What Future for Telco Dividends?

S&P Global senior writer Sarah James takes a look at telco dividends, and the future for such payments. 

The problem is that an industry once characterized by slow growth and rich dividend-paying now is a mix of firms that do not pay dividends, firms that pay, but arguably cannot afford to do so, and a few that might eventually find their way to sustain the traditional model. 

The big challenge is what happens if big dividend payers discover they cannot sustain even slow growth, with moderately-high earnings and cash flow sufficient to pay the dividends. It will not attractive to be a negative-growth, no-dividend company.

It might prove difficult--maybe impossible--to make the transformation to high-growth, no-dividend status. That narrows options greatly, for the remaining dividend payers. 

Disappearing dividends deepen divide between AT&T, Verizon and smaller telcos.

Facebook to Sell Excess Capacity to 3rd Parties

Without making too much of the move, Facebook, which like other major app providers now drive deployment of wide areas optical fiber networks globally, now says it will sell excess capacity

“You’ll start to see a Facebook subsidiary, Middle Mile Infrastructure, operating as a wholesale provider (or, where necessary, as a telecommunications carrier).to third parties,” said Kevin Salvadori, Facebook director of network investments.

https://code.fb.com/connectivity/fiber-optic-cable/

source: TeleGeography

source: Broadband Now  

"Anxiety" at MWC2019

“Anxiety” is the word researchers at ABI Research use to describe the mood at MWC2019. Perhaps it would be more accurate to say connectivity providers were anxious, not the application suppliers that now are a fundamental part of the ecosystem, including suppliers of enterprise vertical market solutions.

That, in turn, largely reflects the saturation of consumer markets for mobile services, and the expectation that new enterprise use cases will drive new revenue sources in the 5G era.

It is hard to argue with that assessment, as the connectivity services market has been under pressure to change for decades already.

“There is widespread understanding in the sector that future revenue growth will come from vertical markets” (enterprise and business services) as the consumer market has nearly saturated,” ABI Research says.

Yes, there now is much hype about 5G, and hope that it will lead to discovery of big new revenue sources. The anxiety comes from the fear that this will not happen. It is not an unfounded concern.

It is not metaphor to suggest that the connectivity industry has had to replace about half

its present revenue about every decade or so since the beginning of deregulation and privatization in the 1980s and 1990s.

In 2001, about 65 percent of total consumer end user spending for all things related to communications and video services went to fixed network "voice."

In 2011, fixed network voice represented only about 28 percent of total consumer end user spending. That is easily a reduction by half.


source: Chetan Sharma

Mobility then replaced fixed network voice spending. 

Private LTE Use Case: Allowing Firefighters to See Through Smoke

Qwake’s C-THRU uses computer vision and augmented reality to allow firefighters to see in a smoke-filled building. It's an example of a private LTE use case. 

Intangible Products Become "Tangible" in the Process of Delivery

Selling services generally is more difficult than selling a product. By definition, services--including communications--are intangible. Like marketing advice, crisis management and other services, communications can be very hard for buyers to evaluate, in advance of purchase.

These sorts of goods are not physical objects consumers can see, hear, taste, smell or touch.

There is no physical object to inspect, so a potential buyer has to try and determine value some other way. Buyers must rely on evaluations, third party testimony, advertising or other proxies for value.

There being no way the buyer actually can determine “quality” in any direct way, until the services are provided. Consider the use of Amazon, for example. Customers might in that case be buying tangible products. But some important part of the experience is the delivery.

Was billing accurate? Was payment secure? Were delivery communications timely and accurate?

Did actual delivery happen when expected (within two or some other promised number of days), where expected (the right address) and how expected (on the day promised, within a four-window, at a place at the delivery location expected)?

Communication products likewise are mostly intangible, There arguably is no "product" until consumption begins. And that is why "trust" often looms so large in the sale of communication products. Customers do not actually know what they will get until after they buy and start using the product. 

The Last Frontier of Radio Communications

The U.S. Federal Communication Commission has adopted new rules allowing experimental licenses of 10-year duration for services in the 95 GHz to 3,000 GHz spectrum, intended to allow innovators to create potential new use cases.

The move might be deemed notable for several reasons. For starters, 3,000 GHz is about the absolute limit of the radio wave spectrum, the place where energy exists as infrared light, not radio waves. We can communicate using light, that is what fiber optics is about. The point is that we have been beyond widespread and cheap free space communication platforms once we are in the realm of light-based communications.

Among the other implications is the near-certainty that commercial use of frequencies this high will be part of the eventual 6 G standard, as every new generation of digital mobile platforms has added new spectrum higher in frequency.

source: RF Page

And since communications in the radio domain start to become “particle-like” or “wave-like” as frequency increases, “line of sight” becomes a major constraint, suggesting the highest ranges of radio frequencies will be best suited for near-field communications, indoor communications and other settings where line of sight is not a big problem.

source: K.B. Kiran  

Ericsson, Telia, Volvo Operate Industrial 5G Network

5G might not be a full replacement for Wi-Fi in all settings, but it is likely to happen in at least some industrial settings where manufacturers want greater control over latency performance of their local area networks when using sensors, automated equipment and production processes.

Ericsson, Volvo Construction Equipment, and Telia, for example, now are operating Sweden’s first 5G network for industrial use, using 5G to control excavation equipment (loaders)

source: Volvo

The 5G network uses Ericsson commercial hardware and software, including 5G New Radio (NR) and Core products from Ericsson’s 5G Platform,  at Volvo CE's research and development facility in Eskilstuna, a municipality approximately 90 kilometers west of Stockholm.

The partners aim to develop solutions for remote control of construction machinery and fully automated solutions.

It has been a couple of decades since serious questions were raised about the respective roles of Wi-Fi and mobile networks as platforms for consumer data access. But the debate is emerging again.

Two decades ago, observers debated whether Wi-Fi was a substitute for mobile access. The latest debate flips the question. Now we debate whether mobile is a substitute for fixed network internet access, or whether 5G can replace Wi-Fi.

To be sure, many are sure that will not happen on a widespread basis, just as Wi-Fi and mobile became complements, not substitutes.

source: Deloitte

But it seems almost certain that, in some use cases, 5G networks will displace Wi-Fi networks. Private networks using 5G seem attractive to some industrial customers because of the built-in latency performance, for example. Some auto manufacturers also are looking at 5G as a replacement for Wi-Fi.  

Others believe 5G could replace consumer home internet access, as yet the latest form of mobile substitution. To a large extent, the feasibility of using mobile platforms to replace fixed internet access, or 5G to replace Wi-Fi, hinge on tariffs and bandwidth.

Until 5G (especially using millimeter wave assets; spectrum aggregation and other tools), it would not have been feasible--either for reasons of capacity or prices--to consider using mobile networks as a full product substitute for fixed networks.

Bulk access at low prices is among the key issues. Many would still argue that mobile substitutes (including fixed wireless) cannot match the cost-per-bit profiles of fixed networks. But mobile data prices have been dropping steadily, though some fixed network services continue to hold an order of magnitude advantage in cost-per-bit.

Of course, all cost-per-bit metrics are statistical. The effective price per bit actually depends on the actual amount of data consumed by any particular customer.

Others argue that price, capacity and speed of 5G networks could in fact offer competitive offers for many customers.

The most-reasonable assumption is that 5G will displace Wi-Fi or fixed networks in specific use cases, and not generally. There will be some industrial settings where 5G might well substitute for Wi-Fi.

Some consumers will find they can "cut the cord" on fixed network access because mobile offers enough speed and usage, at the right price, for the actual use cases some customers have.

In other cases, 5G fixed wireless might offer a full product substitute for some households.