Wednesday, February 14, 2018

AT&T to Attack Verizon MDUs in Boston

Anybody who thinks internet access competition is reaching a nadir might need to rethink those assumptions in the wake of new out-of-region assaults by Verizon, now countered to some extent by AT&T.

The important development is that markets traditionally lead by a telco and a cable operator, sometimes supplemented by competition from Google Fiber or other independent internet service providers, now will become markets where two tier-one telcos, a tier-one cable operator and often other ISPs also compete.

In other words, competition still is increasing, not shrinking, as some believe.
AT&T is offering internet access to multiple-dwelling units in Boston. The move is one example of a new trend in the fixed network business: large tier-one competitors moving out of region for the first time at scale.

Verizon, for its part, already has launched an assault on the AT&T market in Sacramento, and seems likely to attack another dozen or so markets as well. Most of the new 11 launch markets are out of region for Verizon, including Ann Arbor, Atlanta, Bernardsville (NJ), Brockton (MA ), Dallas, Denver, Houston, Miami, Sacramento, Seattle and Washington, D.C.

Of those markets, Washington, D.C.; Brockton and Bernardsville are inside Verizon’s fixed network footprint. The other markets are AT&T or CenturyLink domains.

Those moves outside the fixed network footprint by Verizon indicate thinking about growth prospects outside the core fixed network service territories, and probably also show that fixed wireless in the millimeter wave bands offers a new business case that did not exist before.

It remains unclear how much--if at all--the Verizon deep fiber architecture will play a key role in those out-of-region assaults. At least initially, the targets of opportunity likely will be locations reached by the metro fiber assets, using fixed wireless for access. That tends to suggest urban core targets of opportunity.

Essentially, AT&T and Verizon are becoming competitive local exchange carriers, at some scale, for the first time, attacking other tier-one telcos in their home markets.

The business case likely also includes the ability to use those assets to help with backhaul operations to support 5G small cell deployments as well.

T-Mobile US Deploys AI-Based Customer Care

T-Mobile US has deployed an automated customer care resolution tool supplied by Tupl.

The ACCR tool provides T-Mobile US customer care reps with detailed and easy-to-understand cause reports and technical resolutions, Tupl says. The ACCR tool is said to be 100 times faster and up to four times more accurate than legacy resolution practices support, automating as much as 90 percent of such interactions.

A TM Forum survey suggests service providers already are using artificial intelligence to support chatbots for customer service, network automation and service management, while 70 percent of service provider executives are conducting “proof of concept” trials.

At least so far, improving customer experience is top reason for AI interest, followed by reducing operating expenses.

The survey of 187 executives from 76 communications service providers operating in 51 countries, and 115 executives from supplier companies also suggests some problems.

Since AI is designed to augment human intelligence and processes, reaping value presupposes that organizations actually understand their core processes well enough to augment them, and can do so, as a practical matter. The history of enterprises applying information technology and reaping rewards is spotty, though.



Service Providers See AI Helping Most with Customer Interactions

A TM Forum survey suggests service providers already are using artificial intelligence to support chatbots for customer service, network automation and service management, while 70 percent of service provider executives are conducting “proof of concept” trials.

At least so far, improving customer experience is top reason for AI interest, followed by reducing operating expenses.

The survey of 187 executives from 76 communications service providers operating in 51 countries, and 115 executives from supplier companies also suggests some problems.

Since AI is designed to augment human intelligence and processes, reaping value presupposes that organizations actually understand their core processes well enough to augment them, and can do so, as a practical matter. The history of enterprises applying information technology and reaping rewards is spotty, though.



Tuesday, February 13, 2018

The Internet Era is Fundamentally Different

The internet era is fundamentally different from all prior eras of telecommunications. “Telecom” once was the center of its own universe. These days, telecom is part of the internet ecosystem. And some of us would argue telecom essentially is a tail on an internet ecosystem dog.

In large part, that means the industry cannot independently determine its own destiny, but supports, reflects upon and builds on other key trends in consumer behavior, device use, app use and enterprise priorities.

For that reason, argues the GSMA, “it is no longer appropriate to develop corporate strategies, or to assess policy situations, with a narrow focus on a single segment of the value chain.” In other words, the business context has changed. Boundaries between formerly-distinct industries have become porous, and actors in one part of the value chain now routinely expand into additional roles.

The implications for service providers--at least tier-one providers--are clear: movement beyond the access and transport function are within the realm of necessity and reason. You might compare such options to the older notions of vertical integration. The business logic is the same.

Sometimes revenue growth, profit or cost control is enhanced when firms operate across more of the value chain.


There is an important caveat, though.

It might not be possible for small service providers to contemplate strategies that include operations across multiple parts of the ecosystem. Large entities, whether app providers, device suppliers or access providers, can reasonably expect to have the scale necessary for success across multiple roles.

Smaller providers, for reasons of scale (or lack of scale), will have to adapt to more specialized roles, as smaller participants in the core telecom ecosystem always have done.

That does not mean awareness of the trend is unimportant. Small providers have to understand where opportunities exist within the larger ecosystem, and as potential partners for tier-one actors who do operate across multiple roles.

Precisely how many tier-one telcos actually might envision a substantial role across multiple areas of the ecosystem (apps, services, devices, access, advertising) is unclear, but it will be a relatively small subset of the universe of service providers.

When researchers at Nokia Bell Labs predict a consolidation of some 810 global service providers to perhaps 105 within a decade, that gives you some idea of the universe of possibilities. As only the largest app providers are able to occupy meaningful positions across the ecosystem, so only a few of the largest service providers can contemplate similar moves.


The internet value chain has almost trebled from $1.2 trillion in 2008 to almost $3.5 trillion in 2015, a compound annual growth rate of 16 per cent, according to the GSMA. So the ecosystem has grown substantially. So has the gross amount of revenue earned by the global service provider industry. But the percentage of total value earned by service providers is dropping.

The implications are perhaps obvious.

We sometimes forget that the global telecom business had, for most of its history, been about the sale of apps (services), not “access” to such apps. In other words, consumers and businesses bought the right to make phone calls, and not the right to access a network to make phone calls.

The difference is subtle, but crucial. “Phone companies” were in the “make a phone call” business, not the “network access” business. In the internet era, the value proposition flips.

If access to the internet now is among the primary values, if not the exclusive value, service providers now are in several businesses. “Access to the internet” (dumb pipe) drives significant revenue. But so do “apps” (voice, messaging, video entertainment).

So a core part of strategy is to grow the portion of the business related to apps or services, compared to lower-value “access.” That especially is true if one believes there are clear limits to the amount consumers ever will spend on access services.

The point is that growth options for providers that remain in the access services business (voice, messaging, video, internet access) are probably limited, going forward. Gaining scale (making acquisitions, especially outside the existing geography) will help, for a while. The limit there is the availability of capital and acquisition targets.

As always, that will spur a search for niches. As in the past, those niches will tend to be smaller or specialized segments that a tier-one service provider simply cannot support and make a profit. Rural geographies, local geographies and specialized business services have provided opportunities in the past. That should continue.

In the internet era, successes in other areas are harder to identify, with few clear sustainable advantages for carrier-supplied voice or messaging apps or app stores. There might be new advantages for some carrier-supported devices in some markets, especially where a service provider can use its own branded handsets to drive market share gains.

Language-specific content also could be promising.

The larger point is that, in the internet era, opportunities often are shaped by what other segments of the value chain will allow.

Vint Cerf on Where the Internet is Going

Internet pioneer Vint Cerf talks about where the internet might be going.

Are We in the Pipe Business? If Not, What?

Dean Bubley, Founder, Disruptive Analysis, and Connie Wightman, CEO and Chairman of Interserra Consulting Group, interviewed by Gary Kim, trying to think seriously about the future. Sources of value, roles and functions, prices trending to zero and other hairy challenges.

Part of the problem is that customers "want as little as possible, and don't want to pay for it," said Bubley.

“Voice mail is irrelevant,” says Wightman. “I don’t think telecom is a separate sector, anymore.” And eventually, app interfaces will be as ubiquitous as electrical outlets.”

“There are many more blurred boundaries,” says Bubley. “That makes it hard to classify things with a bright line.” Basically, the old monopoly on creating “telecom services” is over, and “anybody” can create communications features. In other words, private communications networks will be possible and common.

“Telecom is a tail on an internet dog, and cannot determine its own fate,” Kim said. “What drives value,” in that context?”




Monday, February 12, 2018

Cable Dominates U.S. Internet Access

It is hard to overestimate the impact cable TV companies have had in the U.S. internet access business. At every speed tier, cable operators have overwhelming market share, as you immediately can tell from the following graph, where “red” represents cable market share at various speeds. At the higher end, cable has well over 80 percent of sold connections operating at a minimum of 100 Mbps.

But even at the low end, at speeds less than 3 Mbps, cable has 60 percent share.

For better or worse, those adoption statistics reflect deliberate capital investment decisions by U.S. telcos other than Verizon. Basically, many independent telcos have been financially unable to invest faster, while AT&T arguably has made a priority of mobile capital investment.

Verizon “benefits” from having made most of its fiber to premises investments a decade ago.

What comes next is not so clear. Some argue cable operators are in position to leverage their market control to raise prices.

Others might argue that telco fixed wireless is part of the strategy for catching up with cable. And AT&T recently has stepped up investment in gigabit services where it believes their is a business model.

Others might argue that at least AT&T and Verizon are looking past fixed segment competition and hoping to lead in the future mobile and untethered markets. That is part of the interest in both mobile video and fixed wireless built on the mobile network.

Yet others might argue that  apps and services beyond internet access will drive revenue in a decade, not access, per se, reducing the value of access investments, in any case.

Still, the market impact cable TV has had is foundational. Its reliance on its own facilities, using different platforms than telcos use, has allowed it to upgrade faster, at lower cost, than telcos have been able to do using fiber to the home.

But most of the share losses have come from telcos other than AT&T and Verizon, which in recent years have been holding their own. In other words, you might argue both those firms have invested enough to get by, while prioritizing investments in mobility that clearly has driven revenue growth for both firms.

The issue now is how much investment has to be tweaked to maintain the “just enough” capex. Many would argue it does not make sense for either AT&T or Verizon to overinvest in fixed network internet access, as the financial return simply will not be there.


At this point, the fixed network internet access market is nearly a zero-sum game. That means most of the market share gains will have to come from other competitors. Such markets are tough.

The total number of U.S. internet connections increased by about six percent between December 2015 and December 2016, reaching 376 million, the Federal Communications Commission reports. So there was growth, but at low and slowing rates.


With the caveat that speeds offered by some providers seems to be increasing about 50 percent per year,  the 106 million fixed connections at the end of 2016 included 37 percent (39 million connections) operating between 25 Mbps and 100 Mbps, while 23 percent (or 25 million connections) offered speeds of at least 100 Mbps.

That suggests the policy of gradually investment by AT&T, for example, is largely defensive. That makes sense, one might argue, in the context of a business driven by mobility or video services, not internet access.

In the fourth quarter of 2017, for example, AT&T earned 85 percent of revenue from apps, not internet access.

Keep in mind that the FCC  figures also represent consumer buying choices, not the services available to buy. Consumers make rational choices about internet access, buying services that provide the best perceived value proposition, not necessarily always the “fastest available” tiers of service.

They buy what is “good enough,” more often than they buy what they deem “best.”

So 62 percent of consumers chose to buy services running faster than 25 Mbps.

Some 38 percent of consumers bought services operating at slower speeds, though it is impossible to say for sure whether those customers were unable to buy faster services, or chose to buy slower services even when faster alternatives were available.

Some four percent of consumers (four million connections) bought services operating slower than 3 Mbps downstream.

Some 14 percent bought  (15 million connections) services operating between 3 Mbps and 10 Mbps. Some 22 percent (23 million connections) purchased services running between 10 Mbps and 25 Mbps.

The median (half of connections faster, half slower) downstream speed of all reported fixed connections was 40 Mbps and the median upstream speed was 5 Mbps.

For residential fixed connections, the median downstream speed was 50 Mbps and the median upstream speed was 5 Mbps.

Most of the growth in total Internet connections is attributable to increased mobile Internet access subscribership. The number of mobile Internet connections increased 7% year-over-year to 270 million in December 2016, while the number of fixed connections grew to 106 million – up about 3% from December 2015.

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