FCC Supports Competitive Platforms for Internet Access in Rural Areas

The U.S. Federal Communications Commission, preparing to disburse some $2 billion in support for rural high speed networks over the next decade, is using “technology-neutral” rules intended to allow a range of access platforms to gain support.

In part, that is to be ensured by a competitive bidding process for award of funds.

A minimum performance tier requires bidders to provide access speeds of at least 10 Mbps downstream and 1 Mbps upstream (10/1 Mbps) and offer at least 150 gigabytes (GB) of monthly usage.

A baseline performance tier requires bidders to commit to provide at least 25 Mbps downstream and 3 Mbps upstream (25/3 Mbps) and offer a minimum usage allowance of 150 GB per month, or that reflects the average usage of a majority of fixed broadband customers nationwide, using Measuring Broadband America data or a similar data source, whichever is higher.

An above-baseline performance tier requires bidders commit to provide at least 100 Mbps downstream and 20 Mbps upstream (100/20 Mbps) and offer an unlimited monthly usage allowance.

A gigabit performance tier that requires bidders commit to provide at least one gigabit per second (Gbps) downstream and 500 Mbps upstream and offer an unlimited monthly usage allowance.

It is possible that, as the decade unfolds, a wider range of platforms might be available to compete. In part, that is because new platforms are coming, ranging from 5G to fixed wireless (using a range of frequencies) to potentially more exotic platforms (balloons or unmanned aerial vehicles).

Earlier this year, the FCC also affirmed support for the smallest telcos, providing $20 billion in support over the next 10 years.

That might suggest an expectation that non-traditional suppliers will have a reasonable shot at funding under the new program.

Deregulated Mobile Spectrum Policies Needed, GSMA Argues

“Sustainable competition,” not “maximum feasible competition,” is the goal European communications regulators should strive to support, the GSMA essentially argues.

The first of seven recommendations made by the GSMA is to “change objectives of the EU telecoms framework to target investment and sustainable competition in the long term interests of consumers.” An apparently growing number of EU regulators see a clear trade-off between policies that promote investment and policies that promote competition.

The goals are, in substantial part, in conflict. Though highly successful at instituting policies that have increased competition, those same policies have depressed investment, GSMA essentially argues.

“For Europe to catch up in 4G and become a leader in 5G, a fundamental change in approach to telecoms policy is required,” said John Giusti, Chief Regulatory Officer, GSMA.

Deregulation should feature removal of conditions in spectrum licences, such as wholesale access obligations, which are unrelated to the efficient allocation of spectrum, GSMA says.

The European Commission also “should examine what can be done to further reduce the costs of mobile network deployment, including the costs of sites, spectrum fees and other input taxes.”

More spectrum also is needed.

Also, regulations that set uniform targets for network coverage, or that equate network quality with speed, does not work, GSMA argues. Greater flexibility will lead to greater investment.

In the U.S. market, local regulators already have widely moved to such an approach, one might note.

Spectrum licensing also has to be simplified in the near term, with an eventual move to perpetual licensing.

Mobile Data Now Drives 73% of U.S. Mobile Service Provider Revenue

U.S. mobile service provider data revenues increased by 17 percent from 2014 to 2015 and now contribute 73 percent of overall service revenues, according to analyst Chetan Sharma.

Service revenue, postpaid revenue, overall and postpaid ARPU all declined, Sharma says.

U.S. mobile data services revenues in the fourth quarter of 2015 increased two percent sequentially and 17 percent, year over year.

Verizon and AT&T between them accounted  for 69 percent of the mobile data services revenue and had 67 percent of the subscription base, Sharma says.

AT&T continues to add more connected cars than rest of the operators combined, Sharma says. The operator is optimizing its business around profits and one impact is a decline in postpaid phone net-adds for the sixth straight quarter, as AT&T essentially sheds lower-value accounts to competitors such as T-Mobile US, some would argue.

Verizon’s Internet of Things and telematics businesses accounted for $195 million in first quarter 2016 revenue and is likely to cross the $1 billion mark in 2016, Sharma says.

The point is that the U.S. mobile ecosystem now is much broader than “mobile service providers,” though, including all firms generating revenue from mobile apps, devices, operating systems and access.

In 2015, U.S. mobile service provider voice revenues dropped 24 percent, year over year, generally replaced by “access” revenues that often provide unlimited domestic calling and texting as part of the network access fee.

source: Chetan Sharma

source: Chetan Sharma

Project Loon Hits 15 Mbps for Balloon-to-Handset Connections

Direct access to mobile phones has been a key  issue for Google’s Project Loon, as that vastly improves the utility of the access service, compared to use of fixed satellite receivers. At the moment, Project Loon seems to have settled on use of mobile spectrum, probably Long Term Evolution, to deliver signal direct to phones from the balloon fleets.

That of course requires permission from at least one mobile operator in each area to use the spectrum on a shared basis.

The Indian state of Goa is said to want to use Project Loon for Internet connectivity, using direct-to-phone access. Project Loon reportedly is in talks with BSNL, the state-owned mobile operator, to do so. Google apparently has been seeking partnerships with a number of Indian mobile service providers.

BSNL apparently has enough capacity to support speeds up to 100 Mbps. Project Loon apparently has been able to achieve speeds of about 15 Mbps using the satellite-to-phone access.

Sri Lanka and Indonesia are other countries where Project Loon is set for tests or deployment.

SK Telecom Deploying LoRaWAN IoT network nationwide in South Korea

SK Telecom says it is deploying the world’s first commercial Internet of Things (IoT)-dedicated nationwide LoRaWAN network, using a Samsung platform.

The network will be deployed across Korea using the unlicensed 900 MHz frequency band. The service is scheduled to launch in Daegu, Korea’s fourth largest city, next month and will be available nationwide by the middle of 2016.

SK Telecom will be testing renewable energy solutions, cloud platforms and big data analytics for healthcare and medical services, as well as electric vehicle infrastructure for autonomous cars.

Streetlights will collect weather and traffic information using IoT sensors, adjust  lighting levels and collect air pollution status information.

India Mobile Operators Face Dwindling Cash, Higher Capex

There’s a possible pattern developing in the hyper-competitive Indian mobile services market: significant losses or declining net profits just as huge amounts of capital will have to be spent to re-acquire or get new spectrum.

Tata Communications reported a loss in its most-recent quarter, despite a gain of nearly seven percent in operating income.

Vodafone India operating profit was up four percent, but that figure is before deductions for capital investment, depreciation, taxes and interest. Though Vodafone India does not report net overall profit and loss, the four percent operating profit suggests Vodafone India might have lost money, on a consolidated basis.

Meanwhile, analysts at Morgan Stanley have lowered revenue expectations for the rest of the year and through 2018 by three percent.

Bharti Airtel net profit fell 22 percent in its third quarter of 2015, as did Idea Cellular. Over the past year, net profits have fallen by an order of magnitude (10 times), though Airtel did boost profits in the first quarter of 2016.

Reliance Communications, meanwhile, has seen dips in revenue from domestic telecom operations in recent quarters.

source: Cisco

That combination of slim profits--despite account growth--and big upcoming capital requirements will be stressful, especially in terms of increasing debt loads.  

Bharti Airtel, India's largest mobile service provider, saw, net debt jump by more than $1 billion to almost $12 billion in just three months in 2015.

Bharti also spent 98 percent more on capital expenditure over the past four quarters than it did in the 2014 financial year.

Pressure will mount as all major Indian mobile service providers have to invest to meet the challenge from Reliance Jio, entering the market this year, and must spend to re-acquire mobile spectrum licenses this year, as well.

Globe Telecom Testing TV White Spaces in Philippines

Globe Telecom is the first Philippine telecommunications company to begin commercial testing of TV white spaces networks. Globe is currently pilot-testing the use of the frequency for broadband service in several areas in the country, including Bohol and Cebu.

TV white space is considered an important wireless data delivery medium in the Philippines because of its long distance propagation features and the ability of its signals to travel over water and through thick foliage.

The latest TV white space equipment can deliver up to 10 megabits per second of data throughput at a maximum range of 10 kilometers and can accommodate numerous customers at any given time.

Reliance Jio Will Vault to Number 3 Spot in India Mobile Operator Market Share

Though we might not know precisely how telecom market structures will change when a powerful new competitor enters any market, it always is reasonable to assume that a competent new supplier, with financial and brand name strength, will take share from existing providers.

Reliance Jio Infocomm widely is considered to be such a well-heeled and well-known competitor, so the issue is how much market share it might take, from whom, and what the ancillary effects will be on such important matters as average revenue per account, or the average level of retail prices.

Analysts at Macquarie Research expect Reliance Jio will gain at least 15 percent market share over four years.  

Macquarie predicts Idea Cellular will lose as much as seven percent of its market share. If that happens, it is likely Reliance Jio will vault into the top ranks of mobile service providers in India, trailing only Bharti Airtel and Vodafone India, while knocking Idea Cellular out of the number-three spot.

source: dazeinfo

Macquarie analysts also expect data pricing cuts from the current Rs 0.23 per MB to around Rs 0.1 per MB by end of this fiscal, putting severe pressure on the data average revenue per user (ARPU) of the incumbent telcos.

Verizon Explores Fixed Wireless Using 5G

When you have firms including Facebook, Google, Verizon and AT&T all looking at fixed wireless, and AT&T publicly committed to adding as many as 13 million new connections using fixed wireless, you know something has changed.

Fixed wireless is not new, as a concept. It has been seen as the solution for any number of business models, ranging from multi-channel video delivery to Internet access to consumer and business voice. It never has gotten much traction, as a percentage of industry connections.

That could change, dramatically, over the next decade, for several reasons. First, most Internet service providers now acknowledge that fiber to the home is not always the best “use everywhere” platform for high-bandwidth (gigabit) services. In areas where demand is spotty or light, fixed wireless will be a better option, in terms of a sustainable business case.

Second, suppliers--notably the potential ISPs themselves--are working on ways to make fixed wireless work better, at higher frequencies, at lower cost, and have gotten significant support from traditional equipment and platform suppliers, in some cases.

Third, the strategic role of fixed networks now is evolving in a way that makes them backhaul networks, allowing more-affordable “fiber to where you can make money” deployments that, in turn, can use fixed wireless instead of cabled drops.

That strategy is not new, either. Many metro fiber businesses long have built fiber rings to underpin access operations, gradually extending spurs off the rings to reach actual customers.

In a clear sense, fiber networks (metro ring or transport and access) now are going to play the same function in the consumer business. Fiber backbones will have subtending fiber distribution rings or spurs, which will in turn terminate close enough to customer locations that fixed wireless can be the drop (access).

That, fundamentally, is a variant of the hybrid fiber coax network design, fiber to the curb or fiber to the neighborhood architectures, perhaps beginning with services aimed at business customers, especially small or mid-sized businesses.

Now Verizon has begun to talk about using 5G networks in a fixed mode, supported by optical fiber backhaul.

“I think the problem that the telcos have had is a DSL service is really not going to keep up with DOCSIS and so we’ve had to do fiber, and fiber is expensive for all of us,” McAdam notes. “So if you think about it if I can get we than say a 1,000 meters of a business and I give them a router, a basic router that has a 5G service inside it, and I’m up and operating immediately.”

“If you look at 5G in a fixed wireless environment we've demonstrated for some of our shareholders in our Basking Ridge facility putting 1.8 gigs into the house without a wire,” said McAdam. “Think about the difference for the carrier and the cost structure.”

In principle, assuming the acquisition of XO Communications is approved, Verizon will be positioned as a competitive local exchange carrier “out of region,” as XO Communications has fiber rings in 45 of the top 50 U.S. markets.

“That gives you the ability to be out into those markets and then you just run your extensions off of them,” said McAdam.

Though we are early in the process, it appears fixed wireless might be poised for its biggest-ever role in U.S. access operations.

High Spectrum Prices are an Obstacle to Affordable Internet Access in Pakistan

Proposed minimum mobile spectrum prices are an issue in Pakistan, according to consultant Parvez Iftikhar. High prices, he argues, are a key reason that authorized mobile spectrum is not fully in commercial use.

As everywhere in the Internet and mobile ecosystems, one segment’s revenue is another segment’s cost. And high spectrum prices--seen as beneficial from the government treasury point of view--are a negative from the point of view of Internet service providers.

That, in turn, means higher retail prices for Internet users. Conversely, lower spectrum costs would lead to lower retail prices, faster speeds and wider availability of access networks, all other things being equal.

In the recent April 2014 spectrum auction, only 57.38 MHz was offered (7.38MHz in 850 band + 20 MHz in 1800 band + 30MHz in 2100 band), says Iftikhar.

About 40 MHz actually was sold, in large part because of high reserve prices, Iftikhar argues. Out of a total available potential available mobile spectrum of 315 MHz, only 118 MHz has been released so far, about 37 percent of potential.

Indeed, many could argue that spectrum is deliberately being withheld at the moment because the government does not believe it can fetch the highest-possible price. In other words, potential buyers are resisting paying such prices.

“Therefore, government’s intention seems to be to bring the minimum amount of spectrum in the market, till the time the telcos are ready to pay that higher price,” he argues.

Some might argue that high spectrum prices are a clear net negative, where it comes to increasing the availability and affordability of Internet access.

Mobile Data Now Drives 72% of Operator Revenue

U.S. residents used 9.6 trillion megabytes (MB) of mobile data in 2015, three times the 3.2 trillion MB consumed in 2013, according to the CTIA.

Of course, usage is not revenue, which has been relatively flat in recent years, while average revenue per unit sold (line instances) has declined, falling four percent between 2014 and 2015, for example, despite subscriber growth of about six percent.

Aggregate industry revenue has grown, but at low rates, over the last three or so years.

In fact, one might argue that increased usage of voice and carrier text messaging no longer contributes to revenue growth, which is mostly a matter of selling mobile Internet access plans.

Voice minutes of use grew about 17 percent, but nobody seems to credit that usage increase with higher revenues.

Between 2013 and 2014, for example, voice revenue dropped 15 percent. Messaging revenue declined 16 percent. Mobile data, on the other hand, drives 72 percent of U.S. mobile service provider revenues, according to analyst Chetan Sharma.

In 2015, voice revenue dropped an even-steeper 24 percent, while text messaging revenues dipped 18 percent.  

Mobile Trends in the United States, 2014-2015
	2014	2015	The Delta
Subscribers	355.4 million	377.9 million	+6.3%
Smartphones	208.1 million	228.3 million	+9.7%
Data Traffic	4.1 trillion MB	9.6 trillion MB	+137.6%
Minutes of Use	2.5 trillion	2.8 trillion	+17.4%
SMS/MMS traffic	2.07 trillion	2.11 trillion	+1.7%
Incremental Capital investment	$32.0 billion	$31.9 billion	-0.3%
Cumulative Capex	$430.6 billion	$462.6 billion	N/A

Vodafone to Deploy NB-IoT for Internet of Things

source: IC Market Drivers

Vodafone plans to roll out the narrowband IoT (NB-IoT) platform to support Internet of Things connectivity across multiple markets in 2017, said VodafoneInternet of Things group Director, Erik Brenneis.

As often is the case when new platforms are being commercialized, different tier-one mobile operators are making different bets.

Altice’s SFR is deploying Sigfox while rivals Bouygues and Orange have opted for LoRa. Orange, though, has not ruled out use of other platforms as well.

China Mobile also has chosen to support NB-IoT.

In some ways, the choice of NB-IoT is not too surprising. Historically, tier-one telcos have preferred solutions based on licensed spectrum, and also have preferred options that build on already-established networks and also have perceived “quality of service” advantages. BB-IoT fits within that approach.

“NB-IoT operates in licensed spectrum and that is important to us at Vodafone because we need to deliver a high quality experience to our customers,” said Brenneis.

All of the proposed networks emphasize lower-cost connectivity and lower power consumption.

Will Dish Network Lose its Mobile Spectrum Gamble?

How much is Dish Network spectrum worth? Observers continue to argue about the matter.  

Analysts at Kerrisdale Capital continue to argue that demand for Dish Network’s spectrum are wildly optimistic, and that spectrum prices are headed dramatically lower.

Others have argued that the spectrum represents most of the equity value of Dish Network as a whole. Some have pegged the mobile spectrum licenses as 80 percent of Dish equity value, based on a valuation of $35 billion to $50 billion for the spectrum licenses.

The notion that spectrum licenses create equity value for mobile firms is logical enough.

By some estimates, facilities-based U.S. mobile operators, plus Dish Network, own about $368 billion worth of spectrum licenses.

AT&T now holds spectrum licenses worth more than $91 billion, estimates Goldman Sachs analyst Brett Feldman, while the value of Verizon’s spectrum is $79.4 billion.

In all, AT&T now holds spectrum licenses worth more than $91 billion, estimates Goldman Sachs analyst Brett Feldman. He also estimates the value of Verizon's spectrum at $79.4 billion.

The current equity value of all AT&T stock is $176.5 billion, implying that spectrum alone represents 51.6 percent of AT&T’s total equity value.

Verizon’s market value is $207.9 billion, implying that Verizon’s spectrum represents 38 percent of total valuation.  

Bloomberg Intelligence, in fact, estimate the total value of Sprint’s 2.5-GHz spectrum alone at $115.1, about 2.4 times Sprint’s enterprise value of $48 billion.

In fact, some argue that T-Mobile US spectrum accounts for more than 100 percent of its total market value.

But the market value of any particular block of spectrum, or Dish Network’s holdings, hinge on several assumptions. First, one has to assume that the potential buyers (AT&T or Verizon, principally) “need” that spectrum, and need it soon.

One has to assume that other viable options--possibly costing less--do not exist. One has to assume that cash available to buy Dish Network spectrum will be plentiful after commitments made in the 600-MHz auction.

And one has to assume would-be buyers can balance all that with capital investments in the coming 5G network, plus any other strategic investments that might be made.

Finally, longer term, as the U.S. spectrum licensing regime shifts to spectrum sharing and release of huge new swaths of spectrum in the millimeter wave region, one has to anticipate that spectrum licenses, though still valuable, might be worth less.

Nearly everyone agrees that much more mobile spectrum will be needed in the future (a few might argue that future needs mostly can be met by use of smaller cells). The issue is how much, and when, that might happen.

Not so soon, Kerrisdale analysis suggests. Looking at use of the 4G networks, for example, Kerrisdale says that with average (mean) smartphone usage of 3 GB per month, with a median of 1 GB, there is an implied load of 0.009 megabits per second, per device.

Assuming that 10 percent of a day’s usage occurs during the peak hour, about 0.02 megabits per second, per device, at peak. Average LTE throughput in the U.S. mobile market, per carrier,  is 10 megabits per second.

Also, for a number of reasons, Kerrisdale expects spectrum prices in the 600-MHz auction ot fall dramatically from the last AWS auction, which Kerrisdale says Dish Network was able to “game.”

For starters, Sprint will not bid at all, and Dish Network is unlikely to have the resources, much less the appetite, to do so. AT&T and Verizon probably will try to win about 20 MHz each, while T-Mobile US is expected to win most of the 30 MHz of reserve spectrum for smaller carriers. That amounts to demand of about 70 MHz, of an offered 126 MHz of so of capacity.

In other words, less demand than supply; hence the likelihood of lower prices.

In a regulatory environment that seems now to have shifted away from large mergers, there further is the issue of whether roadblocks might now be put in the way of any sale of Dish Network spectrum to either AT&T or Verizon, for antitrust reasons.

Nor, contrary to some popular belief, is the mobile business an especially lucrative business. Profits on invested capital range from a high at Verizon of 16 percent to a low for Sprint of just one percent, with T-Mobile US earning three percent and AT&T eight percent.

The point is that, no matter now valuable, none of the providers can afford to overspend on spectrum, especially if new options are going to emerge (new spectrum, lots of shared spectrum, better ways to use even more unlicensed spectrum).

“The industry’s mediocre profitability not only makes it foolhardy for a new player to aggressively enter the market; it also calls into question the rationality of paying ever higher prices for spectrum,” Kerrisdale analysts say. “When an entire network can only generate a single-digit return on capital, there is a limit to how valuable a single input to that network can be, especially at the margin.”

Kerrisdale researchers note that 84 percent of the U.S. population lives in suburban and rural areas with typical population densities in the hundreds per square kilometer. The clear implication is that 16 percent of the poplulation lives in highly-dense areas where spectrum is most needed.

Across most of the land mass, there simply are not enough people, served by any single carrier, to exhaust capacity. With the caveat that it is peak use, not average use, that matters when designing a network, the “typical” cell tower coverage area does not suggest especially demanding capacity supply.

As an example, assuming a typical tower coverage radius of 2.5 km, a single cell tower could cover about 20 square kilometers containing 5,000 people.

If a single carrier has 35 percent market share, that means supporting 1,800 users.

At a usage rage of 3 GB per month per user, the tower would see 177 GB of average daily traffic.

Assuming only 10 MHz of downlink bandwidth, three sectors, and 1.5 bps/Hz/sector of average spectral efficiency, the site’s capacity would be 45 Mbps or 486 GB per day. Not a crisis, in other words, on average. Peak demand is perhaps another issue, but it is worth noting that the bulk of a consumer’s smartphone usage tends to happen at home, presumably therefore not at “peak” hours (drive time).

Dish Network always has been a firm willing to invest in spectrum. But now it faces a clock: unless it has built out a network reaching 70 percent of U.S. consumers by 2020, it will lose a batch of licenses. Other holdings will need to reach similar levels of coverage by 2022 and 2025, or the licenses are forfeit.

And it appears those deadlines will hold even if Dish Network sells the licenses to another firm. So there is a possibility that potential buyers can simply wait until Dish loses the licenses. The assumption is that the spectrum will eventually be put back up for auction, at which time prices will be lower, if the assumption about declining spectrum prices is correct.

Charlie Ergen always has been a gambler. Some might say the odds are lengthening against him where it comes to a payoff on mobile spectrum licenses.