Where Verizon and XO Communications Both Sell Services, at Least 3 Competitors Operate

As part of its acquisition review of XO Communications, Verizon’s studies show that more than 96 percent of buildings in areas where XO and Verizon both operate have at least two fiber competitors in the building, in addition to Verizon and XO.

Also, 98 percent of these buildings have at least one fiber competitor in the building, in addition to Verizon and XO.

Furthermore, 99 percent of these buildings have at a minimum two or more fiber competitors either in the building or within 1,000 meters.  

The data is important because regulatory bodies will take a look at implications for competition in business markets as a result of the acquisition.

XO and Verizon both have fiber in the same building in 664 locations nationwide.

Within Verizon’s fixed network footprint, XO and Verizon both have fiber to the same building in 170 locations.

More than 95 percent (162 out of 170 in-footprint buildings) have two or more other fiber competitors in the building, in addition to Verizon and XO.  

Thus, there will be at least three fiber competitors fiber access competitors in these buildings following the transaction, and in most instances more.

Of the eight remaining buildings, six have at least one other fiber competitor in addition to Verizon and XO, plus at least one other fiber competitor located within 0.1 miles of the building.  

Thus, nearly 99 percent (168 out of 170 in-footprint buildings) will have at least one fiber competitor in the building and at least one other fiber competitor within 0.1 miles.

The remaining two buildings have at least two fiber competitors located within 0.1 miles.    

Out of footprint, XO and Verizon both have fiber in the same building in 494 locations. More than 94 percent (465 out of 494 out-of-footprint buildings) have two or more other fiber competitors in the building, in addition to Verizon and XO.  

Thus, there will be at least three fiber competitors in these buildings following the transaction, and in most instances more, Verizon says.

Again, this analysis does not account for several other communications and cable providers who also likely serve some of these buildings but for whom information is not readily available.

Of the 29 remaining buildings, 17 have at least one other fiber competitor in the building, in addition to Verizon and XO.  

Of these 17 buildings, eight also have at least one other fiber competitor located within 0.1 miles of the building, and another eight have at least one other fiber competitor located within 1,000 meters of the building.  

Thus, 97 percnet (481 out of 494 out-of-footprint buildings) will have at least one fiber competitor in the building and at least one other fiber competitor within 1000 meters.  

The remaining building of these 17 has one competitor in the building.

Of the other 12 buildings, 4 have at least two fiber competitors within 0.1 miles; two have at least one competitor within 0.1 miles and one additional competitor within 1000 meters; and six have two or more competitors within 1000 meters of the building.  

That means that more than 99 percent (493 out of 494 out-of-footprint buildings) have at a minimum two or more fiber competitors either in the building or within 1,000 meters of the buildings.

AT&T Working on New Fixed Wireless Access Platform

source: AT&aT

Add AT&T to the list of big, influential firms now seriously exploring the use of new types of fixed wireless platforms for gigabit communications in the access network.

AT&T is working on “AirGig,” a method for combining fixed wireless with power line transmission for communications, without building towers, laying cables or acquiring new spectrum.

All three of those attributes have the potential to dramatically lower the cost of delivering gigabit services in the access network.

AT&T’s Project AirGig has several key advantages”

• Easier to deploy than fiber
• Uses license-free spectrum
• No need to deploy towers, dig trenches or connect cables

At&T expects to conduct field trials in 2017.

Combined with the dominant role of cable TV networks in the access network, and the upgrades to gigabit speeds, serious questions can be asked about whether fiber to the home will continue to be viewed as the “best” way to deliver gigabit Internet access and other services to consumers.

“Project AirGig has tremendous potential to transform internet access globally, well beyond our current broadband footprint and not just in the United States,” said John Donovan, AT&T chief strategy officer.

AT&T says it has more than 100 patents or patent applications supporting this new technology and other access technologies.

source: AT&T

“We’re experimenting with multiple ways to send a modulated radio signal around or near medium-voltage power lines,” said Donovan. “There’s no direct electrical connection to the power line required and it has the potential of multi-gigabit speeds in urban, rural and underserved parts of the world.”

Project AirGig is therefore one more potential platform for Internet access and communications that uses fixed wireless.

As part of Project AirGig, AT&T Labs invented low-cost plastic antennas and devices located along the power line to re-generate millimeter wave (mmWave) signals that can be used for 4G LTE and 5G multi-gigabit mobile and fixed deployments.

“These patent-pending devices can mean low hardware and deployment costs while maintaining the highest signal quality,” said Donovan.

Biggest Competitor for Any Enterprise IT, Communications Sale is Not Other Sellers

source: Gartner

It always is tough to get to “yes” when selling communications or information technology products to enterprises.

“Your real competition is often not your competitors,” says Hank Barnes, Gartner research vice president. The status quo, or inertia, arguably is a bigger problem. The adage “you don’t get fired for buying IBM” illustrates the element of decision-maker or recommender risk when buying new technology and products.

The other problem is the sheer amount of buyer effort required to make a decision. No matter how great the promised benefits of a particular solution, there is cost (time, staff effort, political capital) to buy and use the solution.

And, needless to say, few buyers actually believe the benefits will be as great as the seller promises.

Also, internal teams, departments and business units always are vying for additional resources to help them accomplish their missions. So other projects and spending always are potential rivals for any new spending.

Not only do sales personnel need to convince buyers that a particular solution delivers value, but they also have to convince the relevant decisionmakers that any single project is more important than the others they are considering at the same time, Barnes argues.

So spending money elsewhere, or even doing nothing, always is a potential outcome, no matter the merits of a particular solution, says Barnes.

Will Football Win for AT&T?

Will AT&T’s success in entertainment video ultimately hinge on success for NFL Sunday Ticket,  the out-of-market National Football League service? Possibly, especially in the near term.

Longer term, newer formats (over the top, mobile) will develop, and it is unclear how much success in linear video will contribute, though AT&T and many others believe success in linear video will contribute to future success in OTT--and especially mobile--video.

Win or lose, AT&T’s likely gambit will once again prove why unique content assets are so valuable, whether that is original series produced by Netflix or Amazon Prime, or the original series efforts that have for decades been a core part of the strategy for most linear video networks.

In a business where much content is identical on every linear network, unique assets are important. And, win or lose, AT&T is banking on NFL Sunday Ticket to be a huge driver of account growth.

There are other issues, though.

Over the last two quarters, intentionally or not, AT&T has been losing U-verse video accounts while DirecTV accounts have grown.

In the second quarter of 2016, AT&T had net additions of 342,000 DirecTV subs, but net losses of 391,000 U-verse customer accounts served by the fixed network were a drag on net growth.

Some might argue AT&T has to surmount a “digital subscriber line to U-verse” problem it has faced in its consumer Internet access business. AT&T lost 110,000 Internet accounts in the second quarter of 2016, adding 54,000 IP broadband (U-verse) customers, but losing 164,000 DSL (all-copper network) subs.

In other words, as AT&T moves existing customers from one platform to another, it has a zero net gain. Some amount of DirecTV “growth” will have a net zero gain for AT&T’s overall entertainment video business.

And, as a background matter, if AT&T is losing accounts overall. As nearly all fixed network service providers also are losing landline accounts, AT&T naturally should see additional ideo attrition pressures as it loses voice accounts.

As its primary cable TV competitors compete with triple-play offers, losing any single service is also likely to pull along a loss of one or two other services.

The other question is the extent to which AT&T actively is pushing its U-verse video customers to buy DirecTV instead of U-verse. That seems to be happening.

Early on, many thought that was the plan, all along. AT&T knows linear video is a product in the “decline” period of its product cycle, so the lower delivery cost and national footprint (except for Dish Network, no other linear video provider has a national footprint) will likely matter.

Also, as some have noted, offloading video traffic from the fixed network frees up bandwidth for Internet access, a strategic approach U.S. cable TV operators have been doing for some time, shifting to digital delivery of video (and signal compression)  in part because that frees up more bandwidth for Internet access services.

It also now appears that the U-Verse brand is going to be dropped, in favor of simple “AT&T video” or “AT&T Internet” branding.

AT&T might also be encountering an operational learning curve as well. It is not clear to what extent  equipment installs are being shifted to internal AT&T crews, rather than using the former DirecTV crews. Nor is it clear how well AT&T sales staff are selling the new product. But it would not be unusual for a learning curve to take place.

All U.S. Government Units, Higher Ed Moving Apps to Cloud

source: MeriTalk

Some 82 percent of cloud adopters in federal, state, local government and higher education say their organization will increase spending on cloud computing in 2017, according to a survey sponsored by NetApp and Avnet Government Solutions and conducted for MeriTalk,  a public-private partnership focused on improving the outcomes of government information technology.

Cloud adopters plan to nearly double their cloud use over the next five years, from 35 percent of applications up to 60 percent.

Cloud adopters are significantly more likely to select private cloud services over public clouds for apps that handle sensitive information (78 percent prefer private cloud, 14 percent prefer public cloud)

Roughly the same pattern is seen for or are highly specialized apps, where 69 percent of respondents prefer a private cloud solution, and 21 percent prefer a public cloud solution.

source: MeriTalk

While 89 percent of cloud adopters see benefits to using the public cloud, such as cost savings and speed of deployment, 95 percent also see drawbacks, such as security/privacy concerns and reliability concerns.

Today, 55 percent of cloud adopters are evaluating cloud solutions as part of their overall IT strategy and the remaining 45 percent are evaluating cloud solutions for a limited number of specific applications.

Cloud adopters report that cost saving is a key cloud driver – 65 percent of Federal, 67 percent of state and local, and 59 percent of higher education.

In addition, respondents say they now look to cloud options first when considering new investments – 65 percent Federal, 56 percent state and local, and 63 percent higher education.

Competition and Investment Frequently are Rival Goods

There normally is a tension in the telecom business between policies that promote investment and policies that promote competition. The reason is simple enough. Competition leads to lower prices, lower profit margins and often lower gross revenues.

Those, however, are just the conditions that depress appetite to invest more in the business.

That is one reason why the U.S. NCTA opposes proposed new special access rate regulation.

“Excessive regulation will hamper new investment,” says Comcast.

The NCTA argues that rate regulation would only be appropriate for legacy business data services (special acces)  rates in census tracts that meet the following criteria:

• only a single provider has BDS-capable facilities in the tract and therefore there currently is no choice of BDS provider;  
• The tract has fewer than 10 BDS customers and therefore may not have sufficient demand to attract additional BDS providers;
• and no customer purchases fiber-based Ethernet access in the tract,  suggesting that investment in modern packet-based networks may not be occurring.

In fact, Comcast argues, the reason there is not more investment in special access is that the markets are quite small. “More than 80 percent of census blocks have fewer than four customers and more than half have only one customer, says Comcast.

“Even if this regulation were limited to incumbent LEC TDM and Ethernet services, mandating sharp reductions in incumbent LECs’ rates on such an enormous scale would distort the overall market, leading to inappropriate pricing signals and hampering investment across all providers,” said Comcast.

Policymakers in the United Kingdom also are grappling with how to promote facilities investment as well. The specific issue is whether Openreach, the wholesale arm of BT, should be fully separated from BT.

Perhaps unusually, Virgin Media supports Openreach remaining integrated with BT, even while other customers of Openreach want the business completely separated.

There is a straightforward reason why Virgin Media, which operates on it own infrastructure, might support BT keeping Openreach, the unit of BT that supplies wholesale Internet access to other Internet service providers.

And that reason tends to support the arguments for full separation of Openreach from BT. Simply, Virgin Media apparently believes BT keeping Openreach will limit the wholesale unit’s investments in faster speeds, which benefits Virgin Media.

Already the leader in consumer access speeds, Virgin Media apparently believes a separated Openreach will invest faster in access speeds used by virtually all other ISPs in the United Kingdom.

And that would allow all those competitors to better position their offers in relationship to Virgin Media, which has been the market leader in terms of speed for several years.

Oddly enough, Virgin Media’s support of keeping BT Openreach part of BT supports the notion that full separation would lead to more investment in faster speeds by the access wholesaler.

The point is that investment incentives matter. And often, that means refraining from imposing rate regulations. In other cases, wholesale rules are perceived as making a difference.

Independent ISPs Cannot "Move the Needle"

Without disparaging the hundreds--perhaps several thousand--small, independent telcos and Internet service providers operating across the United States, all those providers together serve a very-small percentage of total U.S. Internet access customers.

According to Leichtman Research Group, just 14 of the largest cable and telephone providers in the United States represent about 95 percent of all the customers, or about 91.9 million accounts. That implies a total market of about 96.7 million consumer Internet access accounts.

In other words, all other providers but the top 14--representing more than a thousand or two thousand suppliers--serve 4.8 million customers.

The satellite broadband suppliers are fairly significant in that regard. Dish Network serves perhaps 600,000 customers. Exede might have 696,000 subscribers. HughesNet has more than one million customers. So three satellite broadband suppliers have about 2.3 million customers.

That implies that all other thousand or two thousand ISPs serve just about 2.5 million customers.

So if you want to know what moves the market, it is the cable TV companies and telcos. The satellite broadband providers are among the largest “non-telco or non-cable” providers.

Even Google Fiber might have only several hundred thousand customer accounts.

The big point is that no matter what all the independent suppliers do, they cannot “move the needle.” There simply are not enough accounts to affect national statistics (speed, average price, subscriber counts).....yet.

Nobody knows what might happen in the future. Might new providers begin to take serious market share. It always is possible. But some of us would not be surprised if a national ceiling of about 20 percent share is theoretically capable of shifting, mostly at the expense of telco ISPs.

That might represent about seven million accounts. So there might be lots of gigabit access providers, eventually. What still seems unclear is how many customers those suppliers will serve.