CenturyLink Faces a "Two Types of Network" Problem

CenturyLink has an interesting problem. It earns most of its money from enterprise and business customers, but it has a consumer communications business that covers the most-rural territory of all the entities formerly known as “Baby Bells.”

In fact, CenturyLink now earns as much as 88 percent of revenues from business customers, and nearly all its profit.

Prior to the Level 3 merger, CenturyLink claimed enterprise, small business and wholesale  revenue would amount to 76 percent of total revenue.

source: CenturyLink

CenturyLink might have as many as 17 million access lines in service. Since it does not report total access lines anymore, it is difficult to say with precision what profit margin contribution now is made by the consumer business, except to note that internet access accounts for about 46 percent of consumer segment revenue, with consumer voice contributing about 41 percent of total revenue.  

So what is interesting is that CenturyLink operates as a business services specialist--akin to a competitive local exchange carrier, metro fiber provider or long-haul capacity provider--but still also operates a huge network of relatively low density consumer access lines.

That means CenturyLink likely makes most of its profits from the business segment, with higher profit margins, compared to the consumer segment. That is not a terribly unusual state of affairs for a tier-one fixed network service provider in the U.S. market with universal service obligations.

More than most tier-one service providers, CenturyLink would really benefit from lower-cost platforms to supply high speed internet access services, without having to install fiber to home facilities in rural areas.

Unlike AT&T and Verizon, CenturyLink does not own mobile network assets that will help, in that regard. On the other hand, perhaps CenturyLink can provide small cell backhaul service to those and other firms.

But CenturyLink faces severe capital constraints. It has grown by acquisition, which means high debt loads. CenturyLink gross revenue also is declining, in both business and consumer segments, and has to pay out a high dividend.

One might argue that among the big strategic problems CenturyLink faces is that it is an amalgam of two different types of businesses: a largely-rural fixed network business using one type of network and a separate enterprise services business that uses different facilities.

source: FCC, CenturyLink

"5G LTE" Illustrates Technology Evolution from 4G to 5G

One way of illustrating the “evolutionary” nature of the transition from 4G to 6G is to note the language now used to describe “pre-5G” developments. Sierra Wireless, for example, now talks about “5GNR” and “5G LTE.”

Some skeptics will argue that neither is “real” 5G; optimists will say such criticisms miss the point. The 5GNR air interface uses 4G signaling, but a 5G-compliant radio. Some internet service providers have pushed for a rapid introduction of the 5GNR standard because they plan to use 5GNR to support new fixed wireless services based on use of the mobile infrastructure.

5G LTE arguably is the bigger stretch, as most would say that is simply the latest release of  LTE Advanced Pro (Release 15). On the other hand, Release 15 features are foundational for standards-based 5G.

Support for internet of things applications (LTE-M, NB-IOT, V2X (automotive) provide examples, adding the ability to support long-battery life, low data rate services that will be key for 5G.  

Also important is use of aggregation capabilities that use both licensed and unlicensed spectrum. Much-lower latency and higher speeds also are key features of 5G that Release 15 will introduce first for 4G.

“it’s important to note that 5G LTE is not a ‘transitional’ technology; as mentioned, it’s an essential part of a true 5G system,” Sierra Wireless argues.

U.S. Fixed Network Speeds Grew About 31% Over Last Year, Cable Speeds Grew Faster

U.S. fixed internet access provider speeds are growing, and arguably poised for faster growth, as leading providers push for introduction of gigabit per second speeds. Year over year, average speeds grew about 31 percent.

Cable TV operators have been in the lead, in terms of average speed. In fact, Comcast speed increases have grown nearly at Moore’s Law rates, doubling about every 18 months to two years, since about 1999.

Comcast was the internet service provider with the fastest overall speeds in the first half of 2017, but Verizon FiOS is moving up, according to Ookla Speedtest. But telcos generally lag cable in terms of highest average speed.

Verizon Fios’s significant spike in download and upload speeds in April directly correlates to their introduction of gigabit tier at an affordable $69 price point, Ookla notes.

The challenge for telcos is to find some way to match cable speed advances; in other words to reach improvement close to Moore’s Law rates.

source: Ookla Speedtest

Unlimited Usage Plans Reshape AT&T, Verizon "Average Speeds"

A widespread shift from fixed-usage buckets to unlimited use should, all other things being equal, boost consumption. And that is what appears to be the case, according to Ookla tests of mobile internet access performance in the first half of 2017.

At the same time, overall speed increased about 19 percent overall. “During the past 12 months, improvements in technology and usage of available network spectrum led to a 19 percent increase in average mobile download speeds in the United States,” Ookla notes. “All four major carriers have boosted download speeds, but not all carriers are improving equally and not all areas of the country are seeing the same benefits.”

In its recent tests, average downstream speed grew to 22.69 Mbps, on average. Average upload speed over mobile improved four percent to 8.51 Mbps.

T-Mobile US clocked the fastest speeds, followed by Verizon Wireless.

source: Ookla

One would expect the greatest impact of increased usage to occur on the AT&T and Verizon networks, since Sprint and T-Mobile US already offered unlimited access plans.

That is what the Ookla data suggests. “Our data shows that in the case of Verizon and AT&T, the percentage of test results with the lowest-end download speeds (those under 5 Mbps) shot up compared to the period before these unlimited data plans were widely available.”

Both T-Mobile US and Sprint are seeing the opposite effect: year over year, there were fewer instances of performance “below 5 Mbps.”

But usage on the AT&T and Verizon networks might not be due to actual congestion, but efforts to prevent congestion. Both firms say they might throttle maximum speeds after some amount of monthly usage by any single account.

Both Verizon and AT&T say unlimited customers may experience reduced speeds if customers exceed 22 GB in a month and the cell site is congested. That could explain the greater percentage of AT&T and Verizon accounts experiencing slower overall speeds.

So the AT&T and Verizon networks may not be saturated; just throttling heavy users.

source: Ookla

How Will UAVs Operating Beyond Line of Sight Be Controlled?

Eventually, unmanned aerial vehicles are going to operate commercially, beyond line of sight, which means a relatively low-cost flight control system has to be created.  Some believe Wi-Fi can accomplish the task, while others believe mobile networks make more sense.

In other words, a parallel air traffic control system, optimized for UAVs, will have to be created.  

Alliance for Telecommunications Industry Solutions (ATIS) naturally argues mobile networks are best optimized for such purposes.

One certainty: the Federal Aviation Administration will be involved, which means all sorts of considerations around flight safety will be foundational, and link reliability cannot be an issue, no matter which radio approach is taken.

Satellites are used to control large drones travelling great distances, but some might argue cost is likely to be an issue for small industrial and retail UAVs.

source: www.expouav.com

How Big a Deal Will Wholesale Be, in the 5G Era?

Wholesale is likely to emerge as a key revenue stream for 5G services, especially using the virtualized capabilities of core and edge radio networks to enable end-to-end private networks by third party customers.

The whole point of operating virtualized networks (network functions virtualization) is to support rapid and easy creation of network services and features, almost on-demand, for internal and external customer purposes. In the 5G era, that will include “network slicing.”

Network slicing allows the creation of customized virtual private networks to support mobile operator offers or wholesale opportunities to support third party applications.

source: www.wballiance.com

And such wholesale opportunities might develop as quite an important revenue source. About 44 percent of industry executives surveyed by GSM Intelligence believe operating as a “platform provider” will be the “primary role” for a 5G network, in both business-to-business and business-to-consumer” realms.

About 41 percent believe the primary role in the 5G era will be as a digital service provider, which might have both wholesale and retail aspects.

Likewise, 31 percent of respondents believe third parties will partner for neutral host services. Another 26 percent believe third parties will partner with 5G operators to offer their own services.

source: www.gsmaintelligence.com

source: www.gsmaintelligence.com

How Big is Service Provider IoT Opportunity?

How big is the Internet of Things opportunity for mobile operators? One has to be careful when big numbers are thrown around.

Internet of Things represents a US$1.8 trillion in global revenue for service providers by 2026, according to Machina Research. That does not mean service providers will earn that much revenue themselves. The $1.8 trillion almost certainly includes the total ecosystem activity, much as “e-commerce” includes the retail value of goods sold, but not direct revenue or profit for any single part of the ecosystem.

Having not read the full study, and without knowing the methodology,  it is hard to say whether the $1.8 trillion includes the full value of all exosystem sales (likely, in my opinion) or something more important for communications service providers, namely mobile participation in connectivity, applications, devices and platform revenue streams.

My guess has to  be that the forecast represents Iot ecosystem revenue, not service provider revenues.

It is hard to see how service provider IoT revenues could be as big a market as $1.8 trillion, simply because global mobile revenues in 2012 were about $1.2 trillion. In fact, GSMA estimates total industry revenues will only be about $1 trillion in operator revenue in 2020.

There is no way IoT, in 2026, generates more revenue than the entire global mobile industry in 2017.

source: machinaresearch.com

The research also indicates that the Americas region will account for an estimated US$534billion, or approximately a third of the total revenue.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 percent of all LPWA connections, Machina estimates.

By segment, consumer demand for connected home will be US$441 billion, consumer electronics will be US$376 billion) and connected car technologies will represent US$273 billion in activity.

However, other areas such as connected energy look set to reach US$128 billion by 2026 as a result of local governments and consumers seeking smarter ways to manage utilities. Similarly, revenues from connected cities are forecast to reach US$78 billion by 2026, Machina Research sys.

Mobile IoT networks are expected to have 862 million active connections by 2022 or 56 per cent of all LPWA connections.

source: Machina Research

source: Machina Research

source: machinaresearch.com/

IoT is crucial, strategic and necessary if the global mobile industry is to replace expected lost revenues from voice and text messaging, as well as slower growth of mobile data services and device revenue.

But IoT will not be as big a connectivity revenue stream as some believe. Success really hinges on mobile service providers becoming key suppliers in other areas of the ecosystem as well.