Winner Take All in Mobile Apps

Facebook and Google hold the top-six spots for usage among U.S. mobile users,  and eight of the top-10 slots. That matters because, in a winner take all market, only the few leading firms reap the returns.

U.S. consumers spend 90 percent  of their mobile app time in their top five apps, making up 51 percent of total digital time spent overall, comScore reports.

source: Business Insider

5G Might Generate $3.5 Trillion in 2035

In 2035, when 5G’s full economic benefit should be realized across the globe, a broad range of industries – from retail to education, transportation to entertainment, and everything in between – could produce up to $12.3 trillion worth of goods and services enabled by 5G, a study conducted by Berkeley Research Group forecasts. 

The 5G value chain itself is seen as generating up to $3.5 trillion in revenue in 2035, supporting as many as 22 million jobs. 

Over time, 5G will boost real global GDP growth by $3 trillion dollars cumulatively from 2020 to 2035, roughly the equivalent of adding an economy the size of India to the world in today’s dollars, the researchers predict.

Value Shifts in Auto Industry are an Opportunity for Telecom

Shifts of value within the ecosystem are happening in virtually every industry touched by the internet and software. In the telecom industry, value has shifted from “access and transport” to “applications.” That is happening in the automobile industry as well, with a difference. In the communications business, access providers struggle to maintain relevance.

In the automobile industry, as in other industries, access providers have a chance to gain relevance.

In the automobile industry, shared of ecosystem revenue are shifting from “vehicle sales” to applications and services. More important, shares of profit are shifting even faster, away from vehicle sales and aftermarket, and towards mobility and apps.

If you want to know why 5G matters, a chance to earn new revenues, from new customers, using new applications, is among the key reasons.

source: strategy&

source: strategy&

source: strategy&

5G Fixed Wireless Could Add $1.8 Billion in Consumer Segment Revenues

Even if service providers in most parts of the world will not see the opportunity in such terms, AT&T, Verizon and possibly other service providers see significant upside in fixed 5G deployments, for obvious reasons.

In the U.S. market, fiber to the home has remained a tough business case, given generally lower population densities across much of the United States, as well as the certainty that at least half the investment will be stranded, immediately. So 5G fixed wireless could allow AT&T and Verizon, for the first time, to supply gigabit per second internet access connections in many areas where the fiber-to-home business case has not worked.

Quantifying the potential upside is the issue. One way is to calculate the amount of account loss 5G fixed wireless could address.

In the second quarter of 2017,  U.S. telcos lost at least a net 233,260 internet access accounts, according to Leichtman Research Group. But most of those losses were from a few telcos other than AT&T and Verizon.

Between them, AT&T and Verizon lost only about 32,000 accounts in the second quarter of 2017. So a first-order impact of 5G fixed wireless would be a halt to those losses.  

If AT&T and Verizon merely halted 75 percent of those fixed network internet access account losses, that would represent annual gains of about 96,000 accounts.

Assuming those saved accounts represent monthly gigabit access revenue of $70, each such account represents $840 in annual revenue, or about $80.6 million in revenue.

If AT&T and Verizon were able to erase all the losses, that implies revenue upside of nearly $107 million, from avoided losses of 128,000 accounts.

If AT&T and Verizon did better, and actually gained 231,000 net new accounts (splitting those gains with cable TV operators), the annual revenue impact would be about 359,000 net new accounts.

That might represent $301 million in net new revenue, plus avoided losses of $80.6 million, for a total revenue swing of about $408 million, incrementally.

But that is not the biggest impact.

Considering only AT&T, which had in the second quarter about 15.7 million internet access accounts in service, what is the impact of being able to provide gigabit internet access using 5G fixed wireless?

Assume four million AT&T customers still are on all-copper access lines. Assume half those lines can be upgraded using 5G fixed access in the relatively near term, and that half those locations decide to upgrade to 5G fixed wireless.

That could mean two million additional passing, and perhaps a million additional accounts. At $70 a month, that implies additional upside of about $840 million for AT&T.

So internet access upside could amount to perhaps $1.24 billion annually.

For AT&T, which has a consumer internet access business generating a bit under $2 billion per quarter, $7.6 billion annually, those gains could amount to a boost of about 62 percent. That is huge.

But there is more. Once gigabit access is available, linear and on-demand TV services can be sold to the accounts. Assume a net gain of about 1.2 million accounts because of 5G fixed wireless, in the near term.

Assume half those customers buy a linear video service. That is an incremental 600,000 accounts. At $80 a month ($960 per year), that adds perhaps $576,000 in incremental video revenue.

That implies perhaps $1.8 billion in incremental new revenue generated by 5G fixed wireless, for AT&T alone.

AT&T Expands 5G Fixed Wireless Trials

AT&T expects standards-based deployment of fixed 5G as early as late 2018.

AT&T is expanding its fixed wireless 5G trials to business and residential customers in Waco, Texas; Kalamazoo, Michigan; and South Bend, Indiana by the end of 2017, after tests launched in Austin in June 2017.

In tests so far, AT&T has seen speeds up to 1 Gigabit per second and latency rates well under 10 milliseconds for the radio link at customer trial locations in Austin.

AT&T expects commercial equipment to be available within six months of the completion of the 5G Release 15 standard. In contrast, LTE equipment wasn’t available for a year to 18 months after the LTE standard was complete, says AT&T.

In 5G Evolution metros AT&T has upgraded cell towers with network upgrades that include LTE Advanced technologies like 256 QAM, 4x4 MIMO, and three-way carrier aggregation.

By the end of 2017, AT&T expects to deploy LTE-License Assisted Access and four-way carrier aggregation in certain areas of 5G Evolution metros.

AT&T recently tested LTE-LAA technology in San Francisco where peak speeds of more than 750 Mbps were obtained.

U.S. Mobile IoT Connections Up 11% Year over Year

AT&T is the leader among U.S. carriers when it comes to internet of things connections, according to Compass Intelligence. The carrier ended the second quarter with 33.7 million IoT/machine-to-machine connections, a four percent increase from the first quarter, and more than twice the number of connections reported by Verizon and Sprint combined.

Verizon ended the second quarter with 18.2 million connections and Sprint has 13.2 million. T-Mobile US had an estimated 4.6 million IoT connections, down 22 percent from the first quarter, according to Compass Intelligence.

As a group, the four nationwide U.S. mobile service providers have added an estimated 7.5 million IoT connections within the last year, an increase of almost 11 percent.

AT&T’s IoT  connections are up 16 percent, Verizon’s connections higher by eight percent and Sprint’s IoT accounts up 20 percent. T-Mobile’s number of IoT connections appears to be down 11 percent over the last year, based on the Compass Intelligence estimates.

Unlimited Offers Simply Push Competition Elsewhere

Mobile service providers generally detest competing on the value of their internet access packages, the reason being that offering bigger--and unlimited usage allowances--typically means consumers will use more, creating more demands for capital investment to support the higher usage.

At the same time, revenue per unit sold drops. That tends to hit profit margins, if not revenue.

Also, major competitors simply match any popular new offers, so no particular retail package offers sustainable advantage. For example, in any markets where all the leading providers offer “unlimited usage,” that feature recedes as a source of advantage, since all the suppliers offer the feature.  

Ironically, when all the key suppliers move to any single lead offer--unlimited usage, for example--competition necessarily shifts to other aspects of the offers.

Not only does the adoption of any key feature nullify chances for business advantage, it also shifts combat to other realms.

In the U.S. mobile market, that now possibly means competitive advantage shifts to features such as headline speed. And that, you guessed it, is an area where sustainable advantage will not exist, as all the suppliers eventually will match any offers that threaten to give another competitor sustainable advantage.

The other problem is that there are diminishing returns to a strategy based on “ever-faster” speeds, given the higher capital investment and the certainty that competitors will match--or exceed--those speeds. Higher investment, in other words, does not lead to sustainable advantage.

If all the four leading U.S. mobile operators offer “unlimited usage” as a lead offer, that means consumers will make decisions on other elements of the offer: price, headline speed, device discounts or other aspects of the experience.

In fact, according to a recent survey conducted by Business Insider Intelligence, 84 percent of respondents agreeed that a high-speed mobile network is the most important offering to consider when selecting a mobile provider.

Just 68 percent reported that unlimited data was “extremely important.” In other words, you might argue, the shift to unlimited offers by all four leading operators, whatever that means for capital investment and usage, has simply shifted consumer buying criteria elsewhere.

And that “elsewhere” includes “lower price” and “higher speed.” The former hits profits, but so does the latter, as it requires higher capex.

source: Business Insider