Networks Creep Towards A La Carte

It is an open question whether most of today’s linear programming networks (delivered using one or more fixed or satellite networks) could exist if they had to go direct to consumer as stand-alone streaming packages, as does HBO, or as a few other networks might contemplate.

So far, channels historically not supported by advertising have had the easier time of the transition. HBO, Starz and Showtime, for example, can be purchased as streaming services.

A key issue is consumer expectations about cost of a single channel. Surveys show consumers expect a cost of about $2 per channel, per month, roughly five to eight times more than many channels now charge.

Few streaming channels are sold for such prices, though, suggesting the economics of stand-alone streaming---for most channels--does not allow the expected pricing of a couple dollars per month, as one might deduce from today’s 40-channel bundles selling for up to $40 a month.

CBS sells streaming access as well, suggesting the possibility that the most-watched ad-supported channels might be able to create stand-alone streaming services.

A sort of hybrid step is allowing big retailers such as Amazon to handle sales and distribution. Amazon Channels feature:

• HBO ($14.99 per month)

• Showtime ($8.99 per month)
• Cinemax ($9.99 per month)
• Starz ($8.99 per month)
• Mubi ($5.99 per month)
• Sundance Now ($6.99 per month)
• Sports Illustrated TV ($4.99 per month)
• Comic Con HQ ($4.99 per month)
• History Vault ($4.99 per month)
• Comedy Central Stand-Up ($3.99 per month)
• PBS Masterpiece ($5.99 per month)
• IndiePix Unlimited ($5.99 per month)
• DocComTV ($2.99 per month)
• Smithsonian Earth ($3.99 per month)
• Reelz ($3.99 per month)
• Daily Burn ($14.99 per month)
• PBS Kids ($4.99 per month)
• Shudder ($4.99 per month)
• Cheddar ($2.99 per month)

Some will point to the success of Netflix, Amazon Prime, Sling TV, DirecTV Now, Hulu and others.

Some of those services still use a bundling concept (a menu of TV shows, movies and specials), but not discrete channels. Others use a “skinny bundle” of channels to keep costs lower.

And while Disney and ESPN will undoubtedly be early to test the economics of single-channel streaming, most other networks are likely to resist, as it remains profoundly unclear whether such a strategy would be profitable.

Also, bundles remain popular with consumers, leading to the creation of “skinny” bundles that cost less because they contain fewer channels (and therefore less “cost of goods”).

Edge Computing Might Hit Inflection Point About 2021

Edge computing is entering an early “hybrid” state, and will enter its “native edge” period starting about 2022, GSMA Intelligence now estimates. Revenue will probably hit an inflection point around 2021, according to Grandview Research estimates.

source: GSMA Intelligence

U.S. edge computing market, 2016 - 2025 (US$ Million)

source: Grandview Research

IoT Networks: One Size Does Not Yet Fit All

As much as network technologists might prefer a single network that does everything well, that almost never is the case in metro area communications, and remains true for internet of things networks as well.

The number of potential metro platforms is somewhat bewildering, and includes a number of proprietary (Sigfox and others) and some more-open or standards-based alternatives. We might not be able to say with any certainty which platforms will ultimately “win,” based on market share.

source: Mojo Networks

To be sure, sensor applications (machine to machine) have been in place for decades, mostly using the 2G network. And many expect that several local area technologies (Wi-Fi, others) will be used inside buildings to support IoT applications and devices.

But many believe the key “race” is between LoRaWAN providers and mobile suppliers using NB-IoT and LTE-M, in the metro area portion of the market.

In terms of mobility, LoRaWAN and LTE-M work better. NB-IoT really is designed for stationary apps. LoRaWAN and NB-IoT are better in terms of sensor or device battery life than LTE-M.

source: Actility

But LTE-M has a clear advantage in terms of bandwidth. LoRaWAN is optimized for applications where messages are sent infrequently.

NB-IoT and LoRaWAN have better link budgets than LTE-M, though, suggesting either NB-IoT or LoRaWAN could have coverage advantages, depending on the amount of interference present on the unlicensed spectrum used by any particular LoRaWAN network, at any particular time and space.

source: Dycode

It is hard to say how costs and use cases might change. If the mobile industry gets its way, LTE-based solutions might well rival LoRaWAN and other solutions in terms of battery life, coverage and other performance attributes, while covering a fuller range of use cases (bandwidth, signaling frequency, mobility).

But those are wider area or mobility use cases. Many IoT apps might only require short-range access (Wi-Fi and others) to reach the access, and then the backbone networks.

source: Mojo Networks

source: Mojo Networks

source: Actility

source: Ingenu

source: LoRa Alliance

source: Nokia

Is Video Market Shrinking or Growing?

Is the video subscription business shrinking? The answer depends on which part of the business one is looking at.

As linear video subscription prices rise, take rates drop. Cheaper streaming alternatives, meanwhile, keep growing, both in terms of revenue and subscribers. So you might think the market is shrinking, in terms of revenue. Maybe not.

Higher prices for linear subscriptions will drive even more consumers towards alternatives, and that will eventually reduce average prices for any single service. What remains to be seen is whether total spending actually will shrink much. As some of you already have discovered, lower prices for linear is balanced by more spending on streaming services.

The point is that aggregate video entertainment spending might not actually drop. In fact, there already is evidence that total video scription spending is growing, looking at both  linear and streaming formats.

source: Strategy Analytics

According to Federal Communications Commission reports, U.S. cable TV prices climb every year, though arguably not so much higher than the background rate of inflation. Since the cost of goods (programming) is rising much faster than the rate of cable TV increases, service providers are finding operating cost economies elsewhere in the business.

source: Gigaom

source: Ameni Research

Sports programming costs are one culprit. At around seven percent annual increases, prices double in a decade, so you can see where this is going.

Then there is the Netflix effect, where high spending on original content by internet app firms is forcing all the other competitors to ratchet up their spending as well. In fact, Netflix now spends as much as does Disney, Fox and Warner Media on content, every year.

source: nScreen Media

source: MoffettNathanson

source: CordCutting.com

source: CordCutting.com

IoT "As a Service"?

Turning products into subscriptions (everything as a service) is a big business shift many believe is irresistible. Automating the process of buying staple products or discretionary products Is a way to lock in repeat business. And some would note that 41 percent of all consumer purchasing is repeat business.

Communications providers have some experience with turning products into services. Hosted business voice (hosted IP PBX or hosted IP telephony) provides a recent example, where a recurring subscription replaces a customer’s need to own and manage a business phone system.

Smartphones often are functionally subscriptions, not “products.” Even if consumers actually buy their devices, they often do so as two-year payment plans. And as support for many devices now routinely lasts for only three years, for many consumers “ownership” of a smartphone resembles a “phone subscription.”

Most of the time, a user is making monthly payments on a device. By the time the device is fully paid for, it might be time to get a new model, either because the battery no longer holds a charge well, or because the phone has wear and tear. Personally, I find battery life is the key driver of replacement cycles.

Application and software providers likewise are attempting to turn their shrink-wrapped products into recurring subscriptions. Even jet engines now can be used as a subscription, rather than a purchased product.

Many believe cars will become a service. As the example of pizza might suggest, “build versus buy” or “own versus lease” applies to enterprise computing. The issue is how much IoT as a service might be leveraged by communications service providers.

source: episerver

The key issue for communications providers is that most of the legacy services already are subscriptions. So the chief issue is what new lines of business can be created that take advantage of the “subscriptions, not products” trend.

Almost by definition, that requires service providers to move into new areas of the value chain that traditionally have been purchased, rather than leased or rented. Smartphones would seem to be such an area.

But bigger opportunities probably lie in the internet of things value chain, where service providers could bundle devices, applications, monitoring, analytics, installation and maintenance “as a service.”

PTC Academy Bangkok: For Those Who Are Fast Moving into Top Management, Need to Make Things Happen, Need Knowledge Fast

Thankfully, nearly all employees who work in the communications business do not need an MBA to do their jobs. They really do not need to know about strategic challenges, the evolution of business models, or revenue and cost drivers.

Most employees do not need to read trade media, blogs, tweets or other media to stay up on the latest high-level developments in the business. They do not need to meet with regulators, financial analysts, investors and potential business partners.

But all “C” level executives must do at least some of those things, because their job responsibilities require that they have a fairly good understanding of the key trends shaping the business and the firms within their own segment of the business.

Nor do most up and coming associates get much exposure to the issues and concerns that would be required of them if they move up closer to the “C” ranks.

And that is how PTC’s Academy hopes to help. PTC Academy is a "mini-MBA" crash course in two days that introduces functional department personnel to the broad issues C level faces in running and growing the business. Here’s the program and instructors.

PTC Academy is for you if:

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* You need to understand how new competitors will attack

* You need that knowledge fast

Register for the course, to be held Sept. 20 and 21, 2018 in Bangkok.

Amazon Makes Another OTT Move

Amazon just spent $1 billion to buy online pharmacy PillPack, which PillPack, which supplies medications direct to home in 49 U.S. states, excluding Hawaii. The U.S. pharmacy business currently represents about $400 billion in sales value, so it might be obvious why Amazon wants in.

On the day the deal was announced, incumbent pharmacy suppliers and pharmacy benefit managers lost about $20 billion in market value. The same thing has been happening to virtually all other retailers whenever Amazon decides to enter their segment of the business.

Telecom industry professionals should understand the business issue quite well. What Amazon is doing is taking out the middleman, a process called disintermediation.  

Telcos encountered this some time ago. Skype, Google, Facebook and others now supply messaging and voice services themselves, allowing their users to communicate without buying a service other than internet access from any internet service provider.

Netflix and others now offer video entertainment services that compete with and replace linear video subscriptions. In fact, Google competes directly as an internet access service provider (Google Fiber), acting not only as the app provider but also displacing the ISP role as well.

Disintermediation means the “reduction in the use of intermediaries between producers and consumers.” In other words, cutting out the middleman, and going direct to one’s customers, without the use of other distribution channels.

So one big impact of huge content and app firms building and operating their own networks is that the size of the public communications market is reduced. In other words, a growing percentage of international bandwidth no longer moves over public networks, supplied by public carriers (telcos or capacity specialists).

Depending on the route, private bandwidth supply represents as much as 30 percent to 70 percent of total traffic on those routes.

The other impact is falling prices. With some exceptions, bandwidth prices on undersea routes have fallen steadily, but not precipitously, over the last decade or so.

One issue, as noted, is that traffic now is shifting to private networks owned and operated directly by content companies, app companies and other enterprises, who no longer need to buy such long-haul capacity from commercial providers. That means fewer potential customers, and therefore more competition to secure what remains of demand for public network services.