Mobile Dominates Both Broadband Access and Voice, Globally

Mobile voice subscriptions now outnumber fixed voice connections about six to one, globally, and

about 76 percent of all Internet access connections globally use mobile connections, according to the International Telecommunications Union.

In other words, mobile is the dominant way most people use either voice or Internet access. At the same time, the percentage of people who actually buy voice service from a fixed network is declining, both in developed and developing markets.

Those facts have implications for revenue growth, capital investment and business strategy,

shaping not only “who” is in the business but “how” they approach the business and “where” the revenue growth is, which services are growing and which are declining.

In the U.S. market, for example, revenue growth has shifted to mobile segment, with one important exception.

AT&T and Verizon are seeing revenue growth in their fixed network segment, on the strength of high speed access services and video entertainment.

Google Fiber likewise anchors its service with gigabit high speed access service, complemented with video entertainment. Note that Google Fiber does not offer branded voice service. To be sure, Google has said it would have offered voice service, were the regulatory burdens not so high.

Still, Google Fiber shows that high speed access and video entertainment are the lead apps for a fixed network business.

Even smaller telcos, despite losing money overall, are seeing growth in high speed access services.

In the first quarter of 2014, for example, Fairpoint data and Internet services revenue grew nearly 11 percent, year over year, from $14.9 million to $19.9 million, largely on the strength of services sold to business and organization customers.

Data and Internet services revenue also increased sequentially in the first quarter, for the fifth consecutive quarter, Fairpoint Communications says.

Voice access lines. on the other hand, declined 6.8 percent year-over-year as compared to 7.8 percent decline a year ago.  

That provides just one example of a change in the value of a fixed access network. Whether a fixed network service provider is Google Fiber, Fairpoint Communications, AT&T or Verizon, value increasingly is anchored in high speed access, with video entertainment being the important second app.

Among the possible ramifications of U.S. industry consolidation that could happen were regulatory authorities to approve Comcast’s purchase of Time Warner Cable, an AT&T bid for DirecTV and a Sprint acquisition of T-Mobile US, not to mention any others that also could follow in the immediate wake of such restructuring, is impact on high speed access services.

Comcast would become the largest supplier of consumer high speed access in the United States. AT&T might be able to devote most of its fixed network bandwidth to Internet access services. And Sprint might find it has to re-enter the fixed network Internet access business, as a condition of getting approval for its mobile merger.

Still, overall, since global  revenue and subscriber growth is driven by mobile services, not fixed network services, capital investment will skew towards mobile networks as well, as each incremental unit of fixed network investment produces less incremental revenue than a similar unit of investment in mobile assets.

But the shift in value for fixed networks is clear. In a new twist, fixed Internet access networks provide value as a key way to backhaul mobile Internet traffic.

In some cases, up to 80 percent of mobile traffic is offloaded to Wi-Fi networks, for example.

And fixed network coverage is likely to remain rare. By the end of 2014, fixed broadband penetration will reach about 10 percent of homes globally.

And as consumers seem to be abandoning fixed network voice services in both developing and developed regions, additional investment in new fixed networks is likely to remain limited, wherever it does not already exist.

Some 44 percent of all fixed broadband subscriptions are in Asia and the Pacific, and 25 percent are in Europe. So 69 percent of fixed broadband connections are in those two regions.

In contrast, Africa accounts for less than 0.5 per cent of the world’s fixed broadband subscriptions, and despite double-digit growth over the last four years, penetration in Africa remains very low.

Africa, the Arab States, and CIS are the only regions with double-digit fixed broadband penetration growth rates.

The Americas region stands out with the lowest growth in fixed broadband penetration, estimated at 2.5 per cent and reaching a penetration rate of around 17 per cent by end 2014.

Europe’s fixed broadband penetration is much higher compared with other regions and almost three times as high as the global average.

source: ITU

The point is that the value of fixed networks has to change: such networks cannot provide value as voice vehicles. Instead, high speed access and mobile network offload, plus video entertainment, are emerging as the long-term value of fixed networks.

But where fixed networks operate, revenue growth will be driven by Internet access services.

By the end 2014, there will be almost three billion global Internet users, 66 percent of which live in the developing world.

But mobile networks will supply 2.3 billion of those total connections, or about 77 percent of all Internet access connections.

By way of contrast, there were at the end of 2013 about 1.16 billion fixed voice lines in service, according to the International Telecommunications Union. More importantly, the ITU suggests fixed telephone penetration has been declining for the past five years.

The ITU data suggests there will be about 700 million fixed network high speed access lines in service, or about 60 percent of the number of voice lines. Over time, that percentage is going to grow, at least in part because voice now has shifted to mobile networks.

There will be, at the end of 2014, about seven billion mobile phone users. Some 3.6 billion of these will be in the Asia-Pacific region, and the developing world will account for 78 percent of the world’s total mobile subscribers.

In Africa and Asia and the Pacific, mobile penetration will reach 69 percent and 89 percent, respectively in 2014.

Penetration rates in the CIS, Arab States, the Americas and Europe have reached levels above 100 percent and are expected to grow at less than two percent in 2014.

But even mobile connections are shifting in the direction of adding mobile Internet access. Globally, mobile broadband penetration will reach 32 percent by end 2014; in developed countries, mobile broadband penetration will reach 84 per cent.

In developing countries, mobile broadband adoption will be 21 percent.

Mobile broadband penetration levels are highest in Europe (64 percent) and the Americas (59 percent), followed by CIS (49 percent), the Arab States (25 percent), Asia-Pacific (23 percent) and Africa (19 percent), the ITU says.

By end 2014, 44 percent of the world’s households will have Internet access. About 31 percent of households in developing countries will be connected to the Internet, compared with 78 percent in developed countries.

More than 90 percent of the people who are not yet using the Internet are from the developing world.

In Africa, almost 20 percent of the population will be online by end 2014, up from 10 per cent in 2010.

When the Data is Wrong, So is the Analysis

Very few issues seemingly are more contentious than the issue of whether internet access prices are high or not; rising or not. Internet service providers do not wish to be accused of price gouging; policymakers do not wish to be accused of not doing enough; some policy advocates  must argue there is a problem to be solved, or there is no issue to debate. 

Nor is this an easy matter to quantify. If one points out that price inflation has occurred for most of modern history, then of course “prices” will be higher, not lower, over time.  

U.S. consumer prices in 2022 are 11.77 times higher than average prices since 1950, according to the Bureau of Labor Statistics consumer price index.

source: U.S. Bureau of Labor Statistics 

General U.S. price levels  since 1996, when many people started buying internet access, have increased almost fifty percent. So arguing that prices--any prices--have increased over the last decade, several decades or longer does not mean much. 

All prices have increased. 

source: OfficialData.org 

The only meaningful issue is whether prices for some products, such as home broadband, have increased more, the same or less than the average for all consumer prices. Nor is that an easy exercise. 

Methodology also matters. 

The International Telecommunications Union says that, in the U.S. market, the prices for the lowest-priced plans offering at least 5 Gbytes of usage have increased from less than $40 per month in 2008 to more than $100 a month in 2020. 

That seems wildly incorrect. That might be the case for gigabit services--which can approach $100 a month--but cannot be correct for the budget plans that are in the $30 a month level. The methodology is off, as Comcast, the largest U.S. ISP, only charges $30 a month for services operating at 100 Mbps. To be sure, Comcast also says those prices are good only for one year, with sharp price increases after 12 months. 

Comcast says its 100-Mbps plan will grow to $81 a month after 12 months. The issue is that it would be hard to find anybody who actually pays that amount for a 100-Mbps service, even after a 12-month period. 

The average U.S. home broadband service  costs about $64 a month. If the cost of the lowest-priced plan really were more than $100 a month, as the ITU analysis suggests, the “average” U.S. price could not be as low as $64. By definition, the average would have to be much higher. 

According to Openvault, only about 20 percent of U.S. households purchased services operating at 100 Mbps or less in the second quarter of 2021 and only 18 percent in the third quarter of 2021 and 17 percent by the fourth quarter of 2021. 

source: Openvault 

source: ITU 

Other issues must be confronted when comparing prices across countries. Adjusting for currency and living cost effects, the International Telecommunications Union, for example, says mobile prices (not adjusted for inflation) have dropped, while fixed network prices for the lowest tier of service have climbed a bit since 2015, but only after having dropped since 2008. 

Still, prices are lower than in 2008, all that noted. 

source: ITU 

Keep in mind that this analysis is only of the cheapest plans in each country offering at least 5 Gbytes of usage and a minimum speed of 256 kbps, supplied by the largest internet service provider in each market. 

The analysis is not of the service plans “most consumers buy.” The plans are based only on posted retail tariffs and do not include any discounts customers may have based on promotions or other criteria. Nor does the data take into account whether plans offered by all providers that are not the “biggest” in each market. Nor does the analysis include the prices paid by consumers on the most-popular plans, using any discounts or promotions. 

There are other important drivers at work, as well. Since 2008, ISPs in developed countries have been rapidly increasing “typical” speeds, while consumers have been gradually changing the service plans they buy, shifting from lower-speed plans to higher-speed plans that cost more. 

Beyond all that, the latest ITU data on U.S. home broadband plans seems wildly incorrect.

"The Era of Paying for Voice Calls is Ending," Says Reliance Jio CEO

source: ITU

Reliance Industries Chairman Mukesh Ambani says domestic voice calls will be free forever on the Reliance Jio network. He also and announced a four-month introductory offer of free voice and data services for new customers, starting on September 5, 2016.

“The era of paying for voice calls is ending,” he said.

That, in a nutshell, the fundamental revenue problem faced by legacy service providers in the Internet era: it is tough to compete with providers that “give away what you sell.”

Analysts at Morgan Stanley Research expect Reliance Jio to generate more than $2 billion revenues in 2017 to 2018 period, gaining two percent voice market share and 19 percent market share in mobile data, without overall mobile market share of six percent.

That forecast sees Jio getting  more than 40 million subscribers in a year.

Analysys Mason says mobile data tariffs need to be reduced 75 percent to bring costs in line with developed nation levels.

India’s data tariffs for 1 GB of usage represent 2.6 percent of gross national income per capita

Developed country levels are 0.4 to 0.5 percent GNI per capita.

source: ITU

“Our analysis concludes that a 75 percent cut in data tariffs (average revenue per GB of Rs 57) alone could increase the user base to 645-667 million SIMs, and the level of monthly data usage to around 4.2-4.3 GB per SIM in 2019-20,” said Analysys Mason.

Perhaps nobody expects a 75-percent fall in tariffs over the next couple of years. Longer term, it is hard to bet against such an outcome. Fixed network Internet access prices in the developing world--arguably a much-tougher proposition, still have been falling towards developed country levels, on a percent of GNI basis.

By 2015, average mobile broadband prices corresponded to 5.5 percent of GNI per capita, worldwide. In developing countries, the average was more like seven percent. Of course, mobile Internet access was below one percent in developed countries, as a percentage of GNI per capita.

Further reductions in fixed network costs might be difficult, some data suggests. Since 2013, for example, fixed network costs seem to have grown, not shrunk.

source: ITU

U.S. Fixed Network Broadband is "Among Most Affordable" in the World, says ITU

From time to time, observers complain about the high price of fixed network Internet access, especially when prices climb. A typical line of argument is the retail price, expressed in dollars, compared to prices in other countries, also expressed in dollars.

Analysts who work across regions and nations globally know there are issues with such comparisons. To normalize “prices,” analysts often use purchasing power parity or measures that index communications spending to household income, for example.

Those methods often provide a more-realistic way of comparing prices, since they are expressed in terms that are normalized for purchasing power differences.

In that regard, an International Telecommunications Union report shows that U.S. fixed network broadband prices are exceedingly low, expressed as a percentage of gross national income per person. That is not the only way to compare prices across countries, but is instructive.

Using the per-capita GNI method, fixed network high speed access costs less than one percent of per-person GNI, making U.S. fixed network broadband services among the “most affordable” in the world.

source: ITU

In developed countries, the fixed-broadband basket has been relatively affordable for a number of years, but prices are no longer falling.

Between 2008 and 2013, the price of the fixed-broadband basket as a percentage of GNI per person fell from 2.3 percent to 1.4 percent. That figure remained unchanged in 2014.

While prices for fixed-broadband services are comparable in absolute U.S. dollar  terms across developed and developing countries, they remain much higher in terms of purchasing power parity values.

In 2014, fixed-broadband services in developed countries cost PPP$27, compared to PPP$65 in developing countries. This is not the case for fixed telephone and mobile prices, as prices expressed in purchasing power parity are almost the same in developed and developing regions.

source: ITU

New Platforms Will Help, But Rural-Urban Divide Still Will Exist

Though some will criticize the changes, a new Federal Communications Commission look at where internet access was in 2018 suggests coverage and speeds available to underserved citizens is improving.

Such changes never will be fast enough to satisfy some, and it might never be possible to completely eliminate the urban-rural difference in number of suppliers, typical speeds or absolute speed. Nor is it possible to dismiss progress.

From December 2016 to December 2018, the number of U.S. residents without any options for at least 250/25 Mbps fixed terrestrial broadband service dropped by 74 percent, from 181.7 million to 47 million, the FCC notes.

The number of residents with no options for at least 25/3 Mbps fixed terrestrial broadband service fell by 30 percent, from 26.1 million to 18.3 million.  

The data also showed an increase in competition from December 2016 to December 2018, with the number of residents  enjoying more than two options for 25/3 Mbps fixed terrestrial broadband service increasing by 52 percent, from 45.9 million to 69.8 million.  

Moreover, the number of rural residents with two or more options for 25/3 Mbps fixed terrestrial broadband service increased by 52 percent, from 14.4 million to 22 million.  

New platforms are coming, though, including low earth orbit satellite constellations, fixed wireless, and much more unlicensed and shared spectrum. 

The new HAPS Alliance--including SoftBank’s HAPS Mobile, Alphabet's Loon, AeroVironment, Airbus Defence and Space, Bharti Airtel, China Telecom, Deutsche Telekom, Ericsson, Nokia SoftBank and Telefónica--aims to promote the use of high altitude vehicles for internet access. 

Considered in light of the emergence of low earth orbit satellite constellations, 5G fixed wireless and use of growing amounts of unlicensed and shared spectrum, HAPs shows growing potential use of wireless access platforms for internet access, especially in areas where traditional platforms cannot generate a reasonable financial return. 

Note the involvement of major app developers, mobile service providers, traditional telecom infrastructure providers and aerospace firms. As with the Telecom InfraProject, new and incumbent entities are working together to reduce the costs of communications infrastructure.  

Among the immediate activities is “global harmonization of HAPS spectrum, including the adoption, improvement and acceleration of global spectrum standardization for High Altitude IMT Base Stations within the International Telecommunications Union (ITU),” the group says. 

Some early indications are that--as always in the past--the usable bandwidth of HAPs will be substantially less than available on terrestrial networks. Some early work by the International Telecommunications Union suggests data rates per user will depend on the number of simultaneous users.

source: ITU

A single HAPs platform might have a total throughput of less than 5 Gbps, supporting 2,000 simultaneous users, or perhaps 30 Gbps supporting 12,800 simultaneous users. 

That works out to about 2.38 Mbps per user, when there are 2,000 simultaneous users. HAPs units transmitting over wider areas might only be able to support a couple hundred kilobits per second when 12,800 simultaneous users are active

Some early suggestions for dedicated HAPS bandwidth use the 6.4 GHz to 6.6 GHz band. In the millimeter ranges a few different bands might be used, including 28 GHz, 31 GHz, 47 GHz or 48 GHz. 

source: ITU

Some bandwidth always is preferable to no bandwidth, and that is the primary appeal of the emergence untethered access platforms. In perhaps a minority of cases, untethered bandwidth might approach that of cabled network alternatives. That might occur most often when millimeter wave spectrum is used in a small cell deployment to boost capacity in a dense user, urban location. 

Most of the time, untethered bandwidth supplied by some wireless platform will provide access where it is not otherwise possible, but also not at speeds that approach cabled network performance. 

One way of illustrating the dramatic impact of coming shared spectrum, unlicensed and millimeter wave spectrum is compare those new sources with all existing mobile spectrum. 

source: FCC

Universal Internet Access in 6 Countries Would Eliminate 55% of Global Digital Divide

source: ITU

Providing universal Internet access to just three countries (India, China and Indonesia) would eliminate 45 percent of the “unconnected to Internet” population of the globe.

Doing so in just six countries (adding in Pakistan, Bangladesh and Nigeria) would solve the digital divide problem for 55 percent of the world’s people, according to the International Telecommunications Union.

About 20 countries account for 75 percent of those not using the Internet, according to McKinsey researchers.

The World Bank points out that many of these offline populations share common characteristics. They are predominantly rural, low-educated, with lower incomes, and a large number are women and girls, according to the World Bank.

Affordability is an issue. According to ITU’s latest price research, a monthly fixed broadband package cost 1.7percent  of average income in developed countries, compared with 31 percent  of average income in developing countries, and 64 percent of average income in Africa.

Mobile broadband costs one to two percent of monthly income in developed countries, compared with 11 percent to 25 percent  of monthly average income in developing countries.

Lack of networks also is a big issue. Of the nearly four billion people not connected to the Internet, some 1.6 billion live in remote locations where networks do not exist. That is why Facebook and Google are developing unmanned aerial vehicle systems, Google is developing Project Loon and both are working on fixed access networks.

Among the 3.9 billion people who are not online, many people may be unaware of the Internet’s potential, or cannot use it because they lack the necessary skills or because there is little or no useful content in their native language, on top of facing other barriers to Internet access, including unreliable power supplies and/or sparse network coverage.

with just 137 million customers and a broadband penetration rate of just 13 percent, compared with a mobile penetration rate of 80 percent , India’s digital leap is just starting.

source: ITU

No Matter What the ITU Says, There is 4G

Some will argue that because the new International Telecommunications Union has defined "fourth generation" networks they way they have, there actually is "no such thing" as an actual "4G" network in operation anywhere in the world, right now.

That's actually not correct. The WiMAX and Long Term Evolution networks now operated in the United States and elsewhere use different air interfaces, standards and protocols from "3G." And since the difference between first generation analog, 2G, 3G and now 4G networks is in fact that they represent entirely-new technology generations, it still is accurate to refer to LTE and WiMAX networks, as they now exist, as 4G. They aren't "fully compliant" with the formal ITU definitions, but easily would meet even an industry insider's definition of a "new network, running different protocols, standards and air interfaces," than the older generation of networks.

End users won't care even that much, as in many cases HSPA+ will offer faster downloads and more bandwidth than some 4G networks. Let the purists quibble. Lots of real revenue is going to be made, and lots of new applications and use cases created, by 4G networks that fall short of the full ITU definition. At this point, the business models and businesses do not have to wait for formal compliance. Real-world 4G networks will fashion real business models and earn lots of real revenue without complying fully with the full standards.

Will Fiber to Home Really be a Viable Option for Much of South, SE Asia in the Coming 5G Era?

Countries across South Asia and Southeast Asia need to make big investments in fixed network infrastructure, a new report by the International Telecommunications Union suggests.

In fact, the white paper suggests, it now is time to put the emphasis on fixed access networks, not the mobile networks that have, to this point, brought voice and moderate-speed internet access to people across much of the region.

To be sure, the paper tends to focus on backbone and “fiber to cell tower” investment, less clearly on ubiquitous fiber to the home. “The overall growth in broadband use (both mobile and fixed) significantly increases the requirements for backbone and backhaul bandwidth,” the report says.

But the report also hedges, one chart suggesting that fiber to the home, fiber to the node and 5G all serve the same segments of the market. Some of us also would argue that some other obvious platforms are not mentioned in the report. Hybrid fiber coax and fixed wireless, for example, are absent.

The report suggests that the APAC8 nations (Bangladesh, Cambodia, Laos, Myanmar, Sri Lanka, Thailand and Vietnam) that are the focus of the white paper may benefit from a “leap to fiber” platforms. One presumes that means more than optical backbones and fiber to the cell tower.

That might, in some ways, be a curious conclusion, given the high cost of fiber to home networks, in the South Asia and Southeast Asia markets, as well as elsewhere. Perhaps the ITU has various forms of platform sharing and wholesale in mind, for it does not seem as though facilities-based competition in the fixed network segment of the market will prove financially viable.

Much could ultimately depend on the adoption of 5G platforms. It is at least conceivable that multiple facilities-based mobile platforms, able to operate as fixed wireless platforms as well, will close a market opportunity for fixed networks, for much of the potential access market.

source: ITU  

source: ITU