Mobile Has Enabled More than a Half Billion People to Use Financial Services and Banking

Financial inclusion is among the better examples of how mobile phones are producing positive outcomes in areas other than simple communications.

Some 66 percent of people globally without a bank account do have a mobile phone. In India and Mexico more than 50 percent of the unbanked have a mobile phone; in China 82 percent do.

That represents about 1.1 billion people who can, in principle, use a mobile phone to conduct banking and financial transactions.

Thanks to mobile banking, 69 percent of adults now have an account, up from 62 percent in 2014 and 51 percent in 2011.

In high-income economies 94 percent of adults have an account; in developing economies 63 percent do.

source: World Bank

The Global Findex database reports that 515 million adults worldwide opened an account at a financial institution or through a mobile money provider between 2014 and 2017.

In Sub-Saharan Africa, 21 percent of adults now have a mobile money account, nearly twice the share in 2014, and easily the highest of any region in the world.

source: World Bank

Globally, 52 percent of adults have sent or received digital payments in the past year, up from 42 percent in 2014, the World Bank reports.

The share of adults with a mobile money account has reached about 20 percent or more in Bangladesh, the Islamic Republic of Iran, Mongolia, and Paraguay.

Globally, about 1.7 billion adults remain unbanked — without an account at a financial institution or through a mobile money provider.

Virtually all these unbanked adults live in the developing world. Indeed, nearly half live in just seven developing economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. Some 56 percent of all unbanked adults are women.

"Best Effort Only" Was Never Part of the NGN Vision

Aside from the business advantages opponents in the network neutrality debates may perceive, there also are historic reasons why telecom interests want the ability to provide quality of service features.

Aside from industry culture, founded and built on the notion of “five nines” availability (uptime of 99.999 percent), QoS is, by definition, part of the global industry’s vision of the “next generation network.”

According to the International Telecommunications Union, “a Next Generation Network (NGN) is a packet-based network able to provide services including Telecommunication Services and able to make use of multiple broadband, QoS-enabled transport technologies and in which service-related functions are independent from underlying transport-related technologies.”

Note the key phrase “QoS-enabled.” The ability to provide guaranteed performance is, and has been, a key requirement for telco networks, including the present generation of networks.

You might say that telcos still have the ability to apply QoS to their own managed service (voice, messaging, video entertainment). That was true in an analog environment. It is not so clear that remains true in an IP environment, however. \

Service provider branded voice might feature QoS (Voice over LTE and non-IP digital voice,  for example). But any use of voice over IP or voice over Wi-Fi is not going to have such quality protections.

And as telcos move to supply entertainment video on an on-demand, internet-delivered basis, no QoS is allowable when strong versions of network neutrality prevail. That primarily refers to rules that bar any consumer service provider from applying QoS mechanisms, forcing all packets to be delivered “best effort.”

Again, the point is simply that the global vision for an NGN has been a network that is packet based, QoS enabled and which separates transport from apps.

Without QoS, telecom interests are always going to believe the vision is incomplete. Of course, for the better part of a decade, strategists debated the merits of ATM and IP as the foundation of the coming future network. ATM, by definition, it was argued, supported QoS, while IP was, also by definition, “best effort.”

Eventually, business model issues won the day: ATM interfaces were simply too expensive, and too complex, compared to the cost and simplicity of an IP interface. But proponents tried everything, including encapsulating IP over an ATM infrastructure, to try and keep ATM alive.

source: Iceland Telecom

Will NFV Eventually Enable Third Party Competition?

Network functions virtualization (NFV) is a major way network operators can create new capabilities while lowering cost. In that sense, NFV is a tool used by network owners.

But NFV also could be a way for third parties to federate multiple networks. In some cases, that could essentially allow entities to create their own virtual networks out of capacity sourced from multiple physical networks.

Source: Nokia Bell Labs

If you think about it, even without using NFV, Google Fi combines access assets of Sprint, T-Mobile US and any local Wi-Fi as the foundation of its mobile phone service.

Google Fi already federates Wi-Fi, Sprint network and T-Mobile US network access assets in support of its mobile phone service.

Ultimately, what matters is whether the additional value of federating assets is high enough to outweigh the costs of leasing access on the underlying mobile networks, in relation to the business value contributed by the actual phone service.

It is commonplace to hear arguments that owner’s economics eventually become necessary for any leading mobile service provider. Whether or not that is true for all future leading mobile providers is an open question.

So far, virtualization arguably has posed a threat mostly to suppliers of network infrastructure systems, software and hardware, as virtualization allows service providers to avoid buying more-expensive branded gear and rely instead on open source and white box solutions, while also reducing the amount of intelligent network elements scattered around the network.

By separating the data plane from the control plane, networks can centralize control functions while shifting to dumber appliances in the field, reducing overall cost.

But we should eventually see something possibly unexpected, when many major networks are virtualized, and that is the ability of any entity to construct a big virtualized and custom network of its own.

While it is true that any such effort would not have owner’s economics, that might not be so important for an entity with a different business model, not reliant on access revenues, but for which the ability to integrate access with the other business functions creates more total value.

In the past, large networks with scale have found ownership more affordable than renting. In the future, that could change, but possibly mostly for third parties with business models based on content, transactions, advertising or app and service products beyond network access revenue.

So perhaps NFV, though a tool to increase agility and reduce cost for any single service provider, might also serve in the future as a way for third parties to create communication services in a different way, much as IP messaging, video communications and voice are features of apps that create revenue other ways.

Australian Customers Buying More 50-Mbps Service; 63% Buy at Speeds of 25 Mbps or Less

Internet access customers in Australia are starting to buy faster-speed plans  offered by retailers of National Broadband Network services. In the most-recent quarter, 26 percent of consumers were buying 50-Mbps plans, up from 4.6 percent in December 2017, the NBN says.

About 29 percent of customers buy service at 12 Mbps, while 34 percent buy service at 25 Mbps, the Australian Competition and Consumer Commission says.

Some 11 percent buy service at 100 Mbps, with negligible adoption of services at 250 Mbps, 500 Mbps or 1,000 Mbps.

source: ACCC

As almost always is the case, lower prices have helped. In December 2017, NBN offered a temporary credit to retailers for acquiring 50 percent more Connectivity Virtual Circuit (CVC) per user and reducing the price of the Access Virtual Circuit (AVC) for 50-Mbps services.

Retailers in turn passed some of the savings on to their customers in the form of lower prices.

Average CVC per user continues to increase, rising from 1.52Mbps in December 2017 to 1.55Mbps in March 2018. This follows a 38 per cent increase in CVC per user in the quarter to December 2017.

Over time, consumers always have shifted to higher-speed tiers, in part because internet service providers have kept increasing speeds, in some cases virtually at rates consistent with Moore’s Law. But price reductions seem always to help.

What to Expect in OTT Video, Linear Video Markets, According to Product Life Cycle

Television is not what it used to be. Entertainment video and moves now are consumed on many devices, not just TVs; mobile viewing is growing and younger viewers show a preference for streaming, versus linear formats.

Some logical conclusions might be drawn. Entertainment video is a product like any other, with a product life cycle. And linear video unquestionably is a product in the “decline” period of its lifecycle, as “over the top” or streaming services emerge as the replacement product.

source: marketing charts

source: Nielsen

If Netflix and other streaming services are in the growth phase, we would expect to see growing sales volume; scale benefits (lower cost per customer); growing supplier profits and more competitors entering the market.

Conversely, if traditional linear TV is in its decline phase, we would expect to see falling sales volume; lower profits; lower cost per customer and fewer competitors.

There is one important caveat. Real-time streaming services are probably in the earliest phase of the life cycle, but nearing the transition to the “growth” phase of the cycle.  

That implies high costs per customer; still-low sales volume; financial losses for providers and relatively few suppliers are to be expected. In the next phase (“growth”) we would expect to see growing sales volume; scale benefits (lower cost per customer); growing supplier profits and more competitors entering the market.

In the immediate future, linear TV suppliers are going to employ a hybrid strategy: sustain the existing product as long as possible while investing in OTT alternatives.

For firms such as Comcast, with a big stake in legacy TV revenues, one concrete form of that strategy is that it recently boosted internet access speeds by 100 percent, at no additional charge, for Comcast customers who buy at least one other Comcast product (a bundle).

That is intended to shore up linear TV subscription demand, and undoubtedly will do so.

source: marketing-insider

source: comScore

source: comScore

If Vodafone Believes "Mobile Only" is Not a Sustainable Strategy, Why Do Sprint and T-Mobile US Believe Differently?

Vodafone's proposed acquisition of Liberty Global cable TV assets in a number of European markets is the latest step in Vodafone’s shift from a “mobile-only” service provider to an “integrated” provider built on use of both mobile and fixed network assets.

Perhaps that shift should be kept in mind when evaluating the proposed Sprint merger with T-Mobile US, which would create a substantially-larger mobile company in the U.S. market, perhaps eclipsing even AT&T’s mobile share.

If Vodafone is correct, and a “mobile-only” strategy no longer makes sense, can the same mobile-only strategy make sense, longer term, for Sprint and T-Mobile US?

And, if so, will a much-larger new mobile asset be an easier, or harder match, for any future combination of assets? The answer seems clear enough: a much-bigger Sprint-plus-T-Mobile US would be a harder asset for most companies to envision acquiring.

In principle, one might presume that the bigger mobile company could be the acquirer of substantial fixed and other assets. But, as a practical matter, T-Mobile US (assuming that is the surviving brand) probably does not have the capital to acquire a substantial fixed network presence in the U.S. market.

Charter Communications, for example, has a market capitalization in excess of $100 billion. Charter is the second-largest U.S. cable TV operator. Comcast facilities pass about 41 percent of U.S. homes. Charter passes about 33 percent of U.S. homes.

The point is that even if T-Mobile eventually wanted to acquire substantial fixed network assets, it probably could not afford to do so. It would spend in excess of $100 billion to reach just a third of U.S. households.

The merged Sprint plus T-Mobile US might have a valuation of perhaps $140 billion, making it a tougher acquisition target itself.

In other words, if “mobile only” is not a sustainable strategy, the Sprint merger with T-Mobile US only creates a larger company with an unsustainable strategy and also becomes a harder acquisition target for any other large firm in the app, platform or device area.

Ofcom Report Illustrates Key Benefit of Facilities-Based Competition

There always is a trade-off between investment and competition in telecom markets, as the latest Ofcom report on internet access in the United Kingdom illustrates nicely.

“We find that although consumers can receive better performance by switching to a different technology or upgrading to a service with a higher advertised speed, it is unlikely that they will experience a significant improvement by switching from one ADSL or FTTC package to another at the same advertised speed (as services will be provided over the same copper line),” says Ofcom.

source: Ofcom

In other words, policy can emphasize faster deployment (enabled by sharing and therefore lower costs) or more competition, but not both equally, at the same time.

Many would argue that even if retail providers cannot differentiate on speed, network reliability or other facilities-based features (they all use the same network), there still is competition. But some would question how much effective competition there really is.

When every provider has the same underlying network cost base, there is limited ability to cut such costs. Nor is there any ability to boost performance beyond the level “everyone else has” or to add unique network-based features.

To be sure, other ways to differentiate a service (bundling of additional unique services or apps; different retail channels; customer service innovations) are conceivable.

But nothing really can be done about the “speeds and feeds” part of the experience.

It is “unlikely” consumers can “experience a significant improvement” by switching from one ADSL or FTTC package to another at the same advertised speed,” since all the retail providers use the same network.

Only by “switching to a different technology” can “better performance” be obtained. In the case of the U.K. internet access market, that means choosing the cable TV hybrid fiber coax network instead of the BT Openreach net

Simply put, Virgin Media provides the fastest speeds, significantly faster than fiber-to-curb or digital subscriber line networks.

“Virgin Media’s ‘up to’ 200Mbps cable service provided the fastest average download speed of the packages included in the report, both over the whole day (193.6Mbps) and during the peak 8 p.m. to 10 p.m. period (184.3Mbps),” Ofcom says.

source: Ofcom

That is the result of a clear policy choice to use a wholesale business model (one facilities provider used by all retail providers). The upside is that investment costs are reduced; the downside is that every retail ISP can only offer what the wholesale platform supports.

To be sure, in most markets there are few other choices of ubiquitous fixed network platforms such as cable TV. Globally, most facilities-based competition has been provided by mobile networks.

And that is likely to be an issue in the 5G and subsequent eras, as mobile-provided speeds climb to gigabit levels. When that happens, retail pricing and packaging equivalent with fixed network services will be decisive in creating more competition for fixed network services.