IoT Developers Grow 34% Year over Year

The number of developers currently working on IoT applications has increased 34 percent since 2015 to just over 6.2 million in 2016, according to Evans Data Corp.

In addition, the increase of development for mobile devices, up 14 percent since last year, has led to smartphones being the most commonly connected IoT platform.

For the general developer population, estimates and projections for growth to 2021 show Asia leading--especially in China and India-- with nine hundred thousand more developers than Europe, the Middle East and Africa.

The worldwide  developer population will reach 25 million by 2021 Evans Data also predicts.

The number of developers currently creating mobile applications is estimated at 11.9 million, while the number of developers who target Android first is 5.9 milliion, with 2.8 million developing for  iOS as a first platform.

In Asia, 2.2 million developers target Android first, while in North America iOS is targeted first.

How Competitive is the U.S. Special Access Market?

How competitive is the U.S. special access market? Apparently, more competitive than previously thought. Four of the largest cable providers now report they have 22 times more Ethernet-capable locations than the data on which the Federal Communications Commission based its May 2 further notice of proposed rulemaking.

A Comcast executive, for example, recently argued that the U.S. special access market is “healthy and competitive and the entry of cable companies shows that competition is growing," said David Cohen, Comcast senior EVP. "The government should step back and regulate less.”

Wi-Fi Value is High, Direct Revenue is Not

Even if roughly 70 percent of U.S. mobile consumers say they are interested in Wi-Fi-only data plans, there remains scant evidence that Wi-Fi-only is a big and present segment of the mobility market. Cablevision Systems Corp., for example, launched such a service in its territory, but appears to have found only modest interest.

Wi-Fi carries around 80 percent of mobile data traffic, says Mobile Experts Principal Analyst Joe Madden. He predicts that 90 percent of mobile data will be carried over Wi-Fi and other unlicensed spectrum by 2020.

Such statistics show the nuances of value in the access services space. One might be tempted to suggest that, with that much traffic offloaded to Wi-Fi, much more access revenue “ought” to accrue to Wi-Fi hotspot networks, or the fixed line Internet access services, than to the mobile network.

But, as so often is the case in telecommunications, usage and revenue are different matters. It often happens that usage is indirectly related to revenue. There is a connection, though. The business model impacts, for suppliers of mobile devices, fixed and mobile access services, are quite significant.

For many years, the primary value of a public Wi-Fi hotspot network was the incremental value generated for fixed Internet access services. Likewise, the ability to offload data consumption, as well as the ability to tether a mobile device to Wi-Fi, have been important contributors to the value of specific mobile service plans and devices.

That remains the case. The new issue is how much additional value can be wrung from Wi-Fi, as an access method supporting or replacing mobile access. Wi-Fi-only services have been quite rare. Cablevision Systems Corp. tried that, and will be shutting down its service.

On the other hand, Wi-Fi access, as well as the ability to “roll over” unused mobile data, might be quite important, at the margin, as features attractive to potential “switchers” in the U.S. market.

That is vitally important in any saturated mobile market, as most gains are possible only by taking a customer from another provider. So churn management is more important than ever.

“U.S. operators have ramped up incentives to lure subscribers from competitors and encourage their own to stay longer—their game plans have switched gears from ARPU growth to churn management,” said said Harry Wang, Parks Associates senior director.

Will Sales Channels Shift as a Result of "Product to Service, Service to App" Transition?

Nobody should be surprised if Cisco remains consistent in its belief that business models in technology as well as the broader economy are shifting from “products to services.” Cisco has been saying that for at least a decade or two, and pushing its sales partners towards a “sell services” mentality.

If one believes that the whole “telecommunications” and Internet service provider businesses, as well as the computing business, therefore now are part of the broader Internet ecosystem, there are some important potential implications.

In a broad sense, products become services, and services become apps.

Manufacturing companies selling elevators or jet engines can move from selling those products once to providing ongoing service, said Chuck Robbins, Cisco CEO. That is an example of the “products become services” trend.

Over the top voice, messaging, audio, video and most other content is an example of the latter “services become apps” trend.

The transition from selling products to selling services is an evolution Cisco is itself making, as some 28 percent of Cisco's revenue is now from recurring sources, said Robbins.

As a purely practical matter, business and industry fortunes will hinge, in substantial part, by how well each affected industry segment adapts to either, or both, challenges. Will cloud computing, for example, allow channel partners to “sell computing as a service” to traditional clients, or will online provisioning become so simple that the “sales” function is automated, to a large extent?

How far can suppliers push the “hardware as a service” model, where enterprise or mid-sized businesses rent hardware and services, rather than buying and owning such hardware?

As always, how much incremental value can be added, creating new revenue possibilities?

The existential danger for incumbent service providers, of course, is that the “connectivity role” becomes something akin to the “PC hardware” role. Some might argue that this “dumb pipe” role will be hard to escape, and that the future belongs to access providers able to transition to additional roles within the computing and Internet ecosystem.

At the same time, new possibilities will exist for providers in other parts of the ecosystem to “vertically integrate” access, functionally displacing the incumbent access providers. That might not emerge as the main trend.

Still, the “products become services, services become apps” trends will, at the very least, result in new pressures to realign cost structures, revenue models and ecosystem roles in new ways.

So gross revenue and profit margin pressures on incumbent suppliers are bound to remain in place.

One might speculate that the same business dynamics that have made indirect sales a foundation of computing and communications sales to smaller and mid-size businesses might be extended further.

Tier one providers might retrench in the parts of the business (global and enterprise services) where they have advantages. Suppliers with large enough potential audiences might extend their “content” operations.

On the other hand, specialists might come to play a bigger role in serving the needs of rural and small market customers, much as specialists have been necessary for information technology sales to the mid-market business segments.

The shift to services, and away from products, should actually make it easier to do so, as provisioning, for example, becomes far easier. It is going to be an interesting time.

Products Become Services; Services Become Apps: Where Does it Lead?

Technology has changed, is changing and will change business models, it is safe to say Cisco believes. The implications are not always so immediately obvious, though, as the transition itself can take decades.

Many will agree that “technology will fundamentally change business models," as Cisco CEO Chuck Robbins recently said. But note the time frame: Robbins says the 1990s proved the killer app for the Internet was e-commerce. Two decades later, we still are seeing that process unfold.

One might be tempted to make another observation: products are becoming services, but products and services also are becoming apps, with the result that revenue-generating products and services become “features.”

Voice and messaging increasingly are “features” of mobile Internet access services. Look at the way leading mobile operators now price voice, messaging and Internet access. Voice and messaging are provided on a flat-fee, low price, unlimited domestic use basis, while Internet access is the variable component that drives most of the revenue.

It might be one thing for Cisco to note that the way companies make their money is changing from products (or hardware) to services (and software). It is less comforting, in some quarters, that services are becoming apps.

Optimistically, the belief that industry revenue models are changing could mean that one source is exchanged for another.

Pessimistically, revenue models are being destroyed, not merely refashioned. To say that voice and messaging are “for free” apps, rather than “for fee” services, also implies that the incumbent “service” revenue stream is effectively destroyed.

That does not prevent either incumbents or attackers from creating new revenue models in an “app” mode. But the process is far more dangerous for an incumbent.

Google and Facebook have succeeded in becoming the first big technology companies whose revenue models are based on advertising, not hardware and software sales.

We still do not know what fate awaits many big telcos as every major legacy revenue stream becomes subject to product or supplier substitution.

U.S. International Long Distance Used to Drive Industry Revenues; No More

Total international calling revenues revenues from U.S. customers decreased in 2014, compared to previous years, the U.S. Federal Communications Commission reports.

U.S. international service providers billed U.S. customers $3.87 billion in 2013. Such carriers billed U.S. customers $3.7 billion in 2014.  

Settlement payments of $2.6 billion also were recorded, for $1.0 billion worth of minutes completed on foreign fixed-line networks and $1.5 billion for minutes completed on foreign mobile networks.

So one way of looking at the business is that international long distance represents about 30 percent gross margin on a net $1.1 billion business.

Consider that Verizon’s 2015 annual revenues are about $131.6 billion. AT&T’s 2015 annual revenues were $147 billion. International consumer voice revenues now are negligible for both firms.

Calls to juste three countries accounted for about 63 percent of the outgoing international U.S.- billed minutes.

The top three routes with the highest international U.S.-billed minutes in 2014 were U.S.-India (24.8 percent), U.S.-Mexico (23.7 percent), and U.S.-Canada (14.2 percent).

Of the total 84.7 billion minutes billed in 2014, 49.4 billion minutes were completed on foreign fixed-line networks, and 35.3 billion minutes were completed on foreign mobile networks.  

The number of providers filing traffic and revenue reports increased by 30 percent. The number of providers increased from 1,457 in the previous report to 1,896 in this report, which includes, for the first time, 354 interconnected VoIP service providers.

Why 5G Might Really be Different

New revenue sources and business models have been a hoped-for by-product of 3G and 4G mobile networks, and many supporters hope the same will be true for 5G, perhaps the first next-generation mobile network being designed specifically with new Internet of Things apps and fixed network substitution in mind.

The role of millimeter wave spectrum above 6 GHz also is important, as such resources are expected to provide very high capacity in high-density areas where there is a short distance between users and the network antennas.

Also, many observers believe the initial use cases will involve targeted “add capacity” deployments, rather than a general deployment over wide geographic areas. That might involve high-traffic venues and indoor locations.

At least for the moment, some proponents believe Wi-Fi handoff will not be fully integrated and seamless.

And many believe new sorts of providers might emerge, including community-based 5G networks that will interoperate with mobile carrier 5G networks.

Low mobility and fixed service also is envisioned, to support fixed Internet of Things sensors, for example. Other possible use cases include migration of public switched network services from fixed to mobile networks.

And that is why 5G might really be different: it is the first next generation platform to be optimized for new application classes (Internet of Things and machine-to-machine communications) as well as fixed network substitution.