AT&T to Speed up Video Life Cycle S Curves

The product life cycle is one fundamental principle multi-product firms must follow. As one product moves towards maturity and eventual decline, another product--earlier in its life cycle--has to be cultivated to replace the maturing product.

The challenge for leading providers of video entertainment services is how to manage the transition.

source: Learn Marketing

source: Innovation Factory

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate, but AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.

To be sure, some 82 percent of U.S. TV households (there are more homes than “TV homes”) subscribe to some form of linear TV service, according to Leichtman Research Group.

The percentage of TV households subscribing to such services is down from 87 percent in 2011, but is declining slowly.

The big unknown is whether the rate of decline remains linear, or becomes non-linear at some point in the future, and when that could happen. AT&T now is acting as though it has to move a little faster.

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, given the cost of mobile bandwidth, compared to fixed networks, and the amount of bandwidth video consumes.

AT&T--significantly--is moving to a traditional media model, not an "Internet" data business model.

“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.

To What Extent Does Consumer Video Drive Strategy at AT&T?

Randall Stephenson, AT&T chairman and CEO recently has said  “the consumer is about one thing, it's about video.” Coming from a firm such as AT&T, the comment shows--in large part--what is driving telco consumer services strategy.

Though many questioned AT&T’s acquisition of DirecTV, AT&T argued it had a plan both for wringing immediate and long-term value from the deal. So far, AT&T arguably is showing it is right.

Seen both as a way of creating a nationwide video footprint to match its mobile footprint and a way to create more value from bundling, the deal also was touted as boosting free cash flow needed to support AT&T’s hefty dividend payouts.

Less clear at the time was the way DirecTV would be leveraged to support the next generation of streaming services. AT&T might now be showing it has a plan for transition at scale.

AT&T’s new online streaming video service, DirecTV Now, will become the company’s primary video platform in three to five years, some inside AT&T apparently now predict. The speed of that change--and its implications--show just how much change might be expected in the entertainment video business and the service provider business model.

By switching to over-the-top delivery, AT&T in principle could avoid truck rolls, marketing, in-home capital and other fulfillment cost. DirecTV Now, though primarily aimed mostly at attracting new subscribers among the ranks of consumers disenchanted with linear services, might also eventually appeal even to consumers of facilities-based services that require a physical connection (satellite dish installation or installation of cables and set-tops.

Eliminating a truck roll and customer premises equipment could eliminate several hundreds of dollars of cost whenever a new customer is signed up and activated.

DirecTV Now, set to be introduced by the end of 2016, appears aimed at about 20 million households that have no cable or satellite service, competing with services such as Sling by Dish.

One might argue that DirecTV Now is worth doing if the “unconnected” were the only target. But the benefits might also extend to other consumers who already buy either a fixed network or satellite-delivered linear service.

For AT&T there are trade-offs in other areas, particularly the need to ensure that its access bandwidth assets are plentiful enough to support the big upsurge in bandwidth consumption on mobile and fixed networks.

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate. AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.

IoT Simply is the Future

There is a very good reason why firms such as AT&T, Verizon and others are investing in what might be called the next generation of revenue models for mobile and fixed networks: carrots and sticks.

The carrot is the huge range of applications and services related to Internet of Things, ranging from connected car to smart cities, that will underpin future revenue models.

The stick is the need to replace half of all current revenue over a decade, and perhaps over each of the next decades to come after that.

So mobile operators are investing to support future IoT apps for the same reason people pick certain spots to fish: that is where the fish are. That is reflected not only by high level strategy--the need to discover or create huge new revenue sources--but also by the prosaic changes in market demand for communications-related services.

To a greater extent than at present, more of the communications demand generated by IoT will come from urban areas, less from rural and suburban areas.

At a high level, more people will choose to live in urban areas, as opposed to rural and suburban areas. Higher density will mean better economics for autonomous vehicles and transportation overall.

So smart cities will be built on huge networks of sensors, big data and rich communications.

To be sure, it is possible everybody is wrong. But enterprise executives believe they will need IoT, and that IoT could be transformative for their industries.

source: IoT Analytics

T-Mobile US Customers Lead Daily Mobile Data Usage

Lower the price of some desired product and consumers will buy more of it, basic economics suggests.

And that might be precisely what is happening with U.S. customer mobile data consumption, as T-Mobile US, generally considered the “price leader,” has the highest average daily mobile data consumption, while Verizon Wireless, generally considered the most-expensive of the four leading U.S. mobile service providers, has the least average daily data consumption.

source: Business Insider

Are Telcos Shifting Investment to Fixed Network, Away from Mobile?

With the caveat that it always is difficult to abstract local trends from global trends, Dell’Oro Group says investments in fixed networks are growing, while investments in mobile networks are declining, in the first half of 2016.

That is not to say that overall capital investment is dropping. In fact, investment might well continue to grow.

source: IHS Infonetics Research

A relatively flat trend, by some estimates, be not be unusual, as global telco capex has been dropping since perhaps 2013.

source: Infonetics Research

There always are logical reasons for the cyclical fluctuations. Mobile investment tends to be spiky, rising when new next-generation networks are being built, then leveling off as those networks reach completion, and capex shifts back to maintenance.

But there arguably are other important drivers of behavior. With the growing need for faster fixed network access speeds, as well as continuing competitive threats, many service providers with the option to invest more in either mobile or fixed networks might be shifting funds to upgrade the fixed networks.

Unfortunately, from a service provider perspective, less-robust revenue growth in the mobile segment also is an issue. If revenue upside from incremental mobile investment slows, it is rational to slow capital investment to match.

Investment in fixed networks is more strategic, though. Some amount of incremental investment is required--especially in markets where there are cable TV competitors--simply to maintain competitive parity.

Longer term, some investments in backhaul now are viewed as necessary to support expanded deployment of 4G and 5G small cells, or to grow business customer revenues.

The other long term issue is that capital investment as a percentage of total revenue, after a period of higher investment intensity, might be returning to more-typical ranges.

Analysts at Dell’Oro Group believe telecom capex will decline at a faster pace than revenues over the next three years.

Capital intensity might drop from 18 percent in 2015 to 16 percent in 2018, the analysts say. That would be about what longer-term investment levels have been.

source: Dell'Oro Group

How Much Data Will "Average" U.S. Homes Consume in 2 Years?

In 2011, the average U.S. household data consumption was perhaps 26 Gbps. Time Warner Cable says  the company’s average household usage in December 2015 was 141 gigabytes a month and has grown about 40 percent a year.

Such rates of growth, should they continue--and most believe double-digit annual increases are reasonable--quickly can up to doubling of consumption every 2.5 years to three years.  

In other words, by the end of 2016, the average Charter Communications customer (in legacy Time Warner areas) household might be consuming 197 GB worth of data, topping 276 GB by 2018.

But as with all things related to use of the Internet, averages might obscure as much as they reveal. Many consumers will use far less, but some might use far more.

U.S. homes using Internet-based video surveillance systems might require substantial upload bandwidth, for example, beyond that required for growing amounts of video entertainment in the downstream direction. Entertainment video requires an order of magnitude or more increase in transferred gigabytes, compared to web surfing, for example.

Typical upload bandwidth usage for a “Nest” home security system can reach 380 gigabytes, for example.

source: Southcentral Communications

What's the Advantage of Combining Chrome and Android?

Others of you can probably think of many other reasons why a single operating system blending Chrome and Android would be helpful, such as making tablets that work as notebooks, or notebooks that act like tablets.

Personally, this is the biggest obvious attraction: using the smartphone as the processor, docked to an external monitor or other tablet-sized screen.

For some applications, including content production, keyboards are a necessity and bigger screens very helpful. Sure, you could carry a tablet and external keyboard. You could carry a tablet and a PC, plus your smartphone. Many of us do.

But maybe having less to carry would be very useful.

source: Android Central