AT&T to Launch Mobile OTT Service in 2018

AT&T plans to launch its own mobile-centric, over-the-top streaming solution that is access provider agnostic, with a planned commercial launch in 2018.

AT&T is going to build on its DirecTV Now service and then have it available as “the primary service” in a home.

Operationally, customer acquisition costs could be lower than linear services. Provisioning costs will absolutely be lower. There will be no need for truck rolls, drop cable installation, decoders and outlet installation. There will be virtually nil trouble tickets created because customers have decoder problems.

Also, in the same way that DirecTV allowed AT&T to sell linear video virtually nationwide, for the first time, so mobile streaming service will be available nationwide, without the specific need to add new facilities, as the service will use a “bring your own broadband” approach.

At least initially, the mobile OTT offer will aim to please potential customers who do not wish to buy a traditional linear video service. That target audience is about 20 million U.S. households. One virtually-certain feature is a skinnier bundle, with a lower price, possibly between $30 a month and $60 a month. Linear “big bundle” packages tend to cost between $80 and $100 a month.

There will be other upside as AT&T deepens its media activities.

For many participants in the media business, advertising is the sole or primary revenue source. For others it is a key revenue source, even if direct end user subscriptions are the major revenue driver. Both Verizon and AT&T now believe advertising will be a significant revenue contributor.

AT&T believes a key advantage of its content plus distribution strategy is the ability to create a new targeted advertising capability, according to Randall Stephenson, AT&T chairman and CEO.

“Within AT&T and DirecTV, we have an inventory of advertising that we sell every year, about 200 billion impressions that we sell every year,” said Stephenson. “Time Warner has 750 billion impressions that they sell every year predominantly through Turner networks.”

In other words, AT&T soon will have about a trillion impressions per year to sell. Just as important are the new targeting possibilities. AT&T says it is able to sell about two to three times the targeted advertising that Time Warner is able to sell. So simply creating a targeted ad capability for Time Warner inventory could yield big returns.

Comcast's distribution business (cable TV operations) generates about two percent of total revenue from advertising. On the other hand, its NBCUniversal unit (which contains the programming networks) generates more than 31 percent of total revenue from advertising.

New Telecom Infra Project Team Effort on Fixed Wireless, Backhaul, Smart City Use Cases

Facebook’s work on “Terragraph,” a fixed wireless  network using millimeter wave spectrum, multiple input, multiple output radios (MIMO), mesh networking and open source licensing now forms the foundation for a new development group called the Millimeter Wave (mmWave) Networks Project Group, co-chaired by Deutsche Telekom and Facebook.

Lead applications include:

• Fixed wireless access
• Mobile backhaul
• Smart city applications

The mmWave group will use data and lessons learned from Facebook’s Terragraph solution, a proof-of-concept system that overcame the signal range and absorption limitations that previously confined the 60GHz frequency to indoor use, Telecom Infra Project says.

The proposed architecture has many similarities to a “fiber to light pole” design, where highly-distributed radio sites (small cells) are the “access” network launch points. Verizon’s deep fiber design calls for extending the fiber trunking network to nearly every light pole, potentially.

The mmWave network architecture being developed by Telecom Infra will not require fiber distribution that extensive, as it is designed to rely on a relative handful of optical nodes, and primarily uses the mesh radio network to distribute signals to most small cells.

That feature is designed to minimize capital expenditure on fiber distribution.

The mmWave group will focus specifically on use of the 60 GHz frequency band, expected to remain unlicensed. That also helps minimize distribution network costs.

Disney Plans to Cannibalize Itself

As the video entertainment market shifts to over-the-top distribution methods, content providers will face a problem telcos are well aware of, namely revenue issues caused by product substitution.

Much of the cost to Disney of launching its new streaming services will come from increased operating costs, as it will have to market itself, instead of relying on its distribution partners to do that. UBS has estimated that cost at about $806 million annually.

That is not even the biggest cost, though. As many legacy product providers often find, new products often simply cannibalize existing products.

When an internet service provider using digital subscriber line shifts to newer platforms such as fiber to the home, it loses a DSL account for every existing customer it converts to a fiber access. So net gains are the issue, as a telco trades lost DSL accounts for new fiber accounts.

That problem is obscured a bit by the fact that few telcos in the U.S. market have completely replaced their copper access lines. So, in some areas, there is not an opportunity to even swap fiber lines for copper lines.

That is akin to the problem Disney will face in “going direct” to consumers with its content.

Unlike third-party distributors, Disney does not have a “cost of goods” line item, as it owns its own content. That is a huge plus.

On the other hand, Disney will have a huge “lost revenue” problem, as it loses licensing revenue presently earned by supplying third parties with Disney content. That is very much like the “fiber for DSL” problems faced by telcos. Creating the new platform necessarily causes losses on the old platform.

UBS estimates that Disney’s film TV licensing alone could suffer a $2.1 billion a year loss, and that its streaming licensing through services like Netflix might all $500 million in additional current revenues.  

source: UBS

So before the Disney streaming services can hope to achieve breakeven, they start with a potential loss of up to $2.6 billion in annual lost current revenues from licensees who will not be able to buy that content from Disney. It is a high hurdle.

UBS estimates Disney must find  32 million customer accounts, at a $9 a month subscription fee, to reach breakeven on an operating basis. Though Netflix has 100 million accounts globally, Netflix is unusual. Most of the network-specific streaming services have single-digit million accounts, at least so far.

HBO Go has perhaps 3.5 million subs, while all the CBS streaming accounts might number about four million.

So the biggest single business problem for Disney is the lost revenue it will incur when it stops licensing its content to other distributors.

U.S. TV Antenna Households Increase to Nearly 16 Million Homes

One sign that consumers are unbundling their video entertainment purchases is the increase in purchasing and use of over-the-air antennas, presumably then combined with subscriptions to one or more streaming services.

A study sponsored by Ion Media and conducted by Nielsen shows the number of broadcast-only homes has increased 41 percent over the last five years, to 15.8 million households.

That shift, in turn, is part of a larger rearrangement of buying preferences in the video entertainment business, which has consumers shifting buying to over-the-top streaming services, reducing or halting the buying of linear services and use of streaming services.

The report finds that broadcast-only homes have a higher percentage of young viewers (median age 34.5) than total TV households (39.6).

Some 39 percent of broadcast-only homes have children in the household, compared to 34 percent of total TV households.

The new reliance on over-the-air antennas is part of a range of other trends including a shift to mobile video, cord cutting of linear video subscriptions, a shift to skinny bundles and use of streaming services.

The shift to use of over-the-air TV is related to a larger problem in the communications business, namely the process whereby products and services become features. In the case of broadcast TV, the shift if from paying for a linear video subscription that also includes the local off-air channels, to buying an antenna to avoid paying for such content access.

Vodafone Has 50 Million IoT Accounts

Vodafone says it is the first global IoT provider to amass 50 million internet of things connections, adding about one million new connections a month, with particularly strong performance in the automotive, healthcare and utilities sectors, Vodafone says.

In 2016, global IoT revenues earned by mobile operators was in the range of Eur 11 billion, according to Berg Insight. Average revenue per connection was Eur 1.40 on average, ranging from Eur 0.30 in some developing countries to Eur 3.00 in developed countries.

Some 56 percent of organizations have integrated IoT data into their existing core business systems such as ERP, cloud hosting platforms, analytics tools, and mobile applications.

About 55 percent of IoT adopters in the Americas surveyed by Circle Research have seen revenue growth by greater than 20 percent following IoT implementation.

Globally, IoT now accounts for 24 percent of the average IT budget,  equivalent to IT spending around cloud computing or data analytics, Vodafone ’s fourth annual Internet of Things (IoT) Barometer Report says.

Pangea Will Come Again: Earth in 250 Million Years

Video Becomes Part of Core Telecom

The global telecom and media market will generate $1.58 trillion in revenues in 2021 from 11.96 billion connections, according to Ovum. Video entertainment largely accounts for the growth, as that product becomes a mobile and fixed service provider core offering.

“Core” telecom revenues have been in the range of $1 trillion annually, in recent years. To sustain those revenues, video entertainment increasingly is seen as a new “core” offering.

source: FCC

Using that example, much of the future telecom service provider revenue growth will come from other applications. Many expect that will happen as new internet of things apps develop, and as service providers are able to create new roles for themselves in those areas.

The United States  will be the world’s largest telecom/media market by revenues, with $402 billion in 2021 generated from 805 million connections.

U.S. revenues will be 25 percent of the global total in 2021, compared to US connections, which will be seven percent of the global total.

China will be the biggest market in 2021, as measured by accounts. China will have 2.4 billion connections, representing 20 percent of the global total, and the second-largest market in terms of revenues, with revenues of $220 billion in 2021.

But growth largely will come from emerging markets. The world’s top ten markets ranked by revenue growth from 2016 to 2021 will be concentrated in the Middle East, Africa, and Asia-Pacific regions. The markets in order of revenue CAGR are Myanmar, India, Kenya, Indonesia, Ghana, Tanzania, Nigeria, Iran, Uganda, and Pakistan.

Mobile will be a big contributor everywhere, but content will be a bigger revenue source in some markets.

In 2021, the mobile market will generate 87 percent of total telecom/media revenues in Africa and 70 percent in the Middle East, compared to 50 percent in North America and 49 percent in Western Europe.

Still, mobile  will dominate the market overall, with revenues of $933 billion and nine billion connections in 2021. Fixed broadband will generate $288 billion in revenues in 2021, ahead of entertainment video at $239 billion and fixed voice at $122 billion.