A Historic Shift from Scarcity to Abundance has Been Underway for At Least 2 Decades

Though it perhaps is surprising, very little direct discussion of the role of scarcity in the telecommunications business happens these days. That is manifestly not because people are unaware of its importance.

Contestants are very much aware of the role “scarcity” plays in the access business. In fact, attempts to maintain scarcity are a foundational part of strategy for some contestants, while efforts to end scarcity and create abundance likewise underpin the strategies undertaken by attackers.

The reasons are drop-dead simple: scarcity creates higher profit margins and higher revenue, as is true in any market. Abundance lowers profit margins and gross revenue, in any market.

Some rightly would argue that a ubiquitous access network (mobile, cable TV, fiber to home or copper to the home) is expensive, limited the number of providers that can exist in any market.

The point is that, with the advent of an era of abundance, the barriers are going to fall, and fall substantially.

So the possible “bad news” for some access providers is that the historic scarcity of resources in the access network is going to be replaced by abundance. The “good news” for app providers is that access capacity is going to be less and less a barrier to their business models.

To be clear, the end of the age of scarcity, and the start of the era of abundance, is coming, for the bandwidth portions of telecommunications business, and will force dramatic rethinking of business models.

As access services drive less revenue volume and produce lower profits, access providers will move into other parts of the Internet ecosystem, just as app providers are moving into the access and device portions of the ecosystem.

The trend is not actually so new. In fact, abundance has been approaching for decades, in part because of advances in use of spectrum, the impact of Moore’s Law and competition itself.

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, even if some in the recent past have argued that scarcity and pricing power would return to the access business when optical fiber becomes ubiquitous.

Fixed wireless helps. Spectrum sharing helps as well.  

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.

National Science Foundation to Spend $400 Million on Next-Generation Wireless (Spectrum Sharing and Millimeter Wave Among The Technologies)

The U.S. National Science Foundation will spend more than US$400 million over the next seven years to fund next-generation wireless research in an effort to bring super-fast mobile service to the country.

Support for millimeter wave technology and spectrum sharing are among the areas the NSF will target. Both subjects are among the ssues to be discussed by speakers at Spectrum Futures in Singapore, 19-21 October, 2016.

U.S. officials hope the investments will speed up the county's move to next-generation 5G mobile service, potentially offering speeds of 10Gbps, and allow for a rapid expansion of the internet of things.

The next-generation mobile services will enable self-driving cars, an "always on" IoT, smart cities, new virtual reality offerings, and video to aid police, firefighters, and emergency medical responders.

10 Million IoT Developers by 2020?

Millions of new developers are going to be working on Internet of Things applications, leading a growing number of potential ecosystem participants to prep for potential new roles in the IoT business, beginning with developer support and platforms for industrial Internet of Things, for example.

AT&T and IBM  now are working together to help developers--and the enterprises supporting them--create apps related to Internet of Things (IoT).

Separately, GE and Microsoft are working on an IoT platform support initiative of their own, working to make GE’s Predix platform for the Industrial Internet available on the Microsoft Azure cloud for industrial businesses.

The move marks the first step in a broad strategic collaboration between the two companies, which will allow customers around the world to capture intelligence from their industrial assets and take advantage of Microsoft’s enterprise cloud applications.

According to the VisionMobile, nearly 10 million developers will be active in IoT by 2020, doubling the estimated five million working in the IoT area today.

IBM and AT&T are expanding their investment in open-source based tools, such as Node-Red, and open standards like MQTT, all essential for creating IoT solutions.

In addition, IBM's Watson cognitive computing and AT&T's IoT Platforms like Flow Designer and M2X, and access to its global network, will be pushed as development and execution tools.  

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