Will Verizon Deploy its Deep Fiber Network Out of Region?

Sparring between various direct competitors in any business is unremarkable. Such marketing positions are perhaps even more nebulous than ever where it comes to 5G, as there are so many valid interpretations of what “5G” really means (practically and commercially).

It might also be helpful to remember that one fundamental principle, in such marketing wars, is that contestants emphasize as features what they can provide, while trying to downplay the features of what others can provide.

That should never come as a surprise. So too should we remember that what one person, firm or industry “cannot do” does not mean every person, firm or industry likewise “cannot do” something.

Still, there are some potential surprises about Verizon’s apparent decision to launch its 5G fixed wireless services outside its fixed network territory. The reason is that Verizon has talked about the advantages of its new deep fiber initiative as supporting multiple uses, and that logically would make most sense for in-region markets such as Boston, where the deep fiber network would support business customers, smaller business and small cell backhaul, but then also lay the foundation for consumer internet access.

The idea is that a single optical fiber trunking network will use separate wavelengths to support different use cases.

In the announced Sacramento fixed wireless market, it is not immediately clear that Verizon actually will deploy its deep fiber network.

It might make more sense to add incremental optical trunking on a more selective basis to support tower locations that have to be created or beefed up to support the fixed wireless initiative, as that might require less incremental optical trunking investment.

On the other hand, were Verizon to undertake a massive deep fiber network outside its fixed network footprint, that could lay the groundwork for an expanded assault on business markets out of region, using the mobile network assets.

In other words, if it invests in its own new optical fiber trunking network in Sacramento and other fixed wireless areas outside its core fixed network footprint, Verizon would have the ability to essentially become a full-fledged local access alternative for the first time, out of region.

It is not yet clear which of those deployment scenarios actually will happen. On the other hand, it is understandable that competitors might try to disparage the effort. Some other major competitors are not in position to do anything similar (either because capital is not available or there is no synergy with an existing fixed network).

Netflix, Comcast, Verizon All Show Changed Roles Within Video Business

Network slicing--the ability to create customized virtual private networks--is a key underpinning of the core networks that will support 5G, and potentially creates new revenue opportunities for service provides able to provide such customized network features.

Perhaps inevitably, network slicing will create yet another opportunity to raise “network neutrality” concerns where many would argue they do not properly exist.

The whole point of network slicing is to allow creation of services with different class or quality of service (Cos/QoS) attributes. And, of course, that is the core of the consumer “best effort only” restriction, where CoS and QoS are prohibited, even if such features are allowable for business services and managed services (linear video, voice and messaging being the prime examples of managed services supplied by a service provider).

For entirely practical reasons, it seems likely that most network slicing deployments will support enterprise networks. That is because enterprises are the most likely to have an immediate business case, as enterprises have been the buyers of content delivery services, which likewise supply QoS advantages for enterprises in the application and content businesses.

For service providers and enterprises, network slicing should help optimize traffic and provide load management advantages. Because network slices are supposed to be highly dynamic, that feature also should simply chores related to creating and modifying wholesale capacity operations, such as supplying bandwidth to mobile virtual network operators.

For enterprises and service providers, the goal of fast and easy changes to network resources also should be supported, allowing “on the fly” adjustments to latency or capacity.

In the area of machine or connected car communications, network slicing should help create guaranteed low latency communications for those use cases where very-low and assured latency is fundamental.

Network slicing also should help in instances where quality of experience (latency and bandwidth) is important for end users.  

With regard to perceived “network neutrality” concerns, network slicing will provide additional evidence of how truly hard it is to separate “unhindered access to lawful internet apps” from legitimate network management practices. Network neutrality rules always have been murky on that division of prohibited and permissible traffic shaping practices.

The phrase “treat every bit equally” is unhelpful, in the context of network neutrality discussions, as most major suppliers of consumer internet apps already employ measures to treat their own bits differentially. That is the whole point of CDNs: unequal treatment.

The whole point of a CDN is to provide better quality of experience by minimizing latency, for the firms that choose to use CDNs.

Beyond that, the whole effort to case every business practice as covered by network neutrality (consumer access to all lawful apps; best-effort-only access) is further stressed by network slicing, to the extent that content or app providers decide to take advantage of such network features to improve quality of experience for their internet-accessed apps.

So is the effort to portray the only-important business practices covered by the “lawful access” and “no blocking” principles solely to access providers, and not to app providers. Amazon will not allow Google to sell its voice-activated home appliances on Amazon; Google blocks Amazon appliances from using YouTube.

That is more than “prioritizing packets,” that is actual blocking of lawful commerce and content. And yet, so far, there is little serious consideration of those business practices from the standpoint of maintaining end user or customer access to all lawful apps, content or products.

That, perhaps, is the main point. Business practices are not necessarily “violations” of internet freedom, though some believe zero rating, a business practice, also should be covered by such rules. Some would argue that the effort to cast only some business practices as violating internet freedom is wrong. Freedom is the better approach.

Consumers should have the freedom to use lawful apps. App, content and commerce providers should have freedom to choose their own business practices. Access providers should be free to create additional mechanisms, features and services for access that enhance quality of experience.

That makes even more sense as the roles blur and fuse. Increasingly, content ownership, content development, delivery and use are functions integrated across the value chain. Freedom for all is the better approach than “freedom only for some.”

Good News, Bad News for Telco FTTH

There is good and bad news in Cincinnati Bell’s latest report on its fiber to home adoption. In the first year of marketing, Cincinnati Bell gets about 30 percent of customers to buy. After about four years of marketing, the company seems to get about 50 percent adoption.

So the good news is that fiber to home internet access seems to compete well with cable modem services, after a few years, in terms of market share. In a two-provider market, the company roughly splits the internet access market with cable operators.

The bad news is that no telco yet has been able to demonstrate that its fiber to home efforts, or fiber plus other access platforms, are able to take market share leadership from cable companies.

source: Cincinnati Bell

In rough terms, the upgrade to fiber to home networks allows a telco to battle back to splitting the market with cable, instead of losing share to cable.

There appears to be additional upside in linear video revenue, though some might question the magnitude of those contributions, long term.

So though there are other ways to monetize such investments, the cautionary note is that even with high-performance FTTH networks in place, about the best any telco has been able to show so far is an ability to split the internet access market with cable.

No telco has shown an ability to dominate that market, after upgrading to FTTH. In the future, the business case could be challenged to a greater extent if new rivals emerge. Independent ISPs and  mobile substitution are the prime examples.

If a new provider is able to gain 20 percent market share, that would limit telco and cable share to a theoretical maximum of 40 percent each. Some ISPs believe they will routinely do better than that, gaining perhaps 30 percent market share. Ting believes it can get as much as 50 percent share.  

Calculating share can be difficult, as these days, “revenue generating units” often are the metric used to derive market share. And RGUs are different from “homes” or “locations.” EPB, the poster child for municipal networks, offers voice, video and internet, and claims 45 percent market share.

But it does so by counting RGUs and comparing that to homes in the service territory. Internet access share is likely closer to 27 percent.

Still, the point is that, in a growing number of consumer markets, there might be three sustainable suppliers, not just two. That will have important ramifications for potential market share.

The larger point is that, in a two-supplier market, FTTH seems capable of allowing a local telco to get as much as half the market for internet access services. That drops in a three-provider market.

FTTH really does help. But how much it can help depends in part on the number of contestants in the market.  

Telecom has Price Trends You Would Expect if Moore's Law Operated

For buyers, the last two decades have produced tremendous gains in utility, while prices essentially have remained flat. That might remind you of Moore’s Law, and the insight is largely correct.

By way of comparison, look at prices for other “utility-like” services, including water, wastewater, electricity, natural gas or postal service, since 1984.

From a buyer or consumer perspective, telecommunications has been a great bargain: prices have barely budged since 1997. Prices for all the other products have climbed. Water and sewer service prices nearly doubled since 1997.

Prices for most of the other products have grown, but less substantially. Telecommunications service, despite the many improvements in quality and features (mobility, internet access, distance-insensitive voice and messaging), prices per unit have been flat.

That reflects huge productivity improvements, and lots more competition than arguably has happened in the other businesses.

source: Chordant

Dialpad Offers Small Businesses Free Business Communications in Bay Area

Dialpad and other suppliers of hosted business communications has been driving down prices for business communications for some time.



Now Dialpad Free offers small businesses in the San Francisco Bay Area a phone service including one business number, five extensions, plus a set of features including: Auto-Attendant and IVR Unlimited Voicemail Transfer, Add, Hold, Mute Video Calling Conference Calling Screen Sharing Dialpad Free will always be free to companies of five or fewer employees, the company says. Dialpad hopes to make money from other paid VoIP services, especially as companies grow. “We make money by helping small businesses become large businesses,” said Craig Walker, Dialpad CEO.

Maybe OTT Video Will Prove a Much-Better Business Model than Linear Was

The million accounts AT&T has gotten in just about a year’s time suggest that AT&T might--in this case--have found a way to compete in a mass market over-the-top market that has eluded it and most other tier-one telcos in the voice, messaging and other markets.

That is a not-insignificant achievement.

Some might say that is the second of two big achievements AT&T has pulled off recently. The first was the DirecTV purchase itself, which radically transformed AT&T’s revenue sources. The entertainment group, which includes consumer video and internet access revenues, now is a key reporting segment for AT&T, along with business solutions and consumer mobility.

Revenue from DirecTV more than doubled AT&T’s consumer revenue.

“If you look at what we're getting in our DTV Now customer base now, about 50 percent comes from cord shavers and cord-nevers and 50 percent come from our competitors,” said John Stephenson, AT&T CFO.

Cord shavers are customers who reduce their levels of service; cord-nevers are people who never have purchased a linear TV service (generally younger people). Presumably the “cord shavers” include former DirecTV customers have switched to DirecTV Now.

Presumably, “competitors” refers to other OTT linear services (Hulu, for example).

The other interesting angle is that the OTT business model might turn out to be better than the linear model it replaces, even with the possible disparities in revenue per account. Stephenson notes that activating a DirecTV Now account “requires virtually no capex, because we don't have to send a truck, pull up the ladder climbing the ladder and put on a satellite dish on the side of your house.”

One other advantage is the elimination of the need for decoders and any inside wiring (jumper cables, for example).

Also, since linear accounts are postpaid, there is some bad debt exposure. DirecTV Now is prepaid, which eliminates the bad debt exposure.

AT&T Might Soon Start Taking More Internet Access Market Share

Cable TV has been winning the U.S. internet access “net new subscribers” battle for so long that one might be tempted to argue that telcos have permanently lost the battle.

At least some observers might argue that telcos have permanently lost the internet access market share battle. But one always must be alert for changes. And changes are coming that might allow AT&T and Verizon to start taking more share in internet access, despite a decade of losing share to cable operators.  

Others might argue that a rather historic market share reversal now is possible, at least for AT&T.

At a high level, it might appear that Verizon and AT&T still are losing huge chunks of share to cable operators. That is incorrect. CenturyLink, Windstream and Frontier Communications clearly are in that position. But AT&T and Verizon have either begun to gain share, or are stable, and holding share.

Verizon, for example, has been getting some 40 percent share of internet access in its fiber-to-home service areas, and seems to be adding share, incrementally. AT&T actually has been gaining share.

So it is at least conceivable that Verizon and AT&T could begin a long process of retaking market share as their access line inventory moves to gigabit speed ranges, as new platforms are deployed and marketing initiatives add value in the mobility and video areas.

That would represent a huge break from trends over the past decade. Updated platforms are part of the reason for the potential change.

“If you look at our numbers a few years ago we had 15 million DSL and one million high speed broadband,” said John Stephens, AT&T CFO. “Today we've got about 15 million high speed broadband and one million DSL.”

And where ATT is installing fiber to the home (AT&T has about six million FTTH lines in service}, Stephens says AT&T now is getting 30 percent adoption.

Where AT&T has been marketing fiber to the home for two years, it is seeing take rates greater than 50 percent, Stephens said.

AT&T now expects to reach seven million homes passed by its fiber-to-home network by the end of 2017, reaching perhaps 12.5 million locations by the middle of 2019. “By the time we get finished building we will have 14 million” homes passed by FTTH, Stephens says.

New fixed wireless capabilities coming with 5G, plus mobile substitution, are also likely to be new factors able to reshape consumer internet access market shares. All together, the new platforms might reach as many as 50 million U.S. homes.

One always has to be alert for signs that long-established trends are able to change. The consumer internet market share trend might be among those key changes to watch for.