U.S. Mobile Customers are Rational Consumers of Network Bandwidth

When evaluating the ways U.S. consumers use Wi-Fi or mobile networks, one must distinguish between sessions, data consumed and average session time.

Session time and data consumption tend to be directly correlated on Wi-Fi, while negatively correlated on mobile networks. In other words, mobile sessions seem to be bursty, short sessions, while Wi-Fi sessions seem to be used for more-data-intensive purposes.

A reasonable person would argue that is a direct result of consumer behavior in response to tariff levels. -

Consumers also seem to be rational. On networks with “lowest perceived cost,” consumers use the mobile network more.

On networks with “highest perceived cost,” users restrict network usage. T-Mobile US and AT&T customers are most likely to use the mobile network, in terms of sessions. Sprint customers use both Wi-Fi and the mobile network about equally, in terms of sessions. Verizon customers rely more heavily on Wi-Fi.

LIkewise, when looking at time connected to either Wi-Fi or mobile networks, customers on high-cost networks tend to rely on Wi-Fi for as much as 51 percent of time connected. On the lowest-cost network (perception), Wi-Fi represents only about 39 percent of connection time.

source: P3 Consulting

source: P3 Consulting

Enterprises, Service Providers Do Not See Eye to Eye on Enterprise Priorities

Service providers do not always meet enterprise expectations for security, cloud or mobility services, a study commissioned by Tata Communications found.

Enterprises consider service providers best equipped to increasing their network capacity or reach (73 percent), or delivering hybrid networking (66 percent) services, while around half (48 percent) of enterprises feel that their network service provider is best suited to address their cloud needs.

That makes sense. Connectivity is what communications carriers always have done. Cloud is not only something new, directly supporting computing functions--something telcos never have supplied on a major retail basis--but also a function that megascale suppliers (Amazon Web Services and others) do more efficiently and effectively.

Service providers logically believe (76 percent) supporting employee mobility is key for enterprise UCC strategy. Only 26 percent of enterprises rank this as a top priority.

Some 27 percent of enterprises say lack of employee readiness as a barrier for UCC adoption, a view not shared widely by service providers.

How Can Telcos Create New Value as OTT Cannibalizes Industry?

It will come as no surprise to anybody who follows the industry that value in the communications (internet) ecosystem is shifting from access to apps.

Access provider share of the ecosystem profit pool has declined from 58 percent in 2010 to 47 percent in 2015 and is forecast to fall further, to 45 percent in 2018, the World Economic Forum (WEF) says. Among the beneficiaries are digital content creation, distribution and aggregation companies such as Google, Netflix and Facebook.

Together with device manufacturers, the combined share of industry profits of these segments (apps and devices) is expected to increase to 40 percent in 2018, up from 29 percent in 2010.

“Telecom players, already lacking OTT businesses in this respect, face a real threat of being left to compete on two inherently contradictory fronts – price and throughput – that could put margins under further pressure,” says the WEF. “Telcos could be left to compete as IP-connectivity pure plays.”

“In the extreme scenario, increasing commoditization of the core offering could see margins drop to the levels of utility companies,” WEF says.

source: WEF

“Over-the-top (OTT) applications generate 50 percent to 90 percent less revenue for communications service providers,” the World Economic Forum says. “While the exponential rise in data consumption has provided some relief, this has not been enough to overcome the consistent decline in mobile voice average revenue per user (ARPU).”

Web-scale players such as Google, Microsoft and Facebook are moving quickly to fill key gaps in core telecom services and connectivity, as well. Google Fiber, Project Loon and Project Fi are examples of what Google has been doing.

Amazon and Apple have been making investments to make access from any available netrwork possible, moves that further reduce access provider account control.

Facebook is developing open source public network standards, in addition to the open source data center standards it already has developed, and is using.

All that is driving a search for new business models and revenue streams. The World Economic Forum believes that search will require strong collaboration with vertical industries and internet platforms.

In large part, competitive advantage in digital services and IoT will be driven by the capability to collect and analyse large pools of data specific to vertical-market use cases and to target value opportunities through customization of services and offerings, WEF says.

source: World Economic Forum

The biggest revenue opportunities for the global telecom industry will come from deploying next-generation networks and creating services beyond access, the World Economic Forum believes. The next generation of networks could be worth $440 billion, while apps and services beyond access could represent $650 billion worth of value.

WEF believes Internet of Things (IoT) solutions, consumer and enterprise digital services and communication leveraging natural human interfaces and augmented reality / virtual reality are the areas where new apps will develop.

WEF believes virtualization and an abstraction of the physical hardware layer, to create self-optimizing and secure zero-touch networks will represent the value from next-generation networks.

source: World Economic Forum

IoT, Virtualization Will Drive $1.3 Trillion in Industry Value Over 10 Years, WEF Says

The biggest revenue opportunities for the global telecom industry will come from deploying next-generation networks and creating services beyond access, the World Economic Forum believes. The next generation of networks could be worth $440 billion, while apps and services beyond access could represent $650 billion worth of value.

WEF believes Internet of Things (IoT) solutions, consumer and enterprise digital services and communication leveraging natural human interfaces and augmented reality or virtual reality are the areas where new apps will develop.

WEF believes virtualization and an abstraction of the physical hardware layer, to create self-optimizing and secure zero-touch networks will represent the value from next-generation networks.

source: World Economic Forum

Is Verizon Seriously Considering Sale of its Whole Fixed Network?

Is Verizon contemplating selling its whole fixed network infrastructure? Can it do so, and who are the potential buyers? That would have to be among the potential outcomes if Verizon really is contemplating a purchase of Charter Communications.

The rumored Time Warner merger with Charter Communications likely would be viewed as a horizontal merger, not a vertical merger, as AT&T proposes with its acquisition of Time Warner. That is going to be a tougher sell, to regulatory and antitrust authorities, without huge asset dispositions.

Charter passes 48 million homes. Verizon passes some 27 million homes, with significant overlap in New York, Maine, Massachusetts, New Jersey, Virginia, Pennsylvania, Rhode Island, Connecticut and Delaware. In other words, asset dispositions across most of the Verizon footprint would be expected.

Assume there are a total of about 135.7 million total U.S. homes. Charter passes about 35 percent of U.S. homes, arguably at the limit of traditional antitrust thinking (roughly 30 percent has been a rule of thumb for any single provider). Assuming only half the Verizon homes overlap, that still leads to a Verizon-Charter homes passed count somewhere in the neighborhood of 61.5 million homes, or about 45 percent of total.

It is hard to see antitrust authorities approving that large a footprint. Or, of course, Verizon might contemplate spinning off its entire telco footprint, relying on the hybrid fiber coax network for fixed network access. That would be a huge change for Verizon, but is possible, in principle.

So does Verizon sell its telco assets, and keep the Charter assets, or sell the cable assets, which are said to be the reason Verizon wants Charter in the first place?

In other words, does Verizon contemplate (and who would buy) divestitures of most of its fixed network?

AT&T, Verizon Quarter Revenue Slips

Both AT&T and Verizon reported lower revenue in their most-recent quarterly reports, but that might not be the bigger story. AT&T arguably has done a better job than Verizon at entering big new businesses that move away from the legacy “communications” business. And even if both firms remain largely U.S.-based businesses, future growth almost has to involve more international expansion, something AT&T has begun and Verizon has yet to embrace.

That also assumes that new domestic internet of things and machine-to-machine services also emerge in significant fashion.

But there are many wild cards. At least in principle, 5G-enabled fixed wireless might allow telcos to compete more effectively against cable companies in the internet access and video businesses, out of region as well as in region. While that would not change the strategic situation, it could help marginally in terms of bolstering the legacy businesses.

The maturation of the legacy communications business--including even mobility and mobile data--is obvious.

AT&T had a slight revenue decline in the final quarter of 2016, while Verizon Communications Inc. posted a 5.6 percent revenue decline in its fourth quarter of 2016, something Verizon executives had several quarters ago suggested would be the case.

Expected organic AT&T results for 2017 (without Time Warner) include consolidated revenue growth in the low-single digits, AT&T says.

Verizon reported $23.4 billion in mobile revenues and $7.8 billion in fixed network revenues. Of that amount, retail consumer revenues were $3.2 billion. Verizon executives expect revenue and profit in 2017 will be little changed from 2016.

It is in the video entertainment area that AT&T has shown the greatest move into big new product segments. In fact, video dwarfs AT&T’s consumer internet access and voice businesses.

Video entertainment now dominates AT&T consumer segment revenue, contributing about

73 percent of consumer segment non-mobile revenues. Internet access represents 14 percent of consumer revenue, while “other” revenues including voice generate nearly 13 percent of entertainment group revenue.

Both Verizon and AT&T have enterprise businesses that are flat to declining.

AT&T’s business segment contributes $18 billion (of which $10 billion is mobility revenue). AT&T’s entertainment group--which includes internet access, video entertainment and fixed network voice services, contributes $$13.2 billion worth of revenue.

Consumer mobility represents about $8.2 billion in quarterly revenue, international services a bit less than $2 billion.

AT&T’s total mobility business (aggregating business and consumer segments) generated nearly $19 billion.

Verizon’s enterprise business represents about $4.6 billion in quarterly fixed network revenue.

source: AT&T

New FCC Chairman Emphasizes Investment to Erase Digital Divide

In one of his first public remarks since being named chairman of the Federal Communications Commission, Chairman Ajit Pai reiterated his commitment to closing the digital divide, a theme he talked about when an FCC commissioner.

“I believe one of our core priorities going forward should be to close that (digital) divide; to do what’s necessary to help the private sector build networks, send signals, and distribute information to American consumers, regardless of race, gender, religion, sexual orientation, or anything else,” said Pai.

In the past, Pai has talked about creating investment zones to promote investment in internet access facilities in urban areas, for example. That is likely to be proposed in the new FCC administration as policy.