Wednesday, November 7, 2018

New OTT Video Streaming Services Face Tough Battle to Gain Share

Netflix, Amazon, and Hulu lead the U.S. subscription streaming video market, a fact of some importance as Disney and others prepare their own entries into the market. The main observation is that it is going to be quite hard for any of the new entrants to displace Netflix or Amazon. For most, the issue is to catch Hulu.


One possibly highly-significant data point is that the market structure of the subscription video streaming market is highly congruent with what one would expect in a stable market. The reason is that there generally is a direct relationship between market share and profitability.  

Some note there is a similar return on sales and market share relationship.


The “classic” stable pattern would have market shares  where the market leader had twice the share of number two, which in turn has twice the share of provider three. Some might refer to that as a “rule of three.”

Note that online advertising market share has roughly this pattern as well. By some estimates, mobile device brand market share has roughly that pattern as well.  


The point is that it is reasonable to expect that profits are directly related to market share, with a pattern where the leading three firms have something like a 40-20-10 share pattern, or perhaps 35-17-8 pattern.





Verizon Fixed Wireless in Los Angeles Likely Aimed at Charter

Frontier Communications says it has seen no impact from the Verizon 5G fixed wireless launch in the Frontier Los Angeles market. That might well be because Verizon is not initially targeting the Frontier service area, but rather Charter Communications, which serves an arguably greater portion of the city.

One might guess that Cox Communications officials likewise see little impact so far, as well, as Cox serves a small portion of the market. As this map indicates, Charter (which owns the former TWC properties), is the dominant service provider in Los Angeles.



Loveland, Colo. to Build Municipal Broadband Network

The Loveland, Colo. City Council decided to proceed with building a municipal broadband network, offering symmetrical gigabit services, without a public vote planned for the spring of 2019.

The City of Loveland has an estimated population of 76,701, 32,097 residential premises and 4,600 business premises. Comcast is the leading provider of internet access service in Loveland, at nearly 69 percent residential share and 64 percent of business accounts.

As often happens, would-be attackers find their would-be competitors react to new market entry by changing their value propositions. So where Comcast once offered service at speeds up to 150 Mbps, it now appears Comcast offers speeds up to 1 Gbps.

CenturyLink also appears to have upgraded to about 900 Mbps as well. The point is that the initial market research occurred at a time when Comcast’s top speeds might have been in the 150 Mbps range, while CenturyLink’s speed was 140 Mbps or less.


In addition to speed, the incumbents logically will try to bundle other elements of value (discounts for multi-product accounts), hotspot access and bundled service pricing to cope with new competition from the city.

Loveland originally estimated that 42 percent of residents and 27 percent of businesses would choose to sign up for the city-offered service. Since the network upgrades by Comcast and CenturyLink, that might well be questioned.

The city’s original thinking was that, in addition to gigabit speeds, lower-speed tiers might be offered, ranging in price from $20 per month to $80 per month for residents, and from $50 per month to the highest rate of $800 per month for a dedicated line for businesses.

In some cases, a municipal broadband network might take so much market share that one of the two incumbent providers (telco or cable) is forced from the market. In the case of Loveland, it appears the incumbents already have moved to preempt much of the demand by increasing speeds and adjusting prices.

Access Networks: Where Diversity Really Makes a Difference

Facilities-based competition brings some clear benefits, namely the chance to dramatically change the realm of possibility.

The best examples in the fixed networks business are cable TV hybrid fiber coax and fixed wireless, which have cost and performance profiles distinct from either all-copper, fiber-to-curb or fiber-to-home networks. Many would add to that list satellite delivery of content and internet access services.

The next change will be the emergence of mobile and fixed wireless networks using millimeter wave spectrum representing as much as 10 GHz of new capacity, in a mobile business that uses less than 1 GHz of spectrum.

10 Gbps internet access is the promise of the DOCSIS 3.1 specification for cable TV hybrid fiber coax networks. To reach such levels will require outside plant upgrades that are feasible but non-trivial, requiring a shift to “full duplex” operation.


The larger point is that facilities-based competition offers chances to provide service where some platforms struggle, especially in tougher deployment scenarios where cost per passing, cost per customer and revenue per account are issues. Satellite, fixed wireless and mobile networks offer good examples.

In other cases different platforms can offer some amount of differentiated experience. Mobile substitution for fixed services provides the best example. But cable operators believe they can create different experiences using public hotspots and greater quality of service for indoor Wi-Fi.  

Tuesday, November 6, 2018

U.S. Falling Behind in 5G?

It was probably inevitable that some would claim the United States is falling behind in the “race” to 5G.


After all, in the past, it has been argued that the United States was behind, or falling behind, in use of mobile phones, then smartphones, use of text messaging, broadband coverage, fiber to home, broadband speed or broadband price.


Some even have argued the United States was falling behind in spectrum auctions.  What such observations often miss is a highly dynamic environment, where apparently lagging metrics quickly are closed.


Nor is it hard to find observers worried that Europe is falling behind in internet businesses or 5G, as some argued Europe had fallen behind in 4G.


Just what winning or losing the 5G race could mean is not simple. Some people think “winning” is a matter of which countries deploy and obtain high adoption first. Others would argue that access does not matter as much as the ability to innovate and create in terms of connected business models, apps, services and processes.


International comparisons can be instructive, though sometimes not for the reasons one suspects. Consider voice adoption, where the best the United States ever ranked was about 15th, among nations of the world, for teledensity.


For the most part, nobody really seemed to think that ranking, rather than higher on the list, was a big problem, for several reasons. Coverage always is tougher for continents than for city states or small countries. Also, coverage always is easier for dense urban areas than rural areas. The United States, like some other countries (Canada, Australia, Russia) have vast areas of low population density where infrastructure is very costly.


On virtually any measure of service adoption (voice or fixed network broadband, for example), it will be difficult for a continent-sized market, with huge rural areas and lower density, to reach the very-highest ranks of coverage.


For such reasons, no continent-sized country with vast interior and sparsely-settled areas will reach the top of any list of countries with fastest speeds. Nor is it ever easy to “know” when speeds, prices or availability are a “problem.” Disparities between rural and urban areas almost always are viewed as a problem.


Prices are harder to characterize. When all countries are compared, such prices must be adjusted for purchasing power. In other words, price as a percentage of income provides a better measure of price. In developed markets, for example, internet access costs about 1.7 percent of per-person gross national income.


The International Telecommunications Union has argued that U.S. fixed network internet access prices are among the lowest-priced globally. Mobile internet access provides another view: in perhaps a hundred countries, mobile internet access already costs less than fixed access.  


According to the latest survey by Cable, U.S. average speed ranks it 20th globally for internet access speed. As always, a significant number of the countries with the highest speeds are small.


Singapore, which nearly always leads, is a city state. Others among the top 25 are small islands or countries that are relatively small in geographic area and more densely-populated “first world” states.


Most of the top 25 are in Europe, with the exception of Singapore, Japan, Taiwan, Hong Kong, the United States and Madagascar.  


That is not to dismiss the role of policy. Japan ranks 12th.


Rank Country Region Mean Download Speed
1 Singapore Asia & Pacific 60.39
2 Sweden Europe 46.00
3 Denmark Europe 43.99
4 Norway Europe 40.12
5 Romania Europe 38.60
6 Belgium Europe 36.71
7 Netherlands Europe 35.95
8 Luxembourg Europe 35.14
9 Hungary Europe 34.01
10 Jersey Europe 30.90
11 Switzerland Europe 29.92
12 Japan Asia 28.94
13 Latvia Europe 28.63
14 Taiwan Asia 28.09
15 Estonia Europe 27.91
16 Spain Europe 27.19
17 Lithuania Europe 27.17
18 Andorra Europe 27.14
19 Hong Kong Asia 26.45
20 U.S. North America 25.86
21 Slovakia Europe 25.30
22 Madagascar Africa 24.87
23 France Europe 24.23
24 Finland Europe 24.00
25 Germany Europe 24.00

Tracking broadband speed measurements in 200 countries, “the good news is that the global average speed is rising quickly,” Cable researchers say.


The average global broadband speed measured during the period from 11 May 2016 to 10 May 2017 was 7.40Mbps. The average global broadband speed measured during the period from 30 May 2017 to 29 May 2018 was 9.10 Mbps, a rise of 23 percent increase the authors say is “considerable.”


Speeds are growing faster at the top of the ranking, while there is little change in availability or uptake of faster infrastructure in the bottom half of the rankings. That particular trend is not new.


On average, the top 100 countries in the table have gained 5.43 Mbps while the bottom 100 in the table have gained by an average of only 0.41 Mbps, Cable says.


In part, that is an artifact of the existing speed differentials. The top 100 countries have increased their average broadband speed by 29 percent, while the bottom 100 countries have increased their average broadband speed by 24 percent.

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