Early Metaverse

Metaverse 35,600 years ago! 

source: Pinterest

Ecosystem Adjacencies are Valuable But Debt-Inducing for Telcos

Verizon’s collaboration to develop a 5G, smartphone-based immerse game Helios, and Microsoft’s acquisition of Activision Blizzard illustrate the issues connectivity providers face in creating new value and revenue. 

In part, Verizon believes 5G and a robust edge computing platform will encourage partners, users and customers to prefer its network. Microsoft, for its part, becomes the owner of the third-largest gaming planet globally. 

Verizon will spend a bit to demonstrate the value of its network, though the financial upside will be nearly impossible to measure. Microsoft spent $69 billion to own an asset producing nearly $9 billion in annual revenues. 

The financial upside for Verizon is more likely to be measured in net account additions, churn reduction or average revenue per account than emergence as an equity owner of gaming assets. 

In fact, Verizon is likely to earn measurable revenue from fixed wireless than it will from advanced gaming. Fixed wireless revenue already is measurable, in fact. 

On the other hand, “metaverse,” now touted by Verizon as a growth opportunity, seems likely to produce revenue value--in consumer or business segments--mostly indirectly. 

Verizon is unlikely to be a major asset owner of metaverse properties. Verizon is more likely to create value as a connectivity or edge computing partner for firms that do own metaverse apps and services, with some direct but mostly indirect revenue upside. 

In other words, metaverse is important mostly as it affects account acquisition, account retention or average revenue per account in its consumer mobility business, or as a supplier of edge computing real estate services for companies that offer metaverse platforms, gaming services and apps. 

source: Verizon 

All of that, in turn, illustrates the difficulty of adding new roles, beyond connectivity, to grow revenue. Both Verizon and AT&T have had recent experience amassing content assets, for example, at the cost of high debt burdens. And both have unwound those strategies in large part to reduce leverage. 

Domain expertise is an issue, but probably not as great an issue as the sheer amount of debt a telco has to incur in order to acquire a significant position in any adjacent ecosystem role.

Will Telco Revenue Mix Really Change Substantially Because of 5G or IoT?

Historically, business customers have generated somewhere between 20 percent and 40 percent of total connectivity provider revenues. In most markets, the percentage is likely to be closer to 20 percent than 40 percent.

When one hears observers speculating about 5G revenue growth, business or enterprise revenues always loom large. What is less clear is the meaning of that observation. 

It might mean that new use cases develop mostly in the enterprise segment, but that total revenue remains generated by the consumer segment. It could mean the historic mix of revenues changes, and that business revenue becomes a larger percentage of total.

Globally, revenue amounts and growth are led by mobility services, and most of that is earned from consumers rather than businesses. But one constantly hears the argument that 5G is going to be different, because of the internet of things, edge computing or private networks. 

Just how different is the issue. 

source: Ovum 

It never is completely clear whether 5G produces, or can produce, enterprise revenues fast enough to change the historic share of revenue in fixed or mobile segments of the business. 

It is easy enough to find projections of total mobile connections that suggest sensors will outnumber phone users by quite a wide margin. But connections are not directly related to revenue on a one-for-one basis, as IoT connections generate revenue an order of magnitude or sometimes two orders of magnitude less than phone accounts. 

source: Strategy Analytics 

Also, many IoT connections will not directly use new wide area networks for access. Instead, local area connections of various types might actually predominate. Ericsson, for example, has estimated that about 15 percent of IoT devices will use mobile networks for connectivity. 

source: Ericsson 

In fact, that seems relatively unlikely, Rather, the emphasis on enterprise revenues typically refers to incremental growth. Some estimate business revenues represent only about 25 percent of total revenues. In some markets business revenue might reach close to 40 percent. 

source: TM Forum 

For a decade or so, service providers also have been urged to consider a range of changes in their operations, from separating retail and network functions to simplifying retail offers. Rarely is specific strategic advice given to emphasize business customer connectivity revenue over consumer revenue sources. 

Service providers are, of course, encouraged to explore new roles and revenues in internet of things, private networks or edge computing, all of which might fall under the “explore market adjacencies” objective. 

source: McKinsey 

It seems unlikely to me that new business segment revenues are going to be substantial enough to fundamentally change revenue dynamics that have most of the total revenue being generated by consumers using phones.

Home Broadband Payback Model Changes Radically When One Subsidizes 75% of the Cost

This is one example of how the business case for fiber to the home and other advanced home broadband networks is changing. Delaware has allocated $110 million to improve home broadband access in unserved and underserved areas, using federal government funds.

The cost of construction will be reduced by about 75 percent for 11,000 locations said to have no fixed networks providing home broadband access. Those locations likely map close to the 11,800 unserved Delaware locations previously identified.  

Comcast won a grant of more than $30 million; Verizon received $11.8 million and Mediacom got $11.1 million. 

For Verizon, the grants mean 940 Mbps home broadband will be made available to 3,000 unserved locations” in Delaware. That implies a subsidy of about $3933 per new line, with Verizon contributing $1311 per line. 

That implies a total cost per new Verizon line of about $5244. 

The awards also imply that 75 percent of the cost per line for the cable companies is about $2275. Assuming Comcast and Mediacom contribute 25 percent of the construction cost, the total cable cost per line is about $3033. 

Network cost is one key element of the payback model; consumer willingness to buy is the other key variable. Consumer willingness to pay is highest at $50 per month and drops off steadily at higher levels. 

source: CTC Technology 

One might infer that at about $100 a month, half the market will not buy. Many studies suggest the U.S. home broadband median monthly price paid is about $60 to $65 or $68 a month.    

Some studies show cable connections are the most affordable, satellite connections the most expensive. Inflation-adjusted prices are lower than $60 per month, some suggest. Analyses can vary based on whether they include additional charges or whether the monthly recurring price reported by a consumer includes those charges. 

Estimates also can vary based on how the analysis is conducted. Comparing posted retail prices is one way; estimating actual prices, including all discount mechanisms, is another way. And some studies weight the results by considering the plans consumers actually buy. 

The key takeaway is that subsidizing 75 percent of the cost of facilities radically changes the payback model for home broadband.

Finally, the End of the Password?

If 110 global organizations including Amazon, American Express, Apple, Bank of America, Google, ING, Meta, Intel, Mastercard, Microsoft, Docomo, PayPal, Qualcomm, Samsung, Visa, Chase, Akamai, Ebay, Fidelity, Fujitsu, Hitachi, Huawei, KDDI, NEC, Netflix, NTT, SoftBank, SKT, Sony, Rakuten, Twitter, Vanguard and Verizon all agree they want something done, and have within themselves the power to mandate usage, do you think that something will remain undone?

And that something is the end of passwords as an authentication and security mechanism. 

For mass market users and app providers, internet security requires low-cost authentication mechanisms with very high assurance levels. “Who are you?” and “Do you have permission to use this app?” are among the key functions authentication mechanisms provider. 

Up to this point, passwords have remained a common authentication mechanism, even if most users and app provider consider the method unsecure and a barrier to user experience. 

Two-factor authentication, multi-factor authentication, biometric (fingerprint or facial recognition), single sign-on, token-based (security dongles) or certificates are other methods. But the sheer number of alternate methods make simple, user-friendly authorization difficult to scale. 

source: FIDO Alliance 

The Fast IDentity Online Alliance (www.fidoalliance.org) was formed in July 2012 to address the lack of interoperability among strong authentication technologies, and remedy the problems users face with creating and remembering multiple usernames and passwords. 

The organization now believes FIDO-based secure authentication technology will for the first time be able to replace passwords as the dominant form of authentication on the Internet.

Multi-device credentials are a key enabler. 

source: FIDO Alliance 

The FIDO Alliance and the W3C WebAuthn working group propose a new version (“Level 3”) of the WebAuth specification using the smartphone as a roaming authenticator, plus multi-device FIDO credentials.

In a sense, this is another application of cloud computing. Credentials are not stored on single hardware devices. When users move to different devices, the credentials still are available because they are independent of any hardware. 

We Actaully Know Very Little About What "Causes" Rapid Economic Development

Even if we accept the validity of the Kondratieff Wave hypothesis, and many do not, potential long waves of innovation, with a duration about 50 years, seem to have disparate impact. 

It is not  true that any particular wave has universally-applicable and substantial transformative effects for all people, all regions, all counties, all firms or all segments of the economy. There always are leaders and laggards. 

source: CFI 

One big criticism of the theory is that there is significant disagreement about when such waves have started and ended in the past. Being off by 20 years might not matter for a historian. It is life and death for firms who are too early or too late. 

Some argue the last wave ended in 2008, for example. Others believe that wave has not ended yet. Keep in mind there is a couple decades long pause between waves, characterized by recessions or slow growth. 

If the last wave has ended, it might be decades before the next wave is identified. 

source: Seeburger 

Just as important, nobody knows when the next wave will break, though the theory suggests a new wave might be building. It all depends on where one believes the last cycle will run for a couple more decades or has already ended. 

source: Wikipedia 

Still more contentious is the driver of the next wave. Lots of candidates will be offered. Perhaps none seem especially credible at this point. 

source: Insead 

It might seem obvious that the long wave theory is not precise enough to be useful for guiding firm strategy and investments. The larger point might be that even when we can correctly identify which era we might be in, such knowledge does not mean we have a magic bullet that causes economic growth everywhere, at the same rates. 

It is similar to the argument that quality broadband causes economic growth. We might have made the same arguments about railroads, steam power, electricity, internal combustion, mass production or information technology. 

Growth happens, but whether the underlying technologies can be harnessed everywhere, by everyone, at high levels, has proven untrue. Areas of low population density, for example, rarely benefit as much as areas of high population density. 

Societies without a firm rule of law that protects property rights rarely, if ever, develop as much as regions with such protections. In fact, we probably continue to know very little about why development actually happens in particular circumstances.

Historically, productivity and population increases are associated with economic growth. Obviously population growth happens in lots of places without much growth. Productivity growth likewise is uneven.

"Keeping Whales Safe" Using IoT, Edge Computing and Artificial Intelligence

Whale Safe, a project of the nonprofit Benioff Ocean Initiative, is deploying buoys with acoustical sensors using on-board artificial intelligence and edge computing in key whale habitat off the coast of southern California. 

The analysis of actual whale locations, correlated with movements of ships in the channel, helps avoid whale strikes by the ships moving in one of the most-trafficked sea lanes globally. 

The use case illustrates why it often is hard to clearly delineate "edge computing" value from that of "artificial intelligence" from "internet of things."

source: Whalesafe 

Ships are asked to slow down when whales are located in their path, since collisions between ships and whales are often fatal. 

Since deployment of the system in 2020, whale strikes declined significantly in the Santa Barbara Channel, which is one of the most active feeding grounds for humpback and endangered blue whales on the West Coast.