The Age of Scarcity is Ending, the Era of Abundance is Beginning

The end of the age of scarcity, and the start of the era of abundance, is coming, for the telecommunications business. The implications could not be more profound. For more than a century, “scarcity” has been the fundamental reality of the industry and the business.

Networks were expensive, time-consuming and bandwidth limited.

In some ways, scarcity still drives the equity value of fixed and mobile networks. Fixed access networks are terribly expensive to build and operate, which is why there are so few of them in any market.

Advances are happening, but the “rule of a few” still holds, as what is scarce are enough customers to support the building and operation of a ubiquitous fixed access network in the face of two or more other providers.

But scarcity and abundance are starting to coexist. Moore’s Law helps. Better signal processing and antenna arrays help. Unlicensed spectrum and Wi-Fi also help. Optical fiber helps. Fixed wireless helps.

But much more is coming. The U.S. Federal Communications Commission is moving to make  available an extraordinary amount of new spectrum--including seven gigaHertz (7 GHz)  worth of unlicensed spectrum, in the millimeter wave bands, and a total of 11 GHz, including 3.85 GHz of licensed spectrum, in a first wave.

Nor is that all. The Commission also adopted a Further Notice of Proposed Rulemaking, which seeks comment on  rules adding another 18 GHz of spectrum encompassing eight additional high-frequency bands, as well as spectrum sharing for the 37 GHz to 37.6 GHz band.

Keep in mind that the new allocations represent many times more spectrum than all other existing spectrum now available for mobile and wireless communications in the U.S. market. Just how much more depends on one’s assumptions about coding techniques and modulation.

But it is possible the new spectrum will represent an order of magnitude or two orders of magnitude more communications spectrum than presently is available for mobile and wireless communications purposes.

Abundance will transform business models. Incumbents who built their businesses on scarcity will have to rework those models. App providers whose businesses are built on the assumption of abundance will flourish, at least potentially.

FCC Says Telcos No Longer "Dominant," in One Sense

In something of milestone ruling, the U.S. Federal Communications Commission has said, as part of a decision on decommissioning of old time division multiplex networks, that local voice providers “are no longer dominant in the market for connecting local callers to long-distance networks.

That still is not a full fuling that local telcos are no longer dominantfor other purposes, but it is a step in what some would say is the right direction. It seems only a matter of time before the whole notion of “dominant providers,” and the special restraints placed on them, are reduced.

Cable TV companies arguably already have displaced telcos as the “dominant” suppliers of high speed Internet access while mobile service has displaced landlines as the “dominant” way people use voice and messaging.

“The increasing popularity of mobile wireless, cable Voice over IP services and regulatory changes combined to erode the dominant position of local carriers in the market for interstate switched access,” the FCC noted.

The other helpful decision, from a telecom industry viewpoint, is that the new rules streamline the process of ending  legacy TDM-based voice service and supplying such services on a next-generation network, in as few as 30 days.

Applicants must show that:

• network performance, reliability and coverage is substantially unchanged for customers
• access to 911, cybersecurity and access for people with disabilities meets current rules and standards is proven
• Compatibility with a defined list of legacy services still popular with consumers and small businesses, including home security systems, medical monitoring devices, credit card readers and fax machines, subject to sunset in 2025, is assured.

Ironically, some would note, even as pressure mounts for building of new next-generation optical fiber networks, some still insist that legacy TDM networks--and legacy services--be maintained as well.

To the extent that operating two ubiquitous networks, where one network has fewer and fewer customers, raises operating costs and wastes capital investments, the older networks should be retired faster, not slower.

Yes, there are some consumer effects when a legacy network is terminated. But we have experience wiith such things. First generation netwoerks were shut off in favor of second generation networks.

Those 2G networks, in turn, will be shut off in favor of 3G. Consumers need time to migrate, but there alwys is some disruption, at the margin. Such disruption is no reason to delay the transition process any more than absolutely necessary.

FCC to Release 11 GHZ of New Mobile and Wireless Spectrum; Another 18 GHz is Coming

In an unprecedented move, the U.S. Federal Communications Commission is making available an extraordinary amount of new spectrum--including seven gigaHertz (7 GHz)  worth of unlicensed spectrum, in the millimeter wave bands, and a total of 11 GHz, including 3.85 GHz of licensed spectrum, in a first wave.

As a practical matter (because the higher frequencies can carry much more data than lower frequencies), the new millimeter unlicensed spectrum arguably represents more access spectrum than presently allocated for all other mobile, Wi-Fi and fixed wireless purposes.

Nor is that all. The Commission also adopted a Further Notice of Proposed Rulemaking, which seeks comment on  rules adding another 18 GHz of spectrum encompassing eight additional high-frequency bands, as well as spectrum sharing for the 37 GHz to 37.6 GHz band.

That means a total of about 29 GHZ of new communications spectrum, available for mobile and untethered use, will eventually be coming to market.

The new rules create a new “Upper Microwave Flexible Use” service in the 28 GHz (27.5-28.35 GHz), 37 GHz (37-38.6 GHz), and 39 GHz (38.6-40 GHz) bands, and a new unlicensed band at 64 GHz to 71 GHz.

Altogether, that will make nearly 11 GHz of high-frequency spectrum for flexible, mobile and fixed use wireless broadband, including 3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum.

These rules will support unlicensed, licensed and shared access. That, and the fact that so much new spectrum is being made available, will have business model implications for quite a number of ecosystem participants. To the extent that spectrum scarcity is a source of business advantage, or a barrier to competitor entry, that will be less of an issue.

The availability of so much new unlicensed spectrum should make possible new business models for Internet service providers, who will not have to pay for spectrum.

The millimeter era is coming, and it will upend current business models and market structures.

Linear TV Really is a Legacy Service with Declining Fortunes, Study Suggests

A decade ago, it was an open question whether younger consumers who did not favor linear TV would adopt the habit as they got older and had families. The other question was whether consumers would eventually buy linear TV as their incomes increased.

It appears those hopes are not entirely well founded. Despite the presence of children and higher incomes, a significant percentage of younger consumers simply do not want to buy the linear TV product. So that makes linear subscription TV a legacy services with declining fortunes.

Cord cutters/have an average income of US$59,000, with 47 percent buying an subscription “on demand” service and 63 percent using over the top streaming services.

Some 37 percent of these households have children in the household.

Cord-nevers (consumers who never have purchased linear TV) have an average income of US$47,000, with 30 percent buying some form of on-demand subscription TV, while 35 percent use OTT video sources.

About 26 percent of those “cord-never” homes have children in them.

Some 17 percent of U.S. TV homes now rely on over-the-air reception, up from 15 percent in 2015, while six percent exclusively use internet TV services such as Netflix, Amazon Prime, Hulu or YouTube and have no broadcast or linear TV subscription service at all.

The “streaming only” households increased from four percent of TV homes in 2015.

For TV homes with a resident between 18 and 34 years old, 22 percent are using over-the-air reception only, while 13 percent are only watching internet TV.

Some 38 percent of households with an 18 to 34 year-old resident rely on some kind of alternative TV reception or video source, where 25 pe rcent of all TV homes do so.

Households with at least one resident over 50 are more likely to take cable or satellite services, with 82 percent buying linear TV subscriptions.

Low-income households, meaning those with household income of less than US$30,000 (€27,000), are more likely to rely on over-the-air reception, with 26 percent of these homes taking broadcast-only TV.

High-income households, meaning those earning over US$50,000 are more likely to take satellite TV than the average, with 27 percent of these homes taking a satellite service against a US average of 21 percent.

Overall, cord-cutters have an average income of US$59,000.

“Cord-nevers” (consumers who never have bought a subscription linear TV service)  have an average income of US$47,000.

source: GfK

Mobile Payments Still Have Not Crossed the Chasm

Even if rates of consumer embrace of many new gadgets is stunningly fast, adoption of any important new technology often takes far longer than many would forecast. That is likely to true for Internet of Things and mobile payments as well.

Generally, adoption “crosses the chasm” and becomes a mass market reality sometime after about 10 percent of people start using any new innovation. But how long it takes to reach that take-off stage is the issue. It can take decades. Some might point out that Internet of Things already has been growing for 16 years.

Bharti Airtel Uses an Old Tactic to Smooth Out New Network Demand

Here us one more example of a business practice some might see as a network neutrality infraction that actually does involve network management, but does so by offering incentives for off-peak use of a mobile network.

Consider a pricing plan Bharti Airtel has instituted for the reason of managing loads on its network.

As mobile and other service providers learned long ago with voice services, it makes sense to encourage customers to use the network when it is not heavily loaded.

That is why (and most readers are too young to remember it) long distance calling rates used to be set lower, or much lower, on weekends and evening hours. The idea was drop dead simple: most calling happened during working hours. There was comparatively little usage at other hours, and very little late at night.

Aside from saving consumers money, the lower prices for evening and late-night calling also distributed some of the network load.

Bharti Airtel now is doing the same thing for in-app content downloads, offering what amounts to lower prices for its prepaid mobile customers between 3 am and 5 am.

The offer is “50 percent data back” for all in-app content downloads, effectively cutting the price of usage in half.
   
But some might argue that is network neutrality infraction, as prices are set on a differential basis.

Some might argue it is efficient to shift network demand by offering incentives to users to do so. There seems to be no danger of predatory behavior, even if consumers take advantage of the offer.

That is the same sort of problem some see when zero rating is seen within a network neutrality framework. So long as antitrust is not a problem, firms should be free to experiment with retail packaging, promotions and pricing as they see fit, especially when there is a direct and tangible consumer benefit.

Potential predatory and unfair action by ISPs is a danger we have existing institutions policing. Beyond that, the problem with a broad application of the “best effort only” rules is that they actually do crimp supplier ability to innovate in ways that are demonstrably or arguably valuable for consumers.

One growing problem with network neutrality rules--even if one agrees fully with the objective of preventing antitrust activity by access providers and fostering an innovative and robust Internet--is that the rules (intentionally or not) do place obstacles in the path of some Internet service providers who want to experiment with business models, pricing, packaging and network management efforts.

New Smart Cities, Millimeter Wave Networks Speakers for Spectrum Futures

NSN Murty, Executive Director, Smart Cities, PwC, India, now is as a speaker on smart cities across South Asia, as part of the Spectrum Futures conference, to be held 19-21 October, 2016 in Singapore.

Also joining as a speaker: Prakash Kamtam, Advisor at Smart Cities India Foundation, India.

In addition to smart cities and internet of Things, Spectrum Futures will be addressing the new role of fixed wireless, millimeter wave networks for 5G and Internet access, use of shared spectrum, unlicensed spectrum, spectrum policy across the region, the role of venture capital for application partnerships, collaboration between ISPs and app developers.

Jonathan Brewer, Consulting Engineer at Telco2, will be speaking about use of millimeter waves for rural access across the region.

Other confirmed speakers include:

Chris Weasler, Facebook, Director of Global Connectivity

Greg Leon, Google Product Manager

Jay Fajardo, Founder, LaunchGarage

Praveen Sharma, Tata Communications, Head of Regulatory Affairs

Rajan S. Mathews, Cellular Operators Association of India, Director General

Shrinath V, Product Management & Design Thinking Consultant and Google Developer Expert

Mohamed El-Moghazi, National Telecom Regulatory Authority of Egypt, Director of Radio Spectrum Research and Studies

Camilo Alberto Jiménez Santofimio, Comisión de Regulación de Comunicaciones, Colombia, Senior Advisor

Reza Arefi, Intel Corporation, Director of Spectrum Strategy

Bob Horton, Horton Consulting, Director & Principal

Vern Fotheringham, V-Satcast, LLC, Executive Chairman

Josh Gordon, Red Pocket Mobile, President

Narendra K. Saini, Telecommunication Engineering Center (TEC), India, Chair - Smart Governance WG

Rajnesh Singh, Internet Society, Director, Asia-Pacific Regional Bureau

Muhammad Rashid Shafi, Multinet Pakistan (PVT.) LTD., CEO Global Business & Chief Strategy Officer

Devid Gubiani, Bolt Super 4G - PT First Media, CEO

Leo Sugandhi, spectrum frequency planning analyst for mobile services at Directorate of Spectrum Planning and Policy; Ministry of ICT, West Java Province, Indonesia

Basheerhamad Shadrach, Independent Consultant, Bill & Melinda Gates Foundation; Asia Coordinator, Alliance for Affordable Internet, New Delhi Area, India

Mr. Sushil Kumar, IoT standards and implementation, Telecommunication Engineering Center, Department of Telecom (DoT),  India. (will speak about IoT opportunities in India in several industries)

Syed Ismail Shah, Chairman, Pakistan Telecommunications Authority, Pakistan

Additional speakers are being added weekly. Here is a fact sheet about the event. Join us.