Can VR/AR or Metaverse Wait 2 Decades for the Compute/Connectivity Platform to be Built?

The Telecom Infra Project has formed a group to look at metaverse-ready networks. Whether one accepts the notion of “metaverse” or not, virtually everyone agrees that future experiences will include use of extended, augmented or virtual reality on a wider scale. 

And that is certain to affect both computing and connectivity platforms, in the same way that entertainment video and gaming have shaped network performance demands, in terms of latency performance and capacity. 

The metaverse or just AR and VR will deliver immersive experiences that will require better network performance, for both fixed and mobile networks, TIP says. 

And therein lie many questions. If we assume both ultra-high data bandwidth and ultra-low latency for the most-stringent applications, both “computing” and “connectivity” platforms will be adjusted in some ways. 

Present thinking includes more use of edge computing and probably quality-assured bandwidth in some form. But it is not simply a matter of “what” will be required but also “when” resources will be required, and “where?”

As always, any set of performance requirements might be satisfied in a number of ways. What blend of local versus remote computing will work? And how “local” is good enough? What mix of local distribution (Wi-Fi, bluetooth, 5G and other) is feasible? When can--or should--remote resources be invoked? 

And can all that be done relying on Moore’s Law rates of improvement, Edholm’s Law of access bandwidth improvement or Nielsen’s Law of internet access speed? If we must create improvements at faster rates than simply relying on historic rates of improvement, where are the levers to pull?

The issue really is timing. Left to its own internal logic, the headline speed services in most countries will be terabits per second by perhaps 2050. The problem for metaverse or VR experience providers is that they might not be able to wait that long. 

That means the top-end home broadband speed could be 85 Gbps to 100 Gbps by about 2030. 

source: NCTA  

But most consumers will not be buying service at such rates. Perhaps fewer than 10 percent will do so. So what could developers expect as a baseline? 10 Gbps? Or 40 Gbps? And is that sufficient, all other things considered? 

And is access bandwidth the real hurdle? Intel argues that metaverse will require computing resources 1,000 times better than today. Can Moore’s Law rates of improvement supply that degree of improvement? Sure, given enough time. 

As a rough estimate, vastly-improved platforms--beyond the Nielsen’s Law rates of improvement--might be needed within a decade to support widespread use of VR/AR or metaverse use cases, however one wishes to frame the matter. 

Though the average or typical consumer does not buy the “fastest possible” tier of service, the steady growth of headline tier speed since the time of dial-up access is quite linear. 

And the growth trend--50 percent per year speed increases--known as Nielsen’s Law--has operated since the days of dial-up internet access.

The simple question is “if the metaverse requires 1,000 times more computing power than we generally use at present, how do we get there within a decade? Given enough time, the normal increases in computational power and access bandwidth would get us there, of course.

But metaverse or extensive AR and VR might require that the digital infrastructure  foundation already be in place, before apps and environments can be created. 

What that will entail depends on how fast the new infrastructure has to be built. If we are able to upgrade infrastructure roughly on the past timetable, we would expect to see a 1,000-fold improvement in computation support perhaps every couple of decades. 

That assumes we have pulled a number of levers beyond expected advances in processor power, processor architectures and declines in cost per unit of cycle. Network architectures and appliances also have to change. Quite often, so do applications and end user demand. 

The mobile business, for example, has taken about three decades to achieve 1,000 times change in data speeds, for example. We can assume raw compute changes faster, but even then, based strictly on Moore’s Law rates of improvement in computing power alone, it might still require two decades to achieve a 1,000 times change. 

source: Springer 

And that all assumes underlying demand driving the pace of innovation. 

For digital infrastructure, a 1,000-fold increase in supplied computing capability might well require any number of changes. Chip density probably has to change in different ways. More use of application-specific processors seems likely. 

A revamping of cloud computing architecture towards the edge, to minimize latency, is almost certainly required. 

Rack density likely must change as well, as it is hard to envision a 1,000-fold increase in rack real estate over the next couple of decades. Nor does it seem likely that cooling and power requirements can simply scale linearly by 1,000 times. 

So the timing of capital investment in excess of current requirements is really the issue. How soon? How Much? What Type?

The issue is how and when to accelerate rates of improvement? Can widespread use of AR/VR or metaverse happen if we must wait two decades for the platform to be built?

Correlation is Not Causation

There are two diametrically opposed ways of explaining this data correlating fixed network download speeds with gross domestic product per person (adjusted using the purchasing power parity method). We can see that speeds and GDP are positively correlated. 

source: Ookla 

Higher GDP per person correlates with higher downstream home broadband speeds. What we cannot assert is that higher speeds “cause” higher per-capita GDP. We only know that speed and per-capita GDP are correlated. 

Policy advocates always argue that higher investment in home broadband capability leads to higher economic growth and therefore higher GDP. They might point to such data as evidence.

The reverse hypothesis might also be advanced: higher per-capita GDP leads to more ability to pay, and therefore higher-quality home broadband. In other words, higher economic growth and per-capita GDP leads to stronger demand for quality broadband. 

Higher income is correlated with internet adoption rates, for example. Higher adoption rates also are correlated with age and educational attainment. But we cannot argue that broadband “causes” that higher educational attainment, anymore than broadband causes age. 

source: Phoenix Center for Advanced Legal & Economic Public Policy Studies 

Home Broadband Prices and Inflation: Negative Correlation in Some Cases

Consumer prices in the United States are up more than eight percent over the last 12 months, according to the Bureau of Labor Statistics. But not all products experienced that same inflation rate. Home broadband prices, for example, arguably have fallen, according to an NCTA analysis. 

In fact, according to this heat map, where higher inflation is in darker red, high inflation in light red, moderate inflation in beige and low inflation in blue (light or dark), communications is an area of low inflation. 

source: Knoema 

For some products--including home broadband--BLS also adjusts current prices for quality improvements. In other words, such hedonic adjustments attempt to quantify the qualitative changes in products over time. 

“If the replacement is different from its predecessor and the value of the difference in quality can be accurately estimated, a quality adjustment can be made to the previous item’s price to include the estimated value of the difference in quality, BLS says. Internet access is hedonically adjusted, as are mobile services, computing and communications devices and fixed network voice services. 

The key implication is that retail prices are adjusted to account for quality improvements. So even if some prices appear to be higher, value is greater, so comparative prices might be considered to have dropped. So prices for telephone equipment, calculators and other consumer hardware are deemed to have fallen. 

source: BLS

 

Hedonically adjusted internet access prices (home broadband) also are deemed to have fallen. 

source: BLS 

Still, prices for some connectivity products, such as fixed network voice or cable TV content, have grown for decades, even as home broadband prices have fallen (again, hedonically adjusted). 

Parenthetically, take rates for home broadband vary directly with income and other indices such as educational attainment. “An analysis of broadband adoption rates by income groups, both nationally and for individual states, suggests that broadband is now affordable for middle-class households,” says George Ford, Phoenix Center for Advanced Legal & Economic Public Policy Studies chief economist. 

source: Phoenix Center for Advanced Legal & Economic Public Policy Studies 

source: Phoenix Center for Advanced Legal & Economic Public Policy Studies

Comcast Boosts Home Broadband Speeds, Has Been Doing So at Moore's Law Rates for Two Decades

It should come as no surprise that Comcast is activating home broadband speed increases this week across its entire footprint. Comcast has increased home broadband speeds at Moore’s Law rates--doubling about every 18 months--for two decades.  

“Comcast has increased speeds 17 times in 17 years and has doubled the capacity of its broadband network every 18 to 24 months,” Comcast says. 

That is one reason why cable operators continue to hold between 65 percent and 70 percent share of the installed base of home broadband accounts in the United States. Telcos have simply not been able to increase bandwidth at Moore’s Law rates, though that should change as more of the network is converted to optical fiber access. 

The original insight for Microsoft was the answer to the question "What if computing were free?" Keep in mind the audacious assumption Gates made. In 1970 a computer cost about $4.6 million each. Recall that Micro-Soft (later changed to Microsoft) was founded in 1975. 

source: AEI 

The assumption that computing hardware was going to be “free” would have appeared insane to most observers. In 1982 Gates did not seem to go out of his way to argue that hardware would be free, but he did argue it would be cheaper and far less interesting than software. 

 Gates made the argument in 1994. Gates was still saying it in 2004.  

The point is that the assumption by Gates that computing operations would be so cheap was an astounding leap. But my guess is that Gates understood Moore’s Law in a way that the rest of us did not.

Reed Hastings, Netflix founder, apparently made a similar decision. For Bill Gates, the insight that free computing would be a reality meant he should build his business on software used by computers.

Reed Hastings came to the same conclusion as he looked at bandwidth trends in terms both of capacity and prices. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

Both supply and demand are part of the equation, however. Perhaps the driver of supply is Moore’s Law. 

But the fundamental driver of bandwidth demand  is multiple users and multiple devices, more than the bandwidth required by any single app, any single user or device, even if some apps--such as video--increase bandwidth demand by at least two or three orders of magnitude compared to narrowband apps. 

The point is that home broadband bandwidth now is shared by multiple users, apps and devices. And that is why bandwidth demand keeps growing, aside from the use of more bandwidth-intensive apps and devices. 

“The number of devices connected in Xfinity households has skyrocketed 12 times since 2018, and the need for fast, reliable, and secure Internet will continue to grow,” said Bill Connors, President of Xfinity, Comcast Cable. 

The net effect is that every household now acts as a “multi-user” location. And that matters because any amount of bandwidth X is divided by the number of users, connected devices and apps in simultaneous use. In principle, that means Comcast customers require an amount of bandwidth that is X/12. 

source: Comcast 

We should look for continued increases in capacity, at about a Moore’s Law pace, for the indefinite future.

Are There Hard Limits on Home Broadband Growth?

How much more revenue can the internet access business generate, in markets that are near saturation (almost everybody who wants it already buys)? To be sure, internet service providers will keep boosting speeds and seek to add value to their service features. 

Home broadband has become an “essential” utility in many markets, so demand remains consistent. On the other hand, competition is growing, so retail prices can face pressure. And market share matters in near-saturated markets. 

Weigh everything and one might conclude that revenue growth is going to be difficult, even as customers are shifted to higher-cost plans, where possible. 

The fundamental limit is that households will only spend so much on internet access. Basically, households tend to spend between 1.5 percent to 2.25 percent of gross domestic product on communications services. 

Over time, household spending on connectivity services has fallen. Nor has business spending moved much, either.  

Think of any business. How much will they spend on marketing, sales, labor? The percentages might change a bit, over time. But those percentages are relatively fixed. Consumer spending does not change too much from year to year. 

Nor does the percentage of income spent on various categories change too much. 

source: IDC

In Myanmar, a new mobile market, spending per household might be as high as eight percent of total spending. In Australia, communications spending (devices and services) might be just 1.5 percent of household spending.  

In South Africa, households spend 3.4 percent of income is spent on communications (devices, software and connectivity). In Vietnam, communications spending is about 1.5 percent of total consumer spending.

In the United States, all communications spending (fixed and mobile, devices, software and connectivity, for all household residents) is perhaps 2.7 percent of total household spending. U.S. household spending on communications might be as low as one percent of household spending, for example. 

That means spending on communications services will tend to vary by revenue growth and the health of the economy. Some consumer demand also is shaped by new housing construction, as well. More homes mean more connections. 

The implication is that total market growth always is constrained on the demand side. That is not to say that demand growth is impossible: value can change over time. But value does not always correlate in a linear way with willingness to pay. 

The extreme examples are  luxury goods, where higher prices might actually increase demand (think yachts, jewelry, artwork).

For most products, higher value leads to higher price. But computing appliances and data services have been outliers. Products improve so rapidly (twice as capable every 18 months) that product obsolescence is built in. 

To the extent that internet access increases at Edholm’s Law or Nielsen's Law  rates, home broadband services at any speed are continually devalued. 

Edholm's Law suggests that bandwidth will increase at the same rate as Moore’s Law suggests transistor density will grow. Nielsen’s Law of Internet Bandwidth states that a high-end user’s connection speed grows by 50 percent each year, doubling roughly every 21 months.  

Cloonan's Curve predicts how much bandwidth a typical customer of home broadband services might actually buy. Cloonan’s Curve essentially describes home broadband consumer behavior.

Most customers do not typically buy the fastest-available service, as that also is typically the most-expensive tier of service. Instead, they tend to buy the mid-level service. 

The caveat is that Cloonan’s Curve obviously does not apply to service providers that sell only a single tier of service, at the advertised headline rate (“gigabit only,” for example). 

source: Commscope

This illustration of downstream bandwidth plans actually purchased by customers suggests that although both Nielsen and Cloonan rates increase at about 50 percent per year, most customers buy services that offer six times to 20 times less speed than the fastest-available service tier. 

But usage and price are not connected in linear fashion. Over time, cost per bit tends to decline with volume supplied. And, no matter what the volume supplied, retail prices only grow incrementally, at rates roughly in line with inflation, or below. 

In fact, there is evidence that internet access prices have dropped over the past two decades, in the U.S. market, for example. That is especially true when evaluating plans people actually buy, rather than retail tariffs. Looking only at posted retail prices, and not at actual behavior, can lead to significant distortions.

If the Connectivity Business Now is Part of "Computing," Does That Explain Fundamental Price Trends?

It is easy enough to note that the global data access business (wide area, metro area or local) is now part of the computing ecosystem, which in turns supports almost every sort of content, shopping, learning, entertainment or manufacturing activity you can imagine. 

Less obvious are the ways that integration shapes perceptions of value and retail pricing trends in the connectivity business. The old “telecommunications” business was based on scarcity: expensive networks hard to deploy and with competitive moats. 

The replacement “internet” business is based on abundance: ever-cheaper, ever-faster, ever-powerful processing and storage; ever-cheaper connectivity; easier digital replacements for a growing range of products. 

All observers would agree that, in general, prices for home broadband tend to fall over time, while capacity supplied tends to grow over time. That same trend is seen in wide area network -capacity, internet transit or interconnection prices or just about any measure of computing device or computing service prices as well.

The issue is why that should be so, aside from the fact that most home broadband markets are competitive, which should lead to better products, faster innovation and lower prices over time, as might be the case in any other market. 

But home broadband is not the only sort of product that shows that pattern: higher capability and flat to lower prices as a recurring practice. Computing and storage products famously show the same pattern. 

Home broadband unit prices seem to act as do computer unit prices: capability doubles every 18 months while price either remains the same, or drops. To be sure, in some cases other value drivers seem to be at work. Premium level smartphones actually seem to increase in price, in some cases. 

That may be an instance of prices reflecting higher perceived value for some appliances, compared to others. 

Also, in large part, consumer or business spending on connectivity services is limited for other reasons. Most households are only able to spend so much for connectivity; so much for computing appliances; so much for entertainment. Most of the household budget has to go for shelter, food, transportation, healthcare or other necessities. 

Some might argue that household spending on services and hardware is as much as five percent of household budgets.  

Asymco, Federal Reserve Bank 

Even that might be falling, over time. Demand is  relatively inelastic for communications. In other words, people will only spend so much for communications. As a percentage of gross domestic product, for example, communications spending by households fell between 2006 and 2019, for example. 

source: ETNO

The point is that there is only so much incremental growth possible in the home broadband business, once near-saturation levels in terms of subscriptions are reached, beyond new home construction, which grows the number of potential customer locations. At the firm level, growth eventually boils down to taking market share.

Is Meta the First of Today's Computing Leaders to Falter as We Head for the Next Generation?

It often is asserted that the leaders in one era of computing technology are not the leaders in the next. Whether one looks at the market share leaders, the lead devices, network architectures or applications, computing eras lead to distinct business opportunities. 

source: Dr. James Coakley, Oregon State University

So to the extent that Amazon Web Services, Google, Azure, Facebook or Apple have been seen as leaders of the present era of computing, we should at least hold open the thought that this will not always be the case, as hard as that might be to fathom. 

Facebook--now Meta--might be the best example of how leadership is lost. It can be argued that Facebook’s pivot to metaverse is evidence that the traditional growth drivers of advertising are not expected to fuel the company’s continued growth. 

Perhaps even more oddly, Facebook’s traditional reliance on app layer advertising might arguably be said to be at risk as a new era with more reliance on appliances, devices and hardware could be dawning. 

Consider the oddity of that argument. Apple, over much of the last two decades, has had to shift to services and apps to diversify its revenue away from a reliance on devices and hardware. 

Now it might be applications-driven Meta that has to figure out a way to get into the hardware business. Consider that both Google and Amazon have developed important hardware and device businesses to support their application, advertising and commerce business models. 

Perhaps Meta’s big strategy shift is the first sign that the next wave of computing will feature different leaders.