Eventually, Net Neutrality Rules Will Not be Needed

The argument for regulation of communications services of any type always is justified on the basis of scarcity: that some product or service is supplied by too few suppliers, on too limited a basis, to allow competition to act as the regulator.

Eliminate scarcity and the argument for government regulation goes away. Eventually, even network neutrality rules justified on the basis of scarcity (a few ISPs are so powerful they can shape or limit competition) is going to go away.

Huge amounts of new spectrum; including 29 gigaHertz of new wireless communications capacity, as much as seven gigaHertz to be made available on an unlicensed basis; new competition from Google Fiber, municipal networks and independent ISPs; new economics of fixed wireless; spectrum sharing and new next-generation mobile networks are going to eliminate scarcity.

"Five Nines" Now is Effectively Impossible for Consumer Web Experience

It probably goes without saying that the Internet is a complex system, with lots of servers, transmission paths, networks, devices and software all working together to create a complete value chain.

And since the availability of any complex system is the combined performance of all cumulative potential element failures, it should not come as a surprise that a complete end-to-end user experience is not “five nines.”

Consider a 24×7 e-commerce site with lots of single points of failure. Note that no single part of the whole delivery chain has availability of  more than 99.99 percent, and some portions have availability as low as 85 percent.

The expected availability of the site would be 85%*90%*99.9%*98%*85%*99%*99.99%*95%, or  59.87 percent. Redundancy is the way performance typically is enhanced at a data center or on a transmission network.

For consumers, “hot” redundancy generally is not possible for devices. One can keep spare devices around, but manual restoration (switch to a different device, power it up) is required. Most often, “rebooting” is the restoration protocol, as “I will call you back” is the restoration protocol for a dropped mobile call.

Component	Availability
Web	85%
Application	90%
Database	99.9%
DNS	98%
Firewall	85%
Switch	99%
Data Center	99.99%
ISP	95%

Some of us are old enough to remember joking about “rebooting your TV,” a quip meant to suggest what would happen as TV signal formats switched from analog to digital, from standard to high-definition formats, from playback devices to Internet-connected devices.

Of course, we sometimes find we actually must reboot our TVs, set-top decoders, Wi-Fi and other access routers, so the quip was not without foundation.

In the past, some might have contrasted the availability (uptime) of televisions compared to computing devices. There are many issues.

Software with lots of code, and little fault isolation, can lead to some amount of crashing, and therefore lower availability. Drivers are known to cause faults.

One study of server availability found that 58 percent of IBM servers operated at 99.999 percent availability, but 46 percent of Hewlett-Packard servers and 40 percent of Oracle servers. Such issues normally are dealt with by building in automatic failover to redundant machines.

But many servers have “two nines” 99 percent availability, off the shelf.

Still, although 79 percent majority of corporations now require a minimum of 99.99 percent uptime or better for mission critical hardware, operating systems and main line of business applications, that target obviously is less than the “five nines” standard for telecom services.

On the other hand, IBM “fault tolerant” servers are supposed to operate at “six nines” of availability, higher than the telecom standard.

Whether software is as reliable, or less reliable, than a “five nines” network is debatable. But most would agree that software and hardware (without redundancy) operates at less than 99.999 percent availability.

There is a big difference between 99 percent availability (88 hours of downtime per year) and 99.9 percent availability (8.8 hours of downtime per year); or 99.99 percent availability (53 minutes each year) and 99.999 percent availability (a bit more than five minutes a year).

It is a myth that “five nines” remains the operational definition of availability for modern IP-based systems supporting voice, web and other over-the-top applications, even if service providers can produce reams of data proving that their core networks actually perform at that level.

In other words, even if networks are highly reliable, human beings use devices and applications that never work close to “five nines” in terms of availability.

The fundamental problem is that end user appliances, applications and operating systems cannot reach “five nines” levels of performance. And the whole calculation of availability is based on concatenated chains of devices. Element A might operate at “five nines.”

But, without redundancy, any transmission chain with three elements would be calculated as 99.999 times 99.999 times 99.999. By definition, the total chain involves the downtime caused by any single element in the chain.

Traditionally, telecom networks have considered 99.999 percent availability the standard for fixed network voice services.

These days, it is hard to find anyone arguing that actual end user application or service experience actually ever approaches “five nines.” The reason is that most of the applications people want access to on the Internet actually are processed in data centers whose servers cannot operate at five nines availability.

To cope with that issue, data centers use redundancy. In other words the issue is not how reliable any server is. The issue is how fast an entity can detect a fault and switch to a backup server.

That same approach (redundancy) is used by transport networks and business access networks.

But many apps still are delivered over networks that are unmanaged, even if availability on the part of the delivery chain any single network can control, is “five nines.”

A new way of thinking about reliability or availability is that modern application delivery systems cannot actually meet the old “five nines” standard, end to end, because the actual end-to-end systems are going to crash often enough that five nines is not possible, even when there are redundant “five nines” access and transport systems.

In other words, loss of local power alone is a threat to five nines for end user experience. Operating systems crash, access to websites hiccups, mobile phone calls drop. Devices run out of battery power.

Wi-Fi is the typical device connection in homes and offices, and no matter how well other elements and systems work, Wi-Fi operations alone would crash “five nines” performance, in terms of the actual experience of application and service availability.

The point is that “five nines” is a myth, when considered from the standpoint of a consumer end user of any Internet service or app, on any consumer device.

Apple Pay Shows Some Signs of Leadership in Mobile Payments

As a young business, it remains unclear where value and leadership will develop within the mobile payments business. In principle, retailers who are the immediate buyers of payment services; the processing networks; issuing banks; device suppliers; new service suppliers or access services providers could emerge in a driving role.

And, so far, there have been some notable misfires. A consortium including AT&T, Verizon and T-Mobile US failed to gain traction. A consortium of leading retailers likewise failed to get leadership.

Google’s own efforts have encountered modest success, while device-oriented systems linked to Samsung phones or Apple iPhones have been launched.

There have been some notable successes, though. Starbucks might be the largest mobile payment system in regular use in the United States. Square likewise has been a success in the small business point of sale transaction processing segment of the business.

Apple Pay has been gaining traction as well. According to Apple, Apple Pay now represents 75 percent of all contactless payment transactions made in the United States.

Apple says half of transaction value from payments made through Apple Pay are coming from non-U.S. markets.

Apple Pay is currently available in the U.S. the U.K., Switzerland, Canada, Australia, China, France, Hong Kong, and Singapore.

Some evidence of Apple’s key role in the payments ecosystem can be gleaned by the actions of other in the value chain.

Four of the largest banks in Australia — Commonwealth Bank of Australia, Bendigo and Adelaide Bank, National Australia Bank, and Westpac Banking Corp — have asked the Australian Competition and Consumer Commission (ACCC) to be allowed to join forces and negotiate with Apple as a single block.

While Apple does allow some of the banking apps be loaded on iPhones, it limits their access to the handset's hardware, such as antennas or NFC. As a result, the bank apps are more Internet banking tools than full contactless payment platforms.

Leadership still is not a settled matter in the mobile payment or contactless payments business.

Business Imperative: Replace 1/2 of Revenue Every 10 Years

“Over the last 16 years we have grown from approximately 25 million customers using wireless almost exclusively for voice services to more than 110 million customers using wireless for mostly data services,” said Lowell McAdam, Verizon Communications CEO, during the firm’s second quarter 2016 earnings call.

It is an illustrative comment for several reasons. It illustrates Verizon’s transformation from a fixed network services company to a mobile company. But the comment also illustrates an important business model trend, notably that of firms in telecom needing to replace about half their current revenues every 10 years or so.

In the U.S. telecom business, for example, we already have seen that roughly half of all present revenue sources disappear, and must be replaced, about every decade.

According to the Federal Communications Commission data on end-user revenues earned by telephone companies, that certainly is the case.

In 1997 about 16 percent of revenues came from mobility services. In 2007, more than 49 percent of end user revenue came from mobility services, according to Federal Communications Commission data.

Likewise, in 1997 more than 47 percent of revenue came from long distance services. In 2007 just 18 percent of end user revenues came from long distance.

That change in revenue sources is going to continue. Mobile voice and messaging already is declining, and in its place mobile Internet access is growing. For fixed network operators, video revenues are growing, while voice is shrinking, and high speed access has become the anchor service.

The point is that there is a very good reason for all service providers to assume they will have to replace half their current revenue in 10 years, and possibly for every decade thereafter. It now appears the auto industry is about to experience that same sort of change.

That is why so much of the content at the upcoming Spectrum Futures conference will focus on app development and app partnerships. Venture capitalists Wish Ronquillo and Jay Fajardo, as well as app development consultant and VC V. Shrinath will be speaking at the event.

Wish Ronquillo, Venture Partner, Ruvento Ventures, Singapore

Jay Fajardo, CEO, Launchgarage, Philippines

Shrinath V, Venture Capitalist and Google Developer Expert, India

Verizon: Multiple New Network Investments to Support Fixed Wireless

There was more evidence of Verizon’s plan to deploy fixed wireless rather widely in its network during the firm’s second quarter 2016 earnings call. Verizon CEO Lowell McAdam spoke about a number of interrelated technologies supporting its coming networks.

Millimeter wave radio, small cells, fixed wireless and optical fiber backhaul were among those trends.

“I think of 5G initially as, in effect, wireless fiber, which is wireless technology that can provide an enhanced broadband experience that could only previously be delivered with physical fiber to the customer,” said  Lowell McAdam, Verizon Communications CEO, during the firm’s second quarter 2016 earnings call. “With wireless fiber the so called last mile can be a virtual connection, dramatically changing our cost structure.”

In fact, Verizon’s decision to deploy FiOS in Boston is based on creation of a single fiber optic network platform capable of supporting wireless and wireline technologies.

“Our announced agreement to acquire XO Communications will also be a key part of this strategy, providing us with the deep fiber assets, including 40 metro fiber rings in major cities and millimeter wave spectrum in a significant part of the country that will give us a critical competitive edge,” said McAdam.

The XO deal also supplies a good amount of millimeter wave spectrum.

Reza Arefi

McAdam also illustrated Verizon’s use of network architecture--rather than acquiring new spectrum--to increase capacity. “The farther we push fiber out into the network, the more small cell technology works for us,” he said.  

“The cost trade off that we expected prior to the last auction told us that we would be better off going with the small cells,” he noted.

“And then as we densify the network for 4G, it sets us up perfectly for deploying 5G with the millimeter wave technology,” McAdam added. “Now we have a clear field in front of us to not only densify with 4G, but use that same capital dollar to get the infrastructure in place for 5G. So we think we're in a very strong competitive position here.”

Greg Leon

Verizon is not the first telecom company to tout a wireless platform as a substitute for fiber. But it might emerge as one of the most influential and widespread users of fixed wireless technology.

That is among the reasons the business implications of millimeter wave platforms and fixed wireless will be featured at the upcoming Oct. 20-21, 2016 Spectrum Futures conference in Singapore.

Reza Arefi of Intel will talk about the business implications of millimeter wave spectrum at Spectrum Futures.

At the conference, Greg Leon, Google fixed wireless product manager, will explain the role Google now sees for fixed wireless as a complement or substitute for fiber to the home.

Rajnesh Singh

Rajnesh Singh, Internet Society, Director, Asia-Pacific Regional Bureau, will explore the role of fixed wireless to serve rural villages in India.

Chris Weasler, Facebook, Director of Global Connectivity, likely also will talk about new platforms for fixed wireless Internet access.

Chris Weasler

Auto Insurance is About to Experience Disruption the Telecom Industry Already has Faced

The telecom business is not alone in facing huge business model disruption because of technology advances. Consider driverless cars. By some estimates, as much as $160 billion out of $200 billion in revenue (for insurance premiums) is at risk of disappearing or shifting because driverless cars will reduce accidents so much that premiums will fall.

For those of you doing the quick math, that is an 80-percent hit to existing revenues.

Deloitte, for example, forecasts today’s $200 billion in personal-car-insurance premiums is safe for about seven or eight years, then slide to about $40 billion by 2040.

On the other hand, Deloitte believes $100 billion could shift to product-liability insurance and coverage bought by ride-sharing businesses, for a net drop of about 50 percent in total auto insurance revenues.

Assuming that change happens over roughly a decade, it would fit a pattern of revenue shift we have seen, and likely will continue to see, in the global telecom business, where roughly half of all present revenue sources disappear, and must be replaced, about every decade.

According to the Federal Communications Commission data on end-user revenues earned by telephone companies, that certainly is the case.

In 1997 about 16 percent of revenues came from mobility services. In 2007, more than 49 percent of end user revenue came from mobility services, according to Federal Communications Commission data.

Likewise, in 1997 more than 47 percent of revenue came from long distance services. In 2007 just 18 percent of end user revenues came from long distance.

You can count those as one single change, or two changes. Either way, it literally is the case that half of revenue sources changed within a decade.

That change in revenue sources is going to continue. Mobile voice and messaging already is declining, and in its place mobile Internet access is growing. For fixed network operators, video revenues are growing, while voice is shrinking, and high speed access has become the anchor service.

The point is that there is a very good reason for all service providers to assume they will have to replace half their current revenue in 10 years, and possibly for every decade thereafter. It now appears the auto industry is about to experience that same sort of change.

Internet Access Prices, % of GNI Per Capita is the Problem in Developing Countries

One frequently hears complaints that retail prices for Internet access are too high. Actually, by one common measure, Internet access prices in developed nations are quite low, less than one percent of gross national income per capita.

That is why Spectrum Futures exists. Here is the Spectrum Futures schedule, with speaker and topics.