Does More IT Investment Lead to Higher Productivity or Return on Investment?

The conventional wisdom is that investment in information technology is correlated with business outcomes. But correlation is not causation. 

“We’ve found that investing in remote, LAN, and WAN services correlated with collaboration investment success, defined as above-average ROI or productivity gains,” says Metrigy. 

source: Metrigy 

Other studies likely show the same correlation: firms with better outcomes generally invest in more technology. There are other correlations. 

It also is likely that industries with higher profitability; faster growth rates and higher gross revenues invest more heavily in technology. Industries challenged in terms of revenue, growth or profit tend to invest less than average. 

In other words, it is hard to conclude whether “better-performing firms apply technology” or whether “applying technology makes firms perform better.” Perhaps firms that use more technology perform better for all sorts of other reasons. 

Telco Clouds not Your Grandfather's Oldsmobile

Telco computing platforms in the internet age are vastly different from the closed, proprietary platforms of the voice-only era. Less functionality is built internally and custom; more functionality is sourced from third parties. That requires a more-open platform able to run third party apps, using more open source and standardized operating systems. 

That is why one hears so much about virtual network functions, network virtualization and “telco clouds.” It has not been particularly easy to accomplish. But newer efforts in the mobile segment of the business to create Open RAN standards are an edge counterpart to core network virtualization.

source 

That now creates an architecture that might be called “Microsoft Inside” or “Anthos Inside” (Google) or “Amazon Web Services Inside.”

source: Microsoft

Free Speech Law: Are Big Changes Possible?

You might think our understanding of the First Amendment to the U.S. Constitution is unambiguous. It is not. “The outstanding fact about the First Amendment today is that the Supreme Court has never developed any comprehensive theory of what that constitutional guarantee means and how it should be applied in concrete cases,” argued Thomas Emerson. 

What the First Amendment means, in other words, is far from “settled law” (precedent). It tends to develop on an ad hoc basis, rather than flowing from a comprehensive framework, Emerson notes. 

Right now, a growing concern in some quarters is how freedom of expression is protected not from government action but by the actions of platforms. Indeed, some call for greater restriction of free speech on platforms, in the name of so-called hate speech. Others say the restrictions are not equally applied to all speech, and result in the suppression of some political ideas. 

If we assume that the purpose of the First Amendment is to protect freedom of expression in a democratic society, then new media formats and new platforms can raise new issues. And, as is common, the matter is complicated. 

The First Amendment has generally been interpreted to protect the rights of “speakers. But the owners of new platforms (social media, in particular) say their users are the “speakers,” not the platforms. 

That is the basis for Section 230 of the Telecommunications Act of 1996. The act protects platforms from liability for what is said by users of their platforms. “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,” the Act states. 

In other words, users are the speakers, not the platform. That could have profound implications. 

The owners of platforms do not lose their corporate right of free speech as private entities, but the matter of free speech is complicated when the platforms themselves do not claim to be speakers.

The bigger issue might ultimately be that the First Amendment says “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

Traditionally, citizens are to be protected from government restriction of free speech. 

But the places where “speech” occurs also matter. Public forums--such as public parks and sidewalks--have always been viewed as places where citizens have the right of free speech. 

Nonpublic forums are places where the right of free speech can be limited. Examples are airport terminals, a public school’s internal mail system or polling places. 

In between are limited public forums, where similar restrictions on speech are lawful, especially when applied to classes of speakers. However, the government is still prohibited from engaging in viewpoint discrimination, assuming the class is allowed. 

The government may, for example, limit access to public school meeting rooms to school-related activities. The government may not, however, exclude speakers from a religious group simply because they intend to express religious views, so long as they are in a permitted class of users. 

Those protections have been limited to state action, It is government entities (local, state, or federal) that are enjoined from infringing the right of free speech. Protections have not been deemed applicable to private entities.

There has generally been in other words, no First Amendment right of free speech enforceable on private firms or persons, with some exceptions. 

Common carriers--such as telcos--must allow communications between any users who are willing to pay the tariffs. Telcos cannot censor what those users say. Such regulation--including public accommodation, water and electrical utilities or railroads--is not generally regarded as a direct “free speech” issue, but an issue of commerce.

A common carrier is a person or company that transports goods or people for a fee, the principle being non-discrimination. A common carrier must provide its service to anyone willing to pay its fee, unless it has legitimate grounds for refusal.

If state governments decide to create laws protecting free speech from social media or other private firms, that would at the very least raise an issue: Can the federal government, acting under the guise of the First Amendment, move to restrict state action extending the zone of free speech to include dominant private platforms? 

That might involve a novel regulation of social media platforms as common carriers of a sort. That would plow new ground, but First Amendment law has evolved over the years in an ad hoc way, all along.

Lumen Outlines Where it Will Invest, Where it Will Harvest

Lumen Technologies has a clear understanding of where its revenue growth is to be found. Lumen earns most of its revenue--up to 75 percent or so--from business customers, so it makes sense to look for revenue growth in international enterprise operations, IP data services including edge computing, transport and apps supporting transport. 

source: Lumen Technologies 

Consumer and small business revenue growth (mass markets) will come almost exclusively from broadband access services. 

The wholesale, voice and rural operations are not seen as growth vehicles and essentially will be harvested. Note that Lumen is not a supplier of mobility services, so that is not a growth option. 

Every connectivity provider with multiple customer segments and products has to make similar decisions about where growth is to be found and where investments are to be made. 

Conversely, every business has to know which lines of business are declining and have to be managed for decline.

Post-Pandemic Connectivity Revenue Assumptions Might Change

Many would note that the economic stress created by government shutdown of large portions of the economy, and other public health safety measures, have damaged small business and helped big business. To be sure, those trends were already in place, but were magnified by the government response to the pandemic. 

That impact should be seen in many areas of the communications business as well, where other pressures--especially the growth of competition--were in place even before the pandemic. 

Bharti Airtel, long one of India’s largest mobile service providers, says it has survived several near-death experiences. After three or four crises, Airtel now operates in a market with “2.5 providers.” Just several years ago, Airtel operated in a market with about 10 competitors. 

Big companies with scale are likely to emerge, post pandemic, with more market share than they had going into the crisis, while many smaller businesses will have ceased to exist. Consolidation, of course, is not new in the connectivity business. But the pandemic arguably has nudged the process a bit. 

None of that is going to stop researchers from predicting post-pandemic growth. But markets likely will have been reshaped. 

To look only at the hospitality segment, estimates of restaurant bankruptcies and closures ranging from 30 percent to 60 percent in some countries and areas, the base of potential customers for connectivity services is going to drop. 

Other small and independent retailers likely will face similar pressures, as more market share will shift to giant online retailers and chains. So we will have to be more nuanced in our reading of “growth” forecasts. A return to growth will happen, but on a base of establishments that might be permanently lower. 

source: Analysys Mason 

Unknown at this point is the effect on enterprise connectivity spending as hybrid work patterns are established. Most believe large enterprises will need less office space than in the past, as fewer people will be congregating at such sites. 

That might soften direct enterprise connectivity spending at sites. The impact on employees working from home is not clear, either. Most information workers pay for broadband and mobility service for other reasons than work, and those existing connections can be used for work-from-home purposes, generally with little increased cost, if any. 

So long-term impact on connectivity provider revenues is not clear. Direct demand might be lower in urban areas for a couple of reasons. Firms will downsize. Fewer people will work at offices full time, with ripple effects on other businesses in those areas. 

With fewer people commuting to urban areas, mobile-related behavior will change as well, generally in the direction of less usage while traveling. Less business travel is expected, slowing the growth of roaming revenue. 

Arguably, more international communications will use over-the-top apps and services that limit the growth of carrier revenues from international long distance or messaging. 

Though more people will be working from home, more of the time, the whole point of multi-purpose networks and internet-based services is that the additional work-related bandwidth or capacity might not be very relevant. 

Most consumer bandwidth supports entertainment video, so all work-related additional load will barely be noticed. 

Service providers will have to watch--and adjust--capacity investments. Less capital investment growth will be needed in urban cores, as demand will moderate. In suburban areas, there is likely to be more demand for upstream bandwidth, however. 

Perhaps oddly, in some markets suppliers are pushing “unlimited data usage” plans precisely at the point that work-from-home trends make the value less obvious. More WFH means less bandwidth consumption when out of the home. In the home mobility usage will shift to Wi-Fi instead. 

But bandwidth demand is largely driven by entertainment video, not WFH demands, which are relatively low bandwidth, in comparison. 

The point is that prior assumptions about revenue and growth might have to be revised in light of relatively important shifts in end user connectivity demand.

Survey Finds 58% Believe Covid-19 Pandemic Will be "Over" By 2nd Quarter 2022; Rest Think it Take Longer

About 58 percent of respondents to a survey conducted by Ipsos for the World Economic Forum believe the Covid-19 pandemic will be “over” within a year. Of course, that also means more than 40 percent believe the pandemic will not be over “within 12 months.”

With the caveat that the survey reflects consumer beliefs, and is not a direct measure of what governments will do, and when, that will likely affect any business operating trans-nationally, to say nothing of continued impact within any single country. 

source: Ipsos 

The survey finds that, on average, across 30 countries and markets surveyed, 59 percent expect being able to return to something like their normal pre-COVID life within the next 12 months. So possibly May 2022. That still leaves 41 percent believing the pandemic will not be “over,” with “normal” life reestablished, until sometime in the second quarter of 2022 or beyond. 

source: Ipsos 

More than 70 percent of respondents in Saudi Arabia, Russia, India, and mainland China are confident their life will return to pre-COVID normal within a year. In contrast, 80 percent in Japan and more than half in France, Italy, South Korea and Spain expect it will take longer.

Rogers Acquisition of Shaw is Not Mostly About 5G

The proposed acquisition of Shaw by Rogers Communications in Canada is touted by Shaw as benefiting 5G deployments. As with all acquisitions, participants say what they believe regulators want to hear. 

Some would argue the deal is about revenue growth in a tough market, not 5G. 

Growth in the fixed networks business is slower than that in the mobility business and most of the revenue is now earned in the mobility business, not the fixed business. Revenue growth in the global business now is around one percent per year, with capex tracking revenue, also growing at about one percent per year. 

Global connectivity supplier capital investment (mobile and fixed) is projected to grow at a one percent compound annual growth rate between 2019 and 2022, according to the Dell’Oro Group. Other forecasts call for a decline in capex after 2022, as 5G and fiber investments to support 5G and fixed network broadband projects are completed. 

source: Orange

source: Dell'Oro Group

Shaw is not a player in mobility, nor is its growth upside in the fixed networks segment so favorable, either. There comes a time to sell an asset, and Shaw executives clearly believe now is the time. 

So 5G deployment is pitched by Shaw as the rationale behind the deal. 

The Covid-19 pandemic has generally had a depressing effect on connectivity service provider revenue globally, with a few exceptions in a few markets. But the underlying trends were in place before Covid hit. 

Longer-term trends remain at work, namely slow growth rates. 

source: IDC 

And that is why Shaw executives have made the decision to sell.