Sometimes Uber is Cheaper than Owning a Car for Getting to Work

If you have to pay for parking, Uber can be almost as affordable as driving your own car, analysis suggests. Generally speaking, Uber is not a substitute in many western and less-dense areas, but cheaper than driving and parking in many metro areas.

source: NerdWallet

Back to the Future for Networking

It now is rational to argue that the cost of supplying bandwidth, the amounts of bandwidth offered and the cost of building access networks of very-high bandwidth (gigabits per second, with a business model that works) are improving fast enough that orders of magnitude of new demand can be met with orders of magnitude of new supply, at costs far lower than possible in the past.

It also is rational to argue that roles within the access ecosystem are about to become more  heterogeneous, allowing new actors to supply bandwidth, with new business models.

In large part, past is prologue. Recall that the historic division in networking has been at the demarcation point between the wide area “public network” (telcos, cable, satellite, fixed wireless) and the “inside the building” network (local area networks).

To wit, the WAN has been the place where most customers buy service. The LAN has been the realm of private networks owned by the enterprise, the tenants of a building or owners of a business.

In the coming era of heterogeneous networks, that fundamental distinction will remain. The logical preserve of WAN networks (mobile, fixed, satellite, fixed wireless), while the “indoor” space will largely remain the preserve of end users--consumer and business--who “own” their local networks.

That historic distinction has been harder to envision in the era of mobile communications, as “inside the building” use of mobiles has been a contested space. People expect mobile networks to reach inside buildings, but most people and organizations also realize that is an issues, and have learned to lean on their own networks (Wi-Fi, mostly) to improve data connectivity.

Voice connectivity has been a bit more challenging, but IP voice eventually will fix that problem as well.

New protocols will help, allowing entities to build their own 4G or 5G indoor networks  for boosting mobile performance. Other developments, including shared spectrum, will allow privately-owned inside-the-building networks to support 4G and 5G mobile connectivity.

That will allow new thinking about how internet access and mobility services are supporting inside buildings. But that is simply a return to historic practice, where WAN service providers added greatest value outside the building, while owners and tenants essentially built and operated their own internal networks.

Back to the future, in other words.

Google et al Really are the Competition for Major Telcos, Not Other Telcos

For some time now, telecom executives have mentioned in surveys that their main competition  is not other service providers, but over the top app firms such as Google, which now lead markets for content, apps and platforms, and are emerging in devices and infrastructure.

Yet other surveys have executives citing device or other platform suppliers as the top threats, not other service providers.

And yet the typical executive or department head, on a day-to-day basis, likely continues to benchmark performance by other service providers. So mobile operators are obsessive about their market share, compared to other mobile operators. Cable operators tend to benchmark against telcos, fixed network telcos against cable.

Rival satellite providers consider other satellite providers to be the key share benchmarks.

All of that makes sense, yet obscures the primary challenge (some would say the existential threat) to the “telecom” industry, namely the shift of value away from access to applications, and the ability of app platforms and providers to subsume access functions and vertically integrate.

It would be correct to say that app provider strategy includes vertical integration, allowing the firms to better control both their supply chains as well as reducing cost.

For example, 60 percent of trans-Atlantic traffic now runs over privately-owned and operated undersea networks, not over public telecom networks. One way of describing this is to say that 60 percent of international traffic on those routes has been removed from the telco addressable market.

Google and Facebook already have moved into public Wi-Fi, fixed network access, mobile services, satellite services, access equipment standards and ways to subsidize internet access.

But that is only part of the story. The leading app and platform providers have emerged as the leading forces in cloud computing as well, with a growing role in devices.

Devices, in fact,  are among the building blocks of Google’s growth strategy, to be built on Google, cloud, hardware and YouTube, Google says.

Hardware revenue, though still included in the “other” revenue category, grew 38 percent in 2016 and seem to have doubled in 2017.

The commercial reason behind Google’s emerging business model appears to be the value that a single company can create if it combines content services with network hardware, many would argue.

One way to create this value is by aligning networks with content.

And that is the reason why Comcast’s acquisition of NBCUniversal was so instructive, and why AT&T wants to buy Time Warner. If your primary competition is app firms with network assets, then telcos likewise need to become app providers with access network assets.

That is seen first in entertainment video, but will deepen in other areas, such as internet of things. In that sense, the U.S. Department of Justice effort to block the AT&T acquisition of Time Warner is misguided. That would block a necessary step AT&T must take to survive the competition with the leading app providers.

In other words, the “relevant market” is no longer “telecom services.” The walls between content, media, access and communications are evaporating. Firms such as AT&T must vertically integrate, as their most-important competitors are doing.

Will Cable Have 72% Fixed Network Internet Access Share in 2022?

Some 37.2 million U.S. households will buy only internet access, and drop subscription TV services by 2022, according to Kagan Research, a media research group owned by S&P Global Market Intelligence. Some 19 million U.S. households already are broadband-only, the firm says.

By 2022, about 38.4 percent of cable or telco households buying internet access will rely mostly on a combination of broadband and over-the-air broadcast signals for home video entertainment, Kagan Research estimates.

Kagan expects broadband-only homes will grow at a 14.4 percent compound annual growth rate from 2017 to 2022, representing about 29 percent of U.S. occupied homes.

But more than 60 percent of occupied U.S. homes still will buy multichannel video packages, Kagan estimates.

Kagan also estimates that U.S. cable operators will have some 70 million internet access accounts in 2022. That is an interesting figure.

Assume there will be about 136 million U.S. homes in 2022. Assume 95 percent are occupied, leaving a base of about 129 million occupied housing units.  Assume fixed network residential internet access adoption is about 75 percent in 2022.

That makes the total market about 96.75 million locations. If the Kagan forecast is correct, then cable might have 72 percent market share in 2022.

At the moment, cable has about 64 percent market share.

That requires some interpretation, though.

It is unlikely that cable operators facing Verizon or AT&T will do that well. At a high level, cable market share--where the cable operator faces AT&T or Verizon,  could stabilize at about 60 percent.

The reason for that belief is that AT&T and Verizon appear not to be losing market share against cable, and that is before the upgrades by AT&T to gigabit networks, and before Verizon starts to launch new assaults out of region.

It might also be within reason that as AT&T and Verizon increasingly offer gigabit access across broader footprints, and independent providers also take some share, that cable’s share could drop to 50 percent or maybe less, as Comcast, Charter, Cox and a few others find themselves competing against both Verizon and AT&T in some markets, plus a handful of other independent providers.

That development would also assume that new bundles marketed by AT&T and Verizon, plus use of new forms of wireless access, also were successful ways both firms potential grew share.

Researchers at PwC have estimated U.S. fixed network revenues will reach about $60 billion in 2021. That might be low.

Even if the average account generates only $50 a month, or $600 annually, 129 million accounts implies a market of about $77.4 billion. If one assumes average prices (gigabit and higher speed tiers) might sell for $70 a month, or $840 annually per account, then revenue could reach $108.36 billion.

source: PwC

AI Might Have High Impact in Telecom Networks

It often is difficult to explain how and why  artificial intelligence, as used by telecom and internet service providers, matters. But AI has been used in telecom, in some ways, for as much as a decade.

AI seems essential for operating virtualized networks and already is being used for customer service applications and call centers. Self optimized networks that can reconfigure themselves for better performance without manual intervention are a prime example.

That noted, most professionals in the industry will have little immediate need to make decisions about AI, or perhaps even encounter applied AI in their daily activities.

Beyond that, decision makers who must authorize spending on AI also face issues.   

One problem is that  AI most often is a process or feature used by applications and networks, not ever a retail end user service or app. End users and customers cannot actually discern when and how AI improves their service, apps and experiences.

The other problem is that applied AI does not actually lead in a direct way to incremental revenue growth, either. As with other features such as voice control or Wi-Fi access, AI can enhance existing products, provider higher perceived value,  improve stickiness, reduce churn or ease new customer marketing efforts.

But it is difficult to quantify those effects. AI, when applied to processes, apps or services, does not produce a direct uptick in sales or revenue.

Over time, fee-based services could develop, but it always has been difficult to move customers or users from free products to higher-value paid products. That will be true in both for-profit and nonprofit settings.

That noted, AI might have some of the highest possible impact in the telecom industry, McKinsey consultants believe.

source: McKinsey

source: McKinsey

A La Carte Seems to Work, Despite Business Model Concerns

One of the more dangerous statements in the internet or telecom businesses is that something “cannot be done.” That was said about the business model and demand for gigabit internet. We now routinely do lots of things once believed to be impossible.

One has to translate. When a talented engineer says something is "impossible," it means the speaker honestly believes something cannot be done, because "we cannot, with our known technology, do so."

That might not be the same thing as saying "nobody else can do this."

I once heard a proposal made that a high-definition TV signal could be squeezed into 6 MHz of bandwidth. At that time, it was believed something like 20 MHz or more would be required.

The room literally exploded with verbal disbelief. As it turned out, the proposal was right, and HDTV now is delivered in 6 MHz.

On another occasion, I was quietly informed by some very senior Bell Laboratories engineers that an analog fiber optic access network "could not" deliver 40 cable TV signals, as cable industry engineers were saying was a minimum requirement for cable network fiber optic access systems. The reason for the belief was that lasers capable of doing so could not be produced.

As it turns out, it was entirely possible to produce lasers with characteristics that would allow delivery of 40 channels of analog TV on a single laser, at reasonable distances. When those engineers said "it could not be done," what they meant was that "we cannot do so."

The point is that lots of things we once believed were impossible are, in fact, quite possible. Among those impossibilities is the financial success of single a la carte TV networks, delivered direct to consumers.

Many argued that the business model would not work. As it turns out, that seems to be incorrect. So far, HBO Now, Starz, Showtime and CBS seem to be growing subscription volumes significantly. At some volume, the economics of “going direct” will work.  

source: Business Insider

5G is All About the Business Model

It is quite fair to note that the 5G business case is a work in progress. That is to say, nobody can be quite sure how well suppliers of 5G services will be able to generate significant incremental revenue, beyond “more bandwidth.”

It is true that end users consume more bandwidth every year, and every decade, and that supply (typical consumer network internet access speed) increases about 42 percent every year.

The question is whether internet service providers can monetize that usage, since capacity increases grow faster than incremental revenue. “New technologies mean declining prices, even as capacity grows,” notes Armand Musey, Summit Ridge Group founder.

In other words, if supplying 10 times more bandwidth means 10 times more capex, is there a business model, Musey asks. Beyond that, with use of new untethered and wireless access using unlicensed spectrum, especially indoors, is it at all clear that mobile operators are even the eventual suppliers of most of that bandwidth, asks consultant Bob Horton.

On the other hand, notes Zayo Technologies CTO Jack Waters, technology costs have dropped by orders of magnitude over past decades, so capex requirements per new unit of capacity are not linear.

Still, notes Kalpak Gude, Dynamic Spectrum Alliance president, who pays? In other words, what is the business model for any of the coming next generation networks? “Much of 5G sounds like internet of things, and IoT is mostly going to use fixed access,” Gude argues. “Where’s the value?”

source: Technology Futures

But 5G arguably is different in several ways. It will be the first mobile network generation where incremental revenue will come from non-human customers. And though some remain skeptical, 5G is viewed at AT&T as a replacement or substitute for the fixed network.

In fact, the 5G use case Randall Stephenson, AT&T CEO is “most excited about is the opportunity to have nearly, a nationwide broadband footprint and it could be a fixed line replacement.”

Of those attributes, it is the nationwide, gigabit everywhere angle that is most strategic. Up to this point, though mobile operators have had nationwide coverage, no provider of fixed network services has been able to reach more than a fraction of U.S. households and business locations.

For the first time, 5G means firms will have the ability to reach most customer locations with gigabit internet access speeds, on networks that will take only a few years to build, not decades. Also, regulatory barriers have prevented any fixed network firm from trying to reach nearly 100 percent coverage of consumer locations.

“The capacity is there, the performance is there, there's going to be full gigabit throughput,” Stephenson says.

As you would expect, given the lack of 5G handsets, fixed or nomadic applications and internet access are going to be the earliest-possible opportunities, as was the case for early 4G.