their dominance of the app store markets.

source: Wall Street Journal

Growing competition from Amazon likely also is a factor. But the shift of app revenue to developers will likely increase developer commitment to both platforms.

The new revenue splits might be especially interesting for content providers, especially streaming video providers. Sales of streaming content subscriptions is becoming more important for content owners and distributors.

Value-Added Services--Free or For Fee--Boost Retention, Data Consumption, Perceived Value of Mobile Services

Value-added services--provided at no incremental cost as part of a mobile subscription--possibly can increase retention by about 11 percent, boost customer perception of network quality by about 55 percent, and boost data consumption by about a gigabyte each month.

In mature markets, offers are focused around video and music streaming services, primarily as a way of affecting customer perceptions of network quality or value.

That is one example of the way access providers partner with app providers to provide services that are seen to boost perceived value.

source: Nokia

Another important strategy involves creating and selling for-fee services, which might range from branded video or audio streaming to connected car services, home security and eventually, other Internet of Things or machine-to-machine (industrial Internet of Things) services.

40% of Mobile Operator Churn Driven by "Cost"

Not all customer churn is controllable by actions of the service provider. But about 40 percent of controllable churn still hinges on “cost and billing” issues, while 26 percent of churn is driven by network quality issues.

About 24 percent of churn is created by “customer care” issues, while “service and device portfolios” seem to drive about 10 percent of churn, a study sponsored by Nokia suggests.

In other words, prices deemed to be too high remain the biggest single driver of customer desertion, globally.

Perhaps also not surprisingly, prices are the top driver of customer decisions to choose a carrier. Asked why consumers chose a particular service provider, 45 percent indicated that “best prices” was the top reason.

Some 26 percent indicated that “network quality” was the chief reason for choosing a particular new service provider, while 25 percent said “geographical coverage” was the main reason for selecting a particular service provider.

source: Nokia

source: Nokia

IoT Eventual Winners Cannot Yet be Predicted

It always is hard to say which companies or industry segments will do best--or which will lead the disruptive attack--whenever an existing market starts to be disrupted by new technology and business models.

In the mobile payments business, various participants, from different segments of the value chain, and some intending to create space for themselves in the value chain, have made a run at mobile payments. Mobile service providers were the first to admit at least temporary defeat in the U.S. market, as the Softcard business was sold to Google.

Google, in turn, has struggled to make mass market inroads with its own Google Wallet and then Android Pay service. Apple Pay and Samsung Pay also are among the device or operating system providers trying to create a position within the ecosystem.

The retailer consortium, CurrentC, is the latest to fail. In some ways, Currentc had a potent argument: it represented major retailers who are the “buyers” of payments systems and services.

Banks and card processing services, plus PayPal and other app-based payment systems therefore remain in the race to win share in the new business.

Some believe the device or operating system suppliers will win.

At the moment, the same sort of uncertainty exists in every part of the Internet of Things ecosystem.

There is just no way, for example, to tell how the “access” or “connectivity” market ultimately will develop, or who the leaders will be. Similar uncertainty exists in terms of operating systems, chipset suppliers and most importantly, in terms of the applications and services to emerge first.

As with the mobile payments business, value must be proven before consumers or businesses will adopt any particular service or approach. And there is just no way to know for sure which services will prove to have the clearest business model, early on.

source: ABI Research

67 Million Connected Car Subscriptions by 2025

By 2025, 67 million automotive 5G vehicle subscriptions will be active, according to ABI Research. That largely explains Verizon Wireless and AT&T Mobility interest in the connected car market.

About three million of those accounts will be low latency connections mainly deployed in autonomous and driverless cars.

So the connected car might be an early “killer app” for 5G networks, enabling broadband multimedia streaming, cloud services for vehicle lifecycle management, the capturing and uploading of huge volumes of sensor data, and vehicle-to-vehicle and vehicle-to-infrastructure communication.

ABI Research suggests that 5G’s most promising capability for automotive will be its low latency, which could be as low as one millisecond.

European Regulators Try to Operationalize Net Neutrality and Network Management Rules

It might be easy to say in principle that Internet service providers must treat consumer Internet traffic equally. It is not easy to square that rule with the need to manage network traffic, on occasion, at times of peak load, to maintain network performance.

Though most network neutrality rules make allowances for network management, it is difficult to create specific rules that everyone agrees respect the “equal treatment” principles and yet allow for network management.

Proposed guidelines for enforcing network neutrality rules produced by the Body of European Regulators of Electronic Communications (BEREC) provide an example.

BEREC says that the task of safeguarding “equal and non-discriminatory treatment of traffic in the provision of internet access services” does “not necessarily imply that all end-users will experience the same network performance or quality of service (QoS).

The reason is simply that network operators sometimes have to management traffic across the whole network, or parts of the network, at times of high throughput, especially to protect the performance of some classes of apps that are highly susceptible to latency, jitter, packet loss, and bandwidth.

That has been a contentious network neutrality issue. On one hand, the point of such rules is to ensure that “providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used.”

On the other hand, networks have to managed, because networks are not built to handle all of the expected traffic at the most busy hour, on the most busy day. Instead, networks are built to handle typical levels of traffic.

So BEREC reiterates that “providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction or interference, and irrespective of the sender and receiver, the content accessed or distributed, the applications or services used or provided, or the terminal equipment used.”

On the other hand, “reasonable traffic management measures applied by providers of internet access services should be transparent, non-discriminatory and proportionate, and should not be based on commercial considerations,” BEREC says.

In fact, BEREC even recognizes the issue of “peak hour of peak day” congestion. “Measures going beyond such reasonable traffic management measures might also be necessary to prevent impending network congestion, that is, situations where congestion is about to materialise, and to mitigate the effects of network congestion, where such congestion occurs only temporarily or in exceptional circumstances,” BEREC says.

“ISPs may prioritize network management traffic,” in other words, so long as it is not done for commercial reasons.

“In order to be deemed to be reasonable, such measures shall be transparent, non-discriminatory and proportionate, and shall not be based on commercial considerations but on objectively different technical quality of service requirements of specific categories of traffic,” says BEREC. “Such measures shall not monitor the specific content and shall not be maintained for longer than necessary.”

The guidelines confirm that Internet service providers “shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories thereof, except as necessary, and only for as long as necessary” (for traffic management purposes).

As most regulatory bodies have concluded, “reasonable traffic management measures” are allowable. In other words, most networks must be managed, since nobody builds a network to handle any conceivable amount of traffic, at any given point in time. Instead, networks are “dimensioned” to support typical loads, not the absolute peak of traffic at the busiest hour of the busiest day, as telecom engineers used to describe the principle.

Common understanding of the compatibility between “equal treatment” and “network management” always has been an elusive matter, where it comes to network neutrality.