Some Numbers Just Do Not Make Sense

Some numbers one sees in reports on broadband adoption just do not make sense.

More often than you’d think, you see a headline that X percentage of people, or X millions of people, “lack internet access.” Sometimes that is accurate. Many millions of people live where fixed network internet access networks are not available.

But it is quite another thing when it is claimed that people “lack internet access” because they have chosen not to buy a particular form of internet access, when it is available. Ignore for the moment use of mobile internet access, and look only at fixed network access.

It is something else again to claim that the digital divide is as wide as “five to seven times” less “likelihood to lack adequate access” in a city with at least 95 percent fixed network internet access purchase rates, with the lowest district rates being 93 percent take rates.

So here’s a headline I recently ran across: “Low-income areas five times as likely to lack internet access.” Here is the study that supports the claim.

My problem is that I am having a hard time figuring out, in a city where the lowest reported take rates are 93 percent of homes, where the “five times” to “seven times” gap comes from.

The report states that “95 percent of households report internet access in the place where they live (an increase of 10% since 2014).” That ranges from a high of 97 percent to a low of 93 percent in the city.

source: City of Seattle

It might be correct, at a national and high level, that living in poverty is a risk factor for households not buying fixed internet access, as the study indicates. But the study’s own data shows that 75 percent of Seattle homes defined as “living in poverty” do buy internet access.

It arguably is  true that buy rates tend to be lower for homes with a member of the household living with a disability, or homes where English is not the primary language, or households headed by someone older than 65, households containing only single people or minority households.

But one sees relatively little of differences of that magnitude in Seattle, despite the report’s claims.  

“However, we are also seeing significant gaps in access, particularly in low-income and insecurely-housed populations. People living in these communities are five to seven times more likely to lack adequate access to the internet than the average Seattle resident.”

The report’s data seem not to suggest actual behavior of that level. Ignore for the moment that “adequate access” is in other reports a measure of lack of physical facilities. What we are looking at here is not “access,” but “buy rates.

source: City of Seattle

According to the study, households with a disabled member have 85 percent buy rates. Non-English households have 90 percent buy rates. Households with an older adult have 91 percent buy rates, as do households with single adults living in them. Households of racial or ethnic minorities have 92 percent buy rates.

Yes, there are gaps in buy rates. But it is hard to make the math work for a claim of “five to seven times” greater likelihood to lack adequate access.

Methodologically, the study also assumes that the cost of internet access is the price paid for any service, including an internet access service, or a bundle including other services. That is a novel way of describing internet access cost, akin to the adage of “comparing apples to oranges.”

The study claims “households pay on average $150 per month for internet service.” Uh, not really. The study itself says that figure includes money spent by households to “access the internet and internet-related services.”

That means, if the household buys a bundled service, the $150 includes internet access, entertainment video and possibly fixed network voice, in some cases. Odd is the inclusion of video and voice as part of the fee to use the internet.

source: City of Seattle

Fort Collins, Colo. Municipal ISP Should Launch in August 2019

The city of Fort Collins, Colo. is installing its own municipal internet access network. Connexion  plans to sell gigabit service for $70 a month, 50 megabit service for $50 a month and phone service for $25. An "affordable" tier is still to be determined but has been deemed a priority by the City Council.

The entire network is slated to be finished by May of 2022, but the first neighborhoods are expected to be able to buy service in August 2019.

Comcast, the incumbent cable operator, and CenturyLink, the incumbent telco, already have adjusted their plans to meet the new competitive threat. In 2016, the incumbent rate cards showed a price advantage for Connexion. That might not be so true in 2019.

So Connexion might itself have to consider lower prices than originally forecast, as some of the Comcast packages already feature more bandwidth than 50 Mbps for about $50 a month.

source: New America

Now, CenturyLink sells its 40 Mbps service for about $45, without other promotions. Comcast sells its stand-alone 250 Mbps package for about $60 a month, and less if bought with a bundle of video or voice.

The city issued $143 million in bonds to pay for buildout, and the business plan calls for sustainability at about 28 percent take rates.

More than half of eligible households in Longmont signed up for its municipal broadband service within five years of its initial availability, so Fort Collins officials likely are optimistic they will reach the threshold of sustainability.

OneLife "OnePulse" Medical Smartwatch Works on AT&T LTE-M Network

OneLife Technologies Corp. has developed an LTE-M certified OnePulse smartwatch  operating on the AT&T LTE-M network.

The OnePulse provides data for heart rate, location, movement and sleep.  Using Bluetooth, the device can connect to other devices such as a pressure cuff, glucometer, SPo2 monitor or weight scale.

It is expected to be available for purchase by healthcare providers in March of this year.

Real Prices of Mobile and Internet Services Fall in Australia

“Real prices” (including non-price improvements such as bigger usage allowances) of Australian telecommunications services continued to decline in 2018, reports the Australian Competition and Consumer Commission.

“An average consumer renewing their fixed broadband plan would have paid 1.5 percent less in real terms and 8.3 percent less when renewing their mobile phone plan compared to 2017.

“These declines take into account improvements in non-price characteristics, such as data allowances and other inclusions,” the ACCC says.

Mobile broadband costs declined 7.5 percent.

“The decline in mobile phone service prices in 2017 to 2018 continues a trend over the past five years with real prices approximately 30 per cent lower in 2017-2018 than they were in 2013–14,” the ACCC says.

source: ACCC

a significant increase in the take up of higher speed services with the number of 50 megabits per second (Mbps) services increasing from just 100 000 (four percent of all NBN services) in June 2017 to nearly 1.5 million customers (35 percent) in June 2018,

10% of Australians Buy the Fastest Tier of ISP Service

It likely remains true that most consumers do not buy the faster tier of service sold by any ISP, whether the top speed is 100 Mbps or 1,000 Mbps.

About 10 percent of Australian consumers buy the faster tier of service available on the National Broadband Network, a figure which is likely not too different from take rates for gigabit internet access services sold in the United States.

In fact, it is likely that gigabit take rates are in single digits, most consumers buying tiers of service running at slower speeds.

source: ACCC

source: ACCC data, IP Carrier analysis

5G Networks Will Not Cost as Much as Some Fear

Some have estimated the cost of building 5G as between $500 billion and $1 trillion globally. That is not as scary a number as you might think. By some estimates, annual telco capex is between $160 billion and $345 billion.

As construction of the 5G network begins, we might expect capex to climb at least a bit. Mobile capex is perhaps $160 billion, while fixed and mobile capex might be about $345 billion.

The point is that $1 trillion is about what mobile carriers spend in about six years; what the whole industry spends in perhaps three years.

source: GSMA

What will make a big difference is the ability to leverage 4G investments; phase the 5G build over time--perhaps more slowly than was the case for 4G, and take advantage of better technology, lower-cost open source technology and unlicensed spectrum assets.

source: IHS

Sometimes "More Regulation" Can Help Big Firms

One of the quite-likely outcomes of new privacy protection laws is that they will raise costs for small firms (compliance costs), making it easier for big firms to stay dominant. That invariably is the case for major legislation to regulate any industry. What often happens is that smaller firms cannot stay in business as regulatory costs rise, reducing profit margins, where large firms have market power and can pass such costs to customers.  

That might also be true for many types of regulations that are well-intended but have externalities. That, in fact, is precisely the argument made about the European Union's General Data Protection Regulation. It is the same argument made about Dodd-Frank banking regulations: it imposed compliance costs tough for small firms to bear.   

Perhaps oddly or serendipitously, rules intended to protect consumers might also protect the reputations of suppliers, even if suppliers often oppose such guidelines or laws. That might be especially true when suppliers are big, few and reliant on their reputations.

Consumer protection laws might not work so well when sellers are so many they are virtually anonymous, and when some are willing to break the laws or regulations as a routine business practice. Think about rogue telemarketers or other unethical actors, for instance.  

Complaints by consumers about their communication services is not a new issue in Australia or the United States. In Australia, new attention is being paid not only to billing, customer service and network quality issues, but now also credit and sales practices.   

New industry guidelines outline sales, credit and debt managment practices reflecting the

Telecommunications Consumer Protection (TCP) Code, the Industry code of conduct that sets out what Suppliers must do in relation to sales, billing, and credit and debt management.

The codes especially seem to protect “vulnerable” customers from upselling and cross selling that might not reflect customer needs. The guidelines also aim to ensure that credit checks essentially protect consumers from purchase of products they cannot afford.

Big firms can benefit from expanded regulation. Small firms generally do not benefit. Criminals and bad actors do not care.