Why Web 3.0 is Likely to Fail in Some Ways, Succeed in Others

The whole point of Web 3.0 is a change in the architecture of the World Wide Web, where decentralization of applications is founded on user control and ownership of their data. The extent to which decentralization succeeds is based in part on the actions advertising ecosystem participants take, since the whole “centralization” of the present web is driven by the revenues made possible by centralization and scale. 

source: TBD 

Also unclear is why any businesses that profit from “centralized” architectures will voluntarily give all that up. “They will be forced to do” is the retort. Value destruction, to be sure, has been part of most internet disintermediation of the past. 

One possible outcome is that value simply is destroyed at many points of the ecosystem, reducing the value of investing. Recall that past hopes for “decentralized value creation” often have failed. Some entities have made a business out of user-generated content, to be sure. But relatively few have done so. 

About the only participants that will prosper from Web 3.0 are the venture capitalists funding startups in the space. 

Some of us would argue that decentralization in the form of disintermediation is likely to happen, but without the more-futuristic advantages of “users owning their own data.” Blockchain will be foundational. But that is likely to fuel disintermediation of value chains, not a complete change of web business architecture.  

10-Gbps Home Broadband is Coming Within 3 Years

Faster home broadband is about as inevitable as Moore’s Law would predict. Having reached the point where top speeds of 1 Gbps are the current standard, we are heading to 10 Gbps over the next half decade or so. 

Which is one reason we are going to be hearing more about 20 Gbps internet access, and why firms such as AT&T already sell commercial service at 2 Gbps and 5 Gbps in lead markets. 

 

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source: Wik Consult 

Though the demand increase will mostly make sense for multi-user households, the historic increase in top of market speeds is quite linear. That does not mean most users will buy the top-rated tier of service. The general rule is that most consumers will buy the mid-tier level of service. 

source: Commscope 

source: Wik Consult 

source: Fiber Broadband Association. 

60% of Home Broadband Non-Buyers Don't Want It

The latest data from the U.S. National Telecommunications and Information Administration continues to show why the “digital divide,” measured as use of broadband internet access, has not closed faster. 

Nationally, 81 percent of respondents report using the internet. About 71 percent say they use the internet on their smartphones. About 49 percent say they connect their laptops, while 28 percent report connecting desktop computers. 

About 76 percent say they use the internet at home. As recently as 1998, 76 percent of respondents said they did not use the internet at home. About four percent claim the internet is not available where they live. 

Most users report using both mobile and fixed networks. Some 74 percent of respondents have a mobile data plan and 71 say they buy fixed network broadband. 

“When respondents were asked why they don’t use the Internet at home, nearly 60 percent said the main reason is that they don't need it or not interested,” says George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist. 

That finding has been consistent since at least 2015, NTIA data shows. At the same time, “cost” has declined as a reason for not buying broadband access services. Some 18 percent of “non-using” respondents said using the internet was “too expensive.” 

source: Phoenix Center 

Half of U.S. Home Broadband Customers Buy Service at 200 Mbps to 400 Mbps

About half of U.S. internet access customers buy services running between 200 Mbps and 400 Mbps. That is a shift. Until recently, about half of the customers purchased services running between 100 Mbps and 200 Mbps. 

Roughly 70 percent of fixed network broadband customers purchase service at speeds of 200 Mbps or higher. Customers who buy gigabit or faster service have reached 13 percent, while customers of services operating between 500 Mbps and 900 Mbps are six percent of total. 

source: Openvault 

ACSI Rankings Still Show Americans Unhappy with Their ISPs

The latest industry rankings of customer satisfaction produced by the American Customer Satisfaction Index show that internet service providers continue to rank dead last in customer satisfaction. That is not unusual. 

I cannot remember a time since at least the early 1980s when network-based services such as subscription TV services did not rank last to near the bottom in ACSI rankings. As usual, mobile service is the highest-ranked of the connectivity services. 

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source: ACSI 

Perhaps those rankings have something to do with the recurring nature of the charges. Most other subscription services also rank in the lower third of the industry indexes. Most of  the industries in the top half of the rankings sell products purchased episodically. 

As always, some ISPs get higher satisfaction rankings than others. 

source: ACSI 

Some industries that once were low ranked have improved. Airlines provide an example. In 2007 the airline industry had a ranking of 63. Today airlines have a rank of 75. That is very close to an all-time high for airline ACSI scores. 

Over the last four decades, few connectivity industries have improved much, though mobility service has to be the segment that climbed the most. Now scoring about 73, mobile phone service has improved since ACSI began tracking the industry in 2004.

Declining Unit Prices are an Issue for Many Industries; Ability to Scale is the Bigger Issue

Ever-declining price per unit is a common lament in the connectivity business. What we sometimes forget is that similar price drops--often of greater magnitude--also happen in computing hardware, software and services as well.

The salient difference might be that in the computing hardware business, fast retail price declines are offset by equally-dramatic shrinkage of underlying cost of creating those capabilities. 

https://issues.org/jorgenson/ 

Over the last two decades, software costs also have arguably begun to decline at faster rates as well, in part because of the shift to X as a service and cloud computing. Even there, the total cost of ownership can vary over time based on volume. At scale, private cloud might be less costly than public cloud, for example.

Still, services, software, content and communications are subject to the costs of coding, acting, writing and producing those products. 

The amount of non-computing inputs are less subject to the reduction of simple computing or storage costs. Up to 80 percent of the cost of communications is related to the cost of building and upgrading network facilities, for example. And construction costs are only slightly affected by Moore’s Law improvements. 

source: Statista

The point is that lower retail unit costs, over time, drive profit margins and gross revenues in most parts of the internet ecosystem. The salient exception is content. 

The difference is that communications unit costs do not improve as much, with scale, as do other digital products. Cost pressures are an issue for managements in every business and industry. But hyperscalers are able to reduce costs with scale in a way that connectivity providers find much more difficult. 

So it is not so much the declining unit cost, but the inability to scale that causes connectivity providers more pain.  Applications, content or other cloud-based services that are inherently global have a clear advantage there, compared to geographically-bound telcos and access providers.

SMB Marketing Remains Difficult

By some estimates, small and midsize businesses represent around 90 percent of all firms globally, represent 70 percent of employment and contribute to up to 90 percent of global gross domestic product. 

At first glance, the small and mid-sized business segment is lucrative. But most of those organizations cannot be efficiently targeted by business sales organizations. 

Consider that definitions and behavior matter. If you have ever worked for a firm selling to SMBs, you know that segmentation really matters. As a simple “cost of sales” matter, “medium” is easier to target than “small.”

In fact, the vast majority of “small” businesses can only be profitably marketed using the same channels and programs aimed at consumers. Programs aimed at “smaller” businesses start to make sense someplace beyond organizations with 10 to perhaps 50 employees, depending on the industry vertical. 

Firm classifications also vary by country. In most countries, firms with more than a dozen to a few dozen employees are quite rare. 

In many parts of Australia, for example, 97 percent of all firms have fewer than 19 employees. The International Data Corp. definition of “SMB” is a firm with “fewer than 500 employees,” but more than 20 employees. 

source" Small Business Development Corporation 

In many Organization for Economic Cooperation and Development countries, there are not so many firms in the size range of “at least 250 employees.”

In Canada, 98 percent of firms have 99 employees or fewer, for example. 

According to  the European Union, a small business employs between 10 and 49 full-time employees. By some classification systems, medium-sized organizations employ 50 to 250 full-time employees. Others might say mid-size is defined as organizations with 100 to 999 employees. 

But there is a wide range of definitions of “small” and “midsize.” Sometimes midsize firms are defined as having up to 4,999 employees. Many would consider that an “enterprise” or a “large enterprise.”

Midsize firms also can be defined by revenue. A midsize firm might have sales not exceeding €1.5 billion ($1.75 billion) or has a balance sheet total that does not exceed €2 billion ($2.3 billion).

source: World Economic Forum 

Complicating matters further, many “small” businesses are run out of the home, or have no employees beyond the sole proprietor. That sort of business often has buying behavior virtually indistinct from that of a consumer. Many classifications use the term “microsized” to describe such very-small businesses. 

In the U.S. market, for example, 83 percent of all businesses are “micro” sized, having no more than nine employees. 

“Small” firms with 10 to 99 employees represent  15 percent of all businesses, while “medium” organizations with 100 to 499 employees represent just two percent of entities. 

If enterprise is targeted directly with field sales, then “micro” (83 percent of business entities) are marketed through the mass market channels. “Small and medium” organizations tend to be marketed to by partner and channel entities. Think of the role played by resellers and system integrators and distributors in the computing hardware business. 

source: CompTIA