North Carolina Municipal ISP Cannot Operate Outside its Jurisdiction, But Could a CLEC Affiliate Do So?

Much of telecommunications regulation revolves around jurisdiction: which level of government, and which entities, have the right to regulate some particular part of the telecommunications business.

And, as always, every regulatory framework fundamentally shapes telecom services business models.

And all debates about the desirability of municipal-owned Internet access and communications set aside for the moment, the issue of which unit of government has the right to regulate the scope of operations for municipal communications networks now also includes the issue of whether a municipality can serve customers outside its jurisdiction.

So it is that a municipal Internet access service in Wilson, N.C., which also has been serving customers outside its jurisdiction, will have to shut down those out-of-district operations.

Ignore for the moment the long-standing dispute about appropriateness of local government competing with private firms able to supply services or performance of private firms in that regard.

The latest issue is that, where lawful, can municipal service providers operate outside their jurisdictions? At the moment, the answer seems to be “no.” What remains unclear is whether a separately-constituted “competitive local exchange carrier” could do so, if that CLEC is owned by a municipality.

Telecom Capex is a Problem: Spending as a Percentage of Revenue Has to Drop

Capital investments by telcos globally are growing slightly, and that might not be a good thing, as much as investment underpins creation of next-generation networks.

The problem is that service provider revenues are not keeping pace with investment levels. That is one reason why Facebook and Google efforts to create lower-cost access network platforms are important: ISP cost needs to decline. If all facilities-based service providers can use the new platforms, they win.

On a global basis, telecom service provider revenues grew about one percent in the second quarter of 2016, year over year.

That growth is the first for service providers since the third quarter of 2014.

Industry capex over the last 12 months was roughly $340 billion, flat versus the prior two years.

Revenues have been falling, with the result that service capex levels are historically high, at about 20 percent of revenues.

The trick is understanding how to balance capital investments between acquisitions and network investments. In many instances, revenue or profit might be more immediately affected, and to a greater degree, by acquiring assets, rather than investing in existing facilities.

That is one sense in which constantly-growing network capex is a “bad thing.” Money might more profitably be spent elsewhere.

The other issue is the cost of next-generation networks, in circumstances where all legacy revenue sources are declining. It is simple common sense that investments must match revenue expectations. If revenue is falling, or flat, so must capex fall or remain flat, over time.

As a practical matter, capex often is “lumpy” and “staircase” shaped, as investments are made to upgrade, then ratcheted back, and then boosted again to gain the next important increment of network capabilities.

And even if telecom has been a standards-driven and regulation-heavy industry for half a century, at least, a greater percentage of those standards might be created in new ways in the future, as a way of attacking costs.

To wit, competing carriers might begin to identify essential functions that do not confer competitive advantage, and collaborate with key rivals to lower costs in such areas.

Many carriers already have sold their mobile towers, or share tower costs, for example.

A few have outsourced operations tasks not seen as providing the ability to differentiate. In many markets, wholesale networks are the way retailers get use of those functions.

That sometimes is seen as the capital-efficient way to do things. Sometimes that is seen as the only way to boost competition when investment in facilities by other contenders is deemed extremely unlikely.

By definition, that approach fundamentally leads to commoditization of the access function, as all suppliers have the same speeds and quality of service.

So there are strategic reasons why various service providers might not want to open source or otherwise share business functions. Most importantly, every operator will try and gain some source of distinctiveness in their offers, if possible.

The trick is figuring out which essential functions offer the possibility of creating business value, and which do not; which functions are essential and which are not.

Competition and Investment are Rival Goods in the Telecom Market

As regulators in the European Community have found, there is a tension between policies that promote competition and policies that promote investment in facilities.

It is impossible to argue that the wholesale regime in EC countries has not dramatically boosted competition. It has done so.

In France, Orange in late 2013 had about 41 percent market share.  In Germany, Deutsche Telekom in 2013 had about 33 percent mobile market share.  

In the United Kingdom, BT, the former incumbent, had about 27 percent market share before its acquisition of EE, and now has 31 percent market share.  

source: Point Topic   

But EC regulators also are grappling with a perceived slowness to upgrade to next-generation networks. Service providers always argue the very policies that make wholesale attractive are the very rules that make aggressive investment less attractive.

Basically, policies that support one objective nearly automatically work to undermine the other objective.

If regulators want both, there is a balancing act to be undertaken.

The same process is at work in the U.S. special access market. A proposed Federal Communications Commission policy to re-regulate prices will boost competition, but limit investment.

That will help small business buyers of special access, non-facilities-based mobile service providers and non-facilities-based competitive local exchange carriers.

But those same rules will discourage additional investment in legacy special access, especially in rural areas.

Mobile Apps Represent 75% of All Mobile Minutes of Usage

source: comScore data, Business Insider graphic

Over the past three years, total digital media time spent by U.S. mobile users has grown 53 percent, driven mostly by mobile apps and, to a lesser extent, mobile web. Interaction with mobile apps now represents nearly 60 percent of total time spent with media content.

Desktop usage has actually declined by 11 percent, according to ComScore.

Smartphone apps alone now account for nearly half of all digital media time and 75 percent of minutes of mobile usage in total.

source: ComScore

Universal Internet Access in 6 Countries Would Eliminate 55% of Global Digital Divide

source: ITU

Providing universal Internet access to just three countries (India, China and Indonesia) would eliminate 45 percent of the “unconnected to Internet” population of the globe.

Doing so in just six countries (adding in Pakistan, Bangladesh and Nigeria) would solve the digital divide problem for 55 percent of the world’s people, according to the International Telecommunications Union.

About 20 countries account for 75 percent of those not using the Internet, according to McKinsey researchers.

The World Bank points out that many of these offline populations share common characteristics. They are predominantly rural, low-educated, with lower incomes, and a large number are women and girls, according to the World Bank.

Affordability is an issue. According to ITU’s latest price research, a monthly fixed broadband package cost 1.7percent  of average income in developed countries, compared with 31 percent  of average income in developing countries, and 64 percent of average income in Africa.

Mobile broadband costs one to two percent of monthly income in developed countries, compared with 11 percent to 25 percent  of monthly average income in developing countries.

Lack of networks also is a big issue. Of the nearly four billion people not connected to the Internet, some 1.6 billion live in remote locations where networks do not exist. That is why Facebook and Google are developing unmanned aerial vehicle systems, Google is developing Project Loon and both are working on fixed access networks.

Among the 3.9 billion people who are not online, many people may be unaware of the Internet’s potential, or cannot use it because they lack the necessary skills or because there is little or no useful content in their native language, on top of facing other barriers to Internet access, including unreliable power supplies and/or sparse network coverage.

with just 137 million customers and a broadband penetration rate of just 13 percent, compared with a mobile penetration rate of 80 percent , India’s digital leap is just starting.

source: ITU

Why is Verizon Getting Fewer iPhone 7 Orders?

Why is Verizon apparently having a harder time getting iPhone accounts, as exemplified by Verizon customer demand for the Apple iPhone? Promotional pricing by competitors, one might argue.

Pre-orders of iPhone 7 and iPhone 7 Plus at Sprint (NYSE: S) are up more than 375 percent in the first three days over last year.

Since Sprint  began accepting pre-orders for the new iPhone 7, new and existing customers have been placing orders for the devices at a rate nearly four times greater than this time last year.

T-Mobile US says it is seeing iPhone 7 orders four times higher than comparable rates for the iPhone 6.

AT&T has reported “higher than expected” orders for the new iPhones.

Verizon says demand for the new iPhone was about what it expected.

Perhaps it is promotional pricing by Sprint and T-Mobile US that explains the difference. Prior to the iPhone 7 launch, Sprint and T-Mobile US, plus AT&T to an arguably lesser extent, had launched new “unlimited usage” plans.

Verizon, AT&T Make IoT Moves

Verizon and AT&T have taken other moves to support their moves into the broader Internet of Things business, on both the “use my network for connectivity” and “use my platform to build your apps” dimensions.

Historically, the cost to connect remote sensors (now considered part of the Internet of Things) to a 4G mobile network has been higher than linking using Wi-Fi, Bluetooth, Zwave or ZigBee.

Verizon believes it can close much of that gap by directly embedding Qualcomm Technologies by embedding the ThingSpace  IoT functions directly on Qualcomm chips used for communications.

ThingSpace is Verizon’s global IoT app development platform.

ThingSpace will embedded on the Qualcomm Technologies’ MDM9206 Category M (Cat M1) LTE modems.

The embedded ThingSpace IoT platform will be available for OEM integration in early 2017, Qualcomm says.

Verizon also acquired a “smart cities” systems supplier--Sensity Systems--intended to add a comprehensive suite of smart city solutions to its ThingSpace platform.

Verizon also has acquired Fleetmatics, a vehicle telematics and fleet management supplier, as well as Telogis, a provider of connected vehicle solutions.