Public Cloud Spending Accelerates

Though software as a service remains the biggest single segment of the cloud computing market, infrastructure as a service might have the highest growth rates.

If one counts both hardware and software spending to support cloud computing, plus actual services sold to retail customers, the cloud computing industry generated $148 billion of revenues between August 2015 and September 2016, growing by 25 percent, year over year.

According to Synergy Research Group, that period was the first when industry revenues were generated more from actual cloud computing services than spending to create that capability.

In early 2017, cloud service markets now are growing three times faster than cloud infrastructure hardware and software investments. Part of the reason for that is that most spending on private cloud services involves enterprises buying and deploying their own facilities.

From the fourth quarter of 2015 to the third quarter of 2016 total industry spending on hardware and software to build cloud infrastructure exceeded $65 billion, with spend on private clouds accounting for over half of the total spend.

Investments in infrastructure by cloud service providers helped them to generate almost $30 billion in revenues from cloud infrastructure services (IaaS, PaaS, hosted private cloud services) and over $40 billion from enterprise SaaS.

source: Synergy Research

source: Software Strategies

MPLS Approaching Maturity?

It is not yet clear whether developing software-defined wide area networks (SD-WAN) will represent the next generation data network, displacing MPLS, but that is a logical argument for enterprise branch network connections.

Global enterprise spending on WAN business services represents about $40 billion in annual spending.

Included in that bucket are MPLS virtual private networks (VPNs), virtual LANs, Ethernet connections, digital subscriber line, cable TV and LTE connections as well. The arguments for using SD WANs, in place of MPLS, is that recurring costs are lower, while provisioning intervals potentially are much better.

To be sure, MPLS prices are dropping about five percent to 10 percent per year, but so are internet access costs, with faster declines expected as 5G comes online.

In the separate content delivery networks business, SD WANs might also have a role, allowing private network (MPLS) performance over public internet connections.

The next generation CDN should move beyond caching and include client self-management and quality of experience capabilities, especially playing a role for mobile CDN applications, some argue.


source: Ovum

More "Free Mobile Data Offers" in India?

Idea Cellular may soon launch promotional mobile data offers lasting one to 1.5 years that offer unlimited free mobile data for 4G customers. Idea also might offer free international incoming calls.

Those moves would counter Reliance Jio’s free mobile data offers, which run until March 2017. Bharti Airtel already has matched Jio's offer by providing 3 GB extra data every month till December 2017.

Such promotional offers should never be mistaken as indicating direct shifts in the level of  “permanent pricing.” On the other hand, rarely--if ever--do such promotional offers allow “every day” pricing levels to climb back to prior levels. Such offers are indicators of increased competitive pressure, leading to pricing declines, over the longer term.

Average revenue per account in the Indian mobile market has, in fact, been declining for some years.

The Indian mobile service provider market has been in a state of disruption for several years, with Idea Cellular displacing Reliance Communications as the third-largest Indian mobile company, ranked by subscribers. The next big changes will involve mergers that could again reshape the leader ranks, and the emergence of Reliance Jio within the top-10 ranks in 2017.

Longer term, most observers believe Reliance Jio will be a threat to the mobile market leaders.

source: TRAI

source: Datareign

OTT Voice and Texting to Cost Telcos $104 Billion in 2017

At the risk of seemingly downplaying the danger of declining voice and text messaging revenues globally, that is the lesser problem global telcos face. The trend is real.

On a global basis, over-the-top (OTT ) voice and text messaging alternatives displaced more than $84 billion in 2016. In 2017, another 23 percent erosion will happen, representing nearly $104 billion, according to Juniper Research.

Telcos globally might have lost about 19 percent of their text messaging revenues to over-the-top (OTT) alternatives between 2013 and 2015, according to Juniper Research.

In Spain, for example,  text message volume peaked as early as 2009, at 9.6 billion messages. By 2015, less than 2.3 billion messages were sent.

In the Netherlands, KPN experienced a 60 percent decline in average text message volume between 2011 and 2013. Similar declines have also been reported in South Korea following the widespread adoption of KakaoTalk, while similar trends have been seen in China.

Though it clearly matters that global service providers are losing voice and text messaging revenue, the bigger question is what suppliers do about that situation. One proven strategy is simply to harvest legacy revenues as long as possible, at the highest rate possible, while making other plans.

In the near term, in developing nations, mobile data is the immediate solution. In developed markets, where mobile data adoption already is robust, acquisitions are the near term solution, while the long term solutions involve creating big new markets in the internet of things and machine-to-machine industries.

Those, and other initiatives are likely to be jarring in some cases. As with the move by Mars from packaged goods into pet services, the range of applications and services businesses telcos and other internet service providers will seek to own and offer will be controversial.

At first glance, it might seem incongruous that Mars, a company perhaps best known for candy brands, is big in the pet services business.

But Mars owns pet food brands Pedigree, Iams and Nutro. Mars also owns the biggest U.S. veterinary operation in Banfield Pet Hospitals. Mars also owns the BluePearl emergency and specialty clinics, and also is buying VCA, the operator of veterinary offices. That represents a diversification away from consumer packaged goods and towards services.

Juniper Research suggests big data and analytics packages for both consumer and IoT (Internet of Things) devices will be fruitful. Juniper also suggests carrier billing, mobile money and mobile identity services will drive new opportunities.

Some of us might argue that even if such initiatives develop, they will be too small to fundamentally reorient service provider revenue streams. Core telecom service revenues in 2016 were about $1.93 trillion. Smaller service providers might have earnings before interest, taxes and depreciation of less than one percent. Tier-one carriers might have EBITDA of as much as 15 percent. So 15 percent of $1.93 trillion is about $285 billion, less than the capital investment carriers will make of about $350 billion.

At the revenue level, replacing lost voice and messaging revenues requires annual new revenues in the range of $100 billion. That might  be tough to achieve on the strength of billing services, mobile money and analytics services.

5G Will Happen; It Has To Happen

A few skeptics might argue that there is no need for 5G, or that the business model will not work or that consumer demand does not exist. That noted, the movement, globally, seems unstoppable, and for existential reasons. Whether 5G works out largely as planned (it actually produces new revenue streams, business models and applications), it is a gamble that must be taken.

In fact, for fixed network telcos, the odds of failure are growing, as revenue earned from investments increasingly is less than the capital investment.

source: The Economist

For that reason, there is a good reason for arguing that either capex or opex, or both must be reduced to match potential revenues earned by those investments.

In fact, the importance of cash flow, rather than other traditional measures of “profit,” indicate the shift. In past years, it was mostly unprofitable startups whose progress was measured in terms of cash flow.

But the big issue is simply that, with all existing revenue sources flat, diminishing or poised to become flat and diminish, the broad telecom industry must find big new revenue sources to replace those being lost, or face decline, if not death.

Since 5G is being purpose built to support new applications (internet of things, machine-to-machine communications, connected cars, fixed line replacement), it is a necessary gamble on the ability to create and sustain big new businesses in those areas.

There can be no certainty, at this point, about the degree of success. What there is certainty about is that doing nothing risks industry failure. So 5G is going to happen. It has to.

Did SingTel Acquire Amobee in 2012, 2013 or 2017?

Did SingTel acquire Amobee in 2013, buy Amobee in 2012 or make the acquisition in 2017? Apparently, “fake news” (which, to be honest, has seemingly always been part of the press agency business) is alive and well, since "news" of that acquisition is being publicized in 2017, when the deal actually happened in 2012. Odd.

Whatever the odd reason for apparently announcing, in 2017, a deal that was previously announced in 2012, the Amobee deal is the direct precursor of what Verizon Wireless is attempting to do with AOL (and possible Yahoo). Amobee is a digital advertising platform, an ambition AOL has had, as well.

That strategy sometimes is contrasted with AT&T’s more direct investment in content and content delivery. Arguably, either approach targets a different part of the same ecosystem.  

Globally, broader entertainment and media revenues are expected to rise at a compound annual growth rate (CAGR) of 4.4 percent between 2016 and 2020, from $1.7 trillion in 2015 to $2.1 trillion in 2020, according to PwC. Those figures include the broader internet advertising business, internet access, broadcast TV, theatrical distribution, newspaper and magazine industries, plus some business-to-business categories not relevant to the consumer video subscription business.

Looking strictly at the TV and video segment, revenue is expected to rise from $121.4 billion to $124.2 billion in 2020 (0.5 percent CAGR). Those revenues include video on demand (VOD) and over-the-top (OTT) services.

Mobile advertising represents 34.7 percent of total Internet ad revenue at $20.7 billion in 2015 and projected to rise to 49.4 percent by 2020. But the rise in mobile video Internet ad revenue will be the most remarkable, from $3.5 billion in 2015 to $13.3 billion in 2020 (30.3 percent CAGR), driven by growth of mobile video consumption.

Verizon’s ambition to create a position as the default for U.S. advertisers that do not want, for whatever reason, to use Google or Facebook for mobile advertising requirements.

source: Business insider

No Global Consensus on 5G Early Use Cases, But Fixed Wireless Will be Key in North America

There is no global service provider consensus about which 5G applications will be important, early on. In fact, one survey conducted on behalf of Ericsson found no agreement on the killer app for 5G, though obviously there was a majority who believed mobile broadband would be among the key uses. Nor is there agreement on whether consumers or business users will drive the early adoption.

Fixed wireless will be the lead application in North America and South America, says Glenn Laxdal, CTO and head of strategy at Ericsson North America.

Laxdal says a mixture of direct fiber and wireless will be used to balance performance and cost in the access business. Also, Ericsson’s tests show a higher antenna point results in significantly better performance and lower path-loss. When aiming for delivered 5G fixed bandwidth of 100 Mbps, a six-meter high radio will reach 350 meters, containing 100 to 120 homes. If antenna height is increased to 12 meters, the signal will propagate 500 meters and potentially reach 200 homes.

In some markets, likely including the United States, where 5G spectrum is likely to be available in lower bands as well as new millimeter wave regions (28 GHz and 39 GHz), 5G is likely to be useful in some scenarios for coverage, and it other cases for capacity, even if 5G typically is thought of as a capacity tool.

Fixed wireless is not expected to lead the commercial deployment of 5G in other regions, though.

In Europe, operators expect new revenue models and apps to drive adoption.

In North Asia, mobile broadband will be the lead app.