Smartphone Shipments Shift to 4G in Emerging Markets

Global smartphone shipments will reach 1.45 billion units with a year-over-year growth rate of 0.6% in 2016 according to International Data Corporation. In 2015, smartphone shipments grew at a 10.4 percent rate.

But 4G smartphone growth will be 21.3 percent in 2016, reaching 1.17 billion units. Those patterns are related to a shift in network usage, with 4G now is leading growth, especially in emerging markets. Reliance Jio in India, for example, has added 50 million net new 4G accounts in three months from September 2016 to November 2016.

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Will Fixed Network Business Model Go Upside Down by End of 2017?

Some trends are so clear, so enduring, that one almost hesitates to point them out. For example, in its 2017 telecom industry forecast, the Economist concludes that telecom companies “will seek new sources of revenue as traditional streams dwindle and pressure from growing mobile broadband usage mounts in 2017,” say researchers at the Economist Intelligence Unit.

“Declining revenue from traditional channels like voice calls and text messaging is eroding utilities’ balance sheets,” the forecast points out. That is one good reason why service provider executives now pay so much attention to virtualization, lower-cost access network platforms, resource sharing and operational efficiencies, plus a high-priority search for big new revenue sources.

The biggest stresses are in the fixed network part of the business, as revenue has been declining since about 2011. In fact, according to the Economist, we will by about 2017 reach a point where revenues are lower than on-going investment.

In other words, on a cash basis, the global fixed networks business will go negative, overall. Annual revenues will be less than investment to operate the business. The mobile segment is not in that predicament, yet. And mobile has some advantages, namely an investment profile that is lower than fixed networks require, plus upside from big new businesses including entertainment video and Internet of Things apps and services.

That necessarily will start--or accelerate--a process of rethinking the role, scale and scope of fixed networks. Over the long term, fixed networks cannot be operated at a permanent loss, much less justify continual investment in higher speeds and capabilities, as revenue drops.

source: The Economist

Broadband Subscribers Leap 36% in India in 3 Months Because of Reliance Jio

The total number of broadband subscribers in India increased from 136.53 million at the end of december 2015 to 140.10 million at the end of January 2016. But Reliance Jio, and the responses to it by the other leading mobile service providers, has vastly increased the rate of growth.

In fact, Reliance Jio added more than 50 million  net new mobile broadband accounts in just three months, starting early in September 2016. Essentially, Reliance Jio, by itself, grew the broadband market 36 percent in three months.

Top five largest broadband service providers, with 83 percent market share of broadband subscribers at the end of January 2016, were Bharti Airtel (32.70 million), Vodafone (26.24 million), Idea Cellular Ltd (22.04 million), BSNL (20.16 million) and Reliance Communications Group (15.49 million).

Among fixed network providers, BSNL has 9.9 million customers, followed by Bharati Airtel with 1.68 million fixed network customers.

Top Five Wireless Broadband Service providers, January 2016:

1.   Bharti Airtel (31.02 million)

2.   Vodafone (26.23 million)

3.   Idea Cellular (22.04 million)

4.   Reliance Communications (15.37 million)

5.   BSNL (10.26 million)

Top Five Wired Broadband Service providers, January 2016:

1.   BSNL (9.9 million)

2.   Bharti Airtel (1.68 million)

3.   MTNL (1.12 million)

4.   Atria Convergence Technologies (0.89 million)

5.   YOU Broadband (0.51 million)

Where Will Millimeter Wave Network Business Models Work?

Few matters are as contentious as the business model for millimeter wave communication, either in a mobile or fixed wireless deployment. The biggest concerns probably concern signal propagation, and the impact on business models.

Some think sheer reach will be an issue, while others might argue that the cost of infrastructure, relative to revenue, will prove sub-optimal.

The Mobile Experts model for 5G deployment estimates the cost of a 5G network and the potential revenue from new 5G services such as fixed wireless might be quite challenging. “There is simply not enough high-density demand for that,” Mobile Experts says.

In Korea and Japan, when mobile operators crossed a threshold of 0.02 GkM (traffic density about 20 Gbps/ km2), they started using small cells. When density reaches this threshold, it’s best to supplement the macro network with a small cell layer.

Put simply, if the network only needs coverage, macro is the answer.  For dense capacity, small cells should be added.  What happens when density increases by another 10X?

The simple-minded answer is that we will need 10X as many small cells. That is too expensive, Mobile Experts says.

source: Mobile Experts

Will Shared Spectrum Benefit Mobile Operators?

It is not yet clear which participants in the internet ecosystem will benefit the most from access to shared spectrum in the U.S. market, starting with the 3.5 GHz Citizens Broadband Radio Service (CBRS ). Google clearly believes it wins, while users of licensed spectrum for mobile service lose, as CBRS shared spectrum is made available.  

The outcome might not be that clear, since mobile operators will be able to use CBRS as well. To be sure, CBRS access might well help new providers of internet access more than mobile operators. Cable TV operators and other non-traditional entities might well benefit most from unlicensed or lower-cost spectrum access. But mobile operators also should benefit, if not to the same extent as newer entrants.

Technology advancements sometimes confer business advantage, when other contestants cannot use the tools. DOCSIS 3.1 allows operators of hybrid fiber coax networks to supply gigabit connections over existing networks.

Telcos and others using telco industry standard platforms are unable to make use of the technology, as DOCSIS is HFC-specific.

Other tools and platforms are company agnostic, or industry agnostic. Wi-Fi, for example, can be used by any firm or user. Shared spectrum is more like Wi-Fi than DOCSIS, even if some believe some companies will benefit more than others.

Dynamic spectrum access is an agnostic development, though arguably most valuable for well-heeled firms that want to bundle access with other products.

The 150 MHz of spectrum for mobile broadband to be made available in the 3.5 GHz band, in the U.S. market, will allow either lower-cost or unlicensed use.

Some argue shared spectrum is a tool mobile companies and others can use to their advantage. Google tends to believe shared spectrum helps it more than mobile operators, as it will devalue licensed spectrum.

Nor, for example, is it entirely clear how the “infrastructure” (radio networks) will be provided. As with Wi-Fi, it is possible that enterprises, service providers or capacity wholesalers will provide the radio network. As Wi-Fi acts as a “neutral host” for users, so it is possible that at least some 3.5-GHz shared spectrum networks will act in that capacity.

In other cases, service providers or enterprises might use a “licensed” approach outdoors or in large venues, to support small cell operations. In some cases, there will be direct benefit, such as lower capex, better indoor coverage or faster deployment. In other cases there will be indirect benefits, including higher quality of experience.

That noted, it is clear that the CBRS shared spectrum will allow new entrants to offer 4G services at lower cost than would have been the case. So there will be more competition.

O2 Should be the Most-Motivated Bidder in Upcoming U.K. Spectrum Auctions

It is not unusual for a communications regulator pondering the release of new spectrum  to take current market structure into consideration. So it is that U.K. regulator Ofcom, planning for a 2017 auction of 190 MHz of spectrum in the 2.3GHz and 3.4GHz bands, wants to cap any single mobile provider’s maximum spectrum holdings at 255 MHz.

The practical implication is that BT, owning the use of 45 percent of “immediately usable” spectrum, will not be able to bid for any of the spectrum. Of the total amount of mobile spectrum that is currently useable, BT/EE holds 45 percent; Vodafone holds 28 percent; O2 holds 15 percent; and H3G holds 12 percent.

The auction will increase the total amount of mobile spectrum from 647 MHz to 837 MHz, an increase of 29 percent.

An argument can be made that O2 is the carrier most in need of additional spectrum, as it has market share as great as BT does, but without BT’s spectrum assets.

In the near term, the 40 MHz of spectrum in the 2.3 GHz band will be most useful in an immediate sense, as popular devices already support that band.

The 150 MHz of spectrum in the 3.4 GHz band is not immediately useful since most mobile devices do not support those frequencies.

Additionally, there will be more spectrum made available for mobile services in future, including at 700 MHz and proposed at 3.6-3.8 GHz.

Wi-Fi Inevitably Evolves Toward Quality of Service Mechanisms

Here’s an illustration of the objection some have to network neutrality rules that bar all quality of service mechanisms for consumer internet access: it simply does not match the expected migration of access services that will use a mix of “best effort” and “quality of service” mechanisms.

It is an “evolution of Wi-Fi” scenario developed by Wi-Fi 360, and predicts that “best effort” access (as stipulated by network neutrality rules) will evolve towards a mix of access types including “carrier grade” access with “quality of service” mechanisms. Voice and video are prime examples of applications that benefit from QoS mechanisms at times of network congestion.

The problem is that network neutrality--conceived of as a way to protect innovation and competition--actually prevents many types of innovation and prevents competition from developing between legacy and new services.

Everybody agrees that traditional video entertainment services (like voice and messaging before them) are transitioning to a mixed market model where both carrier services and over-the-top services compete.

But entertainment video is a “managed” service: customers pay subscription fees and therefore expect the services to work. That is true no matter which access network or delivery system is used.

Historically, different regulatory frameworks have been used for Internet, broadcast radio and TV, cable TV and other content businesses.

Print content has been unregulated, much of the Internet unregulated, but cable TV was more regulated. Over-the-air TV and radio have been most regulated. That all breaks down when the internet becomes a delivery mechanism for all those types of content.

Since the “internet” can deliver all types of media and all apps, it will not make sense to keep using different legacy regulatory models for the same content, delivered by different providers, with different network platforms and business models. Put another way, the business model does not change because an app or service uses multiple access networks.

But if the business model requires some amount of quality of service control (voice and video entertainment, for example), that has to be lawful across all the access networks to be used. The apps themselves often require such QoS.

Source: Wi-Fi 360

Internet Access Prices are Going to Fall

If increasing supply of any desired product tends to reduce prices (and increase consumption), then new competitors in a market tend to lead to lower prices, and if “new and improved” products devalue legacy products, it is fairly easy to argue that retail internet access prices in many developed markets will fall as 5G networks are launched, as vast new amounts of spectrum become available, as the ability to make more-efficient use of spectrum increases and the number of providers that can claim to deliver “gigabit” speeds in a given market grows from one or two to five or six.

Those price reductions should, history suggests, take two forms. The price of a unit of consumption will fall, and absolute retail prices also should fall. For example, some of us paid more than $100 to buy service at 756 kbps and now routinely buy access at about $40 (before taxes and fees) that operates up to 100 Mbps.

In other words, absolute price is far lower, and price-per-unit also is far lower.

The forces increasing supply are many. New competitors are entering the market. More spectrum is being released. The efficiency with which we can use any set amount of spectrum is improving as well, and networks are being redesigned to improve efficiency as well.

Shared spectrum (dynamic spectrum) is one of the new tools. Huge amounts of new spectrum also will be released for 5G use, and impressive amounts of new unlicensed spectrum as well. Competition also is growing, as new providers enter traditional access markets and many end user entities (app, device, service suppliers) decide to incorporate access sourced on a wholesale basis into their core offers.

To be sure, some still doubt that the economics of 5G networks operating, in part, as fixed wireless networks, actually will prove as attractive as hoped. If so, then gigabit competition from mobile providers will not develop as expected.

At the same time, new developments in shared use of spectrum potentially will vastly expand the supply of spectrum, either on an unlicensed basis or on a “low cost” basis.  

Preston Marshall, engineering director for Alphabet Access at Google, flatly argues that the scarcity value of licensed spectrum is going to be challenged by access to shared and unlicensed spectrum.

New Role for Wholesale in 5G Era?

Will wholesale assume a new importance in the 5G era, when large app providers, device suppliers and enterprises might want to bundle connectivity with their own apps and services? And will new virtualized 5G network features--such as the ability to create “network slices”--play a role?

Such are reasonable questions, one might agree.  Of some 800 industry professionals polled about 5G by Telecoms.com, 80 percent agreed  that “delivering MVNO-like services will mean dedicating a dynamic network slice based on customers’ specific needs”.

In other words, wholesale services might well take a new tack in the 5G era, with fewer sales to retail MVNOs and more sales to enterprises (app, device, service) that want to bundle connectivity with the products they sell, or the users they support.

About 70 percent of respondents agreed that  “we need to enable enterprise customers to act as a private MVNO in their own right, using 5G.

Philippines Still Wants a 3rd Mobile Contestant

The Philippines  National Telecommunications Commission (NTC) has been trying--so far without success--to encourage a third mobile operator to enter the market, something regulators in Japan and South Korea also have found difficult.

San Miguel Corporation had wanted to do so, but eventually gave up and sold its spectrum to the two existing providers, PLDT and Globe.

Some might question whether there actually is room in the market, given the power of the two existing providers, the amount of spectrum available to compete, capital investment challenges and inability of the government to “force” or “enable” significant market share shifts.

The essential goal of any pro-competition policy is that market share shifts from the dominant provider to other entities, in the transition from monopoly to competition, or in this case, the shift from a stable duopoly to a competitive market.

The big question is how much competition is sustainable. In most markets with four providers, there are legitimate questions about sustainability. In most markets with just two providers, there is a sense that duopoly limits innovation and consumer benefit.

Some might argue that alternative strategies will be necessary, as fiercely-competitive mobile markets--especially in smaller nations--might not be able to sustain three competitors. The dynamics arguably are different in large nations, where additional scale is possible.

Competition not exclusively based on traditional mobile platforms is one of the possible, perhaps even likely avenues, in a growing number of markets. Use of Wi-Fi, hotspot networks, unlicensed spectrum, more support for localized ownership, new forms of backhaul and access can be parts of such solutions.

Those paths will not necessarily be easy, but likely will be necessary in markets where the objective is to spur more competition in mobile markets. Among the key impediments is willingness on the part of policymakers to enable more freedom: of spectrum use, of local ownership and operation of networks, of investment incentives. That will not be easy, either.

Video, and Video Business Models, Now Shape Mobile Bandwidth and Business Models

At least three reinforcing trends drive the mobile data business, and supplier strategies to deal with mobile data supply. First, exponential consumption, with mobile data consumption growing by about a factor of six over the next five years or so. Second, Mobile data consumption is driven by entertainment video. Third, content consumption overall now increasingly is happening on mobile screens.

Taken together, all those trends, in advance of wider widespread mobile streaming consumption, mean suppliers need to dramatically increase access bandwidth, but also do so within the context of sustainable business models.

Increasingly, that means ways to offload or direct consumption off the “mobile” infrastructure and onto an “untethered” mechanism of one sort or another. Up to this point, such offload has used Wi-Fi. In the future, more of the load will be shifted to small cells, where users in dense areas are consuming content on a mobile device, but in a stationary context.

In 2016, for the first time, adults in the United Kingdom, for example, will spend more time with their mobile devices than with desktop and laptop computers, eMarketer projects. In 2016, mobile time—which includes non-voice time with tablets and mobile phones—will account for more than a quarter of daily media time for the average adult, at 2 hours and 29 minutes.

By 2018, mobile will have a 29.5 percent share of total media time spent per day, just a single percentage point behind TV.

There are other notable changes in business context as well. “Mobility” now is partly about communications (voice, messaging, chat, photo sharing, social media) but also about content consumption, and a shift from physical to virtual, large screens to smaller and small screens, linear to on-demand.

It sometimes is not appreciated, but rating mechanisms essential to “free media” or media subscription businesses hinge on zero rating. That makes continuing battles over the application of what some see as “network neutrality” rules are important. Without zero rating, the media subscription business--especially video subscriptions--will not be workable.

source: Market Realist

source: Market Realist

If Spectrum is Real Estate, then Shared, Unlicensed, Small Cell are Airbnb

“Spectrum is real estate,” many are fond of noting. At least, it always has been in the licensed framework.

Unlicensed spectrum is different. It remains an essential resource, but is not real estate, as their are no ownership rights, and no way to maintain scarcity value as does real estate in a dense urban area.

So spectrum might be in some sense a commodity, but it is a complex commodity, shaped by supply and demand as is any other asset.

Still, it might increasingly be true that real estate value is affected by Airbnb and other ways of bringing unused assets to market. And that is why shared spectrum, bonding of unlicensed and licensed spectrum, as well as additional allocations of spectrum, inevitably will affect the value of spectrum as real estate. In other words, if supply increases, prices should fall.

“We believe DISH's spectrum portfolio is progressively devaluing as the industry embraces low-cost, unlicensed and shared spectrum, namely, the 3.5 GHz spectrum band, to solve metro density challenges,” argues consultant Alan Weissberger.

Weissberger believes the 150 MHz of shared 3.5 GHz spectrum will be a “game changer.” That spectrum also should be commercially available earlier than new spectrum from the 600-MHz auctions.

“We expect this trend to shift meaningfully the spectrum supply curve, leading to a devaluation of DISH spectrum value,” he says. “DISH has assembled a potentially solid spectrum position, but the market values this spectrum too highly today.”

The U.S. mobile industry increasingly is relying on small cells and architecture--rather than relying on additional new spectrum, especially as perhaps 80 percent of customer data consumption happens in non-mobile situations suitable for use of Wi-Fi or small cell access.

The industry also increasingly is relying on unlicensed spectrum for access.

In the past, some have estimated that spectrum value is as much as 80 percent of the value of Dish Network. While that might have been too optimistic, it likely is the case that value--while still high--is falling. That would be in line with spectrum pricing in other recent transactions.  

Will Facebook Aquila "Crush" Google Skybender?

Facebook execs have in the past sometimes joked (playfully)  with their counterparts at Google that, where it comes to unmanned aerial vehicles to support internet access, “we’ll crush you.”

As Facebook explores trails with Indian mobile operators, it might appear that Facebook has a bit of a lead. Facebook already is seeking to launch pilot projects with Indian mobile service providers.

Google’s Project Skybender has been testing use of drones outfitted with millimeter wave transmitters to deliver 5G services to terrestrial devices. But little in the way of further details have emerged since early 2016.

Separately, Project Wing has seemingly concentrated more on product delivery, while among Google’s innovative internet access platforms, Project Loon has continued to plow ahead using balloons as the communications vehicle.

It's a friendly competition, but Facebook might be in the lead, for the moment, at least.

Creativity and Imagination Needed to Break Old Physical Network Constraints

Time and again, in the effort to provide communications (internet and other services) to everyone, we keep returning to a core problem: the business model often does not work. Historically, the model breaks because networks cost too much and people cannot afford to buy services.

There are, of course, other issues ranging from technological proficiency to language and literacy, lack of backhaul or electrical power, plus other compelling problems such as sanitation and clean water access.

But the problems within some level of supplier control are retail cost of service, beginning with the cost to create the access networks.

A recent example is the estimate by Europe’s tier-one service provider organization ETNO that it will cost €660 billion to create ubiquitous gigabit internet access networks using fiber to the home, and might take as long as 30 years to achieve, at current rates of investment.

In many other regions and markets, the feasibility of any fixed network solution is questionable. One reason people now have voice and text communications is because suppliers largely shifted to mobile networks.

A key sensitivity even in the ETNO forecast is the assumption that fiber to the home is the platform. Increasingly, that is too narrow a view. In a few markets, it is entirely rational to argue that hybrid fiber cable TV networks can supply gigabit levels of speed for internet access on a timetable and at a retail cost fiber to home networks cannot match.

In a growing range of scenarios, urban, suburban and rural, it is becoming rational to think fixed wireless access will succeed where fixed networks or standard mobile networks cannot. Also, in rural and isolated areas, even more novel approaches might be necessary, such as village-level networks owned or operated by the community, or joint ventures between villages and tier-one service providers and transport providers.

Also, huge new efforts are being made to create and deploy new technology that should help change business models. Open source telecom technology is one approach. The CORD Project and Telecom Infra Project provide examples.

Allowing use of huge amounts of new spectrum is another way technologists and policymakers are working to eliminate scarcity. The U.S. Federal Communications Commission, for example, is getting ready to release 39 GHz of new communications spectrum, including between 7 Ghz and 14 GHz of unlicensed spectrum.

The only issue is real-world deployment, as signals in the millimeter wave region have propagation issues, compared to radio signals below 1 GHz, for example.

In a recent test, millimeter wave signals at 73 GHz traveled more than 10 kilometers in a rural setting, even when a hill or knot of trees was blocking their most direct route to the receiver, using radios drawing less than one watt of power.

Keep in mind that, until recently, frequencies in such ranges could not be deployed commercially, as signal propagation was too limited. But advances in Moore’s Law mean we can use sophisticated signal processing to create much-better radios, receivers and modulation techniques, allowing us to commercially use such millimeter wave frequencies for the first time.

The good news is that, on many fronts, developers are working to essentially break free of the cost constraints that limit access networks from commercial deployment on a wide scale.

Company Culture, Not Just "the Numbers," Will Shape Next Wave of Mergers

Sometimes company or industry culture really does matter, even when the fundamentals of business strategy are based on sober evaluation of financial cases and value.

Would Verizon ever abandon its strategy of “leading” technology innovation in its business? Would Comcast ever abandon its fundamental reliance on “owned” facilities in favor of renting another provider’s facilities?

Such questions might be germane as the next wave of mergers in the U.S. communications business get pondered.

Some suggest a grand bargain could be struck between Verizon and Comcast, for example. Where Comcast would essentially agree to be a wholesale customer of Verizon for mobile services, while Verizon might backpedal on its fixed wireless 5G efforts. That agreement arguably would reduce the threat from Comcast to Verizon’s core mobile business, but also protect Comcast from direct assault from Verizon in the fixed internet access business.

There are lots of important nuances. Would Comcast behave one way if mobile is considered a core business, or differently if mobile is viewed as “ancillary” to its core fixed networks business?

Would Verizon be able to clearly separate its 5G leadership plans from the incremental benefits of nationwide internet access revenues?

Company and industry culture should matter, though. Cable companies traditionally avoid operating core access services on other firm networks. Every tier-one firm buys some wholesale transport, and even some wholesale access. But that is the exception to the rule historically followed by cable companies, which is that services must be provided over “owned” facilities.

For its part, Verizon has for some decades deliberately chosen the marketing platform of “best and most advanced networks.” It is virtually impossible to imagine Verizon allowing any other leading contender to take the lead, in that regard.

The wrinkle, some might believe, is that Verizon would push ahead with mobile 5G, but essentially refrain from aggressive deployment of a fixed wireless capability, if Comcast were to abandon a facilities-based mobile assault.

Either move would be risky and uncharacteristic, if there is a logic. Perhaps Comcast might conclude that even if it has to be in the national mobile business, the capital investment in “owned facilities” is unwarranted. In that potential scenario, Comcast would choose a “good enough” (long term lease) mobile sourcing strategy, rather than “the best” sourcing (owner’s economics).

That would be a major shift of thinking, though. Similar shifts might have to be made by Verizon, as well.

Perhaps Verizon would conclude it has more to gain from keeping Comcast as a wholesale customer, even if enabling a big new competitor.

On the other hand, Verizon has a relatively small fixed network footprint, so the out of market opportunity is fairly significant. But Verizon arguably might consider a limitation on its out of market fixed wireless opportunity for some degree of mobile services competitive protection from Comcast.

Even if Comcast and Verizon agreed to refrain from some of the more potentially damaging forms of competition, that would not restrain other contestants, though.

As logical as a grand bargain by Comcast and Verizon might appear, any abandonment of facilities-based competition by Comcast, in a core service, seems so discordant it is unlikely. And Verizon can not prevent a Comcast entry into mobile services, nor likely dissuade Comcast from adopting a facilities-based strategy.

To the extent Comcast sees mobile as a foundation service, it will choose to own its assets.