Study Suggests 3 Facilities-Based Competitors Unlikely to Succeed in U.K. Market

source: Analysys Mason

A new analysis of facilities-based competition in the United Kingdom tends to support the view that ubiquitous fixed network on a facilities basis will tend to be a duopoly; that a third network offering triple-play services would not be able to cover most of the country, even under the most-optimistic scenarios.

That conclusion likely comports with the notions most researchers have reached, namely that facilities-based and ubiquitous fixed access network markets are oligopolies, because that is all the market will tend to support.

The only issue here is whether the stable oligopoly structure (in terms of facilities) features two providers or can include three (and if so, under what conditions).

That is not to say an oligopoly at the retail level is inevitable: robust wholesale policies have proven effective at stimulating retail competition. What robust wholesale has tended not to promote is investment in new facilities.

Analysys Mason researchers estimate that, at about 25 percent market share, a third facilities-based provider would be able to sustain access to about seven percent (two million locations) of homes.

The study tends to reconfirm that housing density encourages investment. But the study also suggests that robust wholesale policies actually discourage investment.

source: Analysys Mason

The researchers note that the greatest degree of facilities-based competition elsewhere in Europe relies on duct and pole access by competitors in countries where there is no wholesale regime in place.

In other words, where competitors must build their own facilities, and have some clear incentives to do so, facilities-based investment is most robust.

Also, third parties seem to have been most successful where the percentage of high-density housing is high.

The study authors conclude that investment in a third facilities-based network is highly risky and unlikely to succeed in the U.K. market, on a wide basis, though the business case might work in some high-density areas representing about 1.1 million households.

The analysis concluded that "it is highly unlikely that a third operator will be able to reach 40 percent (FTTP) coverage on a commercially viable basis".

“Our economic modelling suggests that encouraging a third separate network to invest in covering more than five to 10 percent of the country will be extremely difficult to achieve,” the study states.

Some might point to the key role cable TV competition tends to play, as well. In several countries, the primary facilities-based competition comes from cable TV operators.

For All Networks, "Fiber to Where You Can Make Money" is the Issue

"Fiber to where you can make money" is a good way to evaluate various fixed network access methods. For cable TV operators, the issue is fiber deep into the neighborhood. For some telcos, that is the same issue.

For some telcos, fiber to the premises is the choice, but the issue of revenue generated by such networks remains.

For fixed wireless networks, the issue is fiber to tower or building. For mobile operators, the issue is fiber to the macrocell or fiber to the small cell.

In other words, the issue is not the choice of physical media, or the topology, but the revenue that any given deployment can generate. And, at a time when voice revenues are declining, and where facilities-based competition exists, the financial returns from fiber to the home often are questionable.

The choices are even more difficult for any telco operating in a market where cable TV firms are active, serious competitors. Stranded assets then are the real issue, as up to 60 percent of deployed assets can routinely be stranded (assuming cable TV gets 40 percent to 45 percent share, the telco gets 40 percent share, while other suppliers get 15 percent to 20 percent market share.

In other words, the issue is to deploy “fiber to where you make money.” That is true for all fixed network suppliers, including cable TV firms using hybrid fiber coax technology.

Assuming fiber is deployed rather deep into the network, coaxial cable can carry huge amounts of bandwidth.

25 Gbps on Hybrid Fiber Coax

Huawei has demonstrated 25 Gbps downstream speeds on a hybrid fiber coax network running DOCSIS, the cable modem protocol. As always, if one has enough capacity, huge amounts of throughput are possible. The Huawei demonstration used 3 GHz of spectrum on the simulated cable network.

Separately, Nokia has demonstrated symmetrical 10 Gbps bandwidth on an HFC network. There are a couple of important caveats. Achieving such speeds requires fiber fairly close to the end user location (about 200 meters in the Nokia demonstration), or new methods for extending the range of frequencies that can be carried over an HFC network (Huawei dem).

DOCSIS 3.0 supports use of 1.6 Gbps downstream bandwidth.

The DOCSIS 3.1 solution, with a 1.2 GHz spectrum, used with multi-channel bonding and orthogonal frequency division multiplexing (OFDM) technologies, already can support a downstream rate of 10 Gbps.

Huawei’s demonstration extended the amount of usable coaxial cable spectrum to 3 GHz for the first time.

Huawei believes a symmetrical 25 Gbps capability can be commercialized.

All Internet of Things Forecasts Slope Up and to the Right

It is impossible to find any Internet of Things forecasts, for any segment of the market, that fail to show an”upward sloping to the right” growth curve. In other words, virtually every forecast predicts significant to strong growth.

That seems to be true whether one looks at single-country or global forecasts. Of course, as always, global forecasts can obscure as much as they illuminate. Most of the near-term deployment of IoT will happen in a relative handful of countries.

So far, by some forecasts, North America represents as much as 45 percent of the global total, Asia perhaps 30 percent, Europe perhaps 20 percent.

source: Business Insider

source: marketsandmarkets

More U.S. Teens Watch YouTube Than Linear TV

Whether YouTube is a “substitute” product for linear TV is debatable. What apparently is harder to debate is that YouTube is a preferred venue for consumer video consumption among U.S. teenagers.

In a survey of U.S. teenagers, analysts at Piper Jaffray found teens spent more time watching YouiTube than watching linear TV. Though 37 percent of respondents reported watching Netflix, 26 percent said they watched YouTube, compared to 25 percent who reported watching linear TV.

And 40 percent say their top shopping website is Amazon, leading other sites by an order of magnitude.

source: Piper Jaffray

The Reason Why Video Entertainment is The Only Service To Increase Prices

Over the past several decades, it would have been a reasonable question to ask why entertainment video service prices grew faster than inflation, while retail prices for communications services (voice, texting, Internet access) declined, either on a price-per-unit basis or in terms of absolute price per unit.

The answer is simple: entertainment video is about the purchase of content, not access to content.

Compared to voice, texting or Internet access, entertainment video is more akin to fashion than a utility service. And that means retail price is not a direct function of production cost.

That is clear in the latest Federal Communications Commission report on content prices in the U.S. linear video market.

However, given diminished consumer appetite for the traditional “big content bundles” and a shift to over-the-top or on-demand viewing, it will be necessary for most, if not all, providers to “just say no” to content providers and restrict the size of bundles.

That is going to shift the way content gets to market, with increasing amounts of programming moving through new services such as Netflix and Amazon Prime.

According to a new FCC report, the average monthly price of expanded basic service (the combined price of basic service and the most subscribed cable programming tier excluding taxes, fees, and customer premises equipment charges) for the communities surveyed grew by 2.7 percent over the 12 months ending January 1, 2015, to $69.03, compared to a decrease of 0.1 percent in the consumer price index.

That is to say, linear video prices rose by an order of magnitude more than the overall level of consumer prices.

This compares to a compound ten-year average rate of increase from 2005 to 2015 of 4.8 percent in the price of expanded basic and a 1.5 percent increase in the CPI.

To be sure, linear video providers have argued in the past that prices are up in large part because the number of channels offered in bundles has grown.

The price per channel (price divided by number of channels) for subscribers purchasing expanded basic service decreased by 1.8 percent over the 12 months ending January 1, 2015, to 46 cents per channel.

Over the 10 years from 2005-2015, the price per channel has declined by 1.4 percent on an average annual compound basis.

In the past, consumers might not have had as much choice. In the future, they will. Prices are going to come down. Still, the issue is whether entertainment video might still outperform voice, texting or Internet access, in some cases, in terms of absolute revenue contribution, price per unit or profit margin.

source: FCC

Google Will Go "Mobile First" for Search

The business strategy known as mobile-first is affecting Google’s continued development of its search business.

Google is going to create a separate mobile index within months, becoming the main or “primary” index that the search engine uses to respond to queries.

A separate desktop index will be maintained, but will not be as up-to-date as the mobile index, it is expected.