R.I.P. Abe Shinzo

Rest in peace, Abe Shinzo. 

source: Getty Images

PTC Academy Focuses on Business Implications of Technology

Training and certification for either connectivity (mobile or fixed ) or data center employees is not hard to find. It arguably is even easier to find data center training than connectivity service provider courses. Virtually all such courses focus on technology topics. 

PTC Academy is different in that it specializes in training for mid-career professionals with a business focus, not technology as such. The focus is the business implications of technology, not so much “how it works.”

Training credit is provided by the Submarine Telecoms Forum, an IACET-accredited continuing education provider. 

Home Broadband Costs--for the Plans People Actually Buy--Have Dropped Since 2015

According to US Telecom, U.S. home broadband prices continue to fall, when looking at the most popular service plans consumers actually buy. The BPI-Consumer Choice compares providers’ most popular speed tier of broadband service in a given year to its most comparable 2022 service.

The BPI-Speed compares providers’ fastest speed tier option in a given year to the comparable plan in 2022. 

source: US Telecom 

Using what is called the “Real Broadband Price IndexI-Consumer Choice method (looking at prices for the service plans most people actually buy),broadband prices dropped by 14.7 percent from 2021 to 2022, UST says. 

Over a longer time span, Real BPI-Consumer Choice tier prices dropped by 44.6 percent from 2015 to 2022, UST adds, while Real BPI-Speed tier prices dropped by 52.7 percent from 2015 to 2022. 

source: US Telecom 

Real BPI-Speed broadband prices dropped by 11.6 percent from 2021 to 2022, the group says. In contrast, the cost of overall goods and services rose by eight percent from 2021 to 2022, UST says. 

Other analyses support similar conclusions. Because of inflation, price levels rise over time. So virtually any product can be accused of “costing more” in 2022 than it cost in 1996. 

Some may intuitively feel this cannot be the full story where it comes to digital products, which keep getting better, while prices either stay the same or decline. Such hedonic change applies to  home broadband. 

Hedonic qualIty adjustment is a method used by economists to adjust prices whenever the characteristics of the products included in the consumer price index change because of innovation. Hedonic quality adjustment also is used when older products are improved and become new products. 

That often has been the case for computing products, televisions, consumer electronics and--dare we note--broadband internet access services. 

Hedonically adjusted price indices for broadband internet access in the U.S. market then looks like this:

source: Bureau of Labor Statistics 

 

Quality improvements also are seen globally. 

Adjusting for currency and living cost differentials, however, broadband access prices globally are remarkably uniform. 

The 2019 average price of a broadband internet access connection--globally--was $72..92, down $0.12 from 2017 levels, according to comparison site Cable. Other comparisons say the average global price for a fixed connection is $67 a month. 

Looking at 95 countries globally with internet access speeds of at least 60 Mbps, U.S. prices were $62.74 a month, with the highest price being $100.42 in the United Arab Emirates and the lowest price being $4.88 in the Ukraine. 

According to comparethemarket.com, the United States is not the most affordable of 50 countries analyzed. On the other hand, the United States ranks fifth among 50 for downstream speeds. 

Another study by Deutsche Bank, looking at cities in a number of countries, with a modest 8 Mbps rate, found  prices ranging between $50 to $52 a month. That still places prices for major U.S. cities such as New York, San Francisco and Boston at the top of the price range for cities studied, but do not seem to be adjusted for purchasing power parity, which attempts to adjust prices based on how much a particular unit of currency buys in each country. 

The other normalization technique used by the International Telecommunications Union is to attempt to normalize by comparing prices to gross national income per person. There are methodological issues when doing so, one can argue. Gross national income is not household income, and per-capita measures might not always be the best way to compare prices, income or other metrics. But at a high level, measuring prices as a percentage of income provides some relative measure of affordability. 

Looking at internet access prices using the PPP method, developed nation prices are around $35 to $40 a month. In absolute terms, developed nation prices are less than $30 a month. 

According to an analysis by NetCredit, which shows U.S. consumers spending about 0.16 percent of income on internet access, “making it the most affordable broadband in North America,” says NetCredit.

Looking at internet access prices using the purchasing power parity method, developed nation prices are around $35 to $40 a month. In absolute terms, developed nation prices are less than $30 a month.  

Methodology always matters. The average U.S. home broadband service  costs about $64 a month. In fact, U.S. home broadband inflation-adjusted costs have declined since the mid-1990s, according to an analysis  of U.S. Consumer Price Index data. 

That will often not be obvious when observers consider only “current” prices for home broadband, and compare them to past “retail” prices.  

Despite the oft-repeated claims that U.S. home broadband is “too expensive,” careful analysis suggests the answer is far from clear. In fact, using measures to normalize prices for different costs across countries; accounting for inflation; taking into account the actual plans people actually buy; including cost per gigabit per second of speed and also accounting for hedonic product change, the opposite conclusion might be reached.

In Perspective, Home Broadband Is Less a Problem Than it is Often Made Out to Be

One fact of discussions of home broadband availability in many countries is the amount of noise about inadequate coverage and service speeds compared to actual availability. To be sure, rural areas might always lag urban areas in many areas of life--economic or social--no matter what we do. 

But it also is helpful to keep perspective. In the United Kingdom, for example, almost every home location can get internet access at minimum speeds of 30 Mbps, which is roughly equivalent to the U.S. minimum definition of 25 Mbps. 

Comparing first half of 2022 to last half of 2021 figures, for example, current coverage at a minimum of 30 Mbps is more than 97 percent (compared to last half 2021 total of just shy of 97 percent for the U.K. as a whole. 

Gigabit speeds are available for purchase across 69 percent of U.K. homes. 

source: ISP Review

In the U.S. market, for all the complaints we hear, gigabit speeds now are available to more than 88 percent of all U.S. homes, according to the Federal Communications Commission. Even if one disagrees with that estimate, most consumers in the U.S. market actually buy services operating far faster than the minimum. 

Other estimates peg the percentage of homes with cable high-speed access at 90 percent. And reported uptake of gigabit speeds in rural areas is far higher than what most likely believe. 

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. 

“On average, three-quarters (75 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, 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 in urban areas, availability does not mean customers actually choose to buy the fastest tier of service. But they can do so if they choose. 

About half of U.S. internet access customers buy services running between 200 Mbps and 400 Mbps as of June 2022.  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 

There are problems, to be sure. If 98 percent of U.S. homes can buy internet access at the defined minimum, that still leaves two percent that cannot. Work has to be done there, of course. But it also is important to note the high and growing percentage of U.S. homes that can buy gigabit service, a figure that might range between 80 percent and 90 percent. 

Speeds and coverage will keep increasing. As electricity now is available to 100 percent of homes, but took decades to reach 70-percent coverage,  so broadband will get there as well, using a mix of platforms. The most isolated locations might always lag speeds available in the urban areas, to be sure. But coverage, as such, will cease to be a problem. 

The point is to maintain perspective. We all face many problems that must be solved, and we must work on all of them at the same time. Exaggeration does not help. Quality U.S. home broadband remains an issue, but is not the widespread problem it often is made out to be. 

There are issues and they are being addressed. But home broadband is hardly a crisis. In perspective, it might not even make a list of the “10 biggest problems” most households face. 

Is "Techco" a Marketing Platform or Something Else?

It never is completely clear why telco executives really mean in touting the transformation from telco to “techco.”

Many telcos--or those who advise and sell to them--say telcos need to become techcos. So what does that mean?

At least as outlined by Mark Newman, Technotree chief analyst and Dean Ramsay, principal analyst, there are two key implications: a culture shift and a business model.

The former is more subjective: telco organizations need to operate “digitally.” The latter is harder: can telcos really change their business models; the ways they earn revenue; their customers and value propositions?

source: TM Forum

It might be easier to describe the desired cultural or technology changes.  Digital touchpoints; higher research and development spending; use of native cloud computing; a developer mindset and data-driven product development or use of use artificial intelligence all might be said to be part of becoming a “techco.”

Changing the business model is the more-problematic objective. 

As helpful as it should be to adapt to native cloud, developer-friendly applications and networks, use data effectively or boost research or development, none of those attributes or activities necessarily changes the business model. 

If “becoming a techco” means lower operating costs; lower capital investment; faster product development or happier customers, that is a good thing, to be sure. Such changes can help ensure that a business or industry is sustainable. 

The change to “techco” does not necessarily boost the equity valuation of a “telco,” however. To accomplish that, a “telco” would have to structurally boost its revenue growth rates to gain a higher valuation; become a supplier of products with a higher price-to-earnings profile, higher profit margins or business moats. 

What would be more relevant, then, is the ability of the “change from telco to techco” to serve new types of customers; create new and different revenue models; develop higher-value roles and products or add new roles  “telcos” can perform in the value chain or ecosystem. 

To be sure, if “becoming a techco” has other intermediate value, such as boosting revenues and profits while reducing costs and speeding new product creation, the process would still have value. 

It would perhaps be the business model equivalent of the transition from analog to digital processes overall. That is important, but does not transform a telco into something else, which is what all the verbiage about “techco” implies. 

It is too early to assess whether “techco” is simply a change in marketing hype  or something more profound.

Why Telcos are Dinosaurs, and Must Be

Bureaucracy has few fans. “Bureaucracy saps initiative, inhibits risk taking, and crushes creativity. It’s a tax on human achievement,” say Gary Hamel and Michele Zanini of the Management Lab. 

But it might also be the “necessary outcome of complex businesses operating in complex international and regulatory environments.” 

There are other ways to spin it. Bureaucracy might be defined as a form of organization defined by complexity, division of labor, permanence, professional management, hierarchical coordination and control, strict chain of command, and legal authority.

It is rules based, with formal leadership based on roles. And yes, it is hierarchical. In practice, it can stifle innovation and initiative. 

But is it a necessary evil? Some would say so. Would you prefer a large organization run only informally, without bureaucracy? Do you believe any truly large organization can be run collegially? 

Sure, impersonal rules are an issue. Any rule can hinder rather than help, at least occasionally. Rules introduce inflexibility. 

But would you rather work in a very-large organization where hiring, promotion and benefits are doled out based on ties of kinship, friendship, or patrimonial or charismatic authority? Would you be happier if decisions were made without regard to professional competence or scope of decision-making authority?

Rules-based governance is designed to eliminate those sorts of processes. The rules inhibit, but they also protect. They tend to enforce equal treatment and some degree of perceived fairness. Bureaucracy tends to reduce capricious and random decisions and actions. 

Beyond all that, scale requires bureaucracy, with all its rules and challenges. That is why telcos always are criticized for being slow-moving, bureaucratic and cumbersome. To provide services and create products sold at massive scale, rules and uniform processes are necessary. 

To operate at high scale, repeatable processes and systems (rules based) are required.  Which is not to say it is easy. Product catalogs, especially for enterprise services, are complex and often customized. Without “bureaucratic” organization, it would be even worse. 

It is all well and good to argue that telcos and connectivity providers, no less than other organizations, need to learn to move faster, to develop the ability to learn and change fairly fast. 

But there always will be limits. To operate at scale, repeatable processes and rules are necessary. Managing complex systems necessarily requires more effort and time to mesh all the various operations on a consistent basis. 

And that means change can be complex as well. Moving fast in one area will always run into problems as other elements of the delivery chain are affected, and must also adapt. 

The point is that, like it or not, complex systems cannot move or change as fast as simple systems. As unpleasant as bureaucracy might be, it might well be unavoidable for organizations that operate at scale with many complicated systems that must all synchronize. 

Call them dinosaurs if you like. So long as they operate at scale, with high complexity, telcos will always move slow. They have to. “Google speed” is not possible, and if tried would likely break operations and cause chaos. 

Bureaucracy and caution can be maddening. They also can be necessary. Like it or not, entied based on physical infrastructure cannot change or move as fast as any organization producing “virtual” products. 

To be sure, any large organization will necessarily be run on bureaucratic principles. Scale requires it. Communications, in addition, is an industrial process. Creating and sustaining the capability requires lots of coordination. 

Does anybody believe a factory can move and change as fast as a big software company? Yes, telcos are “dinosaurs,” big and slow-moving. Bigness and complexity compel such behavior. 

If you do not believe that, try starting a new communications company. You quickly will discover why the need for repeatable processes leads to standardization and rules-based behavior. It will be bureaucratic, and you will not like it. But the alternatives are worse. 

EC Digital Services Act is Intended to Curb Hyperscaler Power: Will it?

The European Commission’s Digital Markets Act and Digital Services Act are intended to create a safer digital space and promote a level playing field for competitors. 

https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package 

As always, there are issues, some expected, some that will likely be unexpected. Implementation might be more complicated than expected, for example. “Intermediary services” are covered, including internet access providers, domain name registrars, hosting services, online platforms and marketplaces and “Very large online platforms.

Of course, in reality, some parts of the ecosystem will be affected more than others. At its core, the DSA is a regulatory framework that will impose rules around how platforms moderate content, advertise and use algorithmic processes.

Not many ISPs, hosting providers or some online platforms or marketplaces will have issues with content moderation, advertising and algorithms. Hyperscalers such as Facebook and Google are really the target. 

Though “safety” often is said to be among the desired outcomes, the DSA also represents an effort to restrain the market power of the hyperscalers. 

We shall see how well it works. Historically, big firms are better able to manage the costs of compliance than small firms. So, ironically, it often is small firms that suffer more from compliance costs than dominant firms that are the target of new regulations. 

Ironically, the new regulations should actually reduce effective competition and innovation because smaller firms will not be able to handle the compliance costs. Regulation increases the cost of doing business. 

So, ironically, and despite its intentions, the DSA is likely to be ineffective at restraining the market power of hyperscalers. If and when markets change, it is likely to be because new needs and suppliers arise that favor new firms that eventually displace the present leaders. 

In computing, for example, the leaders of any particular computing era do not retain that leadership in the next era. If you recall the market leaders in prior eras, leadership changed when the eras changed. 

source: Morgan Stanley

If IBM led during the mainframe era, DEC led in the minicomputer era, while Microsoft and Intel led in the PC era. Leadership arguably shifted to applications in the early internet era (Facebook, Google, Amazon). In the mobility era we saw more of a shift to social media. In the next era leadership will shift again. 

source: Deloitte  

Technology might not be destiny, but market leadership reflects such changes. Leaders in a mainframe or minicomputer era did not lead when the “desktop computing” era developed. 

Those leaders might not be the same leaders in the mobility era, and might change again in the coming era (which we do not uniformly agree on, in terms of characteristics or terminology). 

At least so far, consumer applications have defined leadership in the internet era (desktop and mobile). It is not so clear that this remains the case in the next one or two eras, when enterprise apps could lead, and produce a next generation of market leaders.