For Verizon, Being #3 to Google and Facebook Might Not be a Bad Outcome

Few--if any--observers seem to think Verizon will gain market share against Google and Facebook with its combined AOL-Yahoo business.

“Verizon Communications Inc.'s planned purchase of Yahoo! Inc. for $4.83 billion in cash would make the telecom giant the clear number-three player in the U.S. digital ad market,” says Seth Shafer, SNL Kagan research analyst. “However, gaining ground on Google Inc. and Facebook Inc. could prove difficult.”

Some might argue that being third, and even lagging Google and Facebook by quite some measure is not such a bad outcome for Verizon.

Challenging either Google or Facebook in a serious way might seem fanciful to most observers. But, at a minimum, the new Verizon unit is likely a $4 billion or bigger annual revenues business, which is sort of a minimum for Verizon to bother with.

Also, a market positioning of “we offer an alternative to Google and Facebook” would seem to be sustainable.

source: SNL Kagan

Automation, Machine Learning are Issues in Developing and Developed Nations

Automation, including use of artificial intelligence and machine learning, might boost productivity, but also cause job loss, in developing as well as developed countries. That is not a new problem.

The advent of the industrial revolution caused similar stresses two hundred years ago. But as a growing number of us might say, high productivity gains that lead to job stresses have to be coupled with high efforts to ameliorate those stresses.

An increase in inequality seems to be a byproduct of technology revolution, and therefore creates a challenging new problem to solve.

source: World Bank

source: World Bank

India Mobile Subscriptions Drop in May 2016

One does not often see mobile subscriptions decline in any developing country market, in any particular quarter or month, but that seems to be what happened in India in May 2016, when total mobile subscriptions dropped about one percent.

In urban areas, mobile subscriptions dropped two percent. In rural areas, subscriptions grew.

But most of the dip comes from share losses by several mobile providers, not necessarily an  across the board decline in net subscribers for most mobile service providers.

Fixed voice subscriptions also dropped, but that is not entirely unexpected in many markets.

source: TRAI

Consumer Revenues Propel Service Provider Revenue Growth

Among the big changes in the telecom business over the last three to four decades, one of the most prominent is the growing revenue contribution (and profit contribution, in many cases) made by consumer accounts, as opposed to business customers.

That was not always the case. In the past, super-high profits from business customers funded operation of networks also serving consumers.

These days, it is consumer revenues that lead growth for most service providers.

The other big shift is the relative contributions made by mobile, as opposed to fixed, revenues.

As I mentioned during a recent keynote address for Telegration business partners (a U.S.-based sales organization focusing on enterprise and mid-market customers), when conducting analyses of Internet adoption on a global basis, one can essentially ignore all fixed network access, look only at mobile Internet access, and still get the trend right, and the magnitudes of usage about right.

That is quite a change from historical patterns, where business user revenues accounted for about a half of total revenues in developed countries. But the direction of change is mostly towards greater consumer revenues (What EY calls “smart operator”).

A few service providers might opt for becoming “mostly” wholesale providers for retail partners, in which case the revenue contributors shift dramatically to “business” revenue (wholesale). So far, we see little evidence that service providers are willing to retrench as wholesale capacity suppliers, however.

And that means the percentage of revenue earned from consumers is going to dominate, in the future.

source: EY

Except for about 10.5 percent of Internet users in Asia, for example, who do get access using a fixed network, substantially all the rest of the Internet users do so using mobile networks.

In some Asian countries--such as the Philippines and Thailand--perhaps 20 percent to 25 percent of people use a fixed Internet connection (primarily urban residents). But in many other countries, usage of fixed Internet access can be in single digits, or less than one percent.

As we start to connect the half of people who do not presently use the Internet, the percentage of mobile or wireless users will climb, while the percentage of fixed network users shrinks. And we are talking about roughly two billion new Internet users, in Asia alone.

That is not to say other access methods will not emerge, but it is hard to ignore the fact that nearly 90 percent of Internet access in Asia now is provided by mobile networks.

Rural coverage, language relevance, device prices and recurring access costs all are issues. Still, mobile has to be reckoned the primary delivery vehicle.

As the 80/20 rule suggests, "20 percent of activities produce 80 percent of the results." For Internet access, the practical application is that only mobile really matters, where it comes to consumer Internet access.

Will that change in the future? It is possible. If Internet of Things develops as a key revenue driver, then enterprise or business revenue contributors will grow, again.

source: ITU

Bringing stakeholders together to understand changing supply and demand issues, and the business model for Internet access, is a key focus of the Spectrum Futures conference. Here’s a  fact sheet and Spectrum Futures schedule.

90% of Asia Internet access is Provided by Mobiles

Across Asia, about 58 percent of people still do not use the Internet, according to the International Telecommunications Union.

If you exclude China, Japan and Korea, plus the city-states of Singapore and island of Taiwan, the percentage of Internet non-users can, in some cases, range upwards of 76 percent.

Except for about 10.5 percent of Internet users in Asia, who do get access using a fixed network, substantially all the rest of the Internet users do so using mobile networks. That is not to say other access methods will not emerge, but it is hard to ignore the fact that nearly 90 percent of Internet access in Asia now is provided by mobile networks.

Rural coverage, language relevance, device prices and recurring access costs all are issues. Still, mobile has to be reckoned the primary delivery vehicle.

As I mentioned during a keynote address for Telegration business partners (a U.S.-based sales organization focusing on enterprise and mid-market customers), when conducting analyses of Internet adoption, one can essentially ignore all fixed network access, look only at mobile Internet access, and still get the trend right, and the magnitudes of usage about right.

As the 80/20 rule suggests, "20 percent of activities produce 80 percent of the results." For Internet access, the practical application is that only mobile really matters, where it comes to consumer Internet access.

Bringing stakeholders together to do something about that is the mission of the Spectrum Futures conference. Here’s a  fact sheet and Spectrum Futures schedule.

source: ITU

Why Bundling?

U.K. service provider bundled subscriptions will have grown by 20 percent from 2015 to 2020, with quadruple play revenues growing 300 percent, while total multiplay market revenues grow by 34 percent, Strategy Analytics predicts.

Dual-play subscriptions will peak in 2016 and begin to decline as customers move to triple and quad-play bundles, the firm estimates. By 2020, quadruple-play subscriptions will represent more than 21 percent of bundled subscriptions in the U.K. market.  

The bundled services trend--in any market--tells you quite a lot about the state of the telecommunications market. There are some advantages in terms of customer acquisition and retention.

Simply, most bundles are a form of discounting: “buy more, save money.” Once consumers have made those decisions, churn tends to drop, because dropping any one service means losing the cost savings of the whole bundle.

But bundling also tells you how hard it is (perhaps how “nearly impossible” it is) to build a modern fixed network and build a business model on any single service.

Competition, more than anything, is the cause. Assume a single-purpose network (voice, and entertainment video being the historical examples). Under monopoly conditions, the addressable market is nearly 100 percent of locations. The actual take rates were above 80 percent for video and above 90 percent for voice.

But add competition and the business model is unsustainable. Even if only two competitors split a market, neither is likely to gain more than half the available market. That means actual subscribers are gotten from about 40 percent to 45 percent of locations.

In other words, subscription gross revenue--all other things being equal--is cut in half. Add more competitors and the numbers get worse. And things never are equal. New competition also leads to price cuts. So gross revenue falls more than half.

Bundling allows any single provider to create a new revenue model based on smaller shares of bigger markets. Even if no single provider has more than half the market share in any product segment, any successful provider can maintain gross revenue by selling multiple products to the same customer.

A simple illustration: a supplier that formerly had 100 percent of the market for one product might instead have 33 percent of the market for each of three products. In such a case, the total number of sold units remains the same as under monopoly conditions.

Gross revenue per unit,and profit margins, are issues, but you see the logic.

The most important observation might be that bundling now is necessary because no fixed network can survive on revenues from a single product.

More change is coming, since virtually all existing legacy products in the bundle face product substitution or outright abandonment.

AT&T, Comcast Boost Usage Caps for Internet Access Customers

As with virtually everything else connected with Internet access, speeds keep getting faster, and usage (where there are any limits at all) allocations keep getting bigger, for U.S. customers of leading fixed network Internet service providers.

AT&T has used a variety of usage caps for customers of its U-verse Internet access service, with caps based on user access speed. Users at 768 Kbps to 6 Mbps had a 300 GB cap.

U-verse users on connections of 12 Mbps to 75 Mbps had 600 GB caps. Customers on anything between 100 Mbps and 1 Gbps had a terabyte (1,000 Gb) monthly usage cap.

But AT&T has bumped usage caps usage caps higher. But AT&T now appears to have bumped usage allowances up to 1,000 Gb for all customers on access connections of 768 kbps or faster.

As a practical matter, that means all U-verse customers, and customers of AT&T’s gigabit service have no caps at all.

source: AT&T

Charter Communications, as a condition of the approval of its purchase of Time Warner Cable, will not be allowed to impose any usage caps for seven years.

In markets where it is testing usage caps for its Internet access customers, Comcast has raised the monthly usage from 300 Gb to 1,000 Gb (a terabyte).

Comcast says its typical customer uses about 60 gigabytes of data in a month.

To be sure, some advocate no caps or any kind, ever, arguing that there actually are not cost implications for unlimited use. ISPs would disagree, of course. All networks are dimensioned for some amount of expected usage, and further designed to support peak loads.

Capital has to be invested when peak loads grow substantially. So the amount of usage by typical and the heaviest users does matter.

The terabyte cap allows for viewing of 700 hours of high-definition video, or about 23 hours at is each day. No single person watches that much video, and even if shared between four people, that amounts to nearly six hours per day, per person.

Power users (less than one percent of Comcast’s high speed access customer base) who want more than a terabyte can sign up for an unlimited plan for an additional $50 a month, or they have the option to purchase additional buckets of 50 gigabytes of data for $10 each.

As a practical matter, nearly all of you who actually have kept track of data usage under both “unlimited” and data plans with large buckets of usage, would likely agree that, as a practical, a reasonably-sized usage bucket is virtually indistinguishable from an “unlimited” plan, as a practical matter.

Usage limits vary on U.S. mobile services as well. Sprint and T-Mobile US have been bigger proponents of unlimited usage than have Verizon and AT&T.

But AT&T recently has been offering unlimited mobile data usage for mobile customers who bundle their service with AT&T’s DirecTV service.