Who Will Develop Shared Spectrum Facilities?

Since 5G networks will build on other developments, such as the latest generations of 4G, core network virtualization, new spectrum access methods (shared spectrum) and millimeter wave frequencies and small cells, business models are likely to be evolutionary, rather than a “flash cut,” compared to prior mobile network generations.

For example, development of new commercial method for spectrum sharing in the 3.5-GHz band are not a formal part of the 5G standards process. But shared spectrum access is expected to be a staple of 5G network access methods.

Likewise, the release of more millimeter wave spectrum partly is, and partly is not, part of the 5G standards process. Similarly, small cell deployments, additional distribution fiber deployments, new radio technology and even open source efforts will eventually contribute to enabling and improving the 5G business model.

Perhaps oddly, the 3.5-GHz Citizens Broadband Radio Service (CBRS) being introduced in the U.S. market might see some unusual demand patterns. CBRS uses a three-tier access priority system, with existing licenses having interference protection rights from commercial users, while a a second tier offers priority access, while a third tier operates much as does Wi-Fi (best effort access).

The Priority Access Licenses (PAL), expected to be made available at auction, and with interference rights over the “best effort if capacity is available” General Authorized Access (GAA) tier of service, might be considered the preferred choice of mobile service providers, who have tended in the past to require quality-of-service protections.

The GAA spectrum would allow licensees the right to use 10 MHz channels for two three-year periods (3550–3650 MHz). And that is the issue: the six-year license duration limits the attractiveness of PAL for mobile operators who, in the U.S. market, are used to perpetual license terms, argues Senza Fili principal Monica Paolini.

As a result, she argues, the strongest interest might lie in use of the license-exempt GAA tier, which will effectively represent a new capacity option that is similar to Wi-Fi. That might have other repercussions as well.   

If GAA spectrum can be used by any entity without a license, then CBRS can be built out by property owners in the same way they use Wi-Fi. That might effectively limit use of CBRS capacity by mobile operators

Also, CBRS access using GAA will allow venues to block use of other temporary Wi-Fi access points (consumers using their own devices, for example).

That also increases the likelihood that neutral host approaches could develop on a fairly widespread basis, eventually. The advantage there is that each service provider could use CBRS facilities without building in-building infrastructure. The disadvantage is that mobile service providers and others using a neutral host network would not be able to control the facilities to the same extent as if each provider supplied their own radio infrastructure.

So much remains to be discovered, in terms of the ultimate pattern of CBRS license preferences by commercial users (such as mobile or cable operators), venue owners (building owners and managers) or third-party developers of CBRS indoor access facilities.

If the present Wi-Fi pattern develops, then venue owners will develop CBRS access services that resemble today’s Wi-Fi. In principle, new neutral host facilities could develop, with a property owner or third party operating the radio infrastructure, and offering access to all who wish to partake. Unclear is the amount of demand for priority access approaches that resemble today’s mobile licenses.

Potential regulatory changes that would extend PAL licenses for longer durations also could have an impact. If that were to happen, then CBRS using PAL would more closely resemble traditional mobile licensing.

If one had to make a guess today, it might be that most smaller locations eventually will have CBRS operating just as Wi-Fi does today, with a property owner or tenant making the decision to create a small cell running a CBRS network using the GAA access method, just like they would operate a Wi-Fi network.

Neutral host is going to make more sense at large venues, though it remains unclear how scale will become a factor, favoring larger service providers rather than individual venue owners.

Charter Does Not Have to Overbuild, FCC Says

Charter Communications will not be required to overbuild (compete with an existing cable operator) as part of its acquisition of Time Warner Cable, the U.S. Federal Communications Commission has ruled.

That preserves the collegial structure of the U.S. cable TV industry, which historically has held to a practice of not competing with other cable operators, even if such competition is lawful. Basically, as industry execs have privately said, that “no competition” behavior has meant cable had the “best of all possible worlds, able to operate an an unregulated monopoly.”

That remains only partly true now that U.S. telcos and cable operators compete head to head, with the same key product lines, virtually everywhere. But the historic restraint (no competing with another cable company) remains largely intact.

The big changes will come as Comcast and Charter Communications enter the mobile and OTT streaming businesses, which require national scale. In such areas, Comcast and Charter will “compete” with other cable operators at least in the OTT video area. In that sense, the “competition” will be indirect, similar to the notion of a cable operator competing with Netflix.

Even so, the competition will more theoretical than practical, as smaller cable operators will not have the scale to compete in the OTT streaming services market. It is virtually certain neither Comcast nor Charter would directly challenge other cable operators in the core fixed networks business.

In the mobile business, it is possible local cable partners might, in many cases, also act as marketing and infrastructure partners with either Comcast or Charter or both. Despite that, Comcast and Charter will be trying to market services to customers served by other cable operators. No doubt both firms will do everything possible to minimize the perceived degree of competition and revenue threat.

As a condition of FCC approval of the acquisition, the FCC under the Obama administration had required that Charter build internet access facilities to about a million households that currently have service from other cable operators.

As you would expect, the smaller rural cable operators that would have faced new competition from Charter opposed the provision.

As a condition of approval for its acquisition of two cable companies, Charter in May 2016 agreed to extend high-speed internet access to two million potential customers within five years, with one million served by an existing cable competitor. That would have created new cable operator competition in those overbuilt areas for the first time.

Text Messaging Revenue Opportunities Shift to Marketing, Customer Service, Other Business Revenue Models

New findings from Juniper Research forecast that OTT messaging applications, such as WhatsApp and Snapchat, will see adoption grow from 2.3 billion unique users in 2016 to 4.2 billion by 2021 representing a growth of over 12 percent  CAGR (compound annual growth rate).

It anticipates that players will begin focusing their strategies around the development and provision of artificial intelligence (AI) chatbot tools. In other words, the revenue upside now is seen as marketing, not consumer direct revenue.

That is one example of a broader trend, namely the decline of voice and messaging revenues and the shift of such apps to “features” rather than revenue drivers. To be sure, some revenue still is made from voice and text messaging, and no mobile service provider would dare market a mobile service that did not support voice and messaging.

From time to time, a supplier might ponder offering services that use over the top voice and messaging, with no carrier voice and messaging capability. So far, that business model does not appear to be appealing.

To be sure, traffic or usage is different from “revenue earned from providing such usage,” but consumers globally simply are talking and texting less using carrier services, and substituting OTT voice and messaging, or using social media as a substitute in many cases.

source: Informatica (Portio Research)

source: eMarketer

That explains the new emphasis on use of text messaging as an advertising or business-to-business tool.

Juniper Research predicts that OTT players will reposition their messaging platforms as customer relationship management tools, for example.

By leveraging AI technology, these OTT apps--it is hoped--will create a service that drvies revenue because it offers  a new level of consumer engagement and customer service.

The other interesting implication is that these new customer service and marketing tools will be built on use of artificial intelligence tools.

End of An Era: Android Passes Microsoft Globally as Top OS

Some milestones are turning points. Some turning points illustrate that an era has passed. Even if the fact will surprise virtually nobody, it is worth noting that, in March 2017, for the first time ever, Android passed the Microsoft operating system as the world’s most popular operating system (OS) in terms of total internet usage across desktop, laptop, tablet and mobile devices combined, according to StatCounter.

Granted, you might argue the OS share was a tie. In March of 2017, Android topped the worldwide OS internet usage market share with 37.93 percent usage, compared to Windows, with 37.91 percent share. Five years ago, Android had market share of about 2.4 percent, notes

Aodhan Cullen, CEO, StatCounter.  

That noted, Microsoft Windows still dominates the worldwide operating system desktop market (PC and laptop) with a 84 percent internet usage share in March.

“Windows won the desktop war but the battlefield moved on,” said Cullen.

In substantial part, you can credit use of smartphones In Asia for Android’s global growth. In Asia, Android represents 52.2 percent of internet-using device operating systems,  compared to 29.2 percent share for Windows.

In other regions, Windows retains its lead. In North America Windows had 39.5 percent share in March, followed by iOS at 25.7 percent and Android at 21.2 percent.

In Europe, Windows had 51.7 percent, with Android at 23.6 percent.

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FCC to Consider Special Access (Business Data Services) in April 2017

Among items the Federal Communications Commission will start to address at its April meeting is a potential change of course on special access (business data) regulations. The FCC is expected to begin a process of deregulating (removing price controls) in areas with competition, while maintaining price controls where there is not competition.

In all likelihood, that will mean price regulation is removed in urban areas, but often retained in rural markets. The big new change, after several decades of competition, is the emergence of cable TV companies as the primary new suppliers in markets dominated in the past by telcos.

The last FCC chairman and commission favored more regulation of special access services, though no action was taken, as the change of presidential administration also clearly meant leadership of the FCC would change.

But the FCC had seemingly been on course to institute lower prices for millions of small businesses, schools, and libraries, with an 11 percent reduction in prices phased in over three years. Critics argued the new price caps would further diminish investment, as demand already is moving away from special access and towards Ethernet access alternatives.

In principle, what is at stake is the proper regulatory stance for an important legacy service that nevertheless is in a declining state, with lots of competition in many--if not virtually all--larger markets. In fact, executives of independent business data service providers have noted for some years the fact that cable TV operators have taken leadership of the special access market away from independent providers who used to compete with the legacy telcos (primarily AT&T, CenturyLink and Verizon).

The new chairman now says he favors relaxing pricing rules where there is competition in the market.  Controversy about special access markets has been a staple of the U.S. regulatory environment for decades.

The FCC has been studying the business data services (special access, primarily T1 and DS3) market for more than a decade. “The extensive record compiled by the Commission's excellent staff shows substantial and growing competition in many areas of the country, thanks to new market entrants like cable companies,” said FCC Chairman Ajit Pai. “Where this competition exists, we will relax unnecessary regulation, thereby creating greater incentives for the private sector to invest in next-generation networks. But where competition is still lacking, we'll preserve regulations necessary to prevent anti-competitive price increases.”