New Number-Two in U.K. Telecom Market

The press release announcing the proposed merger of Liberty Media’s Virgin Media and Telefonica’s O2 says the “50-50 joint venture brings together Virgin Media, the U.K.’s fastest broadband network, and O2, the country’s largest mobile platform.” And though such releases often are filled with hype and hope, the release literally describes reality. 

Though BT leads for U.K. mobile account installed base, O2 has been close behind, in recent years. Likewise, BT leads for U.K. fixed network accounts and internet access, but Virgin Media is a strong number-two and actually leads in the highest-speed lines in service. 

source: Point Topic

What happens next is the issue. Point Topic had formerly predicted flattish growth for Virgin Media, based in large part on its more-limited network footprint. That could change, as the firm continues to invest in network coverage. If Virgin Media’s network expands, so should its market share. 

source: Point Topic

The firms also expect operating and overhead savings. 

Mobile Broadband Now Used by 83% of All People on the Planet

Fixed networks, though vital, have not proven to be the answer to connecting the unconnected globally, as mobile networks have proven to be the way most people in the world use voice services, messaging and internet apps. In 2019, growth rates for fixed network internet access grew at about a half percent growth rate, down from two percent in 2018, according to Point Topic. 

source: Point Topic

By 2019 there were 108 subscriber accounts per 100 persons globally, with 83 percent use of mobile internet. In comparison, there were 15 fixed network broadband subscriptions per 100 persons and 12 fixed network voice subscriptions per person the same year, according to the International Telecommunications Union. 

source: ITU

Much of the fixed network broadband installed base is in China.

source: Point Topic

The highest fixed network broadband net additions are in a handful of countries including the United States, Iran, Indonesia, Viet Nam and Russia. 

source: Point Topic

Can Videoconferencing Replace In-Person Sales Meetings? When?

With videoconferencing, “a face-to-face meeting is no longer the same thing as an in-person meeting,” notes Express Virtual Meetings. Few would disagree with that assessment, as the Covid-19 pandemic limits in-person business-to-business meetings. 

What remains to be seen is how behavior persists once the threat of the pandemic recedes from memory. The question is likely not whether use of videoconferencing grows, and is used at a higher rate than in the past. Many would argue usage has been growing steadily for a couple of decades.

The bigger question is how much usage will remain when the “next best thing to being in person” is not absolutely required, when in-person activities are possible again. 

For better or worse, sales, training, education, customer support and internal organization meeting activities that once were conducted face to face now are, at least temporarily, going to be conducted by substitute means, perhaps often by videoconferencing. 

Almost every organization will find that videoconferencing is a necessary substitute for collaboration when travel is not possible or recommended. Some might even go so far as to argue that trade shows and in-person conferences will often not be possible in the future. That will be quite challenging, if it happens at any significant level, for many sales professionals in any business-to-business markets. 

source: Drift

The issues are especially pointed for sales professionals selling business to business, which traditionally has required face to face meetings, not so much for technical presentations or customer support, but to build trust and rapport when a substantial purchase has to be made. 

As always, correlation is not necessarily causation, as when it is argued that closed deals are higher when videoconferencing is used at some point in the sales process. It might be that firms using videoconferencing routinely also have better sales prospecting, development and support processes in general, including use of video support. 

“At the very beginning of a business relationship, it can be beneficial to meet in person in order to create a strong basis for an ongoing relationship,” says Express Virtual Meetings. 

“Touch builds trust,” says René Shimada Siegel, president and founder of High Tech Connect. “That’s why job interviews and project pitches generally need to be done in person.” 

“In-person business meetings let attendees develop transparency and trust in ways that are not always possible with other forms of communications,” says Dr. Richard D. Arvey, a psychologist and professor with the National University of Singapore. 

One member of a corporate team wrote in an online forum that although her team had held many virtual meetings and work sessions, she only felt truly comfortable with the other team members after finally meeting them face-to-face. She said her deadlines now take on greater importance for her, because the project is no longer just a voice on Skype or a person writing an email — but a friend and colleague who is now real to her.

Given that both videoconferencing and face to face meetings have advantages, “the first stages of an engagement or project should be handled by face to face meetings, so the most important details can be discussed and then follow up meetings can be done virtually ,” argues
EZTalks. “The final meeting should also be done in person.”

While better than audio conferencing or email, even videoconferencing is “not as good as in-person communication” for many meetings,  argues Scott Edinger is the founder of Edinger Consulting Group. 

But it is logical to assume that curtailing face to face meetings and trade show attendance will cause softness in the pipeline, despite vigorous efforts to use videoconferencing as a substitute for face-to-face meetings. 

That is likely going to be an issue for business-to-business sales in a variety of industries ranging from pharmaceutical sales to network capacity sales. 

It might be logical to argue that videoconferencing will eventually be seen as more effective for internal functions; less effective for garnering new business; more effective as a retention tool. One study of Norwegian travelers shows the heavy use of videoconferencing for internal organization communications or information exchange. 

Face-to-face meetings were more often used for conferences, seminars or education, as well as project work. 

source: Researchgate 

“One sales leader has directed his sales force to divert all attention to existing accounts and stop pursuit of new logos,” said Randy Illig, FranklinCovey global leader of the sales performance practice. His thinking is simple: trust is required when a customer has to choose between suppliers. 

“And it's going to be hard to establish trust during this time with somebody you don't know,” said Illig. 

And though it is too soon to predict whether such trends will remain in place once the pandemic is over, there is at least some reason to believe that physical face to face meetings will return. 

A study by Oxford Economics found that  85 percent of corporate executives perceive web meetings and teleconferences to be less effective than in-person meetings with prospective customers, while 63 percent believe virtual meetings to be less effective than in-person meetings with current customers. 

That does not necessarily mean such attitudes are correct, or unchangeable. But not many would likely argue that videoconferencing is a full and effective substitute for face to face sales activities. 

source: Oxford Economics

Face-to-face requests are 34 times more likely to result in a donation to a cause than sending an email request, two researchers find. With the caveat that a firm such as Virgin and the U.S. Travel Association have a vested interest in getting business people to invest in travel, 28 percent of executives and business travelers believe they would lose 28 percent of their current business if prevented from face-to-face meetings. 

And with the caveat that some “face to face” interactions can be conducted using videoconferencing, “more than half of business travelers stated that five percent to -20 percent of their company’s new customers were the result of trade show participation, according to the U.S. Travel Association, citing a study conducted by Oxford Economics. 

source: Oxford Economics

There is no contradiction between growth of videoconferencing in business-to-business sales processes, at least for the next several years, when there are likely to be strong pressures to limit in-person interactions, and in-person meetings. 

Logic suggests videoconferencing will be most valuable for retaining clients, while in-person meetings will be vital for getting new clients.  “You can’t really trade travel for face to face communication,” says Vyopta. “If you could, cell phones, email, digital cameras, computers, and the internet would have all reduced travel drastically by now, but instead, we’ve seen a steady increase in all types of travel.”

“Travel is the ultimate way to connect, and that will probably never change, especially for business,” Vyopta argues. 

An existing customer already has a level of necessary trust. That will not be so easy with new potential clients.

Catching Inflection Points Can be Really Important

People tend to think in a linear way: tomorrow will be like today, just differing in small ways. Most of the time, that is a reasonable supposition. Unless it is not. 

The shift from monopoly to competition; the replacement of fixed network services by mobile; analog to digital infrastructure; embedded to virtual; closed networks to open; owned to rented computing and rate-of-return to competitive dynamics provide good examples of non-linear phenomena in the global telecom business. 

Exponential change at power law rates are hard to grasp, at first. Inflection points happen, when slow-changing trends suddenly go non-linear. The practical business implication is that being out of position when the inflection point happens can be unrecoverable.

source: Math is Fun

Once an inflection point happens, a firm or industry can miss a dramatic upturn in demand, ceding leadership to others. Conversely, when an existing product hits a negative inflection point, sales and profit can vanish suddenly. 

It will seem quite odd indeed, but back in the 1980s the best minds in the telecom industry could not figure out how we were ever going to provide voice service to most consumers in developing nations. Mobility changed that rapidly, in the 1990s. 

source: ITU

Many of us thought of voice service as a product with highly-inelastic demand, not a product with a lifecycle. Likewise, the telecom business was closed, not open to third parties. Only telcos could program the network. With the internet, no programming is necessary. Given dumb pipe access, service and app creation is independent of the network. 

Many products were expensive, physical and difficult to supply at lower costs. Now many products are capable of almost-infinite replication at very-low costs. Distributors used to be essential to move those products to customers. Now distribution often can go direct to consumer or end user. 

1980	2020
Natural monopoly	Oligopoly
High margin	Moderate to low margin
Low to moderate adoption	High adoption
Low innovation	High innovation
Stable markets	Unstable markets
Compete on quality	Compete on price
Fixed network dominates	Mobile network dominates
Tightly integrated apps and network	Open network
Owned app creation	3rd-party app creation
Sell app, use network access	Sell network access (dumb pipe)
Voice business model	Internet access, mobile business model
Similar business models globally	Growing diversity of business models
99.999% uptime	99.9% or “good enough” availability
Few lead apps	Many lead apps
IT adoption: enterprise; SMB; consumer	IT adoption: consumer/SMB to enterprise

source: IP Carrier

Such basic questions as “who can be in our business?” now are open and indeterminate. Where every telco basically offered the same products in the monopoly era, strategies now diverge. And where competition once was based on quality, most often it is based on cost, with acceptable levels of quality. 

The global telecom industry, in other words, has developed in a non-linear way. That means we often struggle to keep up. 

Even if We Had Zero FCC Data, We Could Estimate Coverage, Take Rates and Quality of Experience

If Federal Communications Commission internet access data were unavailable at all, could we still make educated assessments of broadband coverage, make reasonable estimates of take rates and understand where the shortcomings exist? Of course we could. 

More granular data arguably always is better, but it is mistaken to make a fetish out of FCC data collection. In a filing to the U.S. Federal Communications Commission, Incompass calls for better data collection about internet access, as virtually everybody agrees would be a good idea. 

But we can gain valuable insight into the state of fixed network internet access coverage, usage and performance in many other ways, using what we know about housing stock, occupancy of housing, account data reported by ISPs and surveys of the amount of substitution occurring, where people deliberately choose not to buy fixed network services (or linear video, voice or any other product). 

There are two big and different issues: how well internet service providers perform at supplying access, and how consumers respond to that availability. Take rates alone are not evidence of supply gaps, but often reflect consumer choices, for example. 

Incompass cites Pew Research surveys that  found that 17 percent  of U.S. adults are smartphone-only internet users, meaning that they do not have a traditional high-speed internet connection at home. Using the nationwide average of 2.5 persons per living unit, that suggests seven percent of U.S. homes are “mobile only” for internet access. 

Vacancy rates also matter, as an unoccupied  living unit will not generally be a candidate for purchasing of internet  access. No all living units are occupied at any given time. Vacancy rates can range from more than one percent for owned housing and up to seven percent for rental units. 

Owner-occupied housing units made up 57.9 percent of total housing units, while renter-occupied units made up 30.7 percent of the inventory in the first quarter 2020, according to Census Bureau data. Vacant year round units represented 8.8 percent of total housing units, while 2.6 percent were vacant for seasonal use. 

Approximately 2.2 percent of the total units were vacant for rent, 0.7 percent were vacant for sale only and 0.6 percent were rented or sold but not yet occupied. Vacant units that were held off market comprised 5.3 percent of the total housing stock – 1.5 percent were for occasional use, 1.0 percent were temporarily occupied by persons with usual residence elsewhere (URE) and 2.9 percent were vacant for a variety of other reasons.

Add it all up and 88.6 percent of the housing units in the United States in the first quarter of 2020 were occupied and 11.4 percent were vacant, according to the U.S. Census Bureau.

The Census Bureau also estimates total housing units at 140 million. That implies a potential buyer base of about 124 million units. 

If we deduct the “mobile-only” households (seven percent, or 8.7 million homes, that implies a potential buyer base of about 115 million locations. But not everyone actually uses the internet, which further reduces the addressable base of buyers. 

Though internet usage is virtually universal for adults below the age of 50, only 73 percent of adults over 65 use the internet. About 88 percent of people 50 to 64 use the internet. 

Eventually, adult usage will be virtually universal, but at the moment some percentage of homes might not buy internet access because they do not use the internet. About 15 percent of the U.S. population presently is 65 or older; about 13 percent are in the 50 to 64 age range. 

There are about 34 million households headed by someone 65 or older and perhaps 35 million households headed by someone age 50 to 64. That suggests a potential nine million non-internet homes headed by someone 65 or older, plus four million homes headed by someone 50 to 64. That suggests as many as 13 million households without a need for internet access. 

Subtracting those homes from the base of 115 million potential buyers give us a potential buyer base of 102  million homes. 

Since fixed internet access is sold to locations, not people, all we have to do is compare the current number of fixed network internet access subscriptions with that potential buyer base of 102 million homes to derive an estimate of adoption (take rates). 

Leichtman Research says there were a total of 101 million U.S. internet access accounts held by firms representing 85 percent of the customer base. That suggests total fixed network accounts at 119 million. Granted, some percentage of those accounts are sold to businesses, especially small businesses. 

There are about 30 million U.S. small businesses.  About half of all small businesses are home based and presumably use home internet. So small business probably represents an addressable opportunity of 15 million locations. 

Add that to the consumer addressable opportunity and the universe might be 117 million locations. That is less than the number of accounts already in service. 

That is not a direct measure of quality of experience or speed, but does suggest that most customers who want to buy fixed network internet already do so, whether small businesses or consumers. And there also are ways to assess quality of experience. But that is another exercise and post.

Will the Digital Divide Always Exist? Will it Matter?

To get funding, any advocacy group must first demonstrate that a problem exists. To keep getting funds, an entity has to insist no progress is being made, necessitating continued funding. And if the original problem actually is solved, the entity has to find some new problem that needs to be solved. 

All that applies to “broadband access,” no less than any other undertaking we might consider worthwhile. Despite much data indicating that internet access (mobile and fixed) is getting substantially better and has held up very well as nationwide stay-at-home policies were put into place because of the Covid pandemic, not every community has been so fortunate. 

Oxnard, Calif., for example, was one such place, seeing a dip in downstream speeds of about 20 percent from mid-March to mid-April, although performance now is moving back up post-mid-April, according to BroadbandNow, using test data from M-Lab. 

The community where I live experienced a 32 percent dip in downstream speed during the same period. Those are the stats. 

What I can say in my own case is that the dip in top speed happened on a connection that normally runs (depending on hour of the weekday) between 130 Mbps and 200 Mbps. The dip was brief, lasting perhaps a week, and did not cause any actual degradation of user experience.

The point is that statistics are one thing; user experience can be quite another matter. The median pre-Covid speed was described as between 75 Mbps and 93 Mbps (half faster, half slower). 

Multi-user households buying lower-speed services might have experienced issues. That was not my own experience, but differences, gaps and disparities exist, and might continue to exist in the future, for all sorts of reasons. 

Consumers make choices. They might decide to buy more-affordable services that can be stressed in multi-user households. Some, in single-user households, might decide to rely on mobile access only. None of that is necessarily a failure of policy, but an expression of consumer choices, or demand. 

Supply is an issue, though. In many communities, though served by gigabit cable networks, telcos still sell digital subscriber line services that are demonstrably slower. 

Still, one analysis by Fastly suggests that even the most-challenged digital subscriber line networks in the United States held up under the new at-home load. Cable TV networks also have held up well.

source: Fastly

According to Ookla, U.S. internet access speeds  on fixed networks dipped about four percent during the pandemic. Mobile speeds actually improved by one percent. 

Most of you are familiar with speed tests. Most of you also know you test your connections primarily when they seem “slow.” Almost nobody bothers to test when the networks are humming along. 

And M-Lab tests have increased significantly during the stay-at-home policies, suggesting customers are aware of greater congestion or slower experienced speeds. 

That would hardly be surprising, as all studies show at-home internet access data volume has grown 40 percent or so as people have been forced to work and learn at home. 

A study by Fastly also indicates speed and income are related. That should not be surprising. Lots of consumer behaviors and spending patterns are correlated with income, education, wealth and geography. Up to 20 percent of U.S. consumers also say they rely on mobile internet access, and do not buy fixed network access. Rural speeds tend to be slower than urban speeds. Rural use of the internet, PC ownership and income also seem to be lower than in urban areas. 

The point is that there always will be room to argue that a digital divide continues to exist, even if it is narrowing and has been narrowing for a couple of decades. And statistics often too-casually dismiss the many nuances as speeds are improving fast. 

But differences might always exist.  Since networks are expensive, the last two percent of locations will always be an economic issue. We might solve the basic speed issue, improving delivery from 10 Mbps to 25 Mbps to some higher figure. But urban networks will keep improving as well, so a gap might always exist.