Survey Suggests Significant Demand for 5G Fixed Wireless

One question about new 5G revenue sources is whether 5G-based fixed wireless will allow some mobile service providers to take market share from fixed network suppliers. A recent consumer survey by Ericsson suggests there is potential for that happening, even if fixed network suppliers downplay the possibility.

Stated demand for a package of ultra-high-definition TV service (5G TV) bundled with 5G home wireless broadband is most sought after by 74 percent of users in our survey globally.

A similar proportion of smartphone users globally are interested in a 5G hot zone service that offers ultra-high speeds and reliability in demanding locations like airports, shopping streets and office spaces, Ericsson suggests.

source: Ericsson

As almost always is the case, consumers complain about “high prices” for fixed network internet access. That is the sort of dissatisfaction that some mobile operators believe they can address with fixed wireless alternatives.

source: Ericsson

Linear Video Providers Lost at Least 1.2 Million Net Accounts in Q1 2019

The leading U.S. linear video subscription providers lost about 1.2 million net accounts in the first quarter of 2019, according to company reports compiled by Fierce Video. The biggest losses were sustained by the satellite providers.

Operators	Video subscribers (mil.)	Net additions (thousands)
1. AT&T*	22.36	(627)
2. Comcast	20.85	(121)
3. Charter	15.95	(145)
4. Dish Network*	12.06	(259)
5. Verizon	4.4	(53)
6. Altice USA	3.3	(10)

source: Fierce Video

5G Bad for Satellite TV, China Satellite Communications Exec Says

You might argue that 5G is going to be bad for other contestants in the communications business, ranging from satellite operators and fixed network telecom providers to subscription TV suppliers.

China Satellite Communications Corp., China's largest civilian satellite operator, believes 5G is going to severely erode its satellite TV business.

"The arrival of 5G is bad news  for satellite companies. We have no choice but to diversify our business," said an executive who works for China Satcom.

China Satcom is not alone among satellite firms that earn as much as 60 percent of revenue from television broadcasting.

But the problems include more than 5G, which offers mobile internet speeds fast enough to make serious video consumption possible. As consumption shifts to on-demand modes, point-to-multipoint networks are disadvantaged, compared to point-to-point networks (internet access using symmetrical and cabled facilities).

In some markets, a shift of consumer demand away from broadcast subscription TV and towards on-demand delivery (Netflix, Amazon Prime, Hulu) already is leading to shrinking satellite TV subscriptions. That is why the future of AT&T’s substantial entertainment TV business is on-demand streaming and linear streaming on internet connections.

"Millennials prefer watching TV online, and the only thing that has held them back is a slow internet connection," the executive said. "But that problem will be solved once 5G networks are in place.

Legacy linear TV services (cable, satellite, IPTV) in the U.S. market declined in the fourth quarter of 2018, part of an ongoing trend. Total subscriber losses were about losing 941,000 subscribers (85.03 million accounts remaining).

Satellite services (DirecTV and DISH Network) accounted for 83 percent of the losses.

source: Strategy Analytics

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.