New Role for Fixed Network: Backhaul and Feeder Functions

Going forward, communications infrastructure is going to take a perhaps-predictable path, many will argue.

At a high level, retail communications--globally--has become “mobile.” Though the role of fixed networks as a retail platform will remain more significant, dwindling retail revenue will force changes, including a huge need for lower-cost infrastructure, as revenue potential will be less robust.

source: Ericsson

Investment and revenue growth, on a global level, will shift to developing regions. The fixed network increasingly will take on the role of backhaul and trunking mechanism for mobile and wireless networks.

And despite the historic preference of fixed network operators for “smart” infrastructure, much of the global transport and access platforms will become simpler, with more intelligence at the edge, and less in the core.

For that reason, fixed networks will have to cost less.

At the same time, dwindling legacy revenues will force service providers to create big new revenue sources, sell themselves to larger providers or take other steps to match lower revenues with higher stranded asset profiles.

Critics of moves by AT&T to buy Time Warner, or Comcast’s past acquisition of NBC Universal argue that too much power or control results. In fact, we are likely to find that such acquisitions only help access providers reposition themselves for a market where traditional access services no longer support the core business model.

Will U.S. Fixed Wireless Access Revenue Be Bigger than U.S. Consumer Satellite Revenue by 2021?

Will the U.S. fixed wireless business generate more consumer service revenue than the U.S. satellite industry by about 2021? Possibly, if fixed wireless grows as much as some predict, and if one does not double count AT&T revenue.

Keep in mind that both fixed wireless and satellite are tails on a big telco dog. Total U.S. mobile service revenues are on the order of $256 billion annually, with fixed telco revenues perhaps $100 million and cable TV revenues roughly $60 billion, representing annual industry revenues of at least $455 billion. Others might prefer higher figures.

Any industry segment with annual revenues in the single-digit billions represents a fraction of a percent of total industry revenues.

U.S. fixed wireless revenue will double from $2.3 billion to more than $5.2 billion, according to the Carmel Group. Accounts also will grow from four million at the end of 2016 to eight million by 2021.

source: The Carmel Group

Depending on how one chooses to count revenue, the fixed wireless industry might then rival satellite service provider revenue. One big issue is whether “DirecTV” revenue should be counted as “satellite” revenue or “telco” revenue. In fact, both industries claim that revenue.

Assume DirecTV generates about $36 billion in annual revenue for AT&T. Assume all U.S. “satellite services revenue” is about $52 billion, including $40 billion of satellite TV revenue. Take out DirecTV and U.S. satellite revenue (booked in the telecom industry as well) is about $16 billion, with perhaps $7 billion in consumer service revenues.

In that scenario, the U.S. fixed wireless business would generate as much, if not more revenue, than does the “consumer satellite” business.

source: SIA

Why Price Anchoring and "Price Per User" Might Explain Antipathy to Linear Video

In the internet era, where the expected price is "free," prices north of zero might be one reason why many people complain about linear subscription video prices. There is a big difference between $10 a month for Netflix and $80 for linear video, even if the products are not full product substitutes.

It is hard to tell whether perceived value or price anchoring are bigger drivers of dissatisfaction with linear TV services, even if the stated reasons for unhappiness tend to center on “customer service” issues, in addition to price.

People often complain about price increases for cable TV services that go up more than the general level of inflation. Yes, that is an issue. But consumer prices have been climbing since 1970 or so.

source: Bureau of Labor Statistics

I cannot remember a time (over three to four decades) when consumers actually reported “liking” their cable TV services. Most often, they tend to rank them very low, when compared to most other consumer products.

These days, there are differences between providers. In recent years, telco TV and satellite TV services actually have produced more satisfaction than cable TV video services.

But the service as a whole still ranks quite low, along with internet access. Perhaps price anchoring explains some of the unhappiness. Most children growing up these days experienced internet access, mobility and video as “being free,” since their parents paid for those services.

So the anchoring price is “free.”

On the other hand, many adults who have been buying internet access for decades might have distinctly-different price anchoring experiences.

I recall paying AOL perhaps $15 to $20 a month for 56 kbps dial-up access using the voice line I already was buying.

I can remember paying more than $100 a month but less than $200 a month for a 756-kbps internet access connection. Recall that about 1996 a T-1 line supporting 1.5 Mbps cost as much as $2500 to $3000 a month.

Now I expect to pay $50 or so for 100 Mbps. So my price anchoring is $150 for 756 kbps in the past and now 100 Mbps for about $50 a month.

That is a different set of expectations from many others who have moved from “free in the past” to $50 a month now.

Perhaps the same experience now anchors pricing expectations for potential customers who are moving from “free” to $80 a month.

So I suspect, “value” explains the hostility many single people seem to feel about buying any linear video product (“cable TV”). In other words, the price-per-user is far lower, in a four-person family, than in a single-person household.

In other words, an $80 a month subscription “costs” $80 per viewer in a single-family household, but only $20 per viewer in a four-person household. Though use of streaming services is growing in all age brackets, that might be one reason why families, larger households or households headed by older persons tend to buy linear video streaming services at higher rates.

Also, despite the fact that linear video prices have risen faster than the background rate of inflation, lots of other products have risen at “above inflation rates” as well.

Consider the cost of college educations.

source: Mybudget360

source" Bureau of Labor Statistics

Medical care and housing are other products whose prices have increased more than the general level of inflation, as well.

source: BLS

IoT Networks Will Be Many-to-One

The architecture of coming internet of things networks is going to be radically different from the voice, consumer internet or business data network architectures. Those networks were built to support “point to point” communications from any node to any other node.

Irrespective of the access mechanism (mobile, Wi-Fi, other), the fundamental networking architecture of a sensor network (and therefore of  the internet of things) is “sensor to server,” not “point-to-point,” as was the architecture of the voice network or the early internet.

source: Aeris

That is going to have consequences. The IoT networks will be the inverse of the point-to-multipoint satellite TV, cable TV, radio and TV broadcast networks.

In contrast with point-to-point, any-to-any networks, these broadcast or multicast networks are optimized for one-to-many communications in the downstream direction.

IoT networks will be optimized for many-to-one communications upstream to servers. If there are scores of billions of devices using such networks, then such many-to-one networks will be optimized for collecting data from remote locations, not distributing information to many remote locations, and not for any-to-any communications.

That is new, really new.

Much of the upstream data will be simple: where are you; what is the temperature; what is the pressure; what is your speed. Some of the data might require more bandwidth, supporting camera feeds, for example. But almost none of the requirement is for downstream communications to sensors.

source: Cisco

How Big Will Satellite IoT Be?

All executives from mid-size to enterprise firms in agriculture, surveyed by Vanson Bourne on behalf of Inmarsat, believe they will be using  internet of things apps and services within about five years.

Some 85 percent of executives in transportation industries believe they will be using IoT apps and services within five years, and nearly that many in the energy business. In the mining business, perhaps 65 percent of respondents believe they will be using IoT in five years.

You are not likely surprised by such findings. Given the hype around internet of things, it would be a rare executive who thought it “sounded right” to project no use of such capabilities.

Neither are you likely surprised that Inmarsat might sponsor such research. No less than other segments of the communications industry, satellite firms argue they will be relevant for IoT, largely because of coverage capabilities. Basically, that is the newest form of the “no one platform is best for all scenarios” argument.

It remains to be seen which satellite implementations are workable for which IoT apps.

“Despite growing demand for IoT satellite services, the business case for IoT exclusive satellite constellations has yet to be proven, especially considering the exponential growth of LPWANs, LTE-M and NB-IoT terrestrial networks for IoT,” says Alan Weissberger of the IEEE ComSoc blog.

Obviously, geostationary platforms are going to have huge problems supporting ultra-low latency apps. Low earth orbit (LEO) constellations arguably will fit a wider range of missions. Low-bandwidth, non-time-sensitive apps might fit best, for any satellite platforms.

Satellite market researcher NSR predicts transportation apps will be the biggest application.

source: NSR

Broadcast (multicast) has been the geostationary satellite network’s fundamental architecture, so multicast apps will make sense, though that is perhaps not an IoT app at all. In other cases, some argue satellite has a role for connected car communications, possibly for multicast use cases.

Some will note that satellite presently serves a niche role in end user communications, serving ships at sea and remote areas where other networks do not reach. That is likely to be the case for most geostationary satellite future apps as well. It is not yet clear how big a role LEO constellations will have.

Expect to hear a lot of promotion from the satellite industry about that industry’s role in internet of things. It will be small, it is safe to say. Satellite researcher NSR projects satellite industry revenue from IoT at less than $3 billion globally by 2026. And that might be highly optimistic.

source: NSR

Some estimate the global IoT connectivity market will be an insignificant fraction of total IoT revenues by about 2025, NSR projects global satellite revenues from IoT might reach about $3.5 billion by 2026.

In that same year, total global satellite connectivity revenues might represent less than $20 billion in revenue. So NSR estimates IoT will represent as much as 17 percent of total satellite industry revenues.

By about 2025, some estimate mobile operator IoT connection revenue of $22 billion. Total global communications service provider revenues should be about US$1 trillion by then.

Also, projections for service provider enterprise connections must contend with the possible use of Wi-Fi or other access mechanisms which do not incrementally increase connection revenue in a direct sense, if at all.

The bottom line is that satellite IoT is at present as uncertain as mobile or fixed network IoT connection revenue might be.

"Can't See Forest for Trees" Problem

It is perhaps an understatement to say that “5G” has business model issues. We often think of such challenges in terms of revenue, profit and value, but there is more. Many would argue that the upside to 5G will come from new applications and use cases substantially related to use of such networks by machines, servers and sensors, not human beings connecting smartphones, PCs, tablets, TVs or personal devices.

There is a perhaps-larger understanding of internet of things to play out over the next couple of decades, involving business processes that happen without direct human intervention.

That is significant, not only because the incremental revenues mobile operators can create will happen because sensors and computers need to retrieve data and analyze it, and not primarily because humans will want to talk, text, access the internet or watch video.

source: Bill Harpley

Sure, we all hear phrases such as “fourth industrial revolution” that are built on the changes. But that does not actually matter to most people, doing their actual jobs, right now. And that makes it tough to create compelling and insightful content that is deemed relevant.

Among the problems is that a complex set of changes to various ecosystems will happen, building on internet apps, internet access, 5G and other access technologies, cloud computing, big data analytics, robotics, machine learning and artificial intelligence. Others might include biotechnology, materials science and other developments as part of the fourth industrial revolution as well.  

As a normal matter of course, nobody really has a job description embracing all that, just as virtually nobody had job responsibilities directly related to the evolution from agriculture to industrial production; or industrial production to a services economy.

So any more-narrow focus on any one of those areas necessarily misses the broader economic or business impact of the combined set of technologies, processes and capabilities.

When you spend a lot of time organizing conference content, those sorts of big changes are hard to operationalize, since almost nobody actually has a job function directly related to such big changes in business processes.

In fact, our efforts to make content more sensible by breaking it up into constituent parts (5G, cloud computing, AI, big data, internet of things) actually obscures the broader changes.

To complicate matters even more, the changes might only appear first in developed markets, where mobile data and mobile services have ceased to be growth drivers. In developing markets, revenue growth will continue to be seen in mobile subscriptions and mobile data, for some time.

And even there, applications, not access, will drive revenue growth. In other words, 5G will be the first mobile network platform whose business model will live or die based on new apps and use cases for non-human applications, mostly created by third parties.

Those are fundamental shifts. And yet almost nobody has a specific job function related to such changes. That makes difficult the task of creating relevant content that also shows the way forward.  

FTC Has Argued for a "Wait and See" Policy on Net Neutrality

The end of common carrier regulation of internet access returns oversight over internet access services to the Federal Trade Commission, which oversees, with the Department of Justice, antitrust matters and consumer protection.

It is worth noting, though the fact is rarely mentioned in reporting on the change, that the specific change made by the FCC is the end of Title II common carrier regulation of internet access.

Under “normal” circumstances, virtually all providers in the communications business would prefer lighter-touch regulation to common carrier regulation, so support for that change is hardly unusual.

The end of common carrier regulation is said to represent the end of “network neutrality.” That is a complicated matter. In principle, the change means that consumer internet access once again becomes a lightly-regulated data service.

Since common carrier regulation was used as the justification for imposing “best effort only” (first in, first out) handling of consumer internet traffic, that prohibition--imposed by common carrier rules--is lifted.

Assuming Congress does not specifically request that the FCC reimpose the rules, ISPs are free to consider quality of service mechanisms for “internet” access, in the same way they are free to implement QoS for business grades of service.

That worries net neutrality supporters.

So it is worthwhile to recall what the FTC said about its views on competition policy back in 2007, before the move to regulate internet access under common carrier rules, something that never was government policy until 2015.

Basically, the FTC notes the dangers and advantages, and essentially argues regulators should wait and see what happens, as moving quickly, in a fast-changing environment, essentially means regulating without actual facts to consider.

“It is impossible to determine in the abstract whether allowing content and applications providers (or even end users) to pay broadband providers for prioritized data transmission will be beneficial or harmful to consumer welfare,” the FTC said. “Such prioritization may provide benefits, such as increased investment and innovation in networks and improved quality of certain content and applications that require higher-quality data transmission.”

The FTC noted network neutrality proponents raise important  issues, ranging from a diminution in innovation by content and applications providers; the intentional or passive degradation of non-prioritized data delivery and increased transaction costs resulting from negotiations between broadband providers and content and applications providers over prioritization.

But no a priori assessment can be made, the FTC argued. Instead, “evidence of particular conduct” is necessary to determine whether there is harm.