Should Regulation be Technology Neutral?

Communications regulators always face issues when technology changes are rapid, the common complaint being that regulation lags technology change by quite some measure.

As the U.S. Federal Communications Commission says, “the fixed broadband industry continues to evolve.” For that reason, the FCC has issued a notice of inquiry on whether internet access should include both fixed and mobile delivery modes, and be tracked as a routine matter when assessing the state of internet access.

The proposal will raise hackles in some instances. Precisely at the point in time when we know gigabit and multi-gigabit internet access will be routinely supplied by mobile and fixed wireless networks operated by mobile service providers, some will say we should not “count” such access when assessing the state of the market.

In other words, the proposed FCC  “technology neutral approach” would continue to view access platforms in silos. That problem is not new. Even if there are important nuances, should legacy voice and VoIP not both be counted a methods for delivering voice services? And should cable modem services be counted separately from telco access services, since the platforms are different?

Are SONET-based data access solutions qualitatively different from Ethernet-based services, in terms of “counting” the usage of business data services?

Even if they use different technologies, are analog private branch exchange lines or trunks in service fundamentally different from IP equivalents?

Is digital TV something different from analog TV, or are both TV services, for purposes of measuring adoption and usage?

You get the point: technology change now is quite rapid in every communications and content delivery areas. And there are good reasons for using “technology neutral” methods of data collection and assessment.

Otherwise, voice, video or internet access delivered by satellite, cable TV, telco or independent ISPs are “different,” and not “parts of a single market.”

source: Nokia

Columbus Yellow Cab Using Verizon Vehicle Sharing Platform

Verizon is working with Columbus Yellow Cab to automate and streamline the cab reservation and payment process for its full fleet of cabs and drivers across Ohio. Columbus Yellow Cab is using Verizon’s Share solution that can track, manage and share fleet services and assets.

The vehicle sharing capability will help Yellow Cab drivers locate and rent available cabs, creating an on-demand, self-service approach to gaining access to vehicles.

Normally, Driver Partners lease vehicles from Yellow Cab on a daily, weekly or longer basis, forcing Driver Partners to repeat basic administrative duties and adding wait times to passenger pickups. Verizon’s Share solutions save Yellow Cab’s drivers time and money by enabling fleet sharing city-wide.

In addition to Yellow Cab, other companies working with Verizon’s Share Solutions platform include The Santa Clara Transportation Authority (VTA) and Swiftmile, the electronic bike (ebike) service; CruCar, a car sharing solution for airline crews, and A.A.S. Technologies, a security, networking and audio visual company.

Will 5G Drive Higher Business Customer Revenues?

So who is right: customers who mostly claim they are willing to spend more for 5G than 4G, or suppliers of 5G, who mostly believe a price premium will not be sustainable?

A recent global Gartner survey revealed that 75 percent of respondents at end-user organizations would be willing to pay more for 5G mobile capabilities. Only 24 percent of the survey's respondents would be unwilling to pay more for 5G than for 4G.

The survey also found that respondents from the telecom sector tend to see 5G migration as a matter of gradual and inevitable infrastructural change, rather than as an opportunity to generate new revenue, Gartner notes.

With the important caveat that survey respondents often say one thing and do another, the use cases suggest incremental service provider revenue is possible, but mostly because there are many new use cases related to internet of thing, meaning a new class of connections will be required.

Also, even if most of the end user respondents think their organizations would be prepared to pay more for 5G, few (eight percent) expect 5G to deliver cost savings or increase revenues. That might suggest the respondents are incorrect about the price increases.

End users tend to see 5G as a network evolution (59 percent) and only secondarily as an enabler of digital business (37 percent).

On the other hand, the end user responses also suggest why the belief in incremental revenues has some foundation. The survey found that almost half the respondents intend to use 5G to access videos and fixed wireless capabilities. The former is unlikely to drive incremental spending, but the latter could, in many instances.

The reason is akin to the possible implications of software-defined wide area networks. In principle, fixed wireless could allow new high-bandwidth connections where they are today not economically attractive, as SD-WAN might do the same for business data connections.

Some 57 percent of respondents believe that their organization’s main intention is to use 5G to drive Internet of Things (IoT) communication, and that might well prove to be correct.

Some might argue, with persuasiveness, that 5G will offer new capabilities primarily for very-high bandwidth applications, and conversely for very-low bandwidth connections used by some IoT sensors, or use cases where low latency is a necessity.

source: Gartner

Average Global Fixed Network Internet Access Price Close to $80/Month

On average, global fixed network internet access, adjusted on a purchasing power parity basis, runs between $50 a month to $80 a month, according to Point Topic. That might come as a surprise, since average prices near $80 hold for countries as disparate as India, Turkey and the United States.

As always with internet trends, there is a difference between peak, average and dynamic range of speeds. Some countries with relatively high “average” costs also have high dynamic range. In other words, a relatively small number of high cost connections can occur at the same time as large numbers of low-cost accounts.

In the second quarter of  2017, the average monthly charge for residential broadband services remained at $105, unchanged since the first quarter of 2017.  At the same time, the average download speed provided to residential subscribers continued to climb and was 135 Mbps, compared to 124 Mbps in the first quarter of 2017.

The average cost per megabit-per-second of speed continues to decline, Point Topic notes.  The average global cost-per-Mbps was US$0.78 at the end of the second quarter of 2017, compared to US$0.85 recorded at the end of the first quarter of  2017. As average speeds continue to climb, it would be reasonable to expect the average price “per Mbps” to continue to decline as well. That has been the trend for decades.

source: Point Topic

source: Point Topic

In some markets, such as the United States and Canada, the median price of internet access now has approached that of video subscription service. The difference is that profit margins for video are moderate to low, and declining, while profit margins for internet access are generally higher.

That is but one reason internet access has emerged as the anchor service for a fixed or mobile service provider. Among the other reasons are the high take rates for internet access and growing usage, while usage and average prices for other services decline.

The End of Cloud Computing?

Peter Levine sees another huge swing in computing architectures, away from cloud computing. The oscillation has been between centralized and distributed computing. The mainframe and cloud eras have been centralized; client-server was distributed.

With the coming era of mobile edge computing, Levine sees another historic change, back to distributed.

Competition Versus Investment: U.S. Regulators Might Face Dilemma European Regulators Have Faced

Telecom regulators and policymakers often face trade offs. They desire maximum feasible competition, but also maximum feasible investment in next generation facilities. The two objectives lie in a state of tension. Too much competition dampens investment. But too little competition also dampens investment.

The trick is finding the balance. In the European Community, regulators have fostered competition so well that incentives to invest now are viewed as having suffered. To create incentives for investment, rules on competition might need to be reworked. As it stands, many believe 5G investment in Europe will lag, compared to other developed markets.

Consolidation now seems inevitable in the U.S. telecom and content markets, but the U.S. market will not be alone. India’s mobile market seems to be on pace to reduce the number of national competitors roughly in half.

And Bell Labs predicts a massive consolidation of the world’s telecom service providers by about 2025.

Consolidation within any given segment of the market is designed to build scale, which boosts revenue and reduces costs. Part of the reason revenue gets a boost is that competition is reduced.

From an antitrust or competition review, it therefore matters how an agency defines “the market.” And we may be at one of those points where some amount of consolidation will be needed to create the cross-industry capabilities survivors will need.

That, in turn, means greater market power in one segment might be a necessary building block for survival in a new market that combines industry segments. In other words, less competition in one segment might be necessary to create the bundled or cross-segment capabilities survivors will require.

Consider the asymmetrical U.S. market positions. Verizon, AT&T, Comcast and Charter have fixed network assets expected to provide backhaul advantages when small cells underpin mobile network capabilities. Sprint and T-Mobile US do not have such assets, which arguably puts them at a disadvantage.

Verizon, AT&T and Comcast have content assets. Sprint and T-Mobile US do not have such assets. Dish Network owns spectrum, but no network and no content assets.

If you assume the future requires competitors that combine access assets (mobile and fixed) with “up the stack” revenue sources, then “less competition” in either fixed or mobile segments of the business, and fewer independent suppliers of content and apps, is going to happen.

So much will hinge on how antitrust officials define the relevant “market,” for purposes of determining competitive impact. By definition, consolidation reduces the number of competitors, and therefore has implications for competition.

But competition in telecom markets might also be heading for a period where ownership of several types of assets (fixed and mobile networks, content and application assets) is necessary for survival.

Much depends on how one views the coming market, and what winners will possess, in terms of assets and capabilities. That, in turn, will affect the definition of the “market,” and what consolidation means for competition in that market.

IoT Already is Driving Connection Growth

The attraction of 5G includes its projected importance as a driver of new internet of things connections. That trend (internet of things connections are a driver of new accounts) already has started.

Growth in the total number of mobile subscriptions was driven by a 14.2 percent increase in the number of machine-to-machine (M2M) connections in 2016, to 7.6 million in the U.K. market, says Ofcom.

source: Ofcom

That is crucial if one considers the chances 5G will drive significant additional revenue on the part of human users.

The problem is that consumers or businesses will only spend so much on all communications services. In the United Kingdom, for example, since 2011, household spending on fixed network voice and mobile voice has dropped.

Spending on fixed internet access services has grown, in large part because more consumers are paying incrementally more for faster speed services that cost more. Faster speed networks both are a response to higher usage, and arguably drive higher usage.

But there are limits to how much a human is willing to spend on access, or various communications and entertainment services. Generally speaking, consumers have substituted one product for another, even if there has arguably been growth in the monthly percent of household income spent on communications.

The point is that, even in the 5G, there are tough limits on how much incremental spending consumers are likely to entertain.

source: Ofcom

source: Ofcom

That is why internet of things and machine-to-machine connections are viewed as so significant: such connections represent a way to grow new accounts without pushing up against consumer spending resistance. Most IoT connections will be purchased by enterprises who have many other value drivers, against which the new connection cost is evaluated.