Technologies of Freedom

It now is a given that media, communications, content and delivery are converging, erasing former clear lines between industries and functions. That has important consequences.

And some ideas, even if abstract, really do matter, in that regard. Freedom, responsibility and fairness always come to mind, given my academic training in journalism. It now appears, for a variety of reasons having nothing much to do with those ideas, that freedom is imperiled.

Ironically, it is the leading app providers that now face threats to their freedom, as there are growing calls to “regulate” them in greater ways, globally.

Let me be clear: my own position has for decades been that more freedom for all in the ecosystem works best, and is the preferred approach to policy. Those of you who ever have read Technologies of Freedom will understand why.

Responsibility and fairness also are requirements, but something that has to happen at the personal, firm and industry level. Yes, this can be done “to” people, firms and industries, by government fiat. But freedom is the preferred course.

In a world where formerly-distinct endeavors and industries really are converging, we have a choice: extend freedom to former highly-regulated entities who now operate in entirely-new realms where freedom is the policy (First Amendment protections), or remove freedom from content providers and make them “utilities.”

The bigger challenge right now is getting the transition right. Somehow, we need to balance regulatory models, away from “utility” and “common carrier” regulation for app providers, but also away from such regulation for firms that now participate in activities that increasingly are inseparable from traditional First Amendment protected ideas, content and media.

At the same time, major app providers already operate as “access providers,” though without the obligations imposed on only a few access providers.

Some now are arguing essentially for “less freedom” for Facebook, Google, Amazon and others, and “even less freedom” for access providers who--despite becoming content providers at their core--deserve freedom no less than any other content provider.

The better policy is to extend the realm of freedom further, not restrict it. In other words, when harmonization is required, it is better to extend freedom to formerly-distinct industries (broadcast TV and radio, cable TV and other distribution entities, even telcos).

Yes, debates about First Amendment protections are abstract. But they are fundamental and consequential, when our old ways of regulating (freedom for media; some regulation for broadcast; common carrier for telcos) need changing, as the spheres converge.

We can take away freedom, or we can extend it. As argued in Technologies of Freedom, more freedom is the better course.

Fort Collins Colo. to Build Own Gigabit Network

The City of Fort Collins will build its own retail municipal broadband network. The city expects to build the entire network over three to four years.

Target residential pricing is  $50 per month for 50-Mbps service, and $70 per month for 1-Gbps service.

An “affordable Internet” tier also will be offered, the business plan says. The city expects to borrow between $130 million and $150 million to fund network construction and activation.

The city estimates a cost per passed home to be $984, with the cost to connect a customer location at about $600 each.

It is obvious that most of the customers will come from one of the two dominant providers, Comcast and CenturyLink, as more than 91 percent of households already buy a fixed network internet connection.

Comcast has about 57 percent market share, while CenturyLink has about 37 percent share, the city says.

Comcast already has launched gigabit services in Fort Collins, ahead of the municipal network launch.

City consultants estimate the new municipal network could get as much as 30 percent share of market. That is based, in large part, on experience. Other municipal networks have gotten share in about that range.

One caveat is that it is unclear how the other networks measure penetration. One way is to count by connected homes. The other method, where a network offers multiple services, is to count “units sold” and then divide by the number of households.

source: City of Fort Collins

In such cases, the actual number of connected homes is less than the penetration figures would suggest, as a single home, buying three services, generates three revenue units. When measuring penetration rates, that has the same impact as three homes buying one service.

So some of us would guess that the actual household penetration can range from less than 20 percent to perhaps 35 percent.

Much also will hinge on what Comcast and CenturyLink decide to do to hang on to existing customer accounts.

Comcast’s gigabit pricing originally was set at  $159.95 per month without a contract, and $110 per month with a one-year contract.

But few might predict Comcast is willing to lose huge chunks of market share rather than lower its prices to about $70 a month (or whatever level is needed to remain competitive with the municipal network).

Comcast has offered $70 a month pricing in other markets where it faces serious competition for gigabit internet access.

source: City of Fort Collins

Some idea of operating costs (exclusive of marketing) can be seen in estimates for personnel.

source: City of Fort Collins

The larger point is that more competition in the internet access space keeps coming, despite fears of a duopoly and limited consumer benefits. For most potential consumers, the real options are going to be mobile services, though, as 5G services are launched nationwide.

Mobile Substitution for Video and Internet Access is Coming

Mobile substitution, initially cannibalizing fixed network voice, now is on the cusp of taking usage away from subscription video and internet access as well.

T-Mobile could bypass the fixed broadband provider in the home and also enhance indoor wireless coverage, BTIG analyst Walter Piecyk thinks, as T-Mobile US launches a proposed video subscription service.

Mobile substitution has been growing for decades. Few now remember it, but the AT&T Digital One Rate plan--which abolished the difference between domestic local and long distance calls--fueled the switch to mobile voice, which already had been underway.

source: areppim.com

It can also be argued that Digital One Rate eliminated the difference between fixed and mobile voice usage entirely.

And one can argue that mobile substitution was precisely the plan.

Some at the time criticized the plan, but the elimination of distance as a cost barrier to domestic voice communications further boosted the value of mobile voice. Notably, consumers liked the service so much they temporarily boosted usage enough to cause network congestion.

Recall that also happened when AT&T launched the Apple iPhone, and more recently as demand for its DirecTV Now service has caused congestion issues.

It is no coincidence that long distance minutes of use and use of local networks for consumer calling began to fall right around the time Digital One Rate was launched.

In the U.S. market, domestic long distance began to fall in 2001, about two years after Digital One Rate was introduced, and then matched, by the other mobile service providers.Voice revenue fell in tandem.  

The key observation is that, every now and then, a huge shift in technology, retail pricing and packaging, new devices and new application use cases can radically reshape communications markets. As mobility has become the preferred way for consumers to use voice, it might increasingly become a preferred way of consuming subscription video and internet access as well.

5G Marketing Wars Heat Up

AT&T says it will be the first U.S. mobile operator to launch mobile 5G--in a dozen U.S. cities--in 2018.

T-Mobile US says it will launch the first commercial mobile 5G network in 2020, when, he argues, AT&T and Verizon will still be focused on fixed implementations of 5G.

Verizon, for its part, plans to launch fixed 5G in several U.S. cities in 2018.

Some observers say no 5G networks going commercial before 2020 are “true standards-based 5G.” Consumers will not care, of course, so long as there are performance advantages. And even the claim of “non-standard” implementations are judgment calls.

International standards bodies have authorized the 5GNR systems AT&T will activate in 2018.

Recall similar arguments about 4G, when there were both “global standard” Long Term Evolution and WiMAX networks in operation, and some might have quibbled about whether WiMAX was really 4G.

But marketing wars always are fought over concepts such as “which network is fastest?” They also are fought over “which firm operates the most-advanced network?” Hence the marketing claims being made about the timing of 5G launches in the U.S. market.

In the end none of this will matter, as important as “leadership” now will be claimed, just as nobody now cares about who was “first” to deploy 4G (Verizon), or how the implementation began (Verizon and others started with data cards only, as no mobile phone devices initially were available).

Sprint, for its part, used WiMAX. Customers still bought it, as it represented faster speeds, compared to 3G.  

As always, there are commercial drivers of all such claims. For starters, it is no clear at all that Verizon and AT&T will not have launched mobile 5G services by 2020, even if their 2018 and 2019 efforts might focus on fixed implementations.

http://www.gsmhistory.com/5g/final-coverage-versus-capacity/

Also, different contestants have assets that lead them to deploy in certain ways. As T-Mobile US says, it has lots of new 600-MHz spectrum that can underpin a 5G launch. Verizon arguably is the most capacity-constrained contestant, and is relying on new troves of millimeter wave spectrum (28 GHz and 39 GHz), which are better suited to small cell deployments, and therefore fixed implementations.

T-Mobile US, on the other hand, will launch mobile 5G most likely in only some areas of the country where it has spectrum shortages, and not nationwide.

As most spectrum-related business issues revolve around whether new capacity is used to support coverage or capacity, it might be argued that T-Mobile US is going to focus on coverage, while Verizon is going to focus on capacity.

In substantial part, those decisions are based on physical signal propagation characteristics of radio waves. Lower frequencies have better reach, but offer less capacity; higher frequencies propagate less well, but support higher bandwidth.

Verizon and AT&T also will be refarming 2G and 3G spectrum to support their coverage and capacity. In that regard, both AT&T and Verizon will be boosting 4G capacity, to support higher consumer access speeds.

That, in turn, represents one of the key 5G business model issues: for consumer smartphone end users, it will not matter whether 4G or 5G is the platform, so long as faster internet access is possible.

Ultimately, marketing claims aside, AT&T, Verizon and T-Mobile US will carefully deploy new capacity, whether augmenting 4G or launching 5G. For consumer smartphone users, the advantages of 5G as a platform are likely to be quite subtle, or perhaps non-existent, where it comes to experienced speed.

Better 5G latency performance might not be noticeable or valuable in most instances, as 4G latency performance should get better as well.

The bottom line: each carrier will deploy new assets in the way that drives most incremental value, and likely not on a ubiquitous basis, initially.

As Device, App, Platform Providers Move Down the Stack, Can Telcos Move Up?

The biggest business problem telecom service providers face is use of the internet, and internet protocol, as the core of the network. The issue is not technology, but the business model. By separating use of the network from ownership of the network, telecom has lost the ability to “control” applications running on the network, fears voiced by many notwithstanding.

That loss of control means inability to generate revenue.

“The role that telecom operators have played in accelerating digital business and service models for external industries, as well as their own initiatives to refocus business models, have not translated into new value for the operators themselves,” says a report by the World Economic Forum. “They now account for a smaller portion of the overall industry profit pool than five years ago and this share is forecast to fall even further.”

source: WEF

Telecom service provider share of the broader internet profit pool (including all other segments of the ecosystem, such as devices, apps and over-the-top services) declined from 58 percent in 2010 to 47 percent in 2015, and is forecast to drop to 45 percent in 2018, says the World Economic Forum.

That is a change from historical reality, where the telecom service providers were the center of their own ecosystem. Today, internet access (and therefore a goodly portion of the former “telecom” industry) is a part of the internet ecosystem.

That is a historic change: legacy connectivity revenue is shrinking and therefore access providers are forced to look for big new revenue streams beyond connectivity.

The big problem. In a nutshell, is the positioning of the potential opportunities. As the WEF sees matters, the issue essentially is the ability to capture X percent of new digital revenues to be created across the ecosystem.

Though opportunities to move “up the stack” are not evenly distributed across all telecom segments and firms, big retail providers will have to do so.

Keep in mind that app, software and device suppliers are themselves moving “down the stack” into parts of the ecosystem traditionally dominated by “access providers.”

source: WEF

2018 Global Telecom Revenue Trend is Unclear

Whether the global telecom industry will see revenue growth or revenue decline in 2018 is unclear. Analysts at the Economist Intelligence Unit expect a two percent decline in global revenue in 2018. Others expect slight growth, overall.

Older forecasts have tended to predict continued revenue growth. The issue is whether trends  are breaking, in an industry that has seen only growth for over a hundred years.

Fixed line voice accounts peaked between 2000 and 2003 in most developed markets, for example. Long distance revenue peaked in the U.S. market about 2000 as well. Mobility drove growth for the past few decades, globally but account saturation in developed markets has generally been reached.

According to the Organization for Economic Cooperation and Development, 2008 broke the growth trend as that apparently saw peak revenue, at least on a short term basis (seven straight years).

The hope, of course, is that big new sources of revenue will emerge in the 5G era, particularly related to internet of things apps and services. But we are years away from assessing the validity of such hopes.

In the meantime, developing Asia will continue to see stronger growth, while Europe probably will decline further.

source: OECD

The Most Fateful Decision Made by Telecom Two Decades Ago

It has been nearly two decades since there was any serious debate in telecom circles about the choice of a next generation network, when the respective roles of internet protocol and asynchronous transfer mode  were evaluated.

The debate was resolved in favor of IP. Few decisions ever made in telecom have had greater implications. The reasons were almost stunningly simple: ATM proved to be too costly; less flexible; less compatible with the growing need to support IP-based end user devices, apps and services.

The biggest change is that where support for voice had been key, the new requirement was support for computer communications. In essence, the network was to become one giant computing network.

Traditionally, the debate had been about how to ensure quality of service. That was the ATM advantage. QoS for computing communications was a completely separate matter. But it seemed obvious enough that future networks would have to be optimized for computing, not voice, in any case. That clearly was the right call.

source: Edge Lens

Quality of service therefore emerges as a key issue for some applications, especially those which are highly susceptible to packet arrival delays. In choosing IP as the next generation platform, service providers embraced the data future, at the cost of creating some potential issues for latency-sensitive apps.