Will History Repeat for IoT Platforms?

One of the recurring themes in the communications and computing businesses is the deployment trajectory of new platforms.

And there are two big contradictory trends. More common in the computing or application sphere is the winner take all ” shape of new markets. That might not always imply that the “first mover” is the eventual winner, simply that outcomes now seem uneven or unequal. Somehow, in most app markets, scale is grabbed disproportionately by one firm, as in the tendency for the market leader to have market share as high as 90 percent.

The access or communication business never has behaved that way. Instead, communications markets tend to develop into oligopoly structures (two dominant providers), though many markets seem to have a total of three to five providers, albeit with markedly-different shares of market.

The question is what tends to happen when new platforms or technologies develop. And in that area, there arguably have been some similarities between computing and communications, at least in pre-internet eras. At least historically, the first mover has not necessarily risen to dominate a market. That can be seen in personal computer operating systems and mobile operating systems.

We now will see how platforms for Internet of Things communications will develop. As often happens, early contenders have stolen a march on traditional mobile platforms (LoRaWAN and others). But mobile operators are developing rival solutions based on existing 4G platforms, for example (narrowband LTE and others).

One possible path of development is that dedicated IoT platforms gain early share, but that leadership eventually is captured by incumbents. Early in the development of digital subscriber line (DSL), the market was pioneered by upstarts (Rhythms, Covad, NorthPoint). It is too early to predict how the variety of platforms will fare, as the IoT market develops.

Will Fiber to Home Really be a Viable Option for Much of South, SE Asia in the Coming 5G Era?

Countries across South Asia and Southeast Asia need to make big investments in fixed network infrastructure, a new report by the International Telecommunications Union suggests.

In fact, the white paper suggests, it now is time to put the emphasis on fixed access networks, not the mobile networks that have, to this point, brought voice and moderate-speed internet access to people across much of the region.

To be sure, the paper tends to focus on backbone and “fiber to cell tower” investment, less clearly on ubiquitous fiber to the home. “The overall growth in broadband use (both mobile and fixed) significantly increases the requirements for backbone and backhaul bandwidth,” the report says.

But the report also hedges, one chart suggesting that fiber to the home, fiber to the node and 5G all serve the same segments of the market. Some of us also would argue that some other obvious platforms are not mentioned in the report. Hybrid fiber coax and fixed wireless, for example, are absent.

The report suggests that the APAC8 nations (Bangladesh, Cambodia, Laos, Myanmar, Sri Lanka, Thailand and Vietnam) that are the focus of the white paper may benefit from a “leap to fiber” platforms. One presumes that means more than optical backbones and fiber to the cell tower.

That might, in some ways, be a curious conclusion, given the high cost of fiber to home networks, in the South Asia and Southeast Asia markets, as well as elsewhere. Perhaps the ITU has various forms of platform sharing and wholesale in mind, for it does not seem as though facilities-based competition in the fixed network segment of the market will prove financially viable.

Much could ultimately depend on the adoption of 5G platforms. It is at least conceivable that multiple facilities-based mobile platforms, able to operate as fixed wireless platforms as well, will close a market opportunity for fixed networks, for much of the potential access market.

source: ITU  

source: ITU  

Different Quarter, Same Story: Cable Gets All the Net High Speed Access Account Gains

It is not yet clear whether U.S. tier-one telcos actually can reverse the cable operator domination of high speed access services.

"Over the past year, cable companies added more than 3.5 million broadband subscribers, accounting for 118 percent of the 2.995 million net broadband additions," said Bruce Leichtman, Leichtman Research Group president. Telco providers have had net broadband losses in five of the past six quarters.

In the first three quarters of 2016, cable companies added about 2,440,000 broadband subscribers, while telcos lost about 475,000 subscribers

Cable companies represented all of the net account growth in the third quarter of 2016 as well.

Broadband Internet	Subscribers at End of 3Q 2016	Net Adds in 3Q 2016
Cable Companies
Comcast	24,316,000	329,000
Charter	22,202,000	387,000
Altice	4,122,000	17,000
Mediacom	1,145,000	17,000
WOW (WideOpenWest)*	728,400	2,700
Cable ONE	510,573	2,256
Other Major Private Company**	4,765,000	20,000
Total Top Cable	57,788,973	774,956
Phone Companies
AT&T	15,618,000	(23,000)
Verizon	7,038,000	24,000
CenturyLink	5,950,000	(40,000)
Frontier^	4,404,000	(99,000)
Windstream	1,063,000	(12,800)
FairPoint	309,547	(1,893)
Cincinnati Bell	299,800	3,100
Total Top Phone Companies	34,682,347	(149,593)
Total Broadband	92,471,320	625,563

Source: Leichtman Research Group

OTT Video Ecosystem Really is Not Aligned

Retail pricing is a big deal in the transition from linear to over-the-top video entertainment, and particularly for consumer and provider expectations of “what access to a single channel is worth.” Up to this point, services such as Netflix have been priced below the purchase of a channel such as HBO, which runs about $15 a month (unless HBO is part of a promotional bundle).  

Consumers seem to perceive the value of a single ad-supported channel somewhere between $1.40 and $1.60 per channel. Those same respondents suggested they would pay $3 a month for ad-free HBO. That implies a consumer value about 80 percent less than presently charged for HBO.  

Consider the stark reality of misalignment: implied wholesale prices for channels in big bundles run from a cents to $1.50 a month, with ESPN costing about $6.10 a month.

In other words, even in volume, the wholesale cost of a single channel--before delivery, marketing and overhead costs--might approach expected retail prices.

“Our projections call for the average TV station's retrans (re-transmission) fee per subscriber per month to rise from $1.40 in 2016 to $2.21 by 2022,” SNL Kagan estimates. In other words, the wholesale content rights cost for video distributors already is about the level consumers tend to believe they would pay.

Any realignment of the ecosystem likely involves higher prices than most consumers expect, but also lower revenues than many content providers expect.

source: Wall Street Journal

source: SNL Kagan

source: MoffetNathanson

Most Video Customers are Satisfied; Still Will Consider Switching

Few executives at any company would deny that “happy or satisfied customers” are an unimportant outcome. The logic is simple: unless potential buyers think they will be satisfied with a product, they are unlikely to buy. Unless actual buyers are satisfied, they are rather unlikely to keep buying.

On the other hand, there is some wisdom in understanding that even satisfied buyers will desert their subscription video providers.

In other words, as important as customer satisfaction might be, it offers questionable protection from customer desertion.

The latest Digitalsmiths (Tivo) survey shows that perhaps 21 percent of linear video customers are “unsatisfied” with their provider’s service. The other 79 percent either are “satisfied” or “very satisfied.”

On the other hand, when asked if they plan to change providers in the next six months, 45 percent “might” or “will” change providers. With the caveat that consumers often do not act as they say they will, that suggests even “satisfied” customers are not loyal (defined as willingness to keep buying a product from a current supplier).

To be sure, most of the potential switchers (about 30 percent) say “maybe” about switching. Only about 15 percent suggested they were definitely going to switch.

To be sure, a rational consumer might well consider switching from one provider to another if the price-value relationship represents a big enough inducement for switching.

So the issue might be better phrased. Though “satisfied” or even “very satisfied” customer ratings are better than “unsatisfied” or “very unsatisfied” ratings, even apparently-happy consumers will desert an entertainment service if the rival offer is attractive enough. The biggest danger comes from rival offers with a dramatically-different--and better--relationship between perceived value and retail price.

The issue is not the percentages of “satisfied” customers any firm presently can count. The bigger issue is a disruptive package offered by a rival. Satisfaction does not offer much protection from churn, if and when disruptive offers come to market.

source: Digitalsmiths

SpaceX Applies for Permission to Create LEO Satellite Constellation

Space Exploration Technologies Corp. (SpaceX) has asked the U.S. Federal Communications Commission for permission to create a network of earth stations that would support a proposed fleet of satellites providing internet access from a huge fleet of satellites in low-earth orbit.

The initial deployment might entail launching 1,600 satellites, eventually growing to 2,825 satellites, and would blanket every inch of the surface of the earth.

Financial backers of the company Alphabet's Google Inc and Fidelity Investments, which together have contributed $1 billion to Musk's space launch firm.

The proposed SpaceX network would begin with the launch of about 800 satellites to expand internet access in the United States, including Puerto Rico and the U.S. Virgin Islands, the FCC filings showed.

OneWeb and by Boeing Co. also are trying to create such a network.

source: SpaceX

source: SpaceX

FCC Pulls Business Data Services Item from Agenda

Special access price controls now appear off the agenda of the U.S. Federal Communications Commission, as a vote on that item (business data services) has been taken off the Commission’s Nov. 17, 2016 meeting. The withdrawal appears to be a reflection of the coming change in FCC composition when President elect Trump takes office in January 2017, triggering a change in agenda, chairman and membership of the FCC.

Deletion of the item, assuming the next FCC will not be inclined to pursue the matter further, will likely be financially beneficial for sellers of special access (Comcast, Charter Communications, AT&T, CenturyLink, Verizon and a few other firms). Buyers of special access services (Sprint, T-Mobile US) will not see lower prices for special access, as the FCC would have put into place price controls on such services in many markets.

In a clear sign that job losses were expected if the rules had been put into place, the Communications Workers of America also opposed the price control rules.

Such forbearance is not unusual. The FCC also refrained from undertaking major rule changes in the months leading up to the first term inauguration of President Barack Obama.