Customer Resistance an Issue for Some Smart Parking Deployments

source: Redtone IoT

How particular smart cities services--including smart parking-- will sustain themselves is a big issue. Irrespective of “soft” value (less air pollution, less traffic), how revenue can be generated to pay for the smart parking infrastructure and operations remains an issue.

User opposition is among the potential roadblocks or issues. One suburban shopping area--which has featured free parking--now is converted to a an app-based paid parking system.

The Reston Town Center in Virginia is activating the new system Sept. 12, 2016, and local residents are--as you would expect--unhappy about the switch to paid parking. Some are unhappy about potentially needing to use the app system, as well.

ParkRTC customers can use an app, website or on-site pay stations that accept credit or debit cards or exact change only.

Park Assist is the system supplier for the area of 50 shops, 30 restaurants, an 11-screen cinema, and other amenities, as well as 9,000 parking spaces in seven parking garages.

Passport is the mobile payment parking provider.

Garages rates will range from $2 for the first hour to $24 for 12 to 24 hours. The street rate will be $3 for the first hour and $6 for between one and two hours.

The system relies on license plate recognition, LED-based space indicators, electronic display boards to indicate quantity of available spaces, and online space counts in real time.

Upon entering one of the center’s seven garages, drivers will locate an available parking space using green and red light indicators. Once parked, the system will read the vehicle’s license plate, and the driver must initiate a parking session, through either the ParkRTC app or ParkRTC.com using a pre-set four-digit pin, or at a pay station.

Using the app or website, driver credit cards will be charged automatically based on their pre-selected length of stay. If using the app or website, drivers will have the option of extending stays remotely.

To be sure, the smart parking features are less the issue than the conversion to paid parking. But the issue remains: would the smart parking have been instituted if the parking revenue were not available to support it?

The business case will be different in urban areas where paid parking already is the norm, to be sure. Still, potential customer confusion or resistance is among the obstacles. No value chain is complete without the customer who supplies the revenue.

source: Gartner

Performance Gaps Rarely Persist--Across Countries, Regions or Service Providers

It always is dangerous to make longer-term predictions based on where technologies or service providers are at the moment. The reason is simply that capabilities can change rapidly, even unexpectedly.

Over the last couple of decades, it has been argued that the United States was “way behind” Europe in use of mobile phones, way behind Japan in access speed, or more recently that Europe as “way behind” the United States in 4G network availability and adoption.

Others have argued that U.S. Internet access prices were high, compared to other countries perceived as leaders. But price is relative. One has to adjust for general price levels across countries, and then to adjust for retail plan differences, to derive price per megabit per second, for example.

Even in 2007, when the price differentials were said to be quite disparate, on a cost per Mbps, U.S., French, German and Japanese prices were comparable.

The point is that such gaps always have closed.

source: OECD  

Many have argued that average or peak U.S. Internet access speeds lagged either Europe or world levels. Those gaps also will close. Since 2011 alone, U.S. Internet access speeds have tripled.

From 2015 to 2016 alone, U.S. Internet access speeds  got 40 percent faster. Much of the credit for those advances goes to U.S. cable TV companies, who are rapidly increasing speeds.

Mobile M2M Will Generate $67 Billion in 2021 Revenue, Ovum Predicts

Mobile machine-to-machine (M2M) connections (not including NB-IoT) will reach 733 million globally by 2021, researchers at Ovum predict. That will drive total mobile M2M service revenues to a global annual total of $67 billion in 2021.

Global mobile M2M connections will reach 733 million in 2021, about  8.1 percent of all mobile connections, up from 4.2 percent in 2015.

Between 2017 and 2021,  total M2M service revenues will grow at a compound annual growth rate of 13.3 percent.

The biggest revenue contributions will come from Asia/Oceania, North America and Western Europe.

The Asia/Oceania market will generate US$ 22 billion, North America will represent US$ 16 billion and Western Europe will create US$14 billion in revenue.

Of all current generations, LTE will be dominant in the long term, accounting for 212 million connections in 2021, Ovum predicts.

source: Ovum

Special Access Prices Are Not Evidence of Market Power, Phoenix Center Argues

Prices in the U.S. special access market (business data services) actually do not actually indicate there is market power, argues George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist.

Why is that important? The U.S. Federal Communications Commission argues there is market power exercised, which it believes explains prices in the special access market. Ford argues that is an unsupported assumption.

If market power is a “bad thing” because it leads to higher prices than would occur in a competitive market, one has to ask what the competitive price might be, as part of the determination of whether market power exists, says Ford.

The answer cannot be “marginal cost of providing the next unit of output,” as that ignores all the sunk costs in the full network.

Telecom markets tend to be oligopolistic, so the assumption of “a perfectly-competitive market” tends to fail, as a useful analytical assumption.

Instead, Ford argues, the relevant “competitive price” in real-world markets is the price that arises from the maximum level of competition supported by the demand- and supply-side conditions of the actual market.

In other words, if market conditions are such that only two firms can profitably offer service, then the noncollusive duopoly price is the “competitive price.”

Firms enter when it is profitable to do so, and they do not enter when it is not profitable to do so. If a market has only two dominant providers, and entry by other firms is lawful, there probably is a reason only two firms operate.

There are real policy implications. “Telecommunications markets are often served by relatively few firms not because of some random process or poor public policy, but because the size of the market is small relative to the fixed cost of providing service (or, equivalently, the fixed costs are high relative to the size of market demand),” says Ford. “If only two firms can profitably serve a market, it is of no value to lament the fact there are not ten firms doing so.”

“Nor is sensible to use the equilibrium price for five firms as a regulatory benchmark in a market that can be served by only two firms,” Ford argues. “If the five-firm price was meaningful, then there would be five firms in the market.”

In other words, the determinants of price are likewise the determinants of the number of firms.

“The lack of entry is not an indicator of market power, it is an indicator that entrants do not believe there is sufficient excess profit in the market to justify the capital costs to serve it,” Ford notes.

5G Seen as "Game Changer" by Wide Range of Mobile-Using Industries

source: Ericsson

The headlines about 5G networks are about speed: data rates up to two orders of magnitude faster than 4G (100 times) or supported data volume three orders of magnitude higher than 4G (1,000 times).

But network latency also will be five times lower. And battery life of remote cellular devices is expected to reach 10 years or more.

source: Ericsson

The big story is potential impact for many industries. In a recent survey, Ericsson  found that executives in a wide range of industries expect serious disruption of their businesses from machine-to-machine communications, cloud-based apps and mobile networks.

Just as significantly, executives believe next-generation mobile platforms provide strategic advantage. Some 99 percent of respondents in public safety believe that will be the case, while 98 percent of respondents in health care believe next-generation mobile platforms will provide strategic advantage.

Some 94 percent of financial services respondents, 92 percent of media or gaming respondents, 94 percent of high-technology manufacturing executives and 90 percent of automotive industry respondents believe strategic value will be gained.

Though executives might be wrong about those perceptions, they clearly believe there is big upside, as well as new competition, on the way.

In fact, 87 percent of all respondents believe next-generation mobile networks will be “game changers.”

“Industries that will benefit the most from 5G are those that connect something in the physical world to the internet in order to create innovative products or services, provide a better customer experience, increase efficiency, or improve safety,” Ericsson believes.

Take Rates Still Key for FTTH, Fixed Wireless Business Models

Among the biggest changes in modern fixed network economics is the assumption of competition, rather than monopoly. That shift from “I serve all potential customers” to “I serve a fraction of potential customers” radically offers the business model.

In a monopoly model, the business model is based on revenue generated from most locations (80 percent to 95 percent adoption, in the U.S. market, for example).

In a competitive model, revenue is generated from as few as 20 percent of locations (for single services), up to perhaps 40 percent of locations (locations taking at least one service).

That strands a majority of outside plant assets.

Though estimates vary by area, $1,500 per passing is a reasonable estimate for U.S. distribution plant costs, including network elements, but excluding drop cabling and customer premises equipment, for a gigabit access network.

That amortization of “per-passing” network costs is recouped only from paying customers. And that is where it gets tricky. Assuming 35-percent take rates, revenue is generated from a bit more than a third of passings.

So amortization of the outside plant network essentially involves a per-customer cost of roughly $4286.

Those costs are the “common” elements. But there are incremental costs incurred on a per-customer basis.

Cost per customer depends on take rates, as some capital is invested only to turn up a paying customer.

Drop costs and customer premises equipment are incremental, installed only for active customers, but $455 might be a reasonable estimate for active customer CPE and install costs, which vary based on what specific services the customer is buying.

Also, CPE might vary based on other details of the customer’s usage (single TV decoder or multiple decoders, for example).

It is difficult to project future fixed wireless network costs, based on use of new millimeter wave unlicensed or licensed spectrum, or shared spectrum, in urban settings using small cells, simply because such networks have never been built.

Nor have traditional fixed wireless networks been designed for gigabit speeds. But better antenna technology is being developed to support small cell networks that support those bandwidth targets, and accommodate use of millimeter wave technology.

What is not clear is the degree to which fixed wireless might be a more-affordable way to build gigabit networks, instead of using fiber to the home.

In addition to the construction costs, customer behavior can be an issue. Traditionally, smaller independent competitors have found that acquiring customers has often proven more difficult than anticipated.

It is hard to say how big brand names will fare, should fixed wireless become a major platform.

Acquisitions Drove Most Telco Growth Since 2000

source: Deloitte University Press

Looking only at markets in the United States, Canada, France, Germany, Spain, UK, Italy, Singapore and Taiwan, researchers at STL Partners have estimated core revenue losses of 25 percent to 46 percent between 2012 and 2018, potentially.

In other words, to stay where they already are, in terms of revenue, service providers will need to create between 25 percent and 46 percent more new revenue over the six-year period. Big acquisitions are almost certain to be part of the answer.

AT&T’s acquisition of DirecTV, for example, instantly made AT&T one of the biggest providers of video entertainment in the U.S. market, and changed its revenue profile by about $7 billion per quarter, or potentially $30 billion annually.

It would have been virtually impossible to add that much revenue, so fast, by any organic means.

source: Deloitte University Press

In similar fashion, Verizon spent $130 billion to buy the minority stake in Verizon Wireless owned by Vodafone, boosting annual revenue by about $22 billion.

Still, even that will not be enough, long term. Voice, messaging and linear entertainment video already are flat or declining.

Eventually even Internet access revenues will stall, then decline, at some point. Long term, big new revenue sources must be found.

source: Telco 2.0