Ofcom Decides Not to Fully Separate Openreach from BT

The U.K. regulator, Ofcom, has concluded, after a review of U.K. communications structure, that it is not best to fully separate fully separate BT from Openreach, the wholesale services division of BT, as a way of promoting innovation and investment in U.K. fixed network communications.

In Australia, New Zealand and Singapore, full separation exists as the current framework for access services.

Inevitably, disagreement will continue, as the present structure might not satisfy competitors or regulators  over the long term. Wherever wholesale access is provided, there are never-ending disagreements between retail buyers and facilities owners about the appropriate prices and policies for allowing such access.

A number of other approaches to robust  wholesale access already have been taken by a number of other countries, though without embracing the full “divest the network” approach taken by Australia, New Zealand and Singapore.

In Belgium, Germany, the Netherlands, Sweden and Spain, wholesale access to “bitstream” services is the framework.

In France, wholesale access to access fiber is the wholesale framework. In the Netherlands and Sweden both bitstream and fiber access products are available.

In most cases, the objective has been to encourage further investment in next-generation access networks, in addition to fostering competition.

All those efforts revolve around ways to encourage--or force--incumbent telcos to invest, while also encouraging immediate competition.

The problem, some would note, is that the two objectives might be mutually exclusive, to a large extent, in the absence of significant facilities-based competition.

Incumbents virtually always complain that the huge upfront capital investments they must make place the risk squarely on the incumbents, while competitors are able to avoid the investments, yet still reap the rewards of using the networks.

Other competitors, of course, are quite able to model the financial impact on their own businesses of building their own facilities, instead of leasing access. Those competitors nearly always conclude that they are better off renting access, rather than building and owning.

Granted, there are differences in legacy market structure and business thinking in the United States and Canada. There, there already are two broadband access networks ubiquitously deployed.

And though many policymakers would disagree, the U.S. emphasis on creating facilities-based competition is made easier since two fully-deployed networks already operate, virtually nationwide.

Recent investments by Google Fiber, third party Internet service providers (Sonic and Ting, for example), as well as a growing number of municipal and now some dark fiber networks suggest a growing number of actors believe they actually can build their own networks.

There still seems to be no single “right framework” for encouraging both rapid investment and robust competition.

The other huge issue is market context. In few countries can mobile alternatives be discounted. Nor, in most countries, can risk and reward in the fixed network business case be ignored, either.

Always a hugely capital-intensive undertaking, financial returns from new next-generation fixed network investment now are tougher to justify as most markets have gotten more competitive, anchor product categories have reached maturation and begun declining, and fixed wireless, mobile and other possible platforms make the return part of any business model less certain, and smaller than in the past.

Regulators have been studying and debating the merits of structural and functional separation for decades. Wholesale obligations, functional separation, structural separation or a reliance on new facilities competition all remain ways to promote investment or competition, or both.

But it seems nothing is definitively settled, for Ofcom or most other regulatory authorities.

Sonic Begins Marketing of Gigabit Internet Access in Parts of San Francisco

Independent Internet service provider Sonic, which operates in Northern California, says it has launched gigabit Internet access service in the Sunset and Richmond districts of San Francisco. One assumes that service is provided over Sonic’s owned fiber to home facilities.

Elsewhere in San Francisco, Sonic also is selling voice and Internet access that appears use AT&T’s fiber to neighborhood network (Sonic appears to be a wholesale ISP customer of AT&T).

Sonic’s Fusion Fiber service costs just $40 a month and includes “unlimited” domestic calling as well as unlimited international calling to 66 countries.

Sonic has previously delivered Gigabit Fiber in Brentwood and Sebastopol, Calif., plus business parks in Santa Rosa, Petaluma and Windsor, Calif.

At such prices, Sonic definitely undercuts the prices Comcast (which serves San Francisco) is likely to offer when it launches its own gigabit Internet access service in San Francisco, sometime later in 2016. In other markets, such service has sold for more than $100 a month.

U.K., U.S. Consumers Like Mobile Service More than Fixed Internet, Video or Voice

U.K. consumer complaints suggest that, overall, people are much happier with mobile service than they are with fixed network service.

U.K. consumers are roughly twice as unhappy with fixed network service disruptions than they are unhappy with mobile service disruptions.

They are nearly that unhappy with fixed network service quality, compared to mobile service quality.

Customer satisfaction trends are similar in the U.S. market, where satisfaction with Internet access and video entertainment service (and fixed voice service) is lower than satisfaction with mobile service.

source: ACSI

source: ACSI

source: ACSI

source: Ofcom

Internet Access is Not a Monopoly; Why Regulate It That Way?

The Internet ecosystem tends to move faster than government regulations are able to keep up with.

In the United Kingdom, the goal for some years has been to provide ubiquitous 30 Mbps Internet access. Under the current definition, “super fast” access is said to be 30 megabits per second.

But U.K. cable TV networks, which reach about half of U.K. households, are able to provide Internet access at speeds up to 100 megabits per second, on their own networks.

One still finds data collection on “fiber to home” capabilities, for example. But that simply ignores all the other ways ISPs already are providing service between 100 Mbps and 1 Gbps, on alternate commercial networks.

Some might argue there is no alternative but reliance on a single network. But that is not the case for a growing number of countries, where two or, in some cases, three fixed high speed access networks are commercially available.

Telecommunications is no longer a natural monopoly. Neither, it appears, is high speed Internet access. Maybe we should stop framing telecom policy matters as though monopoly still exists.

That is not to say some degree of market power might yet exist. But policy seems always to lag reality in markets and technology.

So policy might need to look more at where we are going, and less at where we happen to be at the present moment. Different decisions might then be deemed feasible.

source: Ofcom

source: Ofcom

Frontier Communications to Launch Linear Video in 40 Markets

Frontier Communications plans to launch linear video service to more than 40 markets, representing approximately three million households, over the next three to four-years.

Once complete, video service will be available to about 50 percent of the 8.5 million households in Frontier's existing footprint. Frontier also will be adding video subscribers as the result of its acquisition of Verizon properties in California, Texas and Florida.

In total, Frontier will pass about seven million homes with video-capable networks.

Some might think Frontier Communications is making a mistake, investing in linear video at a time when the market actually is shrinking. The same sort of argument was made about AT&T’s acquisition of DirecTV.

source: Marketing Charts

But actions by other actors, such as Google Fiber, show that the business case for a fiber to home network is dramatically improved when an ISP can sell both high speed access and entertainment video. In other words, selling two or three services boosts average revenue per account.

Also, adoption of streaming services will slow, sharply, soon, some predict. Combined with slowish erosion of linear subscription behavior, that suggests a rather longish period where linear remains a key source of revenue and cash flow for any fixed network service provider.

High speed access might still be the anchor, as voice revenue dwindles. But linear video remains significant.

source: Telco 2.0

Compression technology might have quite a lot to do with the business model.  Frontier says its high definition TV signals will consume just 2.5 Mbps per channel.

So a household with four HDTVs active at once will only require 10 Mbps.

Frontier also says the incremental capital investment to enable 1.3 million households for video will require less than $150 million spread over several years.

source: Activate

Maybe Service Providers Need to Follow Banks

It is too bad that service providers have to send bills to consumers every month. Such processes, and the questions they generate, are one reason customer service chores sometimes are onerous, and why consumer ill will is garnered.

Some banks have found that mobile phone transactions can offload as much as 90 percent of the transactions that once required a JPMorgan teller.

In 2015, about 65 percent of new JPMorgan customers used mobile capabilities within six months of opening an account, up from 53 percent.

Customers say they are happier, and JPMorgan cuts its operating costs and churn.

JPMorgan estimates that each teller transaction costs $2 to $3, compared with 10 cents for the same service using an automated teller machine and just a few cents via a mobile device.

Mobile devices are helping with customer retention as well.

People who use their bank's smartphone app frequently are 40 percnet less likely to switch banks than those who do so only rarely, according to a study JPMorgan conducted.

Some service providers have processes that are easier to use, more pleasant and can be “self provisioned.” Some service providers literally force customers to interact with a call center.

But most service providers would do well to emulate at least some of the processes banks have found customers like, use and that also lower operating costs.

source: JPMorgan Chase

source: JPMorgan Chase

Top U.S. Linear Video Providers Lose Subs in 2015 for First Time Since 2006

For the first time since Verizon and AT&T launched their TV services in 2006, the six largest U.S. linear video subscription providers lost subscribers for a full year, despite gains in the seasonally-strong fourth quarter, says Ooyala.

There possibly should be an asterisk, however. Some of those firms now include streaming accounts in their subscriber totals. That is akin to a mobile operator including prepaid accounts as well as postpaid accounts in the subscriber totals, mixing higher revenue, higher value net adds with lower value, lower revenue gains.

In the fourth quarter of 2015, DirecTV, AT&T, Time Warner, Comcast, Dish Network and Verizon gained a net 125,000 subscribers.

DirecTV (owned by AT&T) gained 214,000 subscribers in the U.S. market, but AT&T’s  U-verse also lost 240,000 for the quarter.

source: Business Insider

It was AT&T’s third consecutive quarter losing accounts, the only three quarters AT&T has failed to gain linear video accounts since 2006.

For the year, AT&T was lost a net 355,000 subs and DirecTV lost a net 568,000, Ooyala says.

Comcast added a net 89,000 accounts for the quarter. For the year, Comcast was down 36,000 accounts.

But Comcast now seems to be including streaming customers to its linear video totals.

Dish Network lost 12,000 subs in the quarter and 81,000 over the year. Notably, Dish Network definitely now includes Sling TV customers in its account totals.

According to MoffettNathanson, Dish might actually have lost 141,000 linear subs in the quarter.

Time Warner Cable added 54,000 video customers in the last quarter and 32,000 over the year,

Verizon adding 20,000 FiOS television customers in the quarter, its lowest level of net additions  since 2006.

For the year, the six firms lost 781,000 accounts.

In 2014, the companies added 472,000 accounts. In 2013, they added 500,000 accounts.

Nobody will be particularly surprised by the findings. Virtually everyone considers the linear video subscription business a declining legacy business.