Can Blockchain Remedy Some of the Internet's "Anonymity" Problems?

The value of data transport protocols other than TCP/IP has been growing for the past decade. Those of you with long memories might recall that the global telecom industry debated the protocols for its next-generation network in the 1990s, with many favoring asynchronous transfer mode. 

To make a long story short, the industry chose TCP/IP, itself once believed to be a “transition” protocol. There were lots of reasons, but chief among them was the cost of connecting. ATM was relatively expensive; TCP/IP was radically cheaper. And not even volume deployment was going to eradicate the price differential. 

But there is another sense--beyond transmission costs--that is likely to become even more important in the decade ahead: the business value. We often forget that TCP/IP is based on “layers” that separate functions from each other.

That has led to the “over the top” way applications are created and owned on all networks using TCP/IP, and at this point that is virtually all networks. In part, that is because all networks now are computer networks, and TCP/IP was originally conceived as a data networking protocol. 

As we create applications on computing networks--applications separated from connectivity--so we also create applications running on public and private wide area networks. 

“Anonymity” has been one feature of the internet that can be troublesome, for social reasons such as enabling bullying, financial fraud, phishing, spoofing and catfishing, to note a few problems. 

But “trust” has become a significant business issue in the internet era. Is it possible that business models that inherently have better “trust” attributes could supplant much of the “zero trust” nature of the internet?

Some might argue blockchain is a candidate to change the “trust” dimension of the internet, for consumers and business users. It once was argued that anonymity was important for political dissidents living under repressive regimes, and there is logic there. 

But that same anonymity arguably makes the consumer internet less useful, and positively harmful, for a similar reason: anonymity frees human beings from the in-person courtesy and respect they might otherwise show people. Anonymity encourages extreme expressions. 

Known identities have become more important, for all sorts of good reasons. Maybe a shift to blockchain--with a new emphasis on verifiable identities, will be a good thing.

$50 a Month for Speeds Between 100 Mbps and 200 Mbps is the "Sweet Spot" for U.S. Home Broadband

The “sweet spot” for U.S. home broadband is a monthly recurring cost around $50 and speeds between 100 Mbps and 200 Mbps, which is purchased by about half of all U.S. home broadband customers. 

Pricing by independent internet service provider Vyve Broadband shows the packaging reflecting buying patterns. The 200-Mbps package sells for $50 a month. The gigabit package, likely bought by about 11 percent to 12 percent of homes, sells for about $70 a month. 

The lowest tier offers 100 Mbps for $40 a month. 

 

source: Vyve Broadband 

It might seem curious, but the new payback analysis for home broadband using fiber to the home also is about $50 per customer location, at take rates close to $50 a month, according to AT&T.

For those of you who follow the payback models for FTTH, that is somewhat shocking, as models from 20 years ago would have assumed per-customer revenue closer to $100 to $130 per month, to make the model work. 

That the revenue assumptions have changed so much reflect secular changes (declining demand for fixed network voice and linear video entertainment) as well as changes in cost structure related to operating cost and capital requirements for home broadband as well. 

It also is noteworthy that T-Mobile’s 5G home broadband service is priced at $50 a month. Though T-Mobile no longer seems to emphasize “speed,” it had in April 2021 talked about speeds up to 100 Mbps. 

Verizon’s 5G fixed wireless has recently been repriced to $50 per month, with speeds up to perhaps 300 Mbps. 

All that tells you where the mass market demand is believed to exist. The packaging will change, of course, in terms of typical speeds and prices. "More speed for the same price" as well as "significantly faster speeds for a higher price" are the two trends that will likely remain in place.

IP Was a Business Model Change, Not Just a New Networking Platform

Almost always, big changes in networking architecture and platform change the range of possible business models and market shares in the application, connectivity and infrastructure businesses. 

For example, the move to disaggregated, open and virtual networks automatically creates new potential roles for system integrators. Where platforms could be purchased monolithically, new networks can be assembled from various suppliers. 

To note only the most-obvious possible changes, monolithic platform suppliers could lose some market share to new suppliers and network integrators who supply the network components and the complete networks. 

In other words, when we move to disaggregate functions and elements, we automatically create a new need for system integration. 

So we must now look for the emergence of new names in the system integration business, as it applies to core networks and access networks. At some point, if they are willing or forced to concede some roles and revenues, the legacy monolithic network suppliers also are in line to act as system integrators, using elements and software sourced from any number of possible suppliers. 

Consider an earlier change that produced precisely those results. Because “layers” are the technology architecture, disaggregation is both possible and desirable. 

Look at data center or server businesses. Hyperscalers now build their own servers, they do not buy them. They can do so because layers make it possible. Custom software can run on commodity hardware; and commodity hardware can be built “in house.”

Hyperscalers build and own their own wide area networks, they do not have to buy services from WAN suppliers on their core data center to data center routes. 

Hyperscalers build their computing fabrics from modular arrays of servers, not monolithic mainframes. Whenever possible, they virtualize both compute and storage operations, rather than dedicating hardware to those functions. 

In a related process, “everything” is moving to virtualized supply. Enterprises and consumers can buy “services” rather than owning their own hardware and software licenses. Customers can buy computing or storage features “by the instance,” as a service, rather than building and operating their own data centers. 

It is an under-appreciated fact that when the global telecom industry selected internet protocol as its next generation platform, it also--knowingly or not--chose a layered business model. 

IP is not simply a framework for moving bits around; it is a business and revenue architecture as well, separating logical functions in ways that allow whole industry segments to emerge in a disaggregated way. 

In other words, the salience of the term “over the top” is precisely the result of a “layered” approach to building communication networks. When we disaggregate edge devices and functions from transport layer functions, and those from application functions, the revenue streams and possible business models also are disaggregated. 

That is why Meta, Amazon, Netflix and others can build businesses using networks without owning networks. 

IP was not just a technology platform change. It was a profound business model change.

"Open:" How We Got Here

Among the various conversations people had at the #PTC’22 conference are those about where networks are going, where the business is going and where revenue is to be found. Among the topics, 5G and Wi-Fi 6, network slicing, edge networks and the complications of in-home environments have been prominent. 

Among the potentially most far-ranging were questions posed by Robert Pepper, Meta head of global connectivity policy. Use of open technology is simply the latest in a series of transitions that have happened in the networking business over the last 40 years, Pepper said. 

“Disaggregated network elements are 40 years in the making,” Pepper said. The industry transitioned from analog to digital; then hardware to software functions, he noted.

The “next transition is from integrated and proprietary to open and modular networks,” he said. 

There will be big repercussions for suppliers of networking infrastructure. Where telcos 50 years ago developed and made their own gear, they then switched to buying complete networks from a handful of global suppliers. That obviously created huge new businesses, but also made telcos “captive” to a few suppliers and “vendor lock in.”

Suppliers might like that state of affairs, but buyers (telcos) hate it, it is fair to say. In a broad sense, the shift to open and modular networks also represents a shift from vendor-led to operator-led infrastructure development and supply. 

It also is fair to note that there always are private interests that benefit from any wider shift in framework. Perceived benefit hinges on where a firm or industry segment operates in the complete value chain. 

Application supplier business models depend on ubiquitous, high-quality and low-cost  internet access. Access providers are not similarly situated within the value chain. For app providers, high-quality, low-cost internet access is a prerequisite for business. For connectivity providers, access is the business. 

For an app provider, internet access is a cost of doing business. For a connectivity provider access is the core revenue stream. What the former wants is lowest-possible cost and highest-possible quality, the latter wants highest-possible revenue with minimum-possible cost. 

You might argue it is in Meta’s interest for internet access to be universal and good, as it is in a connectivity provider’s interest to reap the highest revenue from access services, with the highest margins consistent with long-term sustainability. 

If Meta is right, economics are moving in the direction of what is favorable for application creators. 

There are clear analogies in the data center or server businesses as well. Hyperscalers build their own servers, they do not buy them.  Hyperscalers build and own their own wide area networks, they do not buy services from WAN suppliers on their core data center to data center routes. 

Hyperscalers build their computing fabrics from modular arrays of servers, not monolithic mainframes. Whenever possible, they virtualize both compute and storage operations, rather than dedicating hardware to those functions. 

Moderator Gary Kim, a PTC volunteer and consultant, noted that when the global telecom industry selected internet protocol as its next generation platform, it also--knowingly or not--chose a layered business model. 

IP is not simply a framework for moving bits around; it is a business and revenue architecture as well, separating logical functions in ways that allow whole industry segments to emerge in a disaggregated way.

In other words, the salience of the term “over the top” is precisely the result of a “layered” approach to building communication networks. When we disaggregate edge devices and functions from transport layer functions, and those from application functions, the revenue streams and possible business models also are disaggregated. 

That is why Meta, Amazon, Netflix and others can build businesses using networks without owning networks. 

IP was not just a technology platform change. It was a profound business model change.

What if "Better Broadband" Actually does not "Cause" Economic Growth?

The prevailing wisdom that super-high-quality home broadband actually changes things is wildly and uncritically accepted as “truth.” That is not to deny that ubiquitous access to higher-quality broadband is to be preferred. Homes who can only get 25 Mbps will not have the same experience as households able to use 100 Mbps to 200 Mbps, when there are multiple users and multiple devices in simultaneous use. 

The issue there is bandwidth per user and device, in real time, with simultaneous use of various applications. Multiple users almost always benefit from “more bandwidth,” as is the case for every shared communications medium. 

But as a matter of science, it is impossible to actually quantify the outcomes from upgrading access--ubiquitously--from some lower level to some higher level. 

For most households, businesses and communities, almost nothing would change simply because bandwidth was increased from a moderate level (100 Mbps to 200 Mbps) to a gigabit per second, for example. 

More precisely, for any single user, trying to use any mix of applications, more bandwidth might help with experience, or might not. In other words, the benefit of “more bandwidth” depends on how many users in a home, how many online simultaneously, what they are trying to do, how many devices they are using and what the applications “need” in terms of performance. 

Downstream is one thing; upstream another thing. 

And, to be sure, our requirements drift upwards over time. That will not stop. But outcomes hinge on many things other than per-user bandwidth. We cannot actually say that student performance on homework is X percent better with Y increase in per-user bandwidth. Maybe it is; maybe it isn’t. 

And it is hard to see a true causal relationship between region economic growth and job growth, for example, as bandwidth is increased from X to Y. Regions that are growing slowly will still grow slowly, even with better broadband, because growth hinges on other matters, such as proximity to large markets. 

Regions losing population; facing industrial shutdowns or other changes in underlying conditions do not materially change simply because “better broadband” is available. 

Tourism, manufacturing or service businesses do not often relocate to distant or isolated regions because better broadband is available. There are other important reasons why a place is deemed fruitful for additional job growth or facilities. 

Better broadband does not causally change educational or industrial or professional skills possessed by the local population. You might argue that permanent work from home will change living locations. 

But most of those changes will still be tethered to population centers in key ways, simply because humans value the amenities that population density provides. So exurban changes will happen more than shifts of sizable numbers to very-remote areas. Shifts from urban to suburban likewise will be materially more important than shifts to very-rural areas. 

Yes, anecdotally, more people will spend more time in mobile modes when working away from the office. But the actual level of home broadband access quality--beyond a baseline level-- will arguably be a secondary consideration, at best, in most cases. 

Places that can be upgraded from less than 25 Mbps up to 100 Mbps are likely to be places not so desirable for workers for other reasons. Upgrades from 100 Mbps to some higher number likewise might be helpful and preferred, but not a driver of detectable performance and outcomes. 

One might argue that personal productivity now is higher with gigabit access than with dial-up. But that is a correlation. The applications I could use in the dial-up era were the real limitation, not the bandwidth. 

Today’s applications are so much richer that I cannot separate bandwidth from application richness. To the extent I might claim to be more productive, it is mostly because my applications and devices allow me to do more, in less time, not that my bandwidth--per se--allows me to do so. 

Better bandwidth is--virtually all of us agree-a good thing. But its ability to change outcomes--economic; job creation; educational outcomes--generally is overstated and hard to prove. Parental support for and involvement in their children’s education counts for much more. 

The general economic growth profile of a region matters more than the speed of broadband. The presence of large pools of workers with the right skills matters more than broadband. The quality of life of a region for such workers also arguably matters more than broadband.

In fact, we cannot disprove the thesis that highly-educated residents; fast-growing regions and industries; high incomes and high wealth “cause” better broadband, not the reverse. 

U.K. ISPs More than Double Gigabit Internet Access Availability in a Year

Big internet service providers are used to slings and arrows shot at them. Sometimes the criticisms of their performance seem undeserved. Consider U.K. gigabit-per-second internet access availability. 

U.K. ISPs already had said they would cover between 70 percent and 80 percent of households  of the country with gigabit-capable infrastructure by 2025, without government assistance. 

In September 2020 about 27 percent of homes could buy it. A mere year later, 46 percent of homes could buy gigabit services, according to Ofcom. 

Ofcom estimated availability had reached closer to 60 percent by the end of 2021, largely as a result of Virgin Media’s upgrade to DOCSIS 3.1, Total Telecom says. 

That is a dramatic change for a single year’s work. 

Yes, some households will be harder to upgrade, and yes, there will be additional government support to do so. 

To help deliver on these targets, in 2019, the government pledged £5 billion in public funding to help connect the most difficult-to-reach 20 percent of households, Total Telecom says. Most will be allocated no earlier than 2026, however. 

The point is that we would probably all find it hard to point to a single year when progress that dramatic was made. Basically, the major ISPs more than doubled the availability of gigabit per second service in a year’s time.

Not Every Acquisition Works Out

Not every acquisition works. Not every asset disposition is driven mostly by profit taking. Sometimes loss limitation is at work. And though many institutional investors or private equity firms have one business model for telecom infrastructure assets, service providers often have a different model. 

That difference in models explains why many institutional and private equity firms now are buyers of assets while many service providers are asset sellers. WindTre might be next. Lumen and Telefonica are among recent sellers. So was Cincinnati Bell.

Telecom Italia could move as well. 

Because we can” or “because we should” might explain a good deal of asset disposition behavior in the connectivity business these days. 

Optus owner Singtel, for example, is said to be mulling the sale of a stake in its Australian access facilities, a move that would allow Singtel to raise cash. 

Such opportunistic moves--as always--are driven by a combination of seller need, buyer interest and a broader rise in the value of optical fiber access and transport assets for investors in search of alternative assetshttps. 

Low interest rates mean lots of capital is available, while high valuations for other traditional assets also are driving investor interest in lower-valuation, higher-return financial vehicles and something more akin to a private equity approach to investing by institutional investors such as pension funds. 

Buyer interest has grown the value of optical fiber assets or the ability to create them,  while sellers are enticed by such higher valuations to monetize access network assets as they earlier monetized cell tower assets. Singtel itself sold a majority stake in its Australia cell towers in 2021. 

No doubt owner's economics still are important. But the issue is whether full ownership is required to reap that value. In a growing number of cases, partial ownership seems to be viewed favorably.  

In other areas, co-investment deals are changing the economics of optical fiber investment. 

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. 

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.