Digital Realty Launches Service Exchange

Digital Realty is launching a cloud connectivity platform, The Digital Realty Service Exchange, which will provide private, direct connections between enterprise data centers and the public clouds of Amazon Web Services, Google Cloud Platform, IBM SoftLayer, and Microsoft Azure, in addition to other clouds.

Service Exchange will provide more-flexible and scalable interconnection services, with bandwidth-on-demand features, creating wide area connections that are virtually the same as if co-located partners were inside a single data center, and are managed with a single interface.

The service also provides redundancy across the whole network as though clouds were cross-connected inside a single data center, and allows customers to instantly self-provision extra bandwidth on demand.

The service will be available later this year--as early as November 2016--in 24 data centers and 15 markets, using software defined network capabilities provided by Megaport. “Traditionally, interconnection was a very physical operation and arcane,” said Eric Troyer, Megaport CMO. “We abstract all that.”

Essentially, Service Exchange gives even small customers the same capabilities as once possessed only by large carriers.

Service Exchange also should allow more customers to create express, point-to-point connections between their various data centers and apps, reducing latency by reducing unnecessary traverses of the WAN.

Among other advantages are better ability to move workloads across all available data center assets, easily and rapidly. In that sense, the new service makes all resources “local,” even when physically separated.

It might go without saying that the new features will make Digital Realty a more-capable alternative to similar services offered by Equinix.

Will Oligopoly Still be the Outcome, As New Platforms Emerge?

Capital-intensive industries tend to produce oligopoly market structures. Even some industries that are scale-intensive or moderately capital intensive also tend to do so, it seems. Look at Apple’s market share , for example.

So one reasonable question in the global access business is to ask whether technology platform advances can reduce capital investment hurdles enough to break the “oligopoly” market structure.

If so, then a wider new competitors might expect to break into the top ranks. If not, then only big firms can hope to do so.

At the moment, in several markets, it appears the latter thesis will be tested. In India, the entry of Reliance Jio already is rearranging market structure, forcing consolidation. In the U.S. market, Comcast and Charter Communications are getting ready to enter the market. In Myanmar and Singapore,  new competitors are being authorized.

So far, no breakthroughs in platform cost have occurred that could challenge oligopoly structures, though. In other words, the zero sum game continues to prevail, and one contestant’s gains will come at another’s expense.

It is unknown how much new fixed wireless and mobile platforms might change possibilities for non-oligopolistic market structures, on a marketwide basis. But it might be reasonable to suggest that the new platforms will lower provider cost, but not enough to overcome oligopoly assumptions.

That is not to underplay the potential importance of several new platforms, as well as continued advances by hybrid fiber coax networks. Lower platform costs are helpful in increasingly-competitive markets where capital and operating costs must be lowered.

Lower costs are required to serve rural customers as well. But, at least so far, none of the platforms seemed poised to break the background setting that business models assume costs high enough that oligopoly is the outcome.

In addition to devices, oligopoly also seems to prevail in the consumer applications market.

According to comScore, in the United States, the top seven apps, and eight of the top nine apps are owned by Facebook or Google.

Indeed, one might ask whether it is possible for any new apps providers to displace Google and Facebook, either.

Some might argue that stable oligopolies are possible somewhere between two and four providers, with many arguing three strong contestants is the optimal sustainable outcome. That four or more providers exist in many markets is considered by many a “problem” in that regard, generally called the rule of three.

Most big markets eventually take a rather stable shape where a few firms at the top are difficult to dislodge.

Some call that the rule of three or four. Others think telecom markets could be stable, long term, with just three leading providers. The reasons are very simple.

In most cases, an industry structure becomes stable when three firms dominate a market, and when the market share pattern reaches a ratio of approximately 4:2:1.

A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest, according to the rule of three.

In other words, the market share of each contestant is half that of the next-largest provider, according to Bruce Henderson, founder of the Boston Consulting Group (BCG).

Those ratios also have been seen in a wide variety of industries tracked by the Marketing Science Institute and Profit Impact of Market Strategies (PIMS) database.

In U.S. and U.K., 10-12% of Internet Users are "Mobile Only"

More than 90 percent of Australians under 50 go online using a mobile phone. That does not mean that “only” do so using a mobile device, only that the behavior is ubiquitous.

As with many other aspects of Internet behavior, older age cohorts use their mobile devices to use Internet apps at a lower rate.

Some 75 percent of all consumers in Australia access the internet using a mobile phone, according to a June 2016 survey by Sensis.

But that figure is because just 61 percent of those ages 50 to 64 do so, and just 33 percent of those ages 65 and up do the same.

For some, the more interesting question is what percentage of people use “only” the mobile device for Internet access.

In earlier 2016, for example, 11.7 percent of U.S. Internet users were going online exclusively using a mobile device mobile device, and do not use personal computers or other devices at all.

In fact, since 2015, according to comScore, there are more “mobile-only” than “desktop only” Internet users.

In the United Kingdom, about 10 percent of Internet users use mobile exclusively to get online, according to Ofcom.

source: comScore

source: eMarketer

Ting Will Face Big Test in Denver, Colo. Suburb

Ting will face an important test of its abiliity to compete against the tier-one providers when it lights a gigabit network in Centennial, Colo., where both CenturyLink and Comcast already offer, or soon will offer, their own gigabit services.

It might be one thing to offer gigabit services in a smaller community where it will not have to face a tier-one provider. It will be something else again to compete against two tier-one providers, each of which already is committing to offer gigabit services.

That will be the case in Centennial, a suburban community in the southern part of the Denver metropolitan area. For that reason, it is a crucial test, not only for Ting, but all other independent gigabit providers.

AT&T DirecTV Now Launch Will Include Zero Rated Bandwidth on the Mobile Network

In the fourth quarter of 2016, AT&T will launch DirecTV Now , an over the top video entertainment product with a heavy mobile or untethered focus, featuring “100-plus premium channels.”

There are a couple angles here. Consider the way AT&T plans to manage bandwidth consumption and pricing, something that, in the mobile realm, has been a challenging barrier.

“And when you buy this content, the data required to stream it on your mobile device is incorporated into the price of the content,” said AT&T CEO Randall Stephenson at an investor conference.

“If you choose to use that in a mobile environment on AT&T your data cost associated with this is incorporated into your content cost,” he said.

There is a precedent for this: broadcast TV, broadcast radio, Sirius XM and cable TV and other linear video services. Or, if you like additional examples, newspapers and magazines that consumers can subscribe to, with delivery cost simply bundled into the price of the subscription.

Media products, in other words, always have featured incorporation of delivery cost into the purchased product price.

Zero rating of delivery cost (no incremental charge, in the above examples), is simply a common media and content product pricing model. Though some insist on casting zero rating as an infraction of network neutrality, it is simply an accepted model for media products.

As some have argued, video entertainment services can be viewed as “managed services,” not “Internet” apps. By definition, managed services are not subject to network neutrality rules.

The other angle is that in zero rating video entertainment, AT&T shows its belief that its mobile network can handle the huge increase in consumed bandwidth. And if the mobile network can handle entertainment video, it can handle all the other conceivable media types.

If the mobile network can handle all the media types, and former bandwidth restrictions are not impediments, then mobile increasingly will be a viable substitute for the fixed network.

AT&T Believes Default Future Architecture is Wireless

Just in case you were wondering whether tier-one service providers such as Verizon and AT&T actually believe they can use fixed wireless and mobile services to compete directly with fixed networks--including optical fiber directly to the premises--consider what AT&T CEO Randall Stephenson recently said at an investor conference.

“Our default or target network architecture in the long run is wireless,” he said. “We think that's where we need to be.”

But what about fiber to the premises? “ Obviously fiber is going to be important for several years,” Stephenson said. Of course that will be the case, in enterprise, backhaul and wholesale settings in particular.

But that is not the key point. AT&T might be wrong, but it actually believes wireless will do the job.

“But as we look out in a world of 5G our target architecture is a wireless architecture,” he said.

Fortune 500 CEOs are a sober lot, not given to flippant remarks when speaking in investor forums. So that is a significant statement.

So that little tidbit is instructive. It will bother some in the ecosystem. Many will doubt the shift to wireless is going to be easy, or even possible. But many of us would not bet against the premise.

There simply is too much development effort, too much new technology, too much new spectrum coming and too clear a need for lower infrastructure and operating costs, for that shift to wireless not to be attempted.

Comcast Might Get 12 Million Mobile Accounts in First Few Years

In the early going, Comcast is likely to snag about three percent market share, or about 12 million accounts. That is based on Comcast getting about 10 percent mobile market share in the areas where it actually operates its fixed networks.

Eventually, Comcast theoretically could get 20 percent share of the whole market, but likely not unless it acquires either T-Mobile US or Sprint.

So here’s the thinking.

In the first quarter of 2016, the leading U.S. mobile providers had about 393 million branded mobile accounts in service, with Verizon having 138 million, AT&T 130.4 million, T-Mobile US 65.5 million and Sprint 58.8 million.

For the sake of argument, if Comcast were to grab about 10 percent share in the first few years, that would represent about 39 million accounts.

Eventually, if Comcast gets 20 percent share, that implies something on the order of 79 million accounts.

There are many contingencies. Comcast says it will first concentrate on selling services to its own customer base. Since Comcast networks pass only about 30 percent of U.S. homes, that essentially limits the addressable market to some fraction of the total U.S.mobile market.

So if Comcast gets 10 percent of mobile customers in its own areas, that might equate to some 12 million accounts. To get to 20 percent share of the whole U.S. market, Comcast almost certainly would have to acquire either Sprint or T-Mobile US.

There are, of course, many unknowns. Some believe it is inevitable that Comcast buys T-Mobile US. Some new entity, with marketing muscle and assets, could enter the market and buy Sprint or T-Mobile US.

Dish Network somehow could find a partner to help it build and operate its own network, complicating the market share possibilities even further.

Some believe Sprint and T-Mobile US will try to merge, again.

You can make your own guesses about which competing mobile service providers will be hurt the most, as Comcast enters the market.

In the second quarter of 2016 Verizon had 35 percent share. AT&T had about 32.5 percent share. T-Mobile US had about 16 percent share, while Sprint had about 15 percent share. All other mobile suppliers collectively had about two percent share.

If Comcast were to take share equally, from all the four leading providers, Verizon would lose the most customers. Few likely believe that will be the case. Assuming Comcast enters the market with a low price positioning, it is likely to compete more with Sprint and T-Mobile US.

AT&T, by virtue of its subscriber mass, and its relatively greater loss of subscribers to T-Mobile US, might also be affected more than Verizon.

U.S. Mobile Operator Subs, Q2 2016 (retail and wholesale)
Carrier	Subscribers (millions)	Net Adds (millions)	Service Revenue (US$ millions)
Verizon Wireless	142.754	1.285	$16,741
AT&T	131.805	1.361	$14,912
T-Mobile USA	67.384	1.881	$6,888
Sprint	58.446	-0.360	$5,943

source: Jackdaw Research