Top U.S. Internet AccessHeadline Speeds Grew 10X Last 5 Years

Over the nearly-five-year period between 2011 and 2015, maximum advertised internet access speeds of the most-popular service tiers offered by U.S. internet access providers have increased from “12 Mbps to 30 Mbps” in March 2011  to “100-300 Mbps” in September 2015, a factor of 10 increase in less than five years.

Two important elements of that report are important.

Some might object that such “maximum advertised” speeds are not matched by actual end user experience. The Federal Communications Commission report on the subject says actual download speeds are 100 percent of advertised speeds, if not better.

But there is an important distinction: speeds improved the most on cable TV networks. In fact, some will rightly note that virtually the entire increase was driven by hybrid fiber coax networks operated by cable companies.

“While fiber based systems continue to have the highest weighted median speeds, cable based ISPs are driving the growth in new high speed service tiers,” the report states. In fact “the maximum advertised download speeds among the most popular service tiers offered by ISPs using cable technologies have increased from 12-30 Mbps in March 2011 to 100-300 Mbps in September 2015.”

“In contrast, the maximum advertised download speeds that were tested among the most popular service tiers offered by ISPs using DSL technology have, with some exceptions, changed little since 2011,” the FCC report notes.

Most popular advertised service tiers
Platform	Company	Speed Tiers (Download)							Speed Tiers (Upload)
DSL	AT&T DSL	1.5*	3	6					0.384	0.512
	AT&T IPBB		3	6	12	18	24	45	0.384*	0.512	0.768	1	1.5	3	6
	CenturyLink	1.5	3	7*	10	12	20	40	0.512	0.768	0.896	5
	Frontier DSL	1	3	6					0.384	0.768
	Verizon DSL	(0.5 -1)*	1.3-3						0.384 *	(0.384 - 0.768)	0.768*
	Windstream	3	6	12					0.768
Cable	Optimum	25	50	101					5	25	35
	Charter	60	100						4
	Comcast	25	50	75	105	150			0.768	5	10	20
	Cox	15	25	50	100				2	5	10
	Mediacom	15	50	100					1	5	10
	Time Warner Cable	15	20	30	50	100*	300		1	2	5	10*	20
Fiber	Frontier Fiber	25							5	10	25*
	Verizon Fiber	25	50	75					25	35	50	75
Satellite	Hughes	5	10						1
	ViaSat	12							3

source: FCC

source: FCC

Median speeds also are important, as they reflect the sort of “typical speeds” used by consumers. The FCC report says that “the median download speed, averaged across all participating ISPs, has almost quadrupled during this period, from approximately 10 Mbps in March 2011, to approximately 41 Mbps in September 2015.”

The Attackers Advantage

In any competitive market, attackers often have some advantages, compared to defenders. In some cases, attackers benefit from “pro-competitive” regulatory or fiscal policies that offer new entrants the ability to compete with lower costs. Attackers often do not have universal service obligations, and can cherry pick their potential customer segments and geographies.

Those advantages often are magnified when the market is declining, rather growing, but remains large in terms of gross revenue. Under such conditions, defenders often face huge stranded asset problems, while attackers can spot deploy or incrementally deploy capital as required.

Simply, at attacker often can build a business model that allows it to grow revenues and customers even in a declining market, by taking market share. Legacy providers generally only can lose share, with a business model that gets worse with each lost account.

That, in a nutshell, illustrates why attacking service providers in the U.S. market, such as Comcast and Charter Communications, are better positioned, strategically, then telcos. They are trading market share with telcos in video entertainment, to be sure. But the rate of decline has been quite restrained, so far, and the video market is far smaller than the core telecom markets.

So cable faces marginal losses in a smaller segment--video--and big potential gains in the vastly-larger core communications market. And, in one important product segment--internet access--telcos have not found a way to remain competitive.

Roughly speaking, annual core telecommunications revenue is something on the order of $330 billion each year. Linear video is about $100 billion a year. Rough math: 30 percent of $330 billion is $99 billion; 30 percent of $100 billion is $30 billion. If telcos and cable companies trade market share at equal rates, cable gains an order of magnitude more revenue than do telcos.

In the important internet access business, cable already dominates. Since about 2007, U.S. telcos have steadily lost market share in internet access services, with cable now getting all the net new additions.

That explains why telcos are so focused on discovering and creating big new revenue sources, and why some attackers are well positioned, compared to telco defenders.

source: Pyramid Research

Odds of Telco Failure are Growing

One graph shows the tension in fixed network business models, globally. By the end of 2017, telecom service provider revenue will potentially be lower than the amount of capital investment being made in those networks. Presumably, if one adds the operating and overhead costs, many service providers are basically “under water” in terms of their business models, which is to say, “failing.”

That is a primary reason why the fundamental strategic challenge for any “telco” or legacy access provider is to replace nearly all of the existing revenue sources with new sources. That would be a huge challenge for the best-placed, best-managed firms in any industry.

The odds of failure continue to grow.

source: The Economist

Are 600-MHz Auction Prices Indicative of Future Trends?

The U.S. Federal Communications, as part of planning for 5G services, is opening up nearly 11 GHz of new spectrum for mobile and fixed wireless broadband, including 3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum, and is exploring additional allocations as well.

In addition, there are reasonable expectations that spectrum owned by Sprint, T-Mobile US and Dish Networks also will be available for acquisition (either by purchase of the firms or, in the case of Dish, a possible sale of airwaves).

That should lead potential bidders to adjust their expectations about the amounts they are willing to bid to acquire 600-MHz spectrum in the ongoing incentive auctions. Up to this point, through two rounds of bidding, bids have significantly lagged seller expectations. So it is not an idle spectrum to ask whether the value of spectrum now is changing radically.

In other words, spectrum value has to change, if supply increases so much, and if other methods are available to increase supply by using newer network architectures (small cells), using more-efficient radios and antennae and continuing to rely on unlicensed spectrum that carries no direct spectrum cost.  In fact, such trends suggesting lower spectrum valuation has been underway for a couple of years.

And that might be a thought process affecting spectrum value in other markets, from Egypt to India.

Consider just the expansion of supply in the U.S. market. The FCC already has announced it plans to release 11 gigahertz of new spectrum, including healthy amounts of unlicensed spectrum, and significant amounts of shared spectrum, in a couple of bands.

Licensed use in the 28 GHz, 37 GHz and 39 GHz bands makes available 3.85 GHz of licensed, flexible use spectrum, which is more than four times the amount of flexible use spectrum the FCC has licensed to date, for all mobile purposes.

Unlicensed use in the 64-71 GHz band makes available 7 GHz of unlicensed spectrum which, when combined with the existing high-band unlicensed spectrum (57-64 GHz), doubles the amount of high-band unlicensed spectrum to 14 GHz of contiguous unlicensed spectrum (57-71 GHz). That 14 GHz band will be 15 times as much as all unlicensed Wi-Fi spectrum in lower bands.

Shared access in the 37-37.6 GHz band makes available 600 MHz of spectrum for dynamic shared access between different commercial users, and commercial and federal users, extending shared spectrum access in the 3.5-GHz band.

Prices are based on supply and demand. If supply increases by an order of magnitude, and demand does not keep pace, wholesale and possibly retail prices will fall, as well.