Verizon Makes Major Change in Fiber to the X Designs

Mass market optical fiber designs do not change radically, very often, in the U.S. market. And not often do they change in a way that directly affects the viability of wireless access. But Verizon has done so.

We seem to have settled into some clear design buckets, including the cable TV hybrid fiber coax network; fiber to the home (FTTH) and fiber “to the neighborhood.” Other variants, such as Radio Frequency Over Glass” have been developed by the cable industry, but has not yet been deployed.

There has been a shift from active to passive designs for FTTH, but the fundamental choices have been fairly well understood for some time.

But Verizon has made a huge change in its own thinking, even after having deployed lots of FTTH. It now is building a fiber-deep trunking network in Boston, and likely will follow in other areas, that uses what we might call a “fiber to the light pole” strategy, or a multi-purpose trunking strategy, that uses one set of distribution cables to serve enterprise networks, small business and consumers.

We do not yet have a well-understood and generally-accepted moniker for the design, which basically installs cables with huge numbers of fibers, virtually ubiquitously (to locations representing about every light pole, in principle).

“The architecture that we're building in Boston, and now in other cities around, is a multi-use” fiber-deep design, Verizon says, where “every light post becomes a potential small cell for 5G.”

That same network is designed to have enough fibers to handle enterprise connections, small business and also serve as the small cell foundation for mobile and fixed consumer access.

If Verizon is correct, then the economics of gigabit internet access for consumers will change significantly, not least because the optical fiber distribution cost is partially defrayed by revenues earned by serving enterprise and business customers, as well as the mobile small cell network.

The drops for gigabit consumer services then will be fixed wireless, using unlicensed or lightly-licensed spectrum. The implications for consumer gigabit access could be huge.

It remains to be seen if the actual cost of a fixed wireless connection using 28 GHz and 39 GHz assets will actually be “miniscule,” as Verizon executives have suggested. But Verizon already believes it can deliver gigabit speeds at distances of perhaps 1,000 feet or so.

That is important since street lights are spaced at distances from 100 feet (30.5 meters) to 400 feet (122 meters) on local roads. In principle, putting radios on every other light pole could mean a radio radius of about 200 feet to 800 feet, well within tested propagation ranges. Putting radios on every light pole would shrink the radius to 100 feet to 400 feet, and allow for more path diversity, in case of obstructions.

If, as some others expect, millimeter wave small cells have a transmission radius of about 50 meters (165 feet) to 200 meters (perhaps a tenth of a mile), it is easy to predict that an unusually-dense backhaul network easily can support radio drops from small cell networks that could number as many as 100,000 in an area such as Manhattan.

That fiber to the light pole network would be the first major innovation in fiber access networks for decades.

Fiber to the Light Pole Now is Quite a Rational Distribution Network Strategy

Starry now is selling its 200-Mbps symmetrical internet access service in Boston for $50 a month. That reportedly includes rental of the Starry Point antenna and the Starry Station WiFi hub, both required to receive service. Apparently there are no contract requirements, either.

It is too early to see whether Starry can garner significant market share, or if it can hold onto that share once Verizon’s 5G upgrades start to make their appearance, including a new fixed wireless access service that could offer gigabit access speeds.

Likewise, it remains to be seen if the actual cost of a fixed wireless connection using 28 GHz and 39 GHz assets will actually be “miniscule,” as Verizon executives have suggested.

Key to the economics is a new distribution network Verizon is putting into place in Boston, which conceivably could support installed fiber on a very dense basis for signal trunking. How dense? Not quite “fiber to the light pole,” but something that could be very close to that.

That is important because Verizon already believes it can deliver gigabit speeds at distances of perhaps 1,000 feet or so.

“The architecture that we're building in Boston, and now in other cities around, is a multi-use” fiber-deep design, Verizon says, where “every light post becomes a potential small cell for 5G.”

That same network is designed to have enough fibers to handle enterprise connections, small business and also serve as the small cell foundation for mobile and fixed consumer access.

If Verizon is correct, then the economics of gigabit internet access for consumers will change significantly, not least because the optical fiber distribution cost is partially defrayed by revenues earned by serving enterprise and business customers, as well as the mobile small cell network.

Fiber to every other light pole then becomes quite realistic.

Siklu says that at 60 GHz, 99.9 percent availability can be obtained at a distance of 1.2 km (about 0.7 miles).

Signal propagation at that same level of availability, using 70 GHz or 80 GHz frequencies, is about 1.1 km (about 0.66 miles).

If, as some others expect, millimeter wave small cells have a transmission radius of about 50 meters (165 feet) to 200 meters (perhaps a tenth of a mile), it is easy to predict that an unusually-dense backhaul network will have to be built (by mobile network standards).

Keep in mind that street lights are spaced at distances from 100 feet (30.5 meters) to 400 feet (122 meters) on local roads. So "fiber to the light pole" seems workable as the distirbution network to support an urban small cell network with enough capacity to deliver gigabit internet access to consumer locations.

Boot Camp for an Industry You Might Not Recognize

The PTC has for some time held training events for mid-career professionals. This year, for the first time, PTC has organized the Industry Transformation Boot Camp (including Spectrum Futures and PTC Academy).

The Boot Camp will educate students on:

• Strategy for a business consolidating from 810 service providers to 105, in 10 years
• What drives the change
• What industry structure will emerge
• How revenue will be earned
• How value will be created
• How 5G sets the stage
• Who wins, who loses, as part of the change
• How to prepare for the changes

Source: Bell Labs

The educational event earns students a certificate of completion, and also immerses them in tutorials and case study exercises preparing them for the most-rapid transformation of the telecom industry in half a century.

The week-long training event, including Spectrum Futures and PTC Academy curricula,  especially is designed to train top-level and mid-career staff on what is coming and why.

Full week discounts are available, especially for organizations who may wish to send several staff members.

Email spectrumfutures@ptc.org to discuss the Boot Camp program.

Can Verizon Do in Mass Market What Nobody Else Can?

Can you think of a business where the trend is anything other than consumers want anything other than high quality and low price, together? And can you name an industry where suppliers have not, over the last couple of decades, moved to supply that demand?

The problem, of course, is that high profits and high gross revenue suffer when that approach has to be taken. Look at the U.S. mobile market, where Verizon long has had a “premium service, premium price” positioning, but faces competitors offering “nearly equal quality, good price” or “good enough quality, lower price.”

At least until something significant changes on the next-generation network and major acquisition fronts, Verizon has a key positioning problem: “high quality and high cost,” while a workable strategy in some markets, for some products, is tough to sustain in  mass consumer markets.

Verizon lost more customers to its competitors than any other major U.S. mobile service provider in the second quarter of 2017, according to Cowen and Company. .

“The results in our view reflect Verizon’s late response to increasing pricing competition and an increasingly difficult-to-justify pricing premium for its promised leadership network experience,” said Colby Synesael, Cowen and Co. equity analyst.

Mobile service providers also serve enterprise and business customers with different buying criteria. And some mobile entities also have corporate parents with fixed network assets that should prove helpful in the 5G era.

And if you assume that virtually all telecom service providers normally have to replace about half their current revenue sources about every decade, there is room to make decisions about the sources of that revenue.

Some service providers might not be able to escape an “access provider only” role. At the moment, that is a workable description of Verizon Wireless, which has almost-negligible revenues from sources not directly related to access (voice, messaging, internet access).

Consider Comcast, which now arguably earns 39 percent of revenue from sources other than its triple-play access services (video subscriptions, voice, internet access).

To be precise, voice and video subscriptions are “apps,” not simple “dumb pipe access.” In a strict sense, voice and video are example of “up the stack” services, where the access provider creates and owns the apps.

The business problem in developed markets is that every such “up the stack” service is declining. So new substitutes, at scale, must be created or discovered. And unless a service provider wants to be a supplier of dumb pipe internet access, that means a search for products with more value, up the stack.

That is why Verizon will move as fast as it can to 5G. Its past experience is that it lead U.S. competitors in mass deployment of fiber to home and 4G, moves that are consistent with its “premium” positioning.

At the same time, 5G will enable many different moves up the stack, because of internet of things. To be sure, there will be “access” opportunities. But the real revenue upside will come from creating platforms at scale, or owning the actual IoT solutions.

That will not, by itself, solve the problem of trying to compete in a mass market with the “high quality, high price” positioning. Verizon’s problem is that such a position arguably is unsustainable. In what area of the mass market does that approach still work well?

source: Cowen and Company

Lunar Launches "Pay by the App, Per Day" Mobile Service

So a new mobile virtual network operator operating in Detroit is trying a unique charging system for usage. On any single day, when you want to use an app (LinkedIn, Facebook, Pandora, make a call, send a text message) that uses the mobile network, you pay Lunar 25 cents for use of that app for the day. So if you use four apps in one day, you pay $1. 

Using any apps on Wi-Fi is free, so the big question is how often, in a single day, a user wants to use an app on the mobile network. Most of us would not be too sure about how our own typical usage breaks down, on that score. 

Some days, when stationary, Wi-Fi might be most of the usage. So the only issue is how many apps might be used when one is out and about. 

Lunar argues most of its customers will wind up paying about $10 a month. 

The issue, for many potential users, is always the same as it has been with usage-based rating. Nobody can easily tell, in advance, how much usage they will incur, and therefore what the bill will be. 

Lighter users might benefit, but even users who are on multiple apps every day might come out ahead. It just depends. If you are using 10 apps a day, you might pay less on some other standard plans from the big four U.S. mobile operators. 

And that is a consumer acceptance problem. There is a long history of consumers voting with their wallets for predictability. They like to know, in advance, what their use of a mobile service will cost.

It's an interesting approach, to be sure. Still, few have managed to build big account bases on a usage-based rating system, compared to flat fee models. 

How to Recreate a "Laughable" Business Model

"Lack of value" is the reason the telecom business model is breaking.  

In fact, a lack of value is so prevalent that a talk by Marcus Weldon, Bell Labs president, to an industry audience, drew immediate laughs. See the laughter when Weldon talked about where telecom sits in the end user’s estimation of value.



The laughter comes at 08:30 minutes into the video, where Weldon shows an illustration of where telecom sits in a value stack. 

How to avoid a dumb pipe, “layer zero” future is the subject of the opening address by Sanjay Kamat, Bell Labs Consulting managing partner, at the first session of the first part of the Industry Transformation Boot Camp, a week-long, intensive learning event. 

Organized by the PTC, the Boot Camp will explore why value is the key problem for the telecom industry, breaking its business model. he event also explores ways value can be recreated to build the next business model. 

Taught by an international team of instructors with decades of hands-on as well as theoretical experience, the Boot Camp will immerse you in the key challenges, opportunities and risks of the coming decade, in an intimate environment where you can ask your own hard questions.

The Boot Camp is much more than its component parts, Spectrum Futures and PTC Academy.

The week-long experience assumes a business cataclysm--touching most, if not all companies-- is possible, indeed likely. Skill and knowledge will matter. So come get them.

Our instructors are experts on the fixed and mobile, 5G and internet of things domains.

Come learn what they believe will happen, what it means for you and how it can help your business.  

Full week discounts are available. If you only have time for part of the program, you can attend Spectrum Futures to learn what you need to know about 5G, and why, or PTC Academy, to learn how the “C suite” approaches the key strategic issues.  

An Industry Headed Not Only For Massive Consolidation, but a New Value Proposition

A growing number of experienced observers now say the telecom industry is headed for a future most of us will not recognize, with a different value proposition, different players and customers.

The optimistic view is that new value propositions and value will drive the industry forward. The pessimistic view is that a) this will not happen, or b) will not have the scale to offset losses in the legacy business.

Where there now are 810 telecom service providers, there will be but 105 by 2025, says Bell Labs. That consolidation of about 87 percent in seven or eight years would be beyond comprehension, for most of us, and would be an apocalypse for most in the industry.

Capgemini calls an era of “massive consolidation” on a “spectacular” level.

Maybe Bell Labs is wrong, but maybe you should think about what your plan is, in case the prediction turns out to be correct. 

Maybe J.P. Morgan equity analyst James Sullivan is wrong about emerging market mobile reaching a “new era” of asset restructuring (consolidation), because revenues are way out of line with network costs. But maybe you want to hear his thoughts on how to win in the new era.

What does Bell Labs mean by a business built on “creating time?” What is 5G and why does it matter?

Telecom average revenue per user now is falling in every region, says Strategy&, but 5G (and its platform for internet of things) offers the promise of new revenue sources, customers and use cases.

But what if we are wrong about 5G? What can you do now, and why, to increase your odds of winning, no matter how well 5G does, or how long it takes? What should you do now, and why?

Those are the sorts of “big questions and answers” at the Industry Transformation Boot Camp, to be held 18-22 September in Bangkok. Organized by the Pacific Telecommunications Council, and including its Spectrum Futures and PTC Academy programs, the Boot Camp will offer a hard-hitting, no-fluff learning exercise on the biggest, toughest problems faced by telecom industry professionals.

Taught by an international team of instructors with decades of hands-on as well as theoretical experience, the Boot Camp will immerse you in the key challenges, opportunities and risks of the coming decade, in an intimate environment where you can ask your own hard questions.

The Boot Camp is much more than its component parts, Spectrum Futures and PTC Academy.

The week-long experience assumes a business cataclysm--touching most, if not all companies-- is possible, indeed likely. Skill and knowledge will matter. So come get them.

Our instructors are experts on the fixed and mobile, 5G and internet of things domains.

Come learn what they believe will happen, what it means for you and how it can help your business.  

Full week discounts are available. If you only have time for part of the program, you can attend Spectrum Futures to learn what you need to know about 5G, and why, or PTC Academy, to learn how the “C suite” approaches the key strategic issues.  

"New Era" for Emerging Market Mobile?

Does the emerging market mobile business face a “new era?” And if it does, given that global telecom industry growth has been driven by emerging market mobile, does that portend a change in global telecom growth as well?

In brief, here is the thesis laid out by James Sullivan, J.P. Morgan head of Asia equity research (all of Asia except Japan): emerging market mobile now is revenue challenged, unable to generate new revenues at rates that justify current investments.

Since revenue cannot be increased, “asset restructuring” is necessary, to adjust the cost base. In emerging markets, that means surviving competitors will not be able to own their own facilities.

Emerging market mobile has faced several challenges, all based around limited revenue growth and higher capital investment that have grown faster than incremental revenue.

As mobile data revenues have grown, they have cannibalized voice revenues. Rapidly-increasing capital investment and operating expense have lead to declining earnings.

Source: J.P. Morgan

“Profitless growth” is perhaps one way to characterize the trend.

Sullivan will flesh out the thesis as one instructor among many appearing at the Industry Transformation Boot Camp, 18 September to 22 September, 2017 in Bangkok,  including Spectrum Futures and PTC Academy components.

Sullivan sees signs that the restructuring has begun. You might look at India’s mobile market, where a huge consolidation of suppliers is underway.

The core thesis is that emerging markets have “no choice but to fundamentally change the structure of industry assets through the unification of networks via nationalization, centralization under a regulated return utility, or more aggressive commercial network sharing,” Sullivan argues.

For policymakers, there are a few fundamental options. In addition to nationalizing the networks, regulators could return to “regulated common carrier” models or oversee a reduction in capex by promoting network sharing.

That would presage a “new era,” indeed. Nationalization or a return to regulated rate of return would certainly lead to a reduction of physically-separate networks. Assuming no nation anymore can afford to run mobile networks on a permanent loss basis, and if revenue is too low, while costs are too high, then fewer assets is the solution.

That would create, in the mobile segment of the industry, the same pattern that exists for the fixed networks industry in many markets, where an authorized wholesaler supplies access capabilities to multiple retail providers.

In other markets, private actors might agree to share the cost of new investments, to reduce costs for each contender, as has been done for towers and radio infrastructure.

If Sullivan is right, the mobile market will be organized and regulated in very-different ways within a decade or so. For starters, the number of facilities will shrink drastically, which will have ripple effects across the whole ecosystem.

Still, “assets” are only part of the issue. Revenue models still must be addressed, and so far, nobody has sustainably proven how “access services” remains profitable, over time, when average revenue per account continues to drop.

Beyond that, there is the other key issue: whether top-line revenue growth can continue, and if so, what will propel that change.

Telecom in Uncharted Waters

For most of its history, telecommunications was a monopoly, expensive and used by relatively few people. That meant one set of regulatory and policy issues, mostly centered on how to manage prices in a slow-moving utility industry.

All that changed in the late 1980s, when a global wave of privatization and competition began to take shape. For the first time, the policy framework shifted to ways to dismantle the monopoly regime and replace it with competitive markets.

source: ITU

We are entering another new era, with unprecedented new challenges for policymakers:

• The business model is challenged, and could break
• Some countries might be forced back to “monopoly” facilities
• Revenue growth will come mostly from non-human use cases
• All the old revenue drivers will decline
• Massive industry consolidation is coming
• “Telecom” might not be the way the new industry develops

To prepare telecom professionals for all those changes, the PTC has created a new program called “Industry Transformation Boot Camp,” a week-long program explaining what is coming; why it is coming; what people plan to do about it; and why 5G will play such a prominent role in determining the outcome.

At the same time, as the wisdom of “everyone sells” has proven to be valuable, the next phase of industry transformation will require an “everyone thinks like a CEO” attitude, so fast, and so furious, will the changes be coming.

Created from two elements--Spectrum Futures (5G) and PTC Academy (“think like a CEO”), the boot camp will clearly explain what will happen (massive industry consolidation; business model collapse) and why. More importantly, boot camp attendees will learn why the changes are happening; what can be done to hasten the transformations and where the opportunities and dangers lie.

18–19 SEPTEMBER 2017 PULLMAN BANGKOK GRANDE SUKHUMVIT

"THE INDUSTRY TRANSFORMATION BOOT CAMP" GROUP REGISTRATION AVAILABLE BEST VALUE | LEARN AND LEAD REGISTER ASAP Bring your team to Spectrum Futures 2017, book your registration, and save 20% per person when you register with a group of three or more.* Taking place 18–19 September in Bangkok, Thailand, Spectrum Futures is gearing up for the “Industry Transformation Boot Camp," a new training program coordinated with the PTC Academy, PTC’s training event for Asia telecom professionals. During the "Industry Transformation Boot Camp," invest in two days of in-depth discovery and the latest updates in mobile and 5G, completed by three days of PTC Academy, to master the intelligence and broader strategic context of the telecom industry. Register now for the "Industry Transformation Boot Camp" – Spectrum Futures 2017 and PTC Academy, take advantage of exclusive group discounts available, and leap your career for success. Email spectrumfutures@ptc.org to register your group, and we will assist you with all your attendance requirements. *To qualify for group discounts, all delegates must be from the same company, and must register for the same registrant type and pay at the same time. Groups cannot retrospectively be compiled with delegates that have already registered.