Ford To Sell Autonomous Vehicles in 2021: IoT Analogy for Mobile Applies

Ford has announced its intent to sell a high-volume, fully autonomous vehicle in 2021.

That big stake in the ground comes with an equally big caveat: the vehicle will only be sold to operators or ride-hailing or ride-sharing services, and not to consumers.

There is a bit of an analogy to the mobile services business. Today, mobile services are sold to human beings, for use by human beings.

Tomorrow, sales will be to operators of industrial and other businesses, to support machine communications. Today, users are “people.” Tomorrow, users will be “sensors, computers and other machines.”,

Today, Ford sells autos to people, to be driven by people. Tomorrow, Ford will sell to businesses that sell transportation to people, but the vehicles themselves will be the drivers.

That is a big change. Today, mobile and auto products are sold directly to end users, for their own use, or to entities that use cars as part of their business processes (auto rental companies, trucking fleets).

Tomorrow, Ford will sell autonomous vehicles only to entities that provide transportation services, and “drive people around.”

To a greater extent in the mobile and communications businesses, but in Ford’s autonomous vehicle business, buyers might not change as much as “users.” Buyers will still be individuals or enterprises.

But users will be sensors, machines and servers.

We have seen such impact before. Fixed network services were sold for use to places. Mobile phones are sold to people, not places. There are many more people than places.

Likewise, autonomous vehicles and Internet of Things devices are much more potentially numerous than either places or people.

As mobility has meant many more potential units to be sold, so will IoT.

Access Network Costs are Going to Fall

Core communications infrastructure costs have improved over several decades, meaning it now costs less to deploy a modern, Internet Protocol based application, access or transport network.

The cost of supplying a gigabit connection on a 5G network likely will be lower than on a fixed fiber to the home network, and possibly lower than a cable TV hybrid fiber coax connection.

Different network architectures, physical media, lower cost computing and storage, open source code, virtualized networks and Internet Protocol itself have contributed.

But greater cost reductions are expected. One new initiative, the “Telecom Infra Project,”  aims to to “develop new technologies and approaches to building and deploying telecom network infrastructure,” according to Jay Parikh, Facebook global head of engineering and infrastructure.

Telecom Infra Project  members will work together to contribute designs in three areas including  access, backhaul, and core and management.

Facebook, Intel, and Nokia have pledged to contribute an initial suite of reference designs, while other members such as operators Deutsche Telekom and SK Telecom will help define and deploy the technology as it fits their needs, said Parikh.

But that is not all that will change. Google Project Loon is testing entirely new platforms for Internet access, using fleets of balloons. Both Google and Facebook are testing use of unmanned aerial vehicles. New fleets of low earth orbit satellites will change the cost of delivering Internet data by satellite.

Fixed wireless technology being developed by Facebook, Google and others such as Starry  likely will change that cost curve as well.

Telecom Infra Project was inspired, in large part, by Facebook’s Open Compute Project (OCP), which created open standards--and hence lower costs--for data centers.

“A few years ago, Facebook was faced with a data center problem familiar to many scale companies: We depended on proprietary systems and hardware that were inflexible and expensive,” said Jay Parikh, Facebook Global Head of Engineering and Infrastructure. “We realized quickly that this approach would not be sustainable; we needed to find a new way.”

Note the language: traditional rack and stack approaches were “unsustainable.”

The end result, for Facebook, was that “we were able to...save billions of dollars in infrastructure costs over the last few years,” Parikh said. The obvious winner was Facebook and its users. The obvious losers were suppliers of traditional data center gear.

“We recognized that telecom infrastructure could benefit from the same innovations taking place in the data center,” Parikh said. So make note: the winners will be Internet access providers. The losers will include many suppliers of network platforms, or whole lines of equipment and software platforms.

“It was clear that the raw building blocks of what we were developing for our own infrastructure could be applied to telecom networks with great benefit,” he said.

The Telecom Infra Project “ is bringing together operators, infrastructure providers, system integrators, and other industry players to work together to develop new technologies and rethink approaches to deploying network architecture.”

Early founding members include Intel and Nokia, Deutsche Telekom and SK Telecom.

At first, “TIP will focus on disaggregating the components of network infrastructure that are traditionally bundled together and vendor-specific,” said Parikh.

TIP members will work across three areas: access, backhaul, and core network management.

As one early example, Facebook has been working in partnership with Globe, deploying a low-cost, solar-powered network-in-a-box solution, bringing mobile coverage to a village. “In the first week alone, we connected more than 60 percent of the community,” said Parikh.

New members include Axiata Digital, Indosat, MTN Group, Telefonica, Vodafone, Acacia, ADVA, BlueStream, Broadcom, Coriant, Deloitte, Juniper Networks, and Lumentum.

The TIP Board of Directors includes Dr. Alex Choi of SK Telecom (TIP Chairman), Axel Clauberg of Deutsche Telekom AG, Ashish Kelkar of Facebook (TIP Secretary and Treasurer), Lynn Comp of Intel, and Henri Tervonen of Nokia.

Project groups also have been created to address “the most pressing industry needs including connecting the unconnected or underserved populations, and augmenting the development of powerful new technologies like 5G.”

The access system integration and site optimization group is chaired by SK Telecom

The unbundled solutions group is co-chaired by SK Telecom and Nokia, and will seek cost-effective, low-power and low-maintenance solutions.

Media-friendly solutions, chaired by Intel, will focus on mobile experience, especially for close-to-edge solutions.

In the backhaul area, Facebook heads the effort to develop “thin and extensible software stack to autonomously coordinate routing, addressing and security related functions in packet-switched IPv6 networks.”

The open optical packet transport project is co-chaired by Facebook and Equinix, and is working on Dense Wavelength Division Multiplexing (DWDM) open packet transport architectures that avoid supplier lock-in.

The core network optimization project is chaired by Intel, and seeks to disaggregate

core network components.

The greenfield telecom networks group is co-chaired by Nokia, Facebook and Deutsche Telekom, and will work on IT-based network architecture.

If and when those solutions emerge as commercial realities, we must assume the cost structure of networks will be lower. So all current assumptions about business models will have to be revised as well.

Telecom Infra Project  members will work together to contribute designs in three areas including  access, backhaul, and core and management.

Significantly, the effort will apply Open Compute Project models of openness and disaggregation as methods of spurring innovation. In other words, in addition to relying on open source, the Project also will rely on use of standard, “commodity” hardware.

“In what is a traditionally closed system, component pieces will be unbundled, affording operators more flexibility in building networks,” Parikh says.

The bottom line is that access costs are going to fall.

Will U.S. Cable TV Industry Also Need to Replace 1/2 Current Revenue Over Next 10 Years?

The most-recent SNL Kagan analysis of cable TV industry revenues predicts cable TV revenues will decline by $2.7 billion over a decade.

But SNL Kagan also predicts the cable industry will also generate $11 billion in new residential broadband revenues.

There is room to question the SNL Kagan optimism on linear video. The product could decline much faster than that. But the substitution of new Internet access revenues for former video revenues illustrates an important point about service provider revenues.

It is becoming something of a rule that leading service providers must replace about half their revenue every decade or so. Assume SNL Kagan is about half right. That could mean video losses of perhaps $5.7 billion, and Internet access gains of about $5.5 billion.

That would be almost a one-for-one revenue substitution.

Total residential video revenue for Comcast, Charter Communications and other American cable operators is projected to fall from $57.7 billion in 2016 to $55.0 billion annually in 2026, declining at a compound annual growth rate of 0.5 percent over the next 10 years, according to SNL Kagan.

Some observers think that is far too modest a projection, as second quarter losses in 2016 would suggest a decline as high as three percent on an annual basis. Granted, the second quarter is the toughest reporting period of the year. Still, the point is that SNL Kagan arguably is being much too optimistic about linear video losses.

Basic video subscriptions are projected to drop from about 53 million today to 45.4 million by 2026.

Internet access subscribers, on the other hand, could grow as much as 13 percent, SNL Kagan estimates.

Remember When 10 Mbps was Really Fast?

AT&T has launched its GigaPower gigabit Internet access service in the Sacramento market, in parts of Placer County (Roseville, Rocklin, Lincoln, and their surrounding communities).

These communities are in addition to the parts of the Bay Area where we initially launched service in 2015, and expanded in parts of Fresno, Clovis, and other areas of the Central Valley in June.

That is notable in some ways because the Roseville market was one of the first in the United to get fiber to the home services from SureWest Communications, formerly Roseville Telephone Company, back in 2002.

It might seem quaint now, but back then SureWest was selling access at 10 Mbps over its fiber to home network. It was symmetrical, but at 10 Mbps. With Comcast and AT&T both upgrading to a gigabit in the Sacramento region, the former SureWest offer no longer is so unique, or so fast.

How Many Telco Voice Lines Will be Left by about 2018?

How many telco fixed network voice lines will still be in use by about 2018? Not too many, industry associations and the Federal Communications Commission tend to suggest. Some have in the past forecast as few as 20 million total residential voice lines sold by telcos by about 2018.

That does not necessarily mean only 20 million lines will be in service, but that the number sold by former telcos could well be that low.

It is easier to note that “peak voice” happened around 2000, and that lines have been falling ever since.

source: Larribeau Associates

source: Federal Register

Linear Video Subscriber Losses Continue in 2Q 2016, But Inflection Point Not Yet Reached

There were not too many--if any surprises--in the latest Leichtman Research Group survey of the U.S. linear TV business. The second quarter of 2016 showed net subscriber losses, but that is consistent with the trends of the last several years.

Some might point to the magnitude of the net losses--665,000 net video subscribers--compared to 545,000 subscribers in the same quarter of 2015.

But the second quarter always is the worst quarter of the year, and the magnitude of those losses could decline for the next three quarters. And most of that came from losses of AT&T U-verse accounts.

Statistically, a loss of 665,000 customers represents about seven-tenths of one percent. Perhaps not pleasant for linear video service providers, but hardly a jarring loss.

On an annualized basis, if continued at the same rate, that would work out to about three percent annually. That would be historically high for any one-year period. And, granted, at that high rate, it wouldn’t take long for the industry to lose most of its business over a decade or so.

And that is what observers will be watching.

Fixed network voice accounts supplied by incumbent telcos (cable TV companies have gained accounts) have fallen far faster than that over the last couple of decades.

From 2000 to 2015, incumbent telcos lost about 70 percent of switched access lines and 79 percent of switched retail residential access lines.

source: US Telecom

From 2006 to 2011, U.S. fixed voice lines fell from about 139 million to 89 million, a drop of 50 million lines, or about 36 percent, or roughly seven percent a year.

From 2010 to 2015, voice lines fell at a slower rate, from about 153 million to 135 million, a loss of 18 million lines, or about 12 percent over five years, or perhaps 2.4 percent annually.

If past is prologue, the steep period of losses of linear video accounts has yet to begin.

Linear Video Subscribers, Second Quarter, 2016
Pay-TV Providers	Subscribers	Net Adds
Cable Companies
Comcast	22,396,000	(4,000)
Charter*	17,312,000	(143,000)
Altice**	3,639,000	(25,000)
Mediacom	842,000	(11,000)
Cable ONE	338,974	(11,602)
Other major private company***	4,330,000	(30,000)
Total Top Cable	48,857,974	(224,602)
Satellite TV Companies (DBS)
DirecTV	20,454,000	342,000
DISH^	13,593,000	(281,000)
Total DBS	34,047,000	61,000
Phone Companies
AT&T U-verse	4,869,000	(391,000)
Verizon FiOS	4,637,000	(41,000)
Frontier^^	1,340,000	(70,000)
Total Top Phone	10,846,000	(502,000)
Total Top Pay-TV Providers	93,750,974	(665,602)
Source: Leichtman Research Group

More Dark Fiber to Backhaul Traffic From Small Cells?

There is going to be massive confusion in some quarters as some mobile operators, cable TV providers and others start to think about monetizing their high-capacity local access networks for small cell backhaul. The reason is that "dark fiber networks" traditionally have been built to serve wholesale customers.

It is unlikely that Verizon or AT&T, for example, have strong--if any--motivation to do so. Instead, they will be looking to build their own optical backhaul facilities. Many will call this a dark fiber strategy. That might not be the best term.

Small cell backhaul is just mobile backhaul. As dense as those networks will be, it will make sense to build and own the facilities, rather than pay to use another carrier's assets.

Verizon Communications, for example, has announced it is going to install much more dark fiber  to support existing 4G LTE services, but more importantly to serve as the backhaul network for 5G small cell networks.

Those actions partially will be supported by Verizon’s acquisition of XO Communications. That deal also includes the right to lease  XO’s Local Multipoint Distribution Service wireless spectrum, with an option to buy them in 2018. XO has a portfolio of 102 LMDS licenses in the 28 GHz and 39 GHz bands.

Verizon, in particular, has been looking at backhaul fiber options for several years anticipating that it will be building dense new small cell backhaul facilities to support its 5G network. What remains unclear is whether those “dark fiber” assets will be “lit” to support Verizon’s internal requirements, or might also be sold commercially to other customers.

Such a move would largely be out of character, so one likely can assume the primary use for the new dark fiber to to light it to support backhaul from dense new small cell networks. Just how dense is easy to illustrate.

If, as expected, millimeter wave small cells have a transmission radius of about 50 meters (165 feet) to 200 meters (perhaps a tenth of a mile), Verizon and others will have build backhaul networks far denser than they are used to in the mobile business, but less dense than they routinely deploy in some parts of the high speed access business.

In the past, mobile operators have only required backhaul to macrocells to towers spaced many miles apart. All that changes with new small cell networks built using millimeter wave spectrum (either for 5G mobile or fixed use, or for ISP fixed access).

Right now, a useful analogy is to think about the problem as “fiber to the light pole.”

Keep in mind that street lights are spaced at distances from 100 feet (30.5 meters) to 400 feet (122 meters) on local roads.

As a rough approximation, think of a small cell, in a dense deployment area, spaced at roughly every other street light, up to small cells spaced at about every fourth light pole.

That suggests the sort of dense backhaul network that also will be required. You can argue that a new “fiber to the light pole” network must be built. You can argue that a new mesh backhaul network must be built. You can argue that some other leased backhaul (cable TV network) could be feasible.

In all cases, there are potential business model costs in the backhaul and small cell transmission network that exceed anything engineers have had to design, yet. That is why ots of people now are asking very-practical questions about millimeter wave spectrum and its potential impact on access network business models.

People want to know how far signals will reach, how much rain or snow will affect signal levels, how signals will bend or otherwise get around line of sight issues and how backhaul will be provided.

Impact on the business model for existing and new Internet service providers lies at the heart of those questions. And those are important questions.

Monetizing a new dense small cell network also is among the reasons one hears so much talk about 5G to support fixed Internet access. Adding those new customers is a logical way to add direct incremental revenue for a small cell network that will be fairly capital intensive.