Cisco VNI: highlights

Besides findings such as 'Global mobile data traffic grew 70 percent in 2012', the most recent Cisco VNI report (Feb. 6, 2013) contains other interesting material (the picture is a heatmap, showing where and when LTE will be deployed).

• Mobile data traffic growth in S Korea, China, Japan was ~100% in 2012, versus ~40% for Australia and Italy. Telefonica's and Vodafone's blended growth was ~35%. Cisco provides three answers why growth was lower in some regions: migration from unlimited to tiered data plans; a slowdown in laptop growth; increased offload to fixed via WiFi.

• Cisco also provides promoters of growth in usage: increased speeds; a shift to video; migration from fixed to mobile (where usage is higher) as a result of prices converging; increased tie spent (again, because mobile has higher usage).

• "Cloud applications (such as Netflix, YouTube) allow mobile users to overcome the memory capacity and porcessing power limitations of mobile devices."

• "Mobile offload is set to increase from 33% of total global mobile data traffic in 2012 to 46% in 2017."

• "The growth in 4G with it benefits of higher bandwidth, lower latency and increased security will help the regions bridge the gap between their mobile and fixed network performance leading to even higher adoption of mobile technologies".

• "Currently, a 4G connection generates 19 times more traffic than a non-4G connection. There are two reasons for this. The first is that many of the 4G connections today are for residential broadband routers and laptops, which have a higher average usage. The second is that higher speeds encourage the adoption and usage of high bandwidth applications, so that a smartphone on a 4G network is likely to generate 50 percent more traffic than the same model smartphone on a 3G or 3.5G network. As smartphones come to represent a larger share of 4G connections, the gap between the average traffic of 4G devices and non-4G devices will narrow, but in 2017 a 4G connection will still generate 8 times more traffic than a non-4G connection."

• "From 2011 to 2012, average usage per device on a tiered plan grew from 425 MB per month to 922 MB per month, a rate of 117 percent, while usage per device of unlimited plans grew at a slower rate of 71 percent from a higher base of 738 MB per month to 1.3 GB per month." (Based on a study of 2 global tier 1 carriers, looking at 22k devices over 12 months.)

• "Tiered pricing plans are often designed to constrain the heaviest mobile data users, especially the top 1 percent of mobile data consumers. An examination of heavy mobile data users reveals that the top 1 percent of mobile users is actually the top 5 percent, because the top 1 percent of users varies each month."

• "The proportion of mobile users generating more than 2 gigabytes per month has increased significantly over the past year, reaching 18 percent of users towards the end of 2012."

• "in comparing data consumption over Wi-Fi and cellular networks, the global average for daily data consumption over Wi-Fi is four times that of cellular, averaging 55 MB per day for Wi-Fi, and 13 MB for cellular. For end-users, selecting Wi-Fi over cellular for the majority of their data consumption is an important consideration for staying within the limits of their cellular data plans."

• "in comparing data consumption over Wi-Fi and cellular networks, the global average for daily data consumption over Wi-Fi is four times that of cellular, averaging 55 MB per day for Wi-Fi, and 13 MB for cellular. For end-users, selecting Wi-Fi over cellular for the majority of their data consumption is an important consideration for staying within the limits of their cellular data plans."

How relevant is the Dutch 4G auction?

At first sight, an auction is business-as-usual, a non-event.

• Spectrum: simply a license renewal.

Taking a closer look, it looks quite exciting:

• Spectrum: a lot of licenses, technology-neutral, up for grabs.
• New entrant: from 3 to 4 MNOs.
• Technology: from 3G to 4G.

However:

• New entrant: Tele2 is an MVNO already. End-users will not care.
• Technology: upgraded 3G (HSPA) can match 4G performance at launch.

Conclusion: not so much of a big deal after all ... at first.

Gaming as a managed service?

We have been doing a report for the regulator on the OTT-market. Our approach was to split services as follows (fixed and mobile have been thrown together - after all, networks are being fiberized while sharing the backhaul and long-haul and the access portion is becoming less relevant: copper, coaxial, fiber, 3G, 4G, WiFi):

• Communication
• Text-based (with or without pictures/video)
• Managed
• SMS
• OTT
• Email
• Chat, IM
• Social networking, (micro)blogging
• Voice-based (with or without video)
• Managed
• Voice calling
• OTT
• VoIP
• Entertainment
• Video
• Managed
• Broadcast linear TV
• Catch-up TV
• VOD
• OTT
• Broadcast video
• Catch-up TV
• VOD
• Gaming
• Managed?
• OTT

Gaming is an OTT service. Which operator will introduce gaming as a managed service?

Ziggo going ex growth on the digital TV market

Here is the analogue-to-digital conversion ratio for Ziggo (digital net additions divided by analogue net deletions). As you can see below (blue line), the ratio used to be roughly around 80 percent for three years (consumers only). Meaning: of all analogue deletions, around 80% would return as a Ziggo digital customer and the other 20% would defect to a different platform (IPTV, DTH, OTT-only). In 12Q4, all deletions defected to a rival platform.

The digital TV penetration now stands at 80.4%, and there are 546,000 analogue-only viewers left to be converted to digital TV. The red line below shows the utility rate of the network (customers divided by homes passed), or if you will: Ziggo's TV market share in its service area against all competition. Currently, it stands at 65.9%.

If all 546,000 analogue-only viewers would defect away from the Ziggo platform (hence the blue line would be flat at 0,00%), then the red line would end up at 52.9% (assuming a flat number of homes passed: 4.213 mln).

Akamai 12Q3 in brief

Akamai State of the Internet report 12Q3

Some overall stats from the 12Q3 State of the Internet report from Akamai:

Fixed:

• global average connection speed -7% qoq and +11% yoy to 2.8 Mb/s
• global average peak connection speed -1.4% qoq and +36% yoy to 15.9 Mb/s
• global high BB (>10 Mb/s) adoption rate +8.8% qoq to 11%
• global broadband (>4 Mb/s) adoption rate +4.8% qoq to 41%

Mobile:

• average connection speeds on mobile networks 324 kb/s to 7.8 Mb/s
• average peak connection speeds on mobile 2.8-39.1 Mb/s
• market shares mobile devices: Android 37.6%, Safari 35.7%

Fixed and mobile:

• market shares mobile devices on all networks Safari 60.1%, Android 23.1%

European telecoms assets for sale

America Movil, AT&T and perhaps France Télécom are looking at telecoms assets in Europe. Let's see what could be for sale right now:

• Deutsche Telekom: T-Mobile in Austria, the Netherlands and Albania, Bulgaria
• DT and FT: EE in the UK
• Telefónica: UK and Germany
• KPN: E-Plus (Germany) and Base (Belgium)
• Tele2: Russia, Germany, Austria
• TeliaSonera: Yoigo (Spain)
• Vivendi: SFR (and Maroc Telecom and GVT)
• UPC: Romania
• Further, assets held by private equity: Com Hem (BC Partners), Colt Group/Colt Technology Services (Fidelity) and Eurofiber (Doughty Hanson).
• And then there are companies considering splitting off businesses: Telekom Austria (Eastern Europe), Telefónica (Latin America, Europe).

The question remains, what are potential buyers looking for: mobile, incumbents, cable companies, business/wholesale operators?

Many scenarios are possible:

• Consolidate Germany: buy both E-Plus and O2 and add some Tele2 to the mix. Could this propel Orange into Germany?
• Consolidate the UK: buy both EE and O2. That could be a start for AT&T, in English speaking territory.
• Pan-European fiber: buy both Eurofiber (mainly Netherlands, but some in Germany and Belgium) and Colt Technology for networks and services. This seems a good fit for Vodafone. But also operators such as BT and AT&T could beef up their European asset portfolio.

What we like about Google

There are many things to like about Google. We grouped them around three themes:

• Advertsing-based business model:
• It implies drawing people to its services, i.e. making great products and services.
• The risk of this model is to be focussed on the masses and producing more of the same, but there appears to be plenty of room for 'the long tail'.
• Open platforms such as Android (Chrome, Widevine, WebP, Dart), allowing for all sorts of cooperations (incl. competitors), with Google only interested in advertising.
• Invests for the long term:
• R&D: plenty of that plus Google[X] (imaginative projects) and Google Ventures. Provides no guidance to Wall Street, i.e. demands the freedom to have a long-term strategy. Hires great scientists, such as Vint Cerf and Ray Kurzweil.
• Access networks (FTTH, WiFi, satellite).
• Green energy
• Google.org
• Be good:
• Motto: don't be evil.
• Google.org (investments and donations)
• The company is also good to its employees.
• Green energy investments.
• Funding (with Clean Power Finance) for solar panel buyers.
• Book preservation through Google Books.
• Free WiFi projects.

The case against technology-neutral spectrum

Rewheel showed that 'independent challengers' add a lot to competition in mobile markets in Europe. The E5 (DT, FT, TEF, TI, VOD) have a combined market share of 80% across 27 nations. There are indie challengers in 14 of those. In the other 13, minimum prices can be 140% higher.

Competition in telecoms is limited as a result of an extremely high entry barriers. In fixed markets, it is legacy infrastructure held by the incumbents. In mobile markets the scarcity of licenses is added. Hence regulation.

Take note that Vodafone is an incumbent on the mobile market, just like Bouygues and SFR. Tele2 also is an incumbent, at least in markets where it joined when 2G (and 3G) licenses were tendered. Now Tele2 is entering the Dutch market on the back of winning a 4G license (not counting its presence as an MVNO). So, Tele2 NL will most likely act as an indie challenger. Hutchison 3G was a challenger in the 3G era, but may not act like one when 4G licenses are issued and a new entrant appears.

Now, there's always scope for an incumbent/E5 operator to behave like a challenger. One could call this atypical, in light of the Rewheel study. For instance, at the latest strategy update, DT told T-Mobile NL to behave like an 'unconventional attacker'. Hence, T-Mobile NL may display atypical behaviour as well.

Back to the entry barrier. It has been lowered considerably by allowing the timing of issuing new licenses to coincide with rise of new technology (4G/LTE). So, Tele2 NL enters the market as an MNO and at the same time can use all the advantages of LTE.

The question now is: is it wise to make spectrum technology neutral? The regulator decided to do so, which at first sight seems to make a lot of sense. However, by the time the next auction will take place (2029 - not counting the 1900/2100 auction probably taking place in 2016), new technology will be around (5G) and all 4 MNOs will have introduced it. So, the new entrant coming to the market in 2030 will not have a technology advantage like the current wave of 4G entrants have.

Smartphones add a sense: smell (what about a thermometer?)

If a smartphone's core competencies are the software and the touch screen, then it has to be added that there are more senses in a smartphone:

• Sight: it has a camera.
• Hearing: it has a microphone.
• Touch: it has a touch screen
• Balance and acceleration: it has a gyroscope and accelerometer.
• Time: it has a clock.

That leaves (apart from temperature) smell. And that is now to be added through a new chip from Adamant Technologies.

One more to follow: a thermometer.