Showing posts sorted by date for query digital divide. Sort by relevance Show all posts
Showing posts sorted by date for query digital divide. Sort by relevance Show all posts

Thursday, April 14, 2022

Demand is a 5G Issue, Not Simply Supply

A foundational claim about any sort of digital divide is that supply is the problem. Networks do not reach everyone; or quality networks do not reach everyone or prices are too high. Those all are supply-side ills.


What often gets confused or forgotten is that there are demand-side drivers as well. Consumers might prefer to buy based on their own perceived needs. Most often, consumers buy home broadband services that are in the middle of what is available, in terms of price and perceived value.


The same thing might apply to mobile services as well.


Where it comes to supply and demand, pundits often assume that slower 5G uptake is to be blamed on supply, not demand. That is not necessarily the case. Subscriber levels for 4G in a few European countries have always been below what we might expect, and availability cannot, at this point, be the main culprit. 


Some might point to lagging 5G uptake and suspect that supply issues are at work. 

source: Ookla 


Customer demand also shapes uptake. Nearly half of all German mobile subscriptions appear to use 3G, instead of 4G. nearly a decade after 4G was introduced, according to a study by Opensignal. 


Governments and policymakers always are quick to quantify supply-based gaps in uptake, quality or availability of communications services, which is among the reasons stories about any form of digital divide are evergreen. 


Most often, studies about service gaps rely on supply or demand indices, including network availability, typical speeds and cost. 


Demand side choices by consumers tend to be overlooked. In other words, some “gaps” might reflect consumer choices, not failures of supply. And that matters for 5G, as much as it did for 4G.


We often are surprised at the resilience of legacy services, as those use of legacy services is always a case of supply failure. Not always. Sometimes demand choices are at work. In other words, a huge percentage of German mobile users seem to be opting to remain on 3G networks even when 4G networks now are in good supply, with good performance metrics. 


Wednesday, January 12, 2022

How Big a Problem is the "Digital Divide?"

One always-present issue when looking at any particular social or economic problem is that we always face multiple problems at the same time. Drug overdoses, malnutrition, carbon and methane emissions, traffic, inflation, joblessness, homelessness, lack of medical care, uneven or inadequate educational opportunities, domestic violence, fair treatment of ehtnic, racial, religious or other minorities, corruption, crime and many other problems have to be tackled simultaneously. 


And it never is possible to rank order all of those problems in terms of allocating resources to solve the problems, in a holistic way, in real time, even assuming we have our means-ends causality chains correctly understood. 


In that vein, the “digital divide” is a bigger problem some places, compared to others, even if it can be seen as a problem no matter where we find it. 


That clearly is the case for people in many lower-income or middle-income countries, where internet access in lower-income countries exceeds four percent of monthly gross domestic product, for example. 


In most middle-income countries greater progress has been made, with costs below the International Telecommunications Union target of two percent of monthly GDP. 


In developed countries, the problems are mostly confined to rural areas or high-cost areas, as monthly recurring costs are below one percent of GDP. There still are issues to be solved, but they are relatively trivial compared to other problems we also face. 


source: ITU

Sunday, January 9, 2022

Are Broadband Cost and Benefit Out of Alignment?

"Better broadband" is no less a "desirable thing" than better roads, bridges, elecrical grids and resource management programs that actually could work. So with decarbonization, elimination of disease, clean drinking water and sanitation, social equity or quality education. We always have multiple problems to solve.


But opportunity costs always exist. More of one thing means less of the others. Occasionally, it might be helpful to evaluate our priorities. We desire many positive outcomes, but our resources lag our ambitions. So cost and beneift always are legitimate questions.


Virtually all government programs to close the digital divide are touted as important because--it is is argued--broadband leads to economic growth. In fact, careful reports only use the word correlation, not “causation” when discussing broadband and economic growth. 


Often, even correlation cannot be shown, as is the case with much “foreign aid.” Still, correlation often does exist, and for obvious reasons. Some regions and industries are fast growing. It should come as no surprise that areas such as Silicon Valley show both high growth and high broadband availability. 


But it never is clear which holds: high growth leads to wealth; and wealth leads to excess spending power; which leads to demand for quality broadband, good restaurants and other outcomes associated with areas of high income. 


To use a phrase, perhaps high economic growth, high wealth, high educational levels, some industries and lots of younger people lead to quality broadband demand and supply, rather than broadband causing those outcomes. 


Will quality broadband really boost economic growth in sparsely settled rural areas far from urban centers, already losing residents and already suffering from low economic growth? 


To be sure, there is virtual agreement that universal broadband is a good thing, as universal telephone service, universal mobile service, electricity, education or medical care are  considered good things. 


But there still is no actual evidence--possible correlation, but not causal proof--that broadband access--or better quality broadband access--actually does “cause” economic development. 


Nor, for that matter, are many government reports actually clear about the differences between supply and demand issues; consumer choices and supplier business choices; or the ways people actually use the internet as it relates to potential economic benefit.


Reports often confuse “people who choose not to buy a product” with “inability to buy.” The former is a matter of consumer choice; the latter a supply chain issue. It is one thing to say “few people buy gigabit internet access.”


But that does not mean they “cannot buy.” They may choose to buy a different product, such as access at 200 Mbps. 


And while the internet can be used to conduct homework or conduct work,  it mostly gets used to “watch TV,” or engage in social media. 


Few--if any--really believe watching TV or engaging with non-business social media has a positive impact on economic growth in a direct sense, important though it is as a driver of income for influencers, advertisers, writers, directors, actors, studios, streaming services and TV networks. 


Beyond all that, improving broadband involves opportunity costs: other uses for that capital that are not undertaken because we spend the money on broadband. In a broad sense, all public policy choices involve such trade offs: things we cannot do because we chose to do something else.


Quality broadband is a good thing, don’t get me wrong. But it might not have nearly the economic upside people often wish to believe.


Sunday, November 21, 2021

Will Telecom Italia's Fixed Network be Privatized?

Telecom Italia’s board of directions is said to be meeting Nov. 21, 2021 about a possible fixed network privatization effort by private equity fund KKR, which is already an investor in the Italian phone group's fixed network, Reuters reported. 


At first glance, the proposed deal looks like a standard private equity deal: buy an underperforming asset, make changes and then sell. But the deal might also reflect another private equity focus: buying infrastructure assets to hold longer term, as an alternative asset. 


Telecom Italia, for its part, also fits the scenario: it has high debt and shrinking recurring revenues and profits, arguably impairing its ability to invest in digital infrastructure including fiber to home facilities. 


At the same time, the access network scarcity moat is challenged by the building of a rival Open Fiber wholesale network owned and operated by electrical and gas provider Enel. 


KKR might or might not see value in merging merging TIM's access network merged with that of rival Open Fiber, which would then be able to run as a single national internet and communications access asset supplying retail services to other internet service providers and telcos.


Alternatively, the former Telecom Italia assets might have enough scale to operate independently of Open Fiber. In either case, the value KKR sees is linked to the scarcity value and regulated, stable cash flows the access network would generate.


As the access network is deemed to be a strategic asset by Italy’s government (as is the case in virtually every country), it presumably would benefit from investment to eliminate the digital divide. That changes the business model for FTTH as it introduces subsidies. 


Were the government to sanction a merger of Telecom Italia and Open Fiber assets, to create a single national wholesale provider, KKR’s investment would acquire a business moat. 


Future KKR options would then involve a sale of the assets to a third party or a longer-term holding as an alternative asset. 


Institutional and private equity investor interest in communications infrastructure waxes and wanes. Right now it is waxing, after a precipitous drop in interest in the wake of massive facilities overbuilding around the turn of the century. 


In large part, the interest is driven by returns on other assets, leading investors to desire some exposure to alternative assets, including infrastructure with some market moats, scarcity and dependable demand, plus free cash flow. 


That appetite is matched by connectivity provider capital investment issues, namely low returns on invested capital that have bedeviled connectivity providers in recent years. 


In many cases, service providers have trouble earning back their cost of capital, according to some analysts. 

source: Arthur D. Little


All of that creates a heightened private equity and institutional investor demand for investments in “digital infrastructure” that is similar to demand for the more-traditional interest in real estate and utility investments. 


But the strategies can vary. The easiest and arguably safest choices are core infrastructure operations where most of the return comes in the form of cash dividends. This is most often found in regulated segments of the industry, with low growth but consistent demand. Ownership of electrical utilities provides a good example of this type of asset. 


Most digital infrastructure assets do not offer predictability or moats as high as might be the case for electrical utilities or airports, but arguably is most true for mobile towers. 


In other cases, there are some specific drivers that shift a bit of the story to more growth, if some tweak to the business model is made. That seems to be the case for mass market telecom networks where the upside is the upgrade from copper internet access to fiber to home. 


In other markets, the same thinking underpins buying a regional airport with expectations of creating a higher-value super-regional hub. In the communications assets business, perhaps an example is the “roll up” strategy of amalgamating many diverse and smaller connectivity or data center assets to create scale. 


The point is that a confluence of connectivity provider need and investor want is fueling a resurgence of private equity and institutional investor interest in a growing range of digital infrastructure assets.


Friday, August 14, 2020

Why the Broadband "Problem" Cannot be Permanently "Solved"

 So long as we keep changing the definition of “broadband,” we are likely “never” to see “improvement” in the number or percentage of homes or people able to buy the product, no matter how much investment is made in facilities. 

When we change definitions of minimum speed, for example, we automatically increase the number or percentage of locations or people that cannot buy the product. Colloquially, that is known as “moving the goalposts.” Put another way, our understanding of “broadband” changes over time. 


The classic definition of broadband was that it was any service running at speeds of 1.5 Mbps. In the U.S. market the official definition of “broadband” is 25 Mbps. But most consumers buy service at speeds an order of magnitude higher than the minimum definition. Yesterday’s power user is today’s light user. 


source: Openvault


And though new platforms might help, a continuing evolution of our definitions to support an increase in minimum speeds will continue to be a challenge for any market or country with lots of rural or thinly-populated areas. In the United States, six percent of the land mass is where most of the people live. 


How we define the market also affects our analysis of the amount of competition in the consumer broadband market. The common observation in the U.S. market, for example, is that minimum service at 25 Mbps is unavailable to “millions” of people. 


Of course, that finding requires a big assumption, namely that all satellite and mobile services are excluded from the analysis. Two U.S. satellite suppliers sell broadband access across virtually the entire continental land mass, while mobile speeds already exceeded the minimum threshold in 2019 and early 2020. 


If any and all services supplying 25 Mbps or faster speeds are considered, it might be very difficult to find any U.S. locations unserved by at least two providers. 


The point is that definitions and assumptions matter. By continually increasing the speed used as the definition of “broadband,” we will almost arbitrarily keep moving the goal line on who has it, where it is available and how many competitors can sell it. 


Ignore for the moment consumer choice, which has shown that most consumers buy services in the middle of the range: not the most costly or least costly; not the fastest or slowest offerings. 


Because “typical, average or median speeds” will keep getting higher, so will our definitions be adjusted. But at a time when satellite and mobile minimum and average speeds often already exceed the minimum definitions, and where most fixed network consumers buy services an order of magnitude above the “minimum” threshold, it is hard to “close the digital divide.”


There likely will always be some statistical gaps. Where there is a serious “problem” actually is--or will be--more debatable.


Friday, May 1, 2020

Will the Digital Divide Always Exist? Will it Matter?

To get funding, any advocacy group must first demonstrate that a problem exists. To keep getting funds, an entity has to insist no progress is being made, necessitating continued funding. And if the original problem actually is solved, the entity has to find some new problem that needs to be solved. 


All that applies to “broadband access,” no less than any other undertaking we might consider worthwhile. Despite much data indicating that internet access (mobile and fixed) is getting substantially better and has held up very well as nationwide stay-at-home policies were put into place because of the Covid pandemic, not every community has been so fortunate. 


Oxnard, Calif., for example, was one such place, seeing a dip in downstream speeds of about 20 percent from mid-March to mid-April, although performance now is moving back up post-mid-April, according to BroadbandNow, using test data from M-Lab. 


The community where I live experienced a 32 percent dip in downstream speed during the same period. Those are the stats. 


What I can say in my own case is that the dip in top speed happened on a connection that normally runs (depending on hour of the weekday) between 130 Mbps and 200 Mbps. The dip was brief, lasting perhaps a week, and did not cause any actual degradation of user experience.


The point is that statistics are one thing; user experience can be quite another matter. The median pre-Covid speed was described as between 75 Mbps and 93 Mbps (half faster, half slower). 


Multi-user households buying lower-speed services might have experienced issues. That was not my own experience, but differences, gaps and disparities exist, and might continue to exist in the future, for all sorts of reasons. 


Consumers make choices. They might decide to buy more-affordable services that can be stressed in multi-user households. Some, in single-user households, might decide to rely on mobile access only. None of that is necessarily a failure of policy, but an expression of consumer choices, or demand. 


Supply is an issue, though. In many communities, though served by gigabit cable networks, telcos still sell digital subscriber line services that are demonstrably slower. 


Still, one analysis by Fastly suggests that even the most-challenged digital subscriber line networks in the United States held up under the new at-home load. Cable TV networks also have held up well.

source: Fastly


According to Ookla, U.S. internet access speeds  on fixed networks dipped about four percent during the pandemic. Mobile speeds actually improved by one percent. 


Most of you are familiar with speed tests. Most of you also know you test your connections primarily when they seem “slow.” Almost nobody bothers to test when the networks are humming along. 


And M-Lab tests have increased significantly during the stay-at-home policies, suggesting customers are aware of greater congestion or slower experienced speeds. 


That would hardly be surprising, as all studies show at-home internet access data volume has grown 40 percent or so as people have been forced to work and learn at home. 


A study by Fastly also indicates speed and income are related. That should not be surprising. Lots of consumer behaviors and spending patterns are correlated with income, education, wealth and geography. Up to 20 percent of U.S. consumers also say they rely on mobile internet access, and do not buy fixed network access. Rural speeds tend to be slower than urban speeds. Rural use of the internet, PC ownership and income also seem to be lower than in urban areas. 


The point is that there always will be room to argue that a digital divide continues to exist, even if it is narrowing and has been narrowing for a couple of decades. And statistics often too-casually dismiss the many nuances as speeds are improving fast


But differences might always exist.  Since networks are expensive, the last two percent of locations will always be an economic issue. We might solve the basic speed issue, improving delivery from 10 Mbps to 25 Mbps to some higher figure. But urban networks will keep improving as well, so a gap might always exist.

Some Problems Do Not Go Away, Even if They Become Less Important

To get funding, any advocacy group must first demonstrate that a problem exists. To keep getting funds, an entity has to insist no progress is being made, necessitating continued funding. And if the original problem actually is solved, the entity has to find some new problem that needs to be solved. 


All that applies to “broadband access,” no less than any other undertaking. Despite much data indicating that internet access (mobile and fixed). One analysis by Fastly suggests that even the most-challenged digital subscriber line networks in the United States held up under the new at-home load. Cable TV networks also have held up well.



According to Ookla, U.S. internet access speeds  on fixed networks dipped about four percent during the pandemic. Mobile speeds actually improved by one percent. 


)has held up very well as nationwide stay-at-home policies were put into place because of the Covid pandemic, not every community was so fortunate. Oxnard, Calif., for example, was one such place, seeing a dip in downstream speeds of about 20 percent from mid-March to mid-April, although performance now is moving back up post-mid-April, according to BroadbandNow, using test data from M-Lab. 


Most of you are familiar with speed tests. Most of you also know you test your connections primarily when they seem “slow.” Almost nobody bothers to test when the networks are humming along. And M-Lab tests have increased significantly during the stay-at-home policies, suggesting customers are aware of greater congestion or slower experienced speeds. That would hardly be surprising, as all studies show at-home internet access data volume has grown 40 percent or so as people have been forced to work and learn at home. 


A study by Fastly indicates speed and income are related. That should not be surprising. Lots of consumer behaviors and spending patterns are correlated with income, education, wealth and geography. Up to 20 percent of U.S. consumers also say they rely on mobile internet access, and do not buy fixed network access. Rural speeds tend to be slower than urban speeds. Rural use of the internet, PC ownership and income also seem to be lower than in urban areas. 


The point is that there always will be room to argue that a digital divide continues to exist, even if it is narrowing and has been narrowing for a couple of decades. And statistics often too-casually dismiss the many nuances as speeds are improving fast


But differences might always exist.  Since networks are expensive, the last two percent of locations will always be an economic issue.

Monday, April 27, 2020

Where are All the Unserved U.S. Households?

Since the “digital divide” is closing everywhere in the world, it simply stands to reason that the divide ought to be narrowing in the United States as well. That is not to say the divide closes completely, only that clear and steady progress is being made to supply better internet access to citizens who wish to buy it. 


The Federal Communications Commission says “the number of Americans lacking access to fixed terrestrial broadband service at 25/3 Mbps continues to decline, going down by more than 14 percent in 2018 and more than 30 percent between 2016 and 2018.” 


The FCC also notes that the number of Americans without access to 4G Long Term Evolution (LTE) mobile broadband with a median speed of 10/3 Mbps fell approximately 54 percent between 2017 and 2018.


Also, more than 85 percent of U.S. residents now have access (can buy) fixed terrestrial broadband service at 250/25 Mbps, a 47 percent increase since 2017. Over the same period, the number of Americans living in rural areas with access to such service increased by 85 percent, the FCC says. 


 Inevitably, some will lament the existence of differences; decrying a lack of perfection or simply arguing that the numbers are incorrect, arguing that the number of people without broadband access is 42 million or even as high as 162 million. 


It is not clear where those higher figures come from. Looking at connected households is revealing, however. 


The Federal Reserve estimates there are about 140 million housing units., defined as “a house, an apartment, a group of rooms, or a single room occupied or intended for occupancy as separate living quarters.” 


To be more precise, we also would have to account for households that either choose not to buy, or cannot easily buy. Some of those latter cases might be boats that serve as a residence, trailers or rooms rented inside homes where the resident does not buy internet access because the owner or manager of the property supplies the access. 


More than 16 million units are vacant at any particular time, leaving a total of perhaps 124 million units, which accords well with the estimate of 121.6 million households we get if we assume the U.S. population is 304 million persons, with an average household size of 2.5. Then there are 121.6 million households. 


That is the base of total locations fixed networks must reach. But a significant number of households choose not to buy fixed network access. 


Somewhere between 15 percent and 20 percent of U.S. homes are “mobile-only” for internet access, which might represent as much between 18 million and 24 million households. Those customers choose not to buy fixed network internet access, for whatever reason they choose. 


If so, then the number of locations who might buy fixed network internet access is on the order of 97.6 million to 103.6 million sites. 


If take rates for all homes (including the vacant units) are about 80 percent, then we would expect total fixed network accounts to number about 97.3 million locations.


Leichtman Research Group estimates that the largest U.S. telcos and cable companies have about 101.2 million accounts, but that includes business accounts. That matches fairly well the estimate that total fixed network accounts should be about 97.3 million in number. 


The point is that there are very few U.S. locations that do not already buy some form of internet access--mobile or fixed or both. That is difficult to square with claims that huge numbers of peop;le literally cannot buy service at 25 Mbps. 


Consider also that internet access routinely is available from satellite and other wireless and mobile platforms. 


Satellite broadband and fixed wireless operators traditionally have targeted rural homes and small businesses as their primary market, in the past said to include as many as 35 million locations. But estimates vary widely. Some say 80 million people live in rural areas, others say 46 million do, using the U.S. Census Bureau methodology. 


 Satellite broadband providers seem to have three million subscriptions, though some estimates (wrong, in my opinion) suggest that  6.76 percent of U.S. internet subscriptions are provided by satellite. 


Assume there are 139 million U.S. housing units, the high estimate, without adjusting for vacant units or other locations that cannot be wired. That implies nine million U.S. satellite broadband subscribers. No estimate I have seen--ever--suggests there really are nine million U.S. satellite broadband accounts. 


HughesNet believes 18 million homes are its market opportunity. Rental units alone might represent 6.6 million units, although not locations, as some of those units are in multi-family complexes. 


According to Urban.org, 13 million homes are owned by rural residents. Those figures roughly accord with HughesNet estimates of market opportunity. 


A more conservative estimate is that perhaps two percent to three percent of U.S. homes are the primary target for satellite broadband. That would include the most-isolated areas, where there are no terrestrial fixed networks using cabling. In many rural areas that are slightly more dense, wireless ISPs already operate. And, of course, there are many parts of rural areas served by cable operators or telcos. 


The point is that many homes already can buy 25 Mbps service, albeit from a satellite provider. 


A big issue is the presence of fixed wireless ISPs. According to Broadband Now, some 148.4 million U.S. residents are covered by fixed wireless ISPs. Assume an average household size of 2.5. That implies some 59 million rural locations already are reached by fixed wireless ISPs. 


Add all that up and some of us cannot fathom how 42 million to 162 million people actually are not able to buy 25 Mbps internet access.


Monday, April 13, 2020

The Use and Misuse of Statistics

The use and misuse of statistics is an ever-recurring issue. Consider only the issue of how to count internet access availability or take rates. The former is a measure of supply, the latter a measure of demand. “Availability” means a consumer  can buy a product. “Access” means a customer does buy it. People confuse the two concepts, routinely. 


Ignore sampling errors or limitations for the moment.  Ignore the impact of definitions, which change. At one point, 10 Mbps was the top speed on a fiber to home network. Today we define “broadband” as a minimum of perhaps 25 Mbps downstream, and the definition will slide higher over time. The point is that we never are comparing apples to apples, over time. 


In isolated and rural areas, where there often is no business case for supplying such access, service only is available if subsidized, and so the issue of “how fast” is important, but arguably secondary to “availability.” We prefer equivalent grades of service everywhere, but the economics of supply mean that rural availability lags urban, virtually always. 


We frequently also often ignore some platforms entirely, as when we measure “fixed network” availability, but omit the additional coverage supplied by satellite providers or mobile networks. Sometimes it is not clear that wireless fixed networks are counted with other fixed networks. 


It arguably is one thing if a potential customer cannot buy a product; quite another thing if a potential customer chooses not to buy. The first might be considered a failure of policy; the latter a consumer exercise of choice. 


One also has to ignore lag times between data collection and publication. Most government data shows what was the case two years ago, not the situation as it stands today. So three years ago, using a minimum standard of 25 Mbps for “high speed,” perhaps 30 percent of “households” did not buy--or perhaps could not buy--the product. 


People often mistake “households” for “people,” as well. This illustration, using 2017 reporting data, says “30 percent of U.S. households don’t have a fixed high-speed internet connection.” 


That is wrong. The Federal Communications Commission figures for 2017 stated that 21.3 million people did not have access at that speed, not households. That overstates the degree of “lack of access” by more than 100 percent, as the typical number of people in a U.S. household is greater than two. 


source: Karma


This is a common error one sees in reports about the size of the digital divide. If one adds two satellite providers to the mix, there is almost no place within the continental landmass not already served by at least two networks selling 25 Mbps service, whatever the limitations of fixed networks in some locations. 


Of course, our goals always are aspirational. Most urban consumers consider 25 Mbps a problem. In my own household, anything less than 50 Mbps triggers the registration of a service issue report and an immediate reboot of the router. As a practical matter, even speeds below 100 Mbps might trigger a reboot. 


The point is that availability--the ability to buy internet access--is not generally a problem. I know people who live in isolated mountainous areas where neither fixed line service nor mobile service is available. They use their mobiles only when “in town.” But those people also choose not to buy satellite internet access. They could buy it; they simply choose not to do so. 


Speed and cost are issues, to be sure. Rare is the wireless platform that will match a hybrid fiber coax network or a fiber to home network in terms of speed or cost per bit. 


The point is not the definitions we use--as those change over time, and should change--so much as the misuse of terms. Availability is one matter; take rates another. People are one matter; households or locations another. 


One frequently sees and hears figures that confuse those concepts, with real implications for the meaning of the data. In the end, we care about take rates. Availability is a measure of our ability to support take rates. But there are grey areas. 


We want reasonable quality services and reasonable prices. That always is hard to do in rural areas. But even in urban areas, when quality and price are not issues, some customers still choose not to buy some services. They might prefer a mobile-only approach to buying fixed access, for example. 


Assessing trends in the real world is hard enough. It never helps when we are simply misapplying statistics (unintentionally, perhaps)  to make a point.


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