Wi-Fi Offload Now Mostly is a Matter of How Mobile Usage Plans are Built

With the caveat that “being connected to Wi-Fi” is a different matter from “using Wi-Fi,” the incentive to use Wi-Fi offload obviously is directly related to consumer perception of the value of doing so. An analysis by OpenSignal finds that T-Mobile US customers (presumably the customers most likely to have unlimited-usage plans) shift to Wi-Fi access the least of customers of the top-four U.S. mobile service providers.

source: OpenSignal

In the coming 5G era, and assuming data tariffs remain affordable (no particular consequences for relying on mobile networks instead of offloading to Wi-Fi), customers might not find it useful to offload to Wi-Fi.

Assuming mobile data usage policies do not penalize video consumption, while usage charges remain affordable, the economic incentive to offload will be lessened. Also, given the speed fo 5G networks, offloading to Wi-Fi will not often result in better user experience.

source: Cisco  

Why Revenue Sources Beyond Mobile, Mobile Data, Must be Found

Some trends now are so well established they are a background issue, no matter how important. Revenue earned by mobile service providers, in developed markets, from mobile data, from human customers, has past its peak. In markets such as Japan and the United Kingdom, mobile data, no matter how important, is no longer driving growth.

That is why hopes for internet of things are so important. Growth prospects for all human uses of mobile services--with one possible exception--are largely negative, in developed markets, even if growing in developing regions.

That possible exception is entertainment video. If some mobile operators can shift enough market share from traditional fixed network linear video services to “owned” mobile video services, that access revenue segment still could grow.

The other important shift is indirect. Or, one might say, what happens with telco diversification efforts. Put simply, the access business is declining, in mature markets. To keep growing, service providers will have to hope IoT really is as important as many believe.

Even so, IoT access revenues might only replace lost “revenues generated by services to humans.” To truly grow, access providers will have to transition to new sources of revenue based on content, platforms, transactions, advertising or other sources.

That is a very tall order for an industry that has struggled for success in most business lines outside the network services domain.

However difficult, that is what has to happen. Among the most-successful access provider transitions has been made by Comcast, which made the leap from video distributor and provider of other access services to owner of major content assets, ranging from studios to theme parks to content networks.

That’s the essence of the strategy: move to revenue sources beyond access, both consumer and enterprise. Be it connected vehicle or other services and apps, the key is to own the assets that are used by customers who need the access networks to do so.

That noted, the next wave of new sources also will come from sensor connections--or machine-to-machine apps and services--or might not come at all.

source: Telco 2.0

source: Telco 2.0

Unlimited Data Changes Verizon Customer Addition Trajectory

Verizon’s launch of unlimited mobile data plans definitely showed that when the price of a desired commodity is lowered, demand goes up.

“The launch of Verizon Unlimited positively changed the trajectory of customer additions in the quarter,” Verizon says. The new plan lead to a net decline of 307,000 retail postpaid connections in first-quarter 2017 included 289,000 phone losses. You might wonder why that was a positive change.

Consider that, prior to the launch of unlimited plans in mid-February, Verizon had a retail postpaid phone net loss of 398,000. After the launch, Verizon added 109,000 retail postpaid phone connections. In other words, the new plans accounted for a positive net swing of about 90,000 accounts.

For the entire first quarter of 2017, Verizon added a net of 49,000 smartphones to its retail postpaid phone base.

Verizon's retail postpaid connections base grew 1.2 percent year over year to 108.5 million, and retail prepaid connections grew 0.5 percent to 5.4 million.

Retail postpaid churn was 1.15 percent in first-quarter 2017.

Total revenues were $20.9 billion in first-quarter 2017, a decline of 5.1 percent compared with first-quarter 2016, due to decreased overage revenue, lower postpaid customers in the quarter and continued promotional activity, Verizon said.

Trends in the fixed network segment were unsurprising. Total fixed network revenues declined 0.6 percent, to $7.9 billion, comparing first-quarter 2017 with first-quarter 2016.

On a comparable basis (excluding XO Communications results), the decline was 3.2 percent.

Total Fios revenues grew 4.7 percent, to $2.9 billion, quarter over quarter. Revenue growth of 0.7 percent in consumer markets and 2.3 percent in business markets was part of the increase.

In first-quarter 2017, Verizon added a net of 35,000 Fios Internet connections and lost a net of 13,000 Fios Video connections. At the end of first-quarter 2017, Verizon had 5.7 million Fios Internet connections and 4.7 million Fios Video connections, year-over-year increases of 3.3 percent and 0.1 percent, respectively.

Spectrum Barriers are Going to Fall

In a business where barriers to entry matter, spectrum policy is evolving in a direction that will dramatically lower such barriers. So, as competitive as the mobile industry tends to be, it is likely to get more competitive.

Spectrum costs for virtually all providers will fall as new access methods, and huge amounts of new spectrum, are brought to market.

On one hand, the lower spectrum costs will help traditional operators in both the capital investment and operating cost areas.

On the other hand, those new ways of using spectrum will enable new entrants, as barriers to entry will fall.

Though Wi-Fi offload will continue to be a key method for using unlicensed spectrum and networks as a support for mobile data access, 31 network operator executives surveyed by Tolaga Research finds executives executives also believe they will be using a number of new techniques.

The TIA study found executives believe their firms will be using techniques that essentially bond unlicensed spectrum with mobile licensed spectrum, including License Assisted Access, LTE-WLAN aggregation (LWA), LTE Wi-Fi integration or MulteFire.

Other techniques, including licensed shared access (LSA, the idea behind the Citizens Broadband Radio Service) also might be used, but respondents were not asked about every other option that might be used.

Though the role of Wi-Fi offload continues, the newer techniques go further in making access across owned and third-party assets more seamless, as well as enabling more-effective use of unlicensed spectrum to support services traditionally offered only on networks using licensed spectrum.

About 55 percent of respondents plan to deploy Licensed Assisted Access (LAA) and prefer the notion of operating LTE in unlicensed spectrum. Wi-Fi offload solutions, such as LTE + Wi-Fi Link Aggregation (LWA) and LTE Wi-Fi Integration, (a forerunner to the LWA), were both favored by 41 percent of respondents, the TIA report says.

A possible wrinkle is that the survey seems to be weighted towards “mobile” industry executives, not executives from other industries that might eventually wind up competing with the traditional mobile providers. Some of those potential competitors--especially those with large hotspot assets--might well favor use of MulteFire at levels most traditional mobile operators would not do.

source: TIA

5G Fixed Wireless Works for Internet Access Business Case, Nokia Argues

Using 5G (and millimeter wave spectrum) for consumer internet access, a service provider might well have a business case for using fixed wireless for internet access, Nokia has found.

In a study of one European service provider, the business model for using 5G for internet access in a fixed mode works at 30 customers served per cell site, though obviously the model is sensitive to capital investment and average revenue per account.

But the model appears most sensitive to take rate, as you would expect. The business model requires a 30-percent take rate. That is a lower threshold than generally required for a facilities-based fiber-to-home network.

Average revenue per account probably needs to be at least 40€ (US$43) per month, a target most consumer service providers should be able to hit with one service.

In its analysis for one European service provider, a Nokia 5G solution using millimeter wave spectrum allows each base station to serve tens of households.

The 5G short-range fixed wireless access is expected to sustain one Gbps per household. To achieve such a high speed and longer ranges for 5G fixed wireless service in suburban and rural markets requires MIMO antenna and beam-forming, plus use of lower-frequency spectrum.

In other work, Nokia has found that 5G is much more cost effective than earlier generations of mobile networks to support entertainment video, an advantage directly related to consumer internet access demand.

source: Nokia

The business model also will be influenced by ARPU, which for some suppliers might be $130 a month, meaning the breakeven is lower than modeled by Nokia. Also, other benefits, especially the ability to share cost with the mobile 5G infrastructure, might have some impact on the business model, further lowering the payback threshold.

That appears to be Verizon’s thinking, as it envisions using one optical transport infrastructure to support both mobile and fixed access operations.

Fiber Reaches Less Than Half of U.S. Commercial Locations

U.S. business locations with 20 or more employees reached by an optical fiber connection  reached 49.6 percent in 2016, according to Vertical Systems Group. In 2004, optical connections reached only about 10 percent of such locations.

One reason so many business locations, even those with at least 20 workers, are not connected directly by optical fiber is that so many are small locations that do not provide a business case. Roughly half of all commercial buildings represent about 10 percent of total floor space, showing how small most sites are.

The vast majority of commercial buildings are relatively small. About half of buildings are 5,000 square feet in size or smaller, and nearly three-fourths are 10,000 square feet or smaller. The median building size is 5,000 square feet (i.e., half the buildings are larger than this and half are smaller), while the average size is 15,700 square feet.

Buildings over 100,000 square feet (from large high schools to hospitals to sprawling distribution centers to skyscrapers, for example) make up only about two percent of the building count but about 35 percent of the total floorspace.

Many of those smaller locations are markets for consumer-grade connections or non-fiber moderate-speed access connections, and may never be amenable to optical fiber access.

 

source: U.S. Energy Information Administration

Offices represent the single biggest category of locations, followed by warehouse and storage locations; service businesses and retail.

source: U.S. Energy Information Administration

Where Will Artificial Intelligence Appear First in Telecom?

Billing systems, self-optimizing networks, customer service and network functions virtualization are some of the areas in which artificial intelligence is likely to appear first in the core telecom business. AI also already is used by content and media firms to personalize content feeds, and some access providers who also own such assets will be using AI that way.

Over time, almost any function or process with big data characteristics will be augmented by AI, as that is a way to wring insights from masses of unstructured data.

Global revenues for cognitive and artificial intelligence (AI) systems will reach $12.5 billion in 2017, an increase of 59 percent over 2016, according to researchers at IDC.

Global spending by enterprises on cognitive and AI solutions will grow at a 54 percent compound annual growth rate (CAGR) through 2020, when revenues will be more than $46 billion.

The largest area of spending in 2017 ($4.5 billion) will be cognitive applications, which includes cognitively-enabled process and industry applications that automatically learn, discover, and make recommendations or predictions.

Spending on cognitive-related IT and business services will be more than $3.5 billion while dedicated server and storage purchase will total $1.9 billion. Each of these areas will experience strong growth throughout the forecast, led by cognitive applications with a five-year CAGR of 69.6 percent, IDC predicts.

On a geographic basis, the United States is the largest market for cognitive/AI spending with 2017 revenues totaling nearly $9.7 billion. Europe, the Middle East and Africa (EMEA) is currently the second largest region, but strong spending growth from Asia/Pacific (including a 107% CAGR in Japan) will move it ahead of EMEA by 2020.