Some Problems Some Themselves

Real life has a way of making some expected problems a non issue. Most readers now are too young to remember it, but half a century ago it was not clear how we actually would enable simple voice communications for half the people on the planet. 

That is not an unsolvable problem, looked at by 2020 standards. So one can occasionally hear people talk about the phrase “half the world’s people have never made a phone call” as an urban legend. That is not correct now, but might have illustrated the problem in 1980, when the only platform we had available was fixed networks. 

Globally, there were about 4.4 billion people on earth in 1980. In 1980, globally, there were about 7.4 phone lines for every 100 people. So global teledensity was 7.4 percent. That does not directly translate into use of phones, as there were payphones. So people used phones that were not theirs. But phone access was quite limited in many countries. 

In 1980, for example, the number of phone lines per 100 people was perhaps 20 in many developing countries. 

source: Researchgate

In 1980, India had less than half a phone line for every 100 persons. 

source: CEIC

The phrase “half the world has never made a phone call” was an estimate even in 1980. But that aside, it is ahistorical to say the statement never was true, or never illustrated teledensity. Today, when there are perhaps six billion mobile accounts in service, against a population of perhaps eight billion, voice usage increasingly is a diminishing problem. But it was not always so. Historical context matters. 

Likewise, other potential problems seem to solve themselves. It always can be argued that there are competitive implications to market power. In the context of communications, managed services are treated, in terms of regulation, differently than internet apps. 

Common carrier rules prohibit differences in terms of service for like classes of buyers. But not all network-delivered services are common carrier instances. Subscription TV, broadcast TV and radio, internet access and all apps are unregulated or lightly-regulated offerings.

Collect calls, toll-free calls or sponsored data provide examples of instances where a third party subsidizes user or customer consumption. In the mobile arena, sponsored data, or zero rating, have sometimes been viewed as impermissible violations of network neutrality rules or principles. 

But real life has a way of muting the potential market power abuses. AT&T, for example, zero rates mobile data usage when customers of its mobile network watch HBO Max content. Though any third party can buy the same feature from AT&T, apparently few do so. 

But there are other market forces at work. AT&T and other U.S. mobile operators have moved to unlimited usage plans that make any zero rating superfluous. In practice, the anti-competitive threat of zero rating is negated by unlimited data usage plans. 

Some potential problems essentially solve themselves.

International Calling Jumps 20% in March 2020

The stay-at-home orders issued to combat the Covid-19 virus have boosted international voice traffic about 20 percent in March 2020, compared to 2019, says i3forum.  Roaming traffic dropped by 30 percent, as travel shrunk. The average length of calls increased by more than 30 percent in March and over 60 percent in April 2020 compared to 2019 levels.

The issue is what happens after the pandemic has passed. It might take an unusual degree of confidence--or excessive linear thinking--to predict that such elevated levels of usage persist. 

IDC predicts a quick return to normalcy, when looking at global customer spending on telecommunications and subscription TV services. Spending is forecast to dip 0.8 percent compared to 2019. IDC expects the decline to continue in 2021, but at a somewhat lower degree. 

Global Regional Services Revenue and Year-on-Year Growth (revenues in $B)
Global Region	2019 Revenue	2020 Revenue	Growth
Americas	$623	$623	0.0%
Asia/Pacific	$471	$465	-1.4%
EMEA	$480	$474	-1.2%
Grand Total	$1,574	$1,561	-0.8%

source: IDC

Business spending might be a different matter. A significant percentage of small businesses will never reopen, so that spending will cease. Some larger businesses might allow some employees to continue working remotely, which will shift spending locations and types, even if it does not lower overall spending. Much also will depend on the speed and magnitude of post-pandemic recovery. 

Countries that fall into significant recession will see lower business spending on communications. 

The mobile segment, the largest segment of the market, will post a slight decline in 2020 due to lower revenues from roaming charges, less mobile data overages due to the stay-at-home situation, and slower net additions, especially in the consumer segment, IDC predicts. 

Fixed data services spending will increase by 2.9 percent in 2020. But spending on fixed voice services will continue to decline.

In 2020, telecom services spending will drop in all geographic regions.

Does Technology Cause Growth, or Does Growth Cause Technology Adoption?

A Deloitte survey of 1,300 enterprise information technology executives across 69 countries and 22 industry sectors finds, as do most such surveys, a correlation between higher-performance firms and lower-performing firms. What never is clear is whether there is a causal relationship between technology investment, customer obsessiveness or any other metric. 

Some 11.6 percent organizations “are delivering significant value through technology,” Deloitte says. Deloitte also notes that such firms also have “an orientation toward growth and leaders who advocate for, prioritize, and appreciate the value of technology.” 

Some industries “always” feature high rates of growth, most likely have moderate growth, while others have low to negative rates of growth. Some industries require high investment in technology, while others might not benefit even from high rates of investment, especially if customer demand is declining. 

source: Deloitte

Software firms, for example, have long-term growth rates between 19 percent and 22 percent, and have business models that virtually require significant technology investment. They also are high-growth industries 

Trucking, on the other hand, has a negative three percent growth rate over the next five years. When an industry is declining, it is not clear that technology adoption can reverse the decline. 

source: Deloitte

Deloitte’s argument is that technology-using, customer-focused, growth-oriented firms got that way because they have positive attitudes toward technology. One might make the argument in reverse: software and technology businesses are fast-growing firms whose very products are “technology.” They innovate because that is how they create new markets and new products, which in turn is the foundation of their growth. 

Such firms often are customer-obsessed because their very survival requires discovering what needs customers have that their products and firms can serve. They do not always know that in advance. 

Conversely, low-growth or no-growth firms might not be customer obsessed because, no matter what they do, demand and revenue drop every year. They essentially are in revenue harvesting mode, where business strategy might actually be to invest as little as possible, as growth is not possible.

How To Install HBO Max on a Fire Stick, Right Now

source: The Android Soul

Many people who use Amazon Fire sticks on their TVs might also have--or want to have--a subscription to HBO Max. Unfortunately, there is a contract dispute between Amazon and Warner Media (AT&T) about revenue sharing. So HBO Max is not yet available on the Fire stick menu. 

But there is an elegant hack that will allow HBO Max subscribers to watch content on their TVs (smartphones and PCs are not a problem, since there is no Amazon inserted into the value chain). 

Watch this video and follow the directions to install HBO Max on an Amazon Fire stick.

Is Work From Home the Future for Many or Most Workers?

Is work from home the wave of the future; a work pattern that will be radically more common and permanent for most knowledge workers?  Not everybody thinks so. 

“The current increase in productivity may be an illusion,” say Jason Gold, managing director and Alec Stapp, director of technology policy at the Progressive Policy Institute. 

Right now, “employees are leveraging the relationships, routines, and habits they developed from interacting with coworkers in person on a daily basis, says PPI. “Over time, however, as workers begin drawing down on this social and organizational capital — culture, structure, and processes — we may find that they become less productive as collegial networks and opportunities to acquire new skills erode.”

“As employees switch jobs, problems linked to the withering of collegial relationships may start to seem more obvious,” says PPI. 

The other issue is whether remote work affects the development of professional networks that aid advancement in a company or industry. Some surveys suggest employees have that concern. So actual productivity or ability to collaborate might not be the whole issue. 

Some employees might rightly believe that being “out of sight means being out of mind,” even if most workers who can do so believe work from home is a productivity booster. 

source: Binfire

“The future will likely feature a robust and variable mix of telework and office work,” the authors say. “Companies that leap prematurely to the conclusion that their ability to prosper during the shutdown proves that the “office” is obsolete risk burning through their organizational capital, just as their rivals start to build it back up.”

If Not Video, What?

Many critics say AT&T’s move into video content ownership and subscriptions has been a big problem. Execution issues might be an issue, but there also is much evidence that revenue growth in the fixed networks business is coming almost exclusively from video subscription services. 

In 2017, for example, video subscription services represented about 27 percent of total telecom service provider revenues, according to the U.S. Bureau of Labor Statistics. “Telephony has made up a decreasing share of the wired industry’s revenues in recent years,” BLS says. “In 2017, this figure was 11.8 percent of industry revenues.”

Internet access services contributed 28 percent.

source: BLS

Put another way, even as observers universally say internet access is the revenue driver for cable and telco fixed services, video in 2017 was producing almost as much revenue as did broadband. 

Some would call video services a distraction, or perhaps only poorly executed. But for an entity with high needs for free cash flow, a revenue generator producing nearly as much revenue as does broadband is nothing to take lightly, especially when voice services are such a small part of the revenue picture.

Nobody can seemingly name a viable and sizable substitute revenue source than subscription video, at the moment. Most of the proposed new services and revenue sources are related to the mobile network: edge computing and internet of things being the salient cited examples. 

Scale Matters: Fixed Networks Lose, Mobile Wins

Lack of customer scale now seems to correlate with lower productivity and profits for fixed network connectivity businesses, while high scale seems also to correlate with mobile network productivity and profits. 

“The difference in labor input between wired and wireless is mainly a matter of scale,” notes the U.S. Bureau of Labor Statistics.  “The extreme rapidity of the labor productivity growth in wireless suggests that technological innovations—new ways of doing things with new types of hardware and software—still play a leading role in the story.”

 “The difference in labor input between wired and wireless is mainly a matter of scale,” says BLS. 

That arguably is true in most--if not all--businesses: scale and market share matter. Profits tend to correlate with market share, for example. Market share also tends to correlate with cost structure. 

Drives to reduce operating cost and capex for new networks have been issues for a couple decades in the telecom business. Headcount reductions, tower sharing, streamlined customer service, open architecture, “do it yourself” servers and routers and open source have been tools used for that purpose, and the work continues. 

But it appears much of the easy gains have been gotten, for mobile networks, computers, communications infrastructure and semiconductors, according to the U.S. Bureau of Labor Statistics. Only the mobile industry has improved its productivity since 1987. 

source: BLS

Scale matters elsewhere. In the U.S. market, fixed network revenue peaked around 2000, and has steadily fallen since then. For example, long distance minutes of use peaked in 2000. The number of U.S. landlines in service peaked about 2001. Long distance revenue peaked about 2001 as well. Most markets will follow a similar trajectory. 

But mobile revenue has grown since 2000. So scale arguably matters for profitability and productivity, not simply gross revenue. 

In the wired industry, output peaked in 2000. “The wired industry actually produced less output in 2018 than it did in 2000,” the BLS says. “Conversely, output for the wireless industry has continued to multiply, growing at an average annual rate of 13.1 percent since 2000.”

Open source and open architectures have played a role in reducing capex and opex, and continue to do so. The Open-RAN Alliance, GSMA, Telecom Infra Project and others are working to create open standards and interoperability of mobile radio access networks, core networks and other key infrastructure. That, in turn, is expected to lead to lower RAN costs. 

But scale does matter most. The basic problem for a fixed network provider is stranded assets, caused by lost market share taken by competitors, product substitution that shrinks demand for fixed access. The installed base of assets remains the same, but declining subscriptions and revenue mean the actual cost per customer keeps going up. 

At the same time, though prices have not fallen consistently for all products, the general trend is lower average revenue per account, or at least lower revenue per unit sold.