Consumers Still Do Not Have a Good Grasp of Value, Price in Internet Access

It never has been easy for consumers to figure out “how fast, or how good” their internet access services are, how much they consume, or how much that consumption actually costs. Matters are complicated by the fact that value keeps climbing, while costs per unit keep dropping.

In 2009, the median consumer internet access speed was just 7 Mbps, according to the Federal Communications Commission. But by 2016, speeds had increased by an order of magnitude or even two orders of magnitude, among the tier-one providers.

And even if prices dropped, consumers have changed behavior, upgrading to faster tiers that cost more.

source: Ookla

All that matters, as a recent survey of consumer attitudes suggests most U.S. residents support building of municipal broadband networks when service is deemed inadequate.

A substantial majority of the public (70 percent) believes local governments should be able to build their own broadband networks if existing services in the area are either too expensive or not good enough.

Of course, there also is evidence that U.S. residents are ill-equipped to make such determinations.

When asked what download speed they have for their own home internet service, 47 percent were not able to provide an answer. Though 73 percent of U.S. homes have fixed network access, and probably 13 percent are mobile-only for internet access (implying that possibly up to 86 percent of the population buys internet access), about 25 percent of respondents guessed that less than half of U.S. residents had fixed network internet access.

On the matter of retail cost, everyone agrees that cost per gigabyte (consumption), or cost per Mbps (speed) have declined over time, and continue to do so. Beyond that, effective cost per gigabyte depends largely on how much any particular user consumes, compared to the posted rates. In other words, if a consumer buys 10 Gbytes of usage per month for $30, but uses only one GB, then the effective cost is $30 per used GB, even if the nominal cost is $3 per GB.

Volume also makes a huge difference: buy more and price per unit drops sharply.  

Typically, retail pricing in the U.S. mobile market is about $10 per GB or less for plans with moderate usage buckets, though pricing for small buckets can reach $15 per GB.

The new unlimited plans make such determinations even more problematic. But it would not be unusual for one GB to cost between $3 and $4 per GB, when a plan has some volume.

Fixed network prices tend to be lower than that, often by an order of magnitude (10 times). The point is that U.S. consumers cannot easily figure out whether value and prices are in line, appropriate or reasonable.

source" The Next Platform

FCC Does Not Plan to Allow in-Flight Calling

The Federal Communications Commission looks to continue its present policy of no in-flight phone calls. Chairman Ajit Pai said  “I stand with airline pilots, flight attendants, and America’s flying public against the FCC’s ill-conceived 2013 plan to allow people to make cellphone calls on planes.”

“I do not believe that moving forward with this plan is in the public interest,” Pai said. Pai plans to take that policy off the agenda, terminating the FCC’s 2013 proceeding to relax the rules and allow in-flight calling.

“Taking it off the table permanently will be a victory for Americans across the country who, like me, value a moment of quiet at 30,000 feet,” Pai said.

5G Networks Will be More Expensive

Business models in the 5G era are likely to be more complicated for a number of reasons, including the likely higher cost of infrastructure. 

For starters, millimeter wave frequencies will require use of small cells, which means many more sites and therefore lots more backhaul locations. Support for new internet of things apps might require--or benefit from--overlay networks of the low power wide area type. So one network might not “do it all.” 

 Radios are likely to feature “massive” multiple input, multiple output (MIMO) technologies, which are more complex than today’s mobile radios, and incorporate new beam-forming technology as well. 

 Also, in addition to designing new mobile networks incorporating millimeter wave frequencies, at least some access providers might choose to build fixed wireless networks that coexist with millimeter-wave mobile networks. 

That will require more frequency coordination. On the revenue side, new business models and roles in the internet of things and machine-to-machine communications areas will have to be created, as services sold only to human beings might not represent all that much incremental revenue.

Most Believe There is a Business Case for Millimeter Wave Networks

There might still be some observers who think millimeter wave networks will “not work,” in the sense of a business case that allows 5G and other wireless access providers to make money.

Few matters are as contentious as the business model for millimeter wave communication, either in a mobile or fixed wireless deployment. The biggest concerns probably concern signal propagation, and the impact on business models.

Some think sheer reach will be an issue, while others might argue that the cost of infrastructure, relative to revenue, will prove sub-optimal. Others, privately, simply think propagation or deployment issues will prove insurmountable.

The Mobile Experts model for 5G deployment estimates the cost of a 5G network and the potential revenue from new 5G services such as fixed wireless might be quite challenging. “There is simply not enough high-density demand for that,” Mobile Experts says.

To be sure, density is a key issue, as high desnity of users is needed to make a business case for small cells. But that might be a feature, not a bug.

So far, most observers and most mobile operators appear to believe small cell networks using millimeter waves will work, and will have a business case.

AT&T is acquiring Straight Path Communications, a holder of spectrum licenses in the 28 GHz and 39 GHz region. The deal means AT&T will acquire 735 licenses in the 39 GHz band and 133 licenses in the 28 GHz band. These licenses cover the entire United States, including all of the top 40 markets, to support the coming 5G network.

That move is but the latest in a series of developments indicating that millimeter wave spectrum and small cells will be foundational for coming 5G networks. Previously, AT&T had acquired 24 GHz and 39 GHz bands covering 8.4 billion MHz POPs as part of AT&T’s acquisition of FiberNet.

Dish Network, for its part, acquired from sister company EchoStar spectrum licenses covering four markets in the 28 GHz band. THat move adds more spectrum to the trove Dish Network has amassed, either to build its own mobile or wireless network, or as an asset to be sold.

Verizon, for its part, as part of its acquisition of XO Communications, gained

102 licenses in the 28 GHz and 39 GHz bands, covering 188 billion MHz­-POPs, or 23 times the FiberTower assets.

Separately, Charter Communications has applied to the Federal Communications Commission to test 28 GHz frequencies.

IT Spending Grows Slowly, But Value Arguably is Quite a Bit Higher Than Spending Suggests

In a business where efficiencies are being reaped, traditional spending metrics have to be interpreted. Traditionally, higher spending on information technology was interpreted as a sign of growth, while spending declines were seen as signs buyers were slowing investments.

That is less true, now, as open source and other sources of efficiency (white label gear, resource sharing) also are at work. In other words, compared to a decade or two ago, computing capability costs as much as an order of magnitude less than it used to. In other words, enterprises can achieve their goals at lower cost, in some cases far lower cost.

Worldwide information technology spending is forecast at $3.5 trillion in 2017, a 1.4 percent increase from 2016, according to Gartner. This growth rate is down from the previous quarter's forecast of 2.7 percent, due in part to currency issues (U.S. dollar strength).

The data center system segment is expected to grow 0.3 percent in 2017. While this is up from negative growth in 2016, the segment is experiencing a slowdown in the server market.

Enterprises are moving away from buying servers from the traditional vendors and instead renting server power in the cloud from companies such as Amazon, Google and Microsoft. This has created a reduction in spending on servers which is impacting the overall data center system segment."

Worldwide IT Spending Forecast (Billions of U.S. Dollars)
	2016	Growth (%)	2017	2017 Growth (%)	2018 Spending	2018 Growth (%)
Data Center Systems	171	-0.1	171	0.3	173	1.2
Enterprise Software	332	5.9	351	5.5	376	7.1
Devices	634	-2.6	645	1.7	656	1.7
IT Services	897	3.6	917	2.3	961	4.7
Communications Services	1,380	-1.4	1,376	-0.3	1,394	1.3
Overall IT	3,414	0.4	3,460	1.4	3,559	2.9

source: Gartner

Can You Build a Business Model on Internet Access Speed?

Can a service provider build a 5G business model on speed? Some might say the answer is “no.” In fact, that likely is the majority opinion at this point. In fact, that is why 5G is seen as the first mobile network that might build revenue substantially beyond services to people who want to talk, text or use the internet.

On the other hand, there are some potentially important revenue segments where 5G speed might be precisely the foundation for a business model of some size. We might take as a given that speed alone will not provide a sustainable advantage within the mobile ecosystem, as all leading providers will adopt the standard.

But that same improvement in speed (up to gigabits per second) will open up a significant opportunity in the wireless substitution market that already has seen mobility become the preferred method of using voice services.

Some idea of the potential market share shift can be seen in the fixed network internet access business in the United States, where distinct platforms operated by telcos and cable TV operators have vastly-different “typical speed” profiles, with serious consequences for market share.

Leichtman Research Group, studying the 14 largest cable and telephone providers in the United States, says the top cable companies netted 122 percent of the broadband additions in 2016 -- compared to 106 percent in 2015, and 89 percent in 2014.

In other words, since 2015, cable companies have gained all the net growth  in the market, after taking most of the market in 2014.

The reason for that shift is “speed,” namely the ability of cable operators to dramatically boost speed, compared to telcos, fast and at reasonable cost. That trend began in 2006, when cable operators began to deploy their new DOCSIS platforms at a time when fiber-to-home deployments on the telco side were restrained.

source: FCC

So it is possible to build a business model on “speed,” but only when key competitors cannot match the faster speeds. That likely will not be the case within the 5G mobile markets, but could be an issue in the fixed access markets, where mobile services might for the first time be competitive with cable offers.

That could have market share and business model implications. Telcos might be able to compete more effectively with cable, principally by closing the speed gap. Also, for some tier-one mobile operators, the addressble market grows substantially.

Today, Verizon and AT&T have fixed networks that cover only a portion of total U.S. homes. Using the 5G network, they will be able to compete nearly nationwide. That is a big deal.

Telcos might find they do not have to spend so much capital to upgrade their networks in their existing footprints.

On the other hand, telco fixed networks will face even greater financial pressures, as mobile and wireless become better alternatives almost immediately.

AT&T Acquires 735 Millimeter Wave Licenses in Top-40 U.S. Markets

AT&T is acquiring Straight Path Communications, a holder of spectrum licenses in the 28 GHz and 39 GHz region. The deal means AT&T will acquire 735 licenses in the 39 GHz band and 133 licenses in the 28 GHz band. These licenses cover the entire United States, including all of the top 40 markets, to support the coming 5G network.

That move is but the latest in a series of developments indicating that millimeter wave spectrum and small cells will be foundational for coming 5G networks. Previously, AT&T had acquired 24 GHz and 39 GHz bands covering 8.4 billion MHz POPs as part of AT&T’s acquisition of FiberNet.

Dish Network, for its part, acquired from sister company EchoStar spectrum licenses covering four markets in the 28 GHz band. THat move adds more spectrum to the trove Dish Network has amassed, either to build its own mobile or wireless network, or as an asset to be sold.

Verizon, for its part, as part of its acquisition of XO Communications, gained

102 licenses in the 28 GHz and 39 GHz bands, covering 188 billion MHz­-POPs, or 23 times the FiberTower assets.

Separately, Charter Communications has applied to the Federal Communications Commission to test 28 GHz frequencies.