U.S. Broadband Availability Remains a "Last 2%" Problem

The last two percent of U.S. housing locations, as shown by the U.S. Federal Communications Commission National Broadband Plan and Broadband Availability Gap analysis, are the areas where the geographically-produced digital divide is most acute.

source: FCC

That seems to be true for military veterans, no less than other citizens. According to the Federal Communications Commission, 92.5 percent of veterans have access to 25 Mbps downstream, 3 Mbps upstream, using terrestrial networks. Some 87 percent of veterans have access at speeds of 100 Mbps or higher.

Also, 99.8 percent of veterans have coverage of 5 Mbps/1 Mbps mobile LTE, based on required FCC reporting from service providers, about which there always is some dispute as to accuracy.

But those figures also are minimums, not typical or average, the FCC says. “We recognize, however, that actual speeds tend to be much faster than the minimum advertised speed reported on Form 477.”

source: FCC

Ookla speed test data suggests that 78.4 percent of veterans have 10 Mbps/3 Mbps mobile LTE broadband coverage.

The report concludes that 78 percent of veterans have coverage of both mobile LTE with a median speed of 10 Mbps/3 Mbps and any fixed broadband of at least 25 Mbps/3 Mbps.

Also, 76 percent of veterans have coverage for both mobile LTE with a median speed of 10 Mbps/3 Mbps and any fixed broadband technology of at least 100 Mbps/10 Mbps service.

About three percent of veterans lack coverage for both 10 Mbps/3 Mbps mobile broadband and 100 Mbps/10 Mbps fixed broadband service.

The bottom line is that “FCC Form 477 deployment data suggest availability of broadband is not substantially different for veterans than for the population overall,” the FCC says. “For most veterans, broadband access is not the barrier to connectivity.”

That speaks to availability, not usage, of course. We sometimes confuse the ability to buy and use quality broadband with the actual consumer willingness to buy the product. We also sometimes conflate supply and demand: what is important is that quality broadband be available at affordable prices, not that consumers choose to buy one product over another.

There is a public policy that citizens and consumers are able to buy quality broadband. There is no similar public policy demand that they buy specific packages, from specific providers.

In other words, as it is not a failure of public policy that consumers choose to buy iPhones rather than some other phone brands, neither is it a failure of public policy that consumers choose to buy specific access plans, from some providers rather than others, or not to use some services at all.

In other areas of public life, that distinction can be described as “opportunity,” rather than “guaranteed results;” the right to exercise a choice, not the right to specific products. In other words, some consumers choose to use mobile for internet access, not a fixed network product.

That can represent the exercise of choice (it is what the customer wants). It might also represent a market failure (supply is not available). It sometimes is argued that consumers make the mobile substitution choice because fixed network access is too expensive. Public policy advocates may differ on what “expensive” means.

Some would note that internet access in the developed world does not cost too much. In developed country markets, internet access costs about 0.7 percent of gross national income, per person, and is far below world averages.

As of 2017, approximately 85 percent of households with veterans reported that they had paid connections to the Internet in their homes. That is higher than the rate of internet access use nationwide, by some accounts.

Price arguably is not an issue, as that is in line with household fixed network internet access overall. Some 1.5 million veterans use the E-rate program providing low-cost internet access.

And there is growing evidence that prices really are not that big a problem (in terms of supply), based on income.

In Seattle, for example, rates of usage (actual buying behavior) between the highest-income and lowest-income neighborhoods varies by just four percentage points (97 percent the high; 95 percent the median; 94 percent the low).

For those veterans who do not buy broadband (even when it is available), barriers may include actual lack of facilities (if one excludes satellite access), willingness to pay, digital illiteracy or perceived irrelevance, the FCC notes. In a growing number of cases, though, mobile broadband is the preferred product, as consumers prefer mobile over fixed facilities for voice.

Estimates of mobile-only internet access households range from 10 percent to 20 percent of homes, and many believe 5G will lead to more substitution, as fixed and mobile access offers, combined with public Wi-Fi hotspot access, will keep gaining appeal as 5G speeds are able to satisfy a wider range of substitution use cases, and pricing plans make fixed and mobile access more directly competitive.

Shift to TV Gaming from PCs?

Jon Peddie Research forecasts that 20 million PC gamers could defect to TV gaming platforms in the 2018 to 2022 period. That could be good news for streaming game services and console suppliers.

It might also be good news for some internet service providers. It might not make too much difference whether a customer buys internet access to support a gaming console or to support use of a streaming service.

There could be upside implications for 5G mobile providers, if the gaming is used to any significant extent on mobile devices.

Gaming services used with TV displays, whether local or cloud-based, will absorb PC defectors and likely flourish with new entrants, JPR predicts. “In the next five years, we will see potential customers with access to TV gaming swell by hundreds of millions.”

source: Jon Peddie Research

Estimates of Value of Precision Agriculture

It always is difficult to determine the impact of any technology in any industry. But one technique is to estimate the total sales value of end products, and then try and impute value contributed by various parts of the underlying value chain.

When looking at e-commerce, the total value of goods sold provides a baseline from which to deduce market share of sales, for example. So revenue for Amazon or any other retailer, or revenue for a transaction processor, is some percentage of sales.

Some have argued that availability of fiber to the home affects home prices, for example. Perhaps the methodology includes comparing home sales prices in areas where FTTH is available, versus areas where FTTH is not available.

Of course, there are other logical explanations. In many cases, FTTH is deployed in neighborhoods where the highest demand is believed to exist.

And predictors of demand include home value, homeowner income or education level. You see the problem: FTTH deployment might simply reflect expectations of buying behavior based on higher incomes or higher education.

With that caveat, the U.S. Department of Agriculture has produced some estimates of the impact of broadband in precision agriculture. With the caveat that value might be produced by internet of things technologies and services that are supported by broadband facilities, the USDA models significant value.

source: USDA

Some of the imputed value comes from use of sensors and automated farming processes, some from more generalized information tools and retailing methods. 

source: USDA

source: USDA

Will IoT Boost Productivity? How Long Will it Take?

The lag time between first deployment of a general-purpose technology (steam engine, railroad,, electricity, electronics, automation, automobile, the computer, the internet) and quantifiable productivity increases is not immediate, not clearly and unmistakably causal, and sometimes impossible to isolate from the impact of other general-purpose technologies.

That is important because we cannot determine whether important new technologies actually increase productivity--although people mostly assume it does--or not. Nor can we see with precision how long it will take: gains often take decades to appear in quantifiable form.

That is worth keeping in mind in assessing the return from internet of things, artificial intelligence, connected vehicles and so forth.

Consider the impact of electricity on agricultural productivity.

“While initial adoption offered direct benefits from 1915 to 1930, productivity grew at a faster rate beginning in 1935, as electricity, along with other inputs in the economy such as the personal automobile, enabled new, more efficient and effective ways of working,” the National Bureau of Economic Research says.  

There are at least two big problems with the “electricity caused productivity to rise” argument. The first is that other inputs also changed, so we cannot isolate any specific driver. Note that the automobile, also generally considered a general-purpose technology, also was introduced at the same time.

That is not to say correlations between important new technology and process efficiency are undetectable.

Looking only at use of machine learning, error rates in labeling the content of photos on ImageNet, a dataset of over 10 million images, have fallen from over 30 percent in 2010 to less than five percent in 2016 and most recently as low as 2.2 percent, say researchers working for NBER.

Likewise, error rates in voice recognition have decreased to 5.5 percent from 8.5 percent in 2017, for example.

At the same time, “there is little sign that they have yet affected aggregate productivity statistics,” the researchers note.  Labor productivity growth rates in a broad swath of developed economies fell in the mid-2000s and have stayed low since then.

“For example, aggregate labor productivity growth in the U.S. averaged only 1.3 percent per year from 2005 to 2016, less than half of the 2.8 percent annual growth rate sustained from 1995 to 2004,” NBER researchers say.

source: National Bureau of Economic Research

“Fully 28 of the 29 other countries for which the OECD has compiled productivity growth data saw similar decelerations,” they say. “The unweighted average annual labor productivity growth rates across these countries was 2.3 percent from 1995 to 2004 but only 1.1 percent from 2005 to 2015.”

So how do observers explain the apparent failure of big applications of technology to produce productivity gains? “False hope” is one explanation.

“The simplest possibility is that the optimism about the potential technologies is misplaced and unfounded,” NBER researchers say. Perhaps new technologies won’t be as transformative as many expect.

More compelling, perhaps, is our inability to measure the productivity gains. Many new technologies, like smartphones, online social networks, and downloadable media involve little monetary cost.

That poses an obvious challenge when only quantifiable price metrics can be used. A personal computer that costs 10 percent less, but supplies double the computing power or memory actually might be deemed a decrease in economic activity, for example.  

Technology improvements that boost qualitative power or potential utility might not show up in price metrics in a fully-capturable way, as imputed value is higher, but price lower. But we cannot measure higher possible value; only price changes.

Another argument is that the impact of potentially-transformative technologies is limited by limited diffusion (not all firms and industries use them equally well). In other words, the gains are not equally distributed. Some industries and firms seem to capture most of the benefits.

Perhaps the most-persuasive opinion is that it takes a considerable time to sufficiently harness the power of a new general-purpose technology, since whole business processed need to be created before the advantages can be reaped.

The bottom line: we assume IoT improves productivity, as we assume electricity and broadband also contribute. But we need to invest in a measured way, as the actual benefits might not show up for a decade or two.

That might be the case for new 5G-based enterprise and consumer use cases as well.

U.S. Mobile Needs 5G Just to Maintain Consistent User Experience

Not every mobile market “needs” lots of additional internet access capacity now, and will need it in the next two years. The U.S. market is among the places where more capacity is an immediate issue, and the issue is whether 5G in new spectrum, spectrum refarming, smaller cells, spectrum sharing, spectrum aggregation, broader advanced 4G deployments or all the above are required.

“4G networks in the U.S. are becoming heavily loaded,” says Opensignal. So “consumers and operators alike will need 5G to relieve pressure on existing networks, otherwise the overall mobile network experience will worsen. In other words, faster speeds made possible by 5G are important, but perhaps the equally-important value is capacity reinforcement.

A shift to unlimited usage plans by all four national U.S. mobile service providers also has driven capacity demand.

source: Opensignal

“Today, 4G networks are very inconsistent in terms of speed with average connections at the busiest time of day often being half that of speeds during the quietest times of day,” Opensignal says, citing its 5G Opportunity report.

In the U.S. market, average 4G download speeds varied between 15.3 Mbps to 28.8 Mbps, depending on the time of day and congestion levels on a network.

The variation in speeds throughout the course of the day are even more pronounced in the largest cities. In Miami, average 4G download speeds were as low as 17 Mbps and as high as 43.2 Mbps over a 24-hour period. Baltimore, Chicago and New York City variations of 20 Mbps or more occurred between fastest and slowest hours.

“5G will not only provide extremely fast speeds but also a solid bedrock of capacity, to even out the consistency issues we are seeing with current 4G networks,” says Opensignal.

In other words, in some markets, 5G is a major tool for supplying the increasing demand for mobile data, which in the U.S. mobile market is growing 46 percent annually, according to Cisco.

source: Cisco

The point is that 5G is needed, in the U.S. market, especially by AT&T and Verizon, the two networks with the most customers and therefore capacity demand to support.

U.S. Mobile Prices are Not "High"

One often hears that U.S. mobile internet access prices are among the highest in the world. As Samuel Clemens (Mark Twain) is reported to have said, there are lies, damned lies, and statistics. And cross-country internet access prices arguably are included in the sphere of such realities.

The problem with comparing prices for anything globally is that price levels are different from one country to the next. So it should not be surprising that mobile internet access prices vary as well.

Economists use a concept known as purchasing power parity to normalize for such differences, removing distortions based on the differing value of currencies (and therefore purchasing power) as well as differences in cost of living.

Once prices are measured using the PPP method, it turns out that mobile internet access prices are significantly lower than the world average in places such as Europe, the United States and the developed world in general .

As you might expect, prices are below world averages in all developed nations and U.S. household spending on communications is among the lowest in the world. That arguably is true for fixed network internet access as much as mobile access.

One sees the same trend if internet access cost is adjusted for gross national income, another way of removing price distortions.

source: ITU  

The point is that endless repetition of false statements does not make them true, no matter how often one hears those claims.

Full 5G Coverage Not Until 2028, or Later, in Some Markets

Service provider executives surveyed by 451 Research believe 5G deployment will occur by 2021 or 2022 at the latest, with full network coverage happening by 2028 or even later.

The majority of respondents said they will not achieve total 5G coverage until 2028 or later. North America is expected to have the highest percentage of early deployments, driven by AT&T, Verizon, Sprint and T-Mobile. Some 47 percent of North American respondents say they will have total 5G coverage by 2025 to 2027.

More than 78 percent of respondents from the rest of the regions, excluding the Middle East and Africa, said they don’t expect to complete 5G deployment until beyond 2028.

Those predictions are mostly in line with actual experience of earlier mobile generation network deployments.

The analysts predict deployment will occur gradually, with North America setting the pace and the rest of the world playing catch-up.

source: 451 Research