Zero Trust Grows from Consumerization of IT

The rise of “zero trust” approaches to security is a recognition of the importance and prevalence of consumerized cloud-based apps, where one must assume there is no difference between apps, processes or identities inside the enterprise and coming from the cloud. 

In essence, zero trust is built on the assumption that perimeter defense is no longer possible or desirable. Where it once was assumed that operations “inside the perimeter” were safe, zero trust assumes nothing is safe. 

 source: McAfee

In other words, even internal interactions on the enterprise side of the firewall and security system are treated as though they were cloud-based and external operations. In a direct sense, that change in security architecture is directly an outgrowth of the shift to cloud-based applications and mix of consumer tools and “IT-sanctioned tools” in the workplace. 

source: Logrhythm 

Use of “non-sanctioned” employee personal devices and cloud-based apps in the workplace has been quite common for a couple of decades, leading to new corporate approaches to such innovations. 

This phenomenon has been frequently referred to as IT consumerization and is notable because it reversed the typical way information technology diffused. 

In the past, IT innovations were developed for enterprises or big government, then spread to mid-market and then small business before reaching consumers. 

Easy-to-use cloud-based applications  and powerful personal devices (PCs, tablets, smartphones) reversed the process. 

Online data storage, social media, and web-based email services and other personal applications actually originated in consumer markets and then were brought to work. 

Consumerization of IT has also come to encompass user experiences and user interfaces that mimic consumer user experience  and user interfaces. So consumerizing enterprise apps and experiences also became a trend. 

Workers seem to prefer apps and experiences that have a consumer ease of use about them and enterprise apps are being redesigned with that in mind. 

Though initially opposing the trend, most enterprises have learned to live with employees preferring the use of consumer tools (Google Apps, Skype or Dropbox) in addition to, or instead of, enterprise IT alternatives. 

Initially seen as “rogue IT,” widespread use of such consumer tools has reshaped enterprise IT, and produced the zero trust approach to security.

Backing Up Home Broadband Using 4G

Information technology diffusion, 40 years ago, generally ran from enterprise to mid-market to small business to consumer users. Tools available in the business gradually became affordable to smaller businesses and then in consumer appliances.

The internet tended to reverse the process: new technologies moved from consumer markets into enterprises, mid-market and small business. Cell phones were one example. Consumer social media and cloud-based applications of every sort provide examples.

Software as a service provides another example. Instead of waiting for formal information technology departments to create a needed capability, department heads often found they could buy capabilities on credit cards without waiting.

Stil, sometimes the older pattern emerges. Some businesses have used 4G for backup of their primary business broadband connections, for example.

Vodafone Always Connected is a 4G backup for home broadband, now offered in Ireland. If the home broadband line has an interruption, access is switched automatically to the 4G mobile network using an in-home appliance. 

When the fixed network issue is resolved, the connection switches back to the home broadband fixed network.

That “4G as a backup” strategy has been used for some time by some business customers who want a failover strategy for their primary fixed network connection. 

To my knowledge, this is the first mass market service to offer the same feature to consumer customers. 

The Vodafone Always Connected device is self installed and delivered by mail. 

It uses its own standard subscriber information module. The device connects to the USB port at the back of the customer’s existing broadband modem. The device autoconnects. That is pretty much it. 

Vodafone notes that this backup service works only when 4G is available, as is the case for about 99 percent of locations in Ireland. 

Vodafone points out that the backup solution works when there are:

• Alterations to connections and wiring inside your home,

• Any local or exchange faults on your broadband,

• Fallen lines due to building work or;

• Storms, high winds, or adverse weather conditions that cause damage to the fixed broadband network.

Instances where it does not help: 

• The customer modem does not have power. For example, if there is a power outage, your modem will not be powered and Vodafone Always Connected will not work.

• The 4G mobile network is down at the same time as your broadband or;

• There is any damage to a customer’s modem.

Of course, when there are local power outages, then the appliances and devices using the internet (TV, PC, dongles and devices using Wi-Fi) also will not work, unless the customer has a backup power source. But that is the case for all locally-powered devices. 

As was the case for locally-powered cordless phones, they are useless when local power is lost, even if the connection remains operational. 

Widespread power outages are another problem. If cell towers are damaged or power is lost over a wide area, for many hours, then the mobile network itself is likely to be unavailable as well. 

For most consumers, higher levels of backup are probably not considered worth the cost and effort. That would entail generator power and battery backup for the whole house and ample supplies of fuel, plus the proper permits. 

Still, the feature is an interesting extension of a business service to the consumer market. For most of the internet era, the diffusion of technology actually ran the other way: from consumer to business. 

We often forget that many current business-grade tools initially came to work when workers wanted to use the same tools they had available to them as consumers. 

The service costs €5 a month.

Co-Investment Changes FTTH Business Model

For a number of reasons, the business model for telco and cable TV fiber to home is changing. A higher degree of government subsidy support; a desire for investment in FTTH facilities as alternative investment and competitive dynamics in the home broadband industry all mean the business case for FTTH improves. 

As one example,Cable One is part of a joint venture with GTCR LLC,  Stephens Capital Partners, The Pritzker Organization and certain members of the management team to build optical fiber to premises networks by Clearwave Fiber.

Clearwave Fiber holds the assets of Cable One’s subsidiary Clearwave Communications and certain fiber assets of Cable One’s subsidiary Hargray Communications. 

At the same time as capital investment requirements are changing, there is a shift in the assumptions about business model. 

In the late 1990s FTTH was seen as the only viable way for telcos to take market share in the linear video subscription business from cable TV operators. So the revenue upside was subscription video and internet access speeds. To be sure, video arguably was seen as the bigger revenue driver, as late 1990s telco FTTH speeds were in the 10 Mbps range. 

Bundling (triple play or dual-play) also was seen at that time as the way to compensate for competition-induced account losses. While telcos or cable each competing across the voice, business customer, internet access and video entertainment markets might have fewer total accounts, revenue per account from triple-play services would compensate. 

source: S&P Global Market Intelligence 

But something else now seems to have changed. A decade ago, independent internet service providers began to attack the market increasingly based on one service: home broadband. To be sure, many independent ISPs tried a dual-play or triple-play approach for a time. 

But nearly all eventually settled on a home broadband-only approach. Since virtually all independent ISPs face both telco and cable TV competitors, the single-product business model makes some concessions on potential revenue that necessarily must be balanced by lower capital investment and operating costs. 

The latest developments are that such tradeoffs are seen as feasible even for incumbent telcos: in other words, the business model increasingly relies on broadband as the foundation, with some contributions from voice. Video (linear or streaming) plays a lesser or no role in revenue assumptions. 

There are other changes. Subsidies have been rising for broadband deployment, and that also changes the capex requirements. Some of the investment in optical fiber also is helped by the denser optical fiber networks necessary to support 5G networks. Essentially, the payback model is bolstered by the ability to defray some optical media costs from mobile service revenue opportunities. 

Also, 5G supports home broadband using the same transmission facilities as does mobile service, often offering a chance for mobile operators to compete in the home broadband business at relatively low incremental cost. That also helps lower the cost of fixed network FTTH as more revenue is wrung from the installed assets. To the extent that higher revenue produces incrementally higher free cash flow, more capital is available to invest in additional FTTH facilities.

The incremental cost of consumer home broadband is lower once a dense trunking network must be put into place to support small cell mobile networks. 

Also, the value of FTTH facilities has changed as rival investors (institutional investors, private equity) view consumer broadband as a legitimate alternative investment. That boosts the equity value of an FTTH network and supplies new sources of investment. 

Also, the cost of FTTH construction has improved steadily over the past few decades. Also, the expected reduction of operating costs from fiber networks, as opposed to copper networks, now is well attested. So there are opex savings. 

FTTH remains a challenging investment, nonetheless. But it is noteworthy that assumptions about the business model now have changed for incumbent and new providers as well. Where it once was thought an FTTH upgrade virtually required revenue from three services, in an increasing number of cases the investment can be justified based on home broadband alone. 

In greater numbers of cases, the primary value of home broadband is supplemented by some revenues from other sources. But where a triple-play might have produced $130 per month to $200 per month revenues, home broadband might produce $50 to $80 a month. 

That projects increasingly are feasible with a $50 monthly revenue target and adoption around 40 percent to 50 percent shows how much the capex and opex assumptions have changed.

U.S. Population Density is a Bigger Problem Than Maps

Few observers, it seems, are completely happy with the state of home broadband maps. Some argue the maps distort availability by as much as 21 percent.  Others argue the degree of distortion likely is less than many believe, perhaps on the order of five percent, according to an analysis by George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist.  

Others note that the lack of access to fixed network “broadband internet access” at a minimum of 25 Mbps is between five percent and six percent. If satellite access is included in the analysis then virtually all continental U.S. locations have access to service at 25 Mbps. 

Inaccurate maps are only part of the story, however. U.S. population density is quite thin across most of its geography. That directly affects the cost of building broadband networks, as hefty subsidies are required to reach the last one percent or two percent of remote locations. 

And the United States has a huge percentage of its land mass that is thinly settled, if at all settled. 

In Canada, 14 percent of the people live in areas of density between five and 50 people per square kilometer. In Australia, 18 percent of people live in such rural areas.

In the United States, 37 percent of the population lives in rural areas with less than 50 people per square kilometer.

Put another way, less than two percent of Canadians and four percent of Australians live in such rural areas. In the United States, fully 48 percent of people live in such areas.

Coverage is an issue in such rural areas. About six percent of the U.S. land mass is “developed” and relatively highly populated. Those are the areas where it is easiest to build networks. 

But about 94 percent of the U.S. land surface  is unsettled or lightly populated, including mountains, rangeland, cropland and forests. And that is where networks are hardest to build and sustain. 

Industry statistics often suggest coverage is far better than critics say. The reality is likely that the maps are faulty, but coverage is still far better than some believe. 

The Federal Communications Commission says 98 percent of U.S. homes have access to  internet access at a minimum of 25 Mbps and 84 percent subscribe. Critics say those numbers are inflated by bad maps. 

But one virtually never hears complaints that the leading U.S. cable companies do not, in fact, supply 500 Mbps (Charter Communications to 0gigabit internet access (Comcast) to nearly 100 percent of their customer locations. Add in Cox Communications and those three firms cover more than 75 percent of U.S. homes. Cox supplies gigabit access to 100 percent of its customer locations. 

Gigabit speeds now are available to more than 88 percent of all U.S. homes, according to the Federal Communications Commission. Other estimates peg the percentage of homes with cable high-speed access at 90 percent. 

One can disagree with the FCC statistics and still not quibble that cable operators generally do supply coverage within their franchise areas that is substantially at 100 percent and offering speeds between 500 Mbps and 1 Gbps. 

Consider rural telco networks. “Respondents to this year’s survey report an average of 4,467 residential and 469 business fixed broadband connections in service,” NTCA says, with an  average of 7,581 serviceable locations. 

Respondents report an average of 72 percent  of customers in their areas subscribe to a broadband service of some speed. 

“On average, three-quarters (75.0 percent) of serviceable locations are served by fiber to the home (FTTH) in 2021; this is an increase of 5.1 percentage points from the prior year’s survey, says the latest Broadband/Internet Availability report issued by NTCA says. 

An average of 15 percent of locations continue to be served via copper loops while fiber to the node (FTTN) is used to serve an average of six percent serviceable locations. Cable modems service 2.7 percent of locations, licensed fixed wireless 0.7 percent and unlicensed fixed wireless 0.6 percent of locations. 

source: NTCA 

As for maximum speeds 55 percent of locations can get speeds between 100 Mbps but less than 1 Gbps. Some 20 percent of locations have maximum speeds between 25 Mbps and 100 Mbps.

Some 10 percent of locations have maximum speeds between 10 Mbps and 20 Mbps. About 3.7 percent of locations get speeds below  10 Mbps. 

To be sure, the data is self reported. One might argue that firms that did not respond to the survey have coverage, speed or physical media attributes quite different from firms that did report. 

Still, coverage in rural areas might be less a problem that generally is talked about.

More Drivers for U.S. FTTH Business Model

U.S. cable operators will face more home broadband competition from telcos in the years to come, according to S&P Global Intelligence. Increased telco investment in fiber to home facilities is the reason. 

But the bigger story arguably is a shift in the economics of fiber to home facilities and the business model. In the late 1990s FTTH was seen as the only sure way to take market share in the linear video subscription business. 

Bundling (triple play or dual-play) also was seen at that time as the way to compensate for competition-induced account losses. While telcos or cable each competing across the voice, business customer, internet access and video entertainment markets might have fewer total accounts, revenue per account from triple-play services would compensate. 

source: S&P Global Market Intelligence 

But something else now seems to have changed. A decade ago, independent internet service providers began to attack the market increasingly based on one service: home broadband. To be sure, many independent ISPs tried a dual-play or triple-play approach for a time. 

But nearly all eventually settled on a home broadband-only approach. Since virtually all independent ISPs face both telco and cable TV competitors, the single-product business model makes some concessions on potential revenue that necessarily must be balanced by lower capital investment and operating costs. 

The latest developments are that such tradeoffs are seen as feasible even for incumbent telcos: in other words, the business model increasingly relies on broadband as the foundation, with some contributions from voice. Video (linear or streaming) plays a lesser or no role in revenue assumptions. 

There are other changes. Subsidies have been rising for broadband deployment, and that also changes the capex requirements. Some of the investment in optical fiber also is helped by the denser optical fiber networks necessary to support 5G networks. Essentially, the payback model is bolstered by the ability to defray some optical media costs from mobile service revenue opportunities. 

Also, 5G supports home broadband using the same transmission facilities as does mobile service, often offering a chance for mobile operators to compete in the home broadband business at relatively low incremental cost. That also helps lower the cost of fixed network FTTH as more revenue is wrung from the installed assets. To the extent that higher revenue produces incrementally higher free cash flow, more capital is available to invest in additional FTTH facilities.

The incremental cost of consumer home broadband is lower once a dense trunking network must be put into place to support small cell mobile networks. 

Also, the value of FTTH facilities has changed as rival investors (institutional investors, private equity) view consumer broadband as a legitimate alternative investment. That boosts the equity value of an FTTH network and supplies new sources of investment. 

Also, the cost of FTTH construction has improved steadily over the past few decades. Also, the expected reduction of operating costs from fiber networks, as opposed to copper networks, now is well attested. So there are opex savings. 

FTTH remains a challenging investment, nonetheless. But it is noteworthy that assumptions about the business model now have changed for incumbent and new providers as well. Where it once was thought an FTTH upgrade virtually required revenue from three services, in an increasing number of cases the investment can be justified based on home broadband alone. 

In greater numbers of cases, the primary value of home broadband is supplemented by some revenues from other sources. But where a triple-play might have produced $130 per month to $200 per month revenues, home broadband might produce $50 to $80 a month. 

That projects increasingly are feasible with a $50 monthly revenue target and adoption around 40 percent to 50 percent shows how much the capex and opex assumptions have changed.

5G Fixed Wireless Might be the Biggest Near-Term New Use Case, in Terms of New Revenue Sources

As easy as it might be to dismiss fixed wireless, it might be equally easy to overstate its impact. At the end of 2021 there might have been about 70 million fixed wireless connections in service globally, according to Deloitte. Ericsson believes there were as many as 90 million fixed wireless connections in service in 2021.  

So how significant is that? Perhaps not so significant when service providers have other alternatives. But fixed wireless might be highly consequential for service providers that can use fixed wireless to compete in the home broadband market where they had not be able to do so, in the past.

source: Deloitte 

By the end of 2021 there were about one billion fixed network internet access subscriptions, according to Point Topic. So fixed wireless represented possible seven percent to nine percent of fixed network internet access connections globally. 

source: Point Topic 

So fixed wireless clearly is incremental to use of other platforms, though arguably of high importance to many infrastructure suppliers.

On the other hand, fixed wireless can be incrementally important for some service providers. For some service providers it might represent a business case that other platforms cannot match, allowing those firms to compete in the home broadband for the first time, or more effectively.

That might especially be true in geographies where the cost of building cabled networks is not feasible, or where subsidies of some sort are not available to help defray the cost.

Mobile-only firms formerly unable to compete in the home broadband market, or unable to compete for much of that market, might find 5G fixed wireless viable. 

5G fixed wireless connections could--in many cases--provide significant incremental revenue growth, allowing mobile operators to compete for home broadband accounts now largely the province of fixed network operators. 

Assume global  gross national income per capita of about $11,600 and a monthly home broadband cost of five percent of GNI per capita. That is about $580 in annual revenue per line. 

So 75 million new fixed wireless accounts represents perhaps $43.5 billion in new annual revenue for mobile service providers. That can take the form of new accounts or market share taken from other suppliers. 

Fixed wireless using 5G will by 2026 support 180 million connections globally and generate US$70 billion in revenue, accounting for 40 percent  of the total fixed wireless access market, according to ABI Research. 

Adoption likely will be highest in markets where the cost of deploying fiber to home or hybrid fiber coax remains unworkable, and where demand for moderate-speed internet access is high. Some might argue that 5G fixed wireless is most directly the successor for 4G fixed wireless and digital subscriber line. In some markets that opportunity might last for a substantial amount of time.

5G fixed wireless might be especially important for firms that have not yet been able to compete in all of most of the home broadband market. For T-Mobile in the U.S. market, that represents a huge opportunity, since T-Mobile has had zero percent share of the home broadband market. 

And Verizon expects that fixed wireless will underpin as much as 71 percent of the potential locations it will reach for home broadband service by about 2025. 

Some will counter that 5G fixed wireless speeds will not generally match those of fiber to home or cable modem services. That is likely to be true.

But 5G fixed wireless is likely to be attractive to a substantial portion of the market. In rural areas, where service might only be available in the 50 Mbps range, that still could be competitive.

Overall, about 20 percent of U.S. home broadband buyers purchase services operating no faster than 100 Mbps. So the issue is general availability of fixed wireless services offering speeds of 100 Mbps to  200 Mbps. 

source: Openvault

Nearly half the market presently buys service operating between 100 Mbps and 200 Mbps. And nearly 68 percent of the U.S. market buys service operating no faster than 200 Mbps. 

Also, the U.S. home broadband market is big enough that gaining just a couple of points of the installed base and market share generates substantial revenue. By 2023, fixed wireless might represent about 4.5 percent of all home broadband accounts , some estimate.  

To put that into perspective, consider projected revenue for other new services. In 2024, it is conceivable that  IoT connectivity revenues for mobile operators globally could  be in the low millions to tens of millions of dollars, according to Machina Research. Millions, not billions. 

In 2026 the global multi-access edge computing market might generate $1.72 billion. Even if one assumes all that revenue is connectivity revenue booked by mobile operators, it still is a far smaller new revenue stream than fixed wireless represents. 

In 2020 there were perhaps 80 million fixed wireless subscriptions in service. Researchers at Mobile Experts see that number growing to almost 200 million by 2026. 

Ericsson notes that more than 70 percent of all service providers now offer fixed wireless access   services. Ericsson also predicts that fixed wireless connections will exceed 180 million by the end of 2026.

By 2026, assuming these forecasts are accurate, fixed wireless will represent about 12 percent of fixed network broadband connections, Ericsson estimates.  

Keep in mind that the incremental revenue from 75 million 5G fixed wireless connections does not include the revenue from 4G fixed wireless connections, which might represent another 110 million connections. 

That represents an additional $104.3 billion in annual revenue, assuming a global average of $48 per month, per line. 

The point is that incremental revenue from 5G fixed wireless might dwarf new revenues earned by mobile operators from edge computing and internet of things.

"Both And" Will Prevail for Network Slicing, Private Networks, Edge Computing

Engineers tend to be a practical lot. They are used to tradeoffs when considering any technology solution to a business problem. For that reason, though they can get involved in "religious" arguments about solutions, most of the time they will acknowledge that there almost are multiple ways to solve any particular problem.

To the extent that network slicing (virtual private networks) is a solution for some latency, bandwidth or availability issues, both private networks and edge computing provide possible substitutes. 

So some might theorize that private networks and edge computing will minimize the market for network slicing or virtual private networks. 

In the end, this likely will shape up to be another “both and” outcome. As we once debated the extent to which Wi-Fi could be a substitute for mobile connectivity, the likely outcome is that we will use virtual private networks, edge computing and private networks, for different use cases.

As often is the case in the communications and computing businesses, there is no one size fits all solution. Wide area private networks can optimize latency, bandwidth,  support for low-power devices and apps or availability and reliability. 

source: STL Partners 

  

But edge computing can address those same problems. So can private networks. Both network slicing and edge computing are suitable for mass deployment apps. Private networks are better for single-enterprise apps. 

Private networks and edge computing arguably are better for supporting compute-intensive apps that also have very low latency requirements as well. Network slicing arguably is better suited for mass market, high-scale, highly-distributed apps. 

In the end, private networks will not be a complete substitute for network slicing, any more than edge computing will be a universal substitute for network slicing or private networks.