Taiwan Regulator Warns of Dangers of Excessive Competition in Mobile Market

Up to a point, competition is good for consumers, leading to better prices and greater value. But there is such a thing as “ruinous competition,” which drives prices below the point at which suppliers can sustain themselves or invest in new products and features that provide more value.

That is a problem in the Taiwan mobile market, says  National Communications Commission (NCC) spokesperson Wong Po-tsungj. The problem is price wars.

Chunghwa Telecom, for example, recently introduced a 4G service plan costing NT$499 monthly (about US$17 a month) for unlimited access to mobile Internet and unlimited phone calls between Chunghwa Telecom subscribers. That basic plan was matched by competitors.

“If telecoms simply want to boost their market shares and revenue by luring subscribers from competitors, rather than with innovative business models, it would not be positive for the development of 5G in the nation,” Wong said.

“What they are doing does not help to make the pie bigger,” said Wong. And though it is easy to criticize firms for making profits, those profits are what allows firms to invest and innovate, as well as stay in business.

That tension between actions and policy that support sustainable competition, or ruinous competition; or competition versus investment, is at the heart of all thinking about ideal mobile market structure.

Few believe any more that telecom is a natural monopoly. But few would deny that sustainable retail markets are likely to be oligopolies. The real questions tend to be over the shape of such oligopolies. How much sustainable competition--especially facilities-based competition--is possible on a sustainable basis?

That is the problem NCC sees with the current price wars.

Fixed Wireless Now Generates as Much Global Revenue as Business Voice, Unified Communications

As vital as business voice and unified communications capabilities might be, they do not drive huge service provider revenues, globally.

By some measures, the global market for all business voice and unified communications, including the value of business access to support voice and UC, is perhaps US $28 billion a year.

Of that $28 billion or so of revenue, perhaps $10 billion consists of internet and data access circuits, implying that the value of hosted voice, unified communications apps and phone systems is about $18 billion annually.

So compare that to just one other product, namely fixed wireless internet access, admittedly a niche.

The global fixed wireless access market will grow 30 percent in 2018 and will generate $18 billion in service revenue, according to ABI Research, boosted by new use of 5G platforms to supply fixed wireless.

The point is that the fixed wireless revenue segment already is about the same size revenue contributor as business voice and unified communications.

It might not be easy to compare the relative value of those revenue streams. Businesses require voice capabilities and unified communications, while consumers also "need" internet access. The point, though, is that the fixed wireless internet access business (mostly consumer) is about the same size revenue contributor as all business voice and UC (phone systems, hosted voice, unified communications solutions).

You might therefore characterize the fixed wireless segment--though still a niche within the broader service provider business--as roughly as big a contributor as business voice and UC.

ABI Research forecasts worldwide fixed wireless broadband market to grow at a compound annual rate of 26 percent to generate $45.2 billion worth of revenue globally  in 2022.

Tier-one service providers launching 5G fixed wireless include Verizon plans an initial 5G fixed wireless network covering around 30 million U.S. households.

AT&T and Charter also are carrying out 5G fixed wireless broadband tests in select markets in the United States.

In Europe, Orange, Elisa, and telecom infrastructure company Arqiva are performing 5G fixed wireless trials as well. Australia’s Optus is planning for a 5G fixed wireless service launch in 2019.

Verizon is Optimistic About 5G; Others are Skeptical. Both are Right

As always, public company perceptions of upside from new markets is conditioned by their own view of ability to capitalize on those new markets. In many regions and markets, heavy recent investments in 4G mean service providers have less appetite for another round of investment to support 5G, as you would expect.

In other regions, where profits in the 3G and 4G era have been tough, there is some caution about revenue and profit upside from 5G. In addition, specific contenders have their own business reasons for seeing potential or danger. In other words, skepticism about the size of the 5G market opportunity, as well as optimism, are specific to particular firms, in particular geographies, for reasons having to do as much with current business environment as anything else.

For U.S. service provider Verizon, a relatively-small fixed line footprint, and the ability to compete in new markets with mobile-based alternatives to fixed network service, are a clear upside.

“We continue to be very excited about the opportunities that 5G has,” said Matthew Ellis, Verizon CFO. “I don't think in the U.S. we've seen people pulling back from 5G at all.”

Simply, Verizon sees many ways to grow its business with 5G. Residential broadband, fixed and mobile, is part of the expectation. But the biggest upside is expected from new internet of things and business-to-business apps, many of which can only be supported by ultra-low-latency networks.

In many quarters there is concern or belief that 5G will require huge capital investment boosts, beyond what was required for 4G. That is debatable. Verizon, for example, does not see capex exceeding the typical and expected annual range.

Though some seem convinced 5G capex will be double or triple what 4G cost, others believe 5G capex could actually be lower than required to create 4G. Some believe 5G could be built with only modest single-digit increases in overall capex. And yet others believe 5G will even cost less than 4G cost.

A variety of new approaches, including open source, virtualization, huge increases in use of unlicensed spectrum, shared spectrum and aggregated spectrum, new radio technologies and ability to leverage existing fixed network investments all will contribute to cost profiles for 5G using lots of small cells and new amounts of backhaul.

On the revenue side, Verizon has ability to compete for new revenues outside its current fixed network footprint. Also, the U.S. market is among those expected to lead in early internet of things deployments.

Also, unlike some other markets, the U.S. has a relatively robust supply of fiber and capacity “deep into the access network,” provided by two or more access providers in nearly every significant market (cable, telco, independent ISP, mobile infrastructure companies,  independent business bandwidth suppliers).

That means small cell backhaul facilities are arguably better positioned, in terms of facilities in place and the number of partners to supply such backhaul.

The point is that a range of opinions exist--for good reasons--about upside for 5G. There is no single pattern that fits every market.

Connectivity Not Necessarily a "Commodity?"

Some statements properly need to be qualified and understood in context, even if our typical phrasing lacks that nuance. We might agree there are a few instances where "connectivity is not a commodity." But that characterization hinges on our understanding of the term, in context, in all its range of connotations.

When observers say that connections to the internet (business or consumer) are a commodity, that typically is phrased as access or connectivity being a “dumb pipe”

The other implied terms span a range: low value, low price, slow-growing, low profit margin, declining growth, saturated market or any other modifier that suggests the connectivity is old, stagnant, saturated, hard to differentiate, lacking growth opportunity, is not innovative,  or some similar notion.

So when a telecom executive implies that “connectivity is not a commodity,” that claim also has to be parsed. Stefano Gastaut, CEO of Vodafone IoT, does not believe that connectivity will be a commodity for a long time.

There are many nuances here. The claim is not unqualified. Gastaut does not claim connectivity services will never be a commodity, only that it will take some time for that to happen.

Allso, note his own context. He is the head of a business unit that sells internet of things services that arguably “are not yet common or necessarily a commodity,” using the sense of “a market that is young and fast-growing.”

Gastaut noted that Vodafone now has 65 million IoT connections, including 14.4 million connected vehicles and five million medical devices. He said IoT is a “sizeable business growing very nicely.”

So Gastaut seems to imply an understanding of the term “dumb pipe” that includes the size of the IoT connectivity business opportunity and the growth rate. But it also is fair to note that IoT sensor connections often generate revenue of between 15 cents per month to $1.50 a month.

Irrespective of profit margin, that is not a lot of incremental revenue, even in high volume.   

He also suggests that connectivity services are not like other utility services (water, electricity) that cannot innovate.

Observers might agree with some of the possible characterizations, using the broadest possible range of connotations for what “dumb pipe” means, in a business sense.

Aside from the clear “technology” function of internet access (it is, in fact a dumb pipe allowing access to any lawful third party app using the public internet, or any lawful private app for which a specific user has access right), one might use an expansive understanding of the range of meanings around “dumb pipe.”

Some of us would use a narrower understanding. IoT connectivity might or might not yet be a commodity. It might not yet have slim profit margins, (though that is most likely). The number of connections clearly is expected to grow at high rates.

Moreover, the range of ecosystem roles IoT connectivity providers assume--in addition to connectivity--is not yet clear. So such providers might well operate apps, platforms and devices in addition to connectivity, and those roles will have varying revenue, growth and profit profiles. Not all will appear to be “commodity” driven in terms of business dynamics.

The point: perhaps some forms of connectivity (market segments, specific apps and geographies or routes) are not presently “commodities,” using a broad sense of what the term “dumb pipe” means.

Those specific instances are few. The word “commodity” can be understood as “a useful thing” or a product that can be bought or sold, or exchanged for other products, or, as its intended usage in telecommunications implies, commodity is a product with no “unique selling point.”

In other words, a ton of raw sugar can be priced and sourced from any number of suppliers, geographies and plant sources, at identical or similar prices. The sugar is chemically identical, irrespective of the source.

So, in context, connectivity services are not “completely” commodities. Network access in France is not a full commodity in the sense that access providers in North America can supply the demand. Capacity across the Atlantic is not fully interchangeable with capacity across the Pacific, or between North and South America.

There are geographic barriers, business model barriers, regulatory obstacles and also some differences in product packaging and tariffs, in any country with competition.

All that noted, in the internet era, the value of access is sharply affected by the shift of value to other parts of the ecosystem (devices, platforms, apps). And the universal trend is for retail prices per bit to decrease over time. That is what Moore’s Law is alll about.

Gastaut’s claim--with all possible modifiers and in the context of his own business unit--that connectivity is not a commodity is correct in some sense. Whether it also is “true” is perhaps another matter.

To my knowledge, no forecaster of internet of things revenue believes much of the revenue will be earned by connectivity suppliers, in that role.

Reducing Carbon Footprint is Not Painless

It is a really good thing that data centers and service providers data centers and communications service providers now are working to reduce their carbon footprints. 

Sometimes the magnitude of the changes is hard to assess, in personal terms, as those changes by firms are not directly experienced. 

This estimate by Business Insider suggests a typical U.S. resident produces 17 tons of carbon dioxide a year. Some of us would be happy it was only that much.

Other estimates peg typical carbon footprint at 20 tons per year, with an absolute minimum of perhaps 8.5 tons (no home, no car, mostly carbon embedded in food consumption). And I have seen estimates as high as 26 tons per year. Of course, it all depends on one’s assumptions.

I did some calculations of what it would take to get my own footprint cut nearly in half, using 26 tons are the baseline, in other words aiming for about 14 tons annually.

The assumptions include business travel on airplanes, one of the worst carbon impacts. A long story made short, I’d have to stop flying altogether, and stop using a private auto altogether, to have any shot at reaching 14 tons of carbon production per year.

source: Business Insider

That sort of hints at the actual sacrifices most people might have to make, to get more carbon neutral. Low carbon lifestyle, no matter how we frame it, is a tax on living standards. Some of that hit arguably consists of us being more careful about how we define lifestyle.

In other words, some changes simply mean a shift to lower-carbon output, without necessarily “lowering” living standards.

But I found it hard to escape the reality that quality of life was going to be affected in serious ways. Granted, one might argue that personal carbon and work-related carbon output should be treated separately. In that case, I’d have a shot at 14 tons. But only a shot. Major limitations on air travel might still be required. I have not modeled that scenario. Sobering, very sobering.

And it has to be said: rich people will simply buy offsets and do as they please. Most working people cannot afford to pay the carbon tax without cutting somewhere else. It is disingenuous to argue otherwise.  

Why Amazon Meetings Ban Presentations; Why Memos Instead

At 24:54 of this video, Amazon CEO explains why he bans use of slideware (PowerPoint and others) at meetings, and instead has meeting organizers prepare written briefing documents of no more than six pages.  

The first half hour of so of every meeting consists of attendees reading the memos, before actual discussion begins.

Some would say that is because “reading” is part of Amazon’s legacy as a bookseller.

Some of us might say the reason for such practices is that writing is related to thinking. clear thinking and clear writing tend to be directly related. In fact, some would argue writing is thinking. better writing requires better thinking.

In fact, some would argue that critical thinking also is correlated with writing. You might agree that teachers believe reading, writing and thinking are related.

There are business implications, if in fact thinking and writing are related. Business leaders these days often complain that their employees, or potential employees, have weak writing skills. According to one study, perhaps 26 percent of college graduates have deficient writing skills.

You will forgive my own biases, as someone who worked at a university, has taught college students and graded papers, then worked for decades as a journalist and writer. I am susceptible to thinking that writing and thinking are related.

But Bezos unusual meeting content format might point to a weakness of media formats. Presentations, one might argue, are difficult, as is writing. But they might be difficult in different ways. Slideware often tends to bullet points, which must be snappy, short, and therefore without nuance.  

Clarity, in fact, is often a casualty of slide presentations. Ideally, a presentation tells a simple story. How many presentations have you created, or witnessed, that pass that test?  

Clarity is no less a problem with any written communication, to be sure. But you might reasonably ask whether it is harder to tell a clear story in a memo or using a presentation. It is difficult in both media.

But Bezos seems--unusually for a business leader--to believe both that the act of producing a memo produces better thinking than a presentation, and that the mandatory “read the memo now” format also forces people to consume the message before the meeting starts.

Those of you who attend lots of meetings know that unless thinking about the meeting subject occurs before the physical meeting, little deeper thinking is likely to happen at the meeting, especially as attendee count grows.

There is another problem the “we all read the memo together, right now” approach tends to fix: the tendency for busy people to skip reading the meeting documents altogether.

     

Maybe Legacy Voice Is Not a Bad Solution for Many Businesses

Though I have to admit I do not follow the unified communications market anymore, one fact about the market that has puzzled me for two decades is why smaller businesses and organizations have not adopted at a far-higher rate.

I understand why the economics of switch and server ownership continue to make sense for larger enterprises. Any product sold as a subscription, by the unit, will tend to have tougher economics for buyers as the number of subscriptions purchased climbs, and when known “own your switch or server” alternatives exist.

Most of us can cite at least some reasons why an IP-based solution of any sort (premises switch or hosted service) has feature advantages over a legacy TDM (time division multiplex) phone system.

source: Edgewater Networks

An annual survey of small and mid-sized businesses conducted for Edgewater Networks of North American organizations seems to suggest that a majority of SMBs of all sizes still rely on TDM solutions for voice.

There is no methodology information provided, so I cannot tell whether the sample was of entities believed not to buy hosted PBX (substitutes for a premises private branch exchange or phone system) services or a sample of entities with a potential mix of buying behaviors. We can easily conclude the survey was not of hosted IP service buyers, since the “IP” adoption rate would then be 100 percent.

The most-logical assumption is that the survey was aimed at firms believed not to be buying hosted IP PBX services (we can use the term “unified communications” interchangeably since all hosted IP solutions include UC features).

About two percent of respondents in the very-small business category (20 or fewer) report buying a hosted solution, while some 11 percent report using an IP PBX. But 40 percent report using key systems that always have been aimed at this market segment, while 22 percent report using TDM-based PBX systems.

After two decades of sales evangelism, that seems a bit of a shock. Most firms have not migrated to hosted or IP premises solutions over the last couple of decades. There are, of course, business reasons for those choices. Many small businesses have single-line phone service, where spending on a phone system of any type does not make sense.

source: Edgewater Networks

The other noteworthy observation is that so many respondents in the very-small category (20 employees or fewer) seem to get by using mobile phones as the “primary” communications device.

In many ways, a smartphone now offers many attributes of “unified communications,” such as a single device that handles conferencing, voice mail, messaging and email. That is a new possibility not generally available two or three decades ago.

So in the very-small business segment of the market, mobile substitution for fixed line servcies seems to operate, as it has in the consumer market.

Larger organizations (100 employees or more) have higher rates of use of hosted PBX services and IP PBXes, as you might expect. But even there, just eight percent of survey respondents in the “100 or more employees” category report buying hosted PBX services.

That is far lower than I would have anticipated, especially after 20 years of sales activity.

If you ask me to explain what I would consider a painfully-slow rate of adoption, it would be that IP voice and unified communications are deemed to provide relatively-low business value, compared to legacy solutions, especially when mobility serves some of those same needs.

The analogy is the relative business upside of modern voice or UC, compared to websites, e-commerce or mobile communications (voice, text messaging, social media and app and web support and email). Businesses still need voice communications, of course.

It is just that the perceived business value for upgrading from legacy solutions arguably is not as high as spending money on other tools.

I cannot explain what I consider slow uptake in any other way.