The other rumor is that Altice which bought Cablevision and Suddenlink is looking at a nearly $2B IPO and will use those proceeds to buy Cox. But that may not happen because Charter now wants to buy Cox.
John Malone, the pioneer cable consolidator, has been all about consolidating cable, telco and wireless. His Liberty Interactive just acquired Alaska's GCI for $1B. There is noise that he would flip that to Charter. Cox plus Bright House plus TWC plus Charter plus GCI gives a 49 state footprint and would make that entity bigger than Comcast.
Charter was fined by New York State $13 million for not living up to its merger agreement. The rest of us are enjoying newer, higher pricing.
Meanwhile Comcast is being sued for cutting a small Texas ISP's lines and putting them out of business after they rebuffed an offer to be acquired by Comcast.
Just to add some notes, a bunch of Senators asked the DOJ to "closely scrutinize AT&T's proposed acquisition of Time Wamer." It won't change the course of this consolidation.
As 5G rolls out -- or 4G gets density to satisfy the bandwidth consumption of mobile Americans, you pick -- it will require a lot of fiber to towers and small cells. The editor opinion on Fierce makes it sound like the cellcos weren't hard nosed negotiators before now. Sheesh. There has always been a cap on how much a cellco would pay for bandwidth to a tower. Always.
Nearly 25% of Urban Americans aren't connected to broadband internet, usually due to cost for broadband. And despite the fact that Americans pay more for broadband than other countries, Wall Street is asking the ISPs to charge more. Greed.
The divide between rural broadband and urban is still large. The short fall at the USF Fund isn't helping. The telcos, including AT&T, want that funding to do any build outs. A political hot potato to add to the pile with Net Neutrality, mergers, healthcare and the whole American infrastructure (bridges, roads, power grid).
Bigger not Better.
Who thinks that the CenturyLink acquisition of Level3 will be derailed by the $12B lawsuit that C-Link is facingin the wake of charges that they pulled a Wells Fargo accounting scam?
One last thing: GTCR acquired Inteliquent. GTCR also owns Onvoy. They merged them and decided to keep the name Inteliquent.
]]>Enterprises buy a variety of computing services from public to private along with VPS, hosting and everything in between. "It's easier for enterprises to develop, test, operate and migrate workloads across hybrid architectures when the CSP's public and private cloud code base is the same, or at least virtualized and functioning identically." However, they cannot procure this variety from Amazon or Google. They would to go to the likes of IBM, Microsoft and Oracle.
"Consumer tablet demand continues to shrink. Apple is the only manufacturer seeing an improvement in buying." Not good news for the cellcos.
"Future data centers will include technologies such as advanced data center management software, distributed resiliency, prefabricated modular (PFM) components and dexterous robots." Meanwhile Telcos are exiting the data center business (WIND, C-Link, VZ).
PE firms own many of the data center companies, including Peak 10 which acquired Via West from Shaw today for $1.7 Billion. In addition, Dupont Fabros merged with Digital Realty. That is along of transactions and consolidation in the space.
Upgrade those pipes!
Cisco's report on Internet traffic growth is out with many pretty graphs. "Globally, Internet traffic will grow 3.2-fold from 2016 to 2021, a compound annual growth rate of 26%. Globally, Internet traffic will reach 235.7 Exabytes per month in 2021, up from 73.1 Exabytes per month in 2016. Global Internet traffic will be 7.7 Exabytes per day in 2021, up from 2.4 Exabytes per day in 2016."
What is an Exabyte? "Global Internet traffic in 2021 will be equivalent to 707 billion DVDs per year, 59 billion DVDs per month, or 81 million DVDs per hour. In 2021, the gigabyte equivalent of all movies ever made will cross the Internet every 1 minutes."
According to Akamai, "Slow IPv6 adoption is a conundrum in light of IPv4 address exhaustion." Global Average Internet Connection Speed = 7.2 Mbps. Yet "U.S. speeds averaged 18.7 megabits per second compared with 28.6 Mbps for global leader South Korea." Most of that is cable modem download speeds since MSOs have the lion's share of broadband customers in the US. DSL is dragging us down.
The Duopoly is looking to strip Net Neutrality rules, claiming they stifled growth. OOPS! "Broadband speeds have soared under net neutrality rules, cable lobby says."
"Fiber is basically the nervous system of the networks of the future," Malady said and Verizon is making big investments in it." Good insight.
]]>If I was starting my telecom agency today, what would I do?
When I started in 1999, I was selling basically one product (Wholesale DSL to ISPs). That was my entry drug of choice. It led to frame relay, ATM, IP Transit, DS1/DS3 and PRIs. But it was a single offering to a very targeted market. Most of those clients from 1999-2001 are still with me!
Certainly an agent starting out is going to be offering bandwidth in all its colors. However, I would build a multi-vendor bundle to sell to a specific audience. I am a big fan of vertical sales. Anyone can be a Generalist, but being a Specialist pays better. How many GPs (general practitioners) are left in medicine or law?
And being a Specialist doesn't mean that you have to turn away other business that comes to you, it just means that you have Focus. You have a target to aim at. You have an audience that you can get to know and develop a message for.
It is far easier to market a specific bundle aimed at a target vertical than it is to create a marketing message aimed at the generic masses.
Targeted marketing is cheaper. Easier to send email or postcards to every ISP in the BellSouth region than to target every SMB in a state.
One bundle I have been working on is the Verizon Wireless One Talk service with 4G backup, a Cradlepoint router, FiOS and a Square POS (point of sale) system. It is a targeted package - Retail. It allows for add-on sales: smartphones, video surveillance, email or Office365 and web hosting. You could also offer credit card processing and PCI DSS Compliance via EarthLink. You could go bigger with managed wi-fi. There are many add-ons, but the original 4 component bundle is where to start.
The bundle contains the essential ingredients of a small retail shop: broadband, backup (because retail can't make money without 100% uptime on the Internet for credit card processing and digital phone service), wireless network, phone system and cash register. Signing up with SYNNEX and any of the Alliance Partners would get you all the access you need to bundle that - and make commissions.
Anyway that is how I would start today. Chasing Verticals with a multi-vendor solution that I designed for them.
]]>Even Fairport, acquired by RLEC Consolidated, is upgrading its network for higher speeds. Some of this is due to the fact that cable is winning the broadband war. Some of it is powered by USF Reform whereby broadband is the metric for dollars. Add in the Connect America Funds (CAF) and other federal and state incentives for broadband and middle mile fiber deployment. AT&T, Verizon, Windstream and CenturyLink have all talked about upgrading the broadband infrastructure. (BTW, this flies in the face of the new FCC Chairman's claims that investment went down after Title II.) It comes down to revenue - and DSL was not cutting it.
Fiber deployment is tough (just ask Google). Many providers use a mix of technologies. TPX (formerly known as TelePacific), Windstream, XO and Google Fiber use fixed wireless for broadband. Thousands of WISPs in America have been utilizing wireless to deliver broadband for years. The bigger guys are now jumping on the bandwagon. To be fair, the technology is not only better, but cheaper.
This from DSL Prime: (from Sail Internet in Fremont California) "George Ginis used Mimosa's super Wi-Fi to connect a customer a customer with 435.74 down, 331.83 up, and 4 ms ping. 5 GHz Mimosa is designed like a mmWave network but a heck of a lot cheaper than 28 GHz. Interesting alternative."
DSL Prime has an ad from Sckipio about Virtual fiber. "Extend your fiber with 100-300 meters of single-port G.fast. It can save expensive trenching for cell towers, small cells, basement fiber, commercial customers and others. A very thin management layer allows operators to keep their existing GPON management layer. Sckipio makes it effortless to add G.fast to any GPON network." G.fast uses copper like VDSL2. We'll see if it gets adopted in the US like it is in Europe.
Also on the copper side is trials by ASSIA for Terabit DSL. See here. Companies are at work to extend the life of wireline broadband to satisfy the consumer appetite for downloading videos. On the business side, the same technologies will be used to feed the business appetite for cloud apps - fixed wireless, 4G/LTE-A/5G, DSL/T1, cable modem and fiber. SD-WAN will be layered on top for metrics, failover/resilience and more. Interesting times.
]]>What do you do when a $60K MPLS network is replaced with a $40K SD-WAN network? And when some of those Internet links are not even on the carrier's network?
What do you do when 10GB trans-continental private lines are so ridiculously low?
Well, the management has to re-adjust their reality for the sales team. It isn't the salespeople's fault that price is eroding fast. That is an industry wide executive decision. There are no safe havens for high margin. Even SD-WAN which was hyped just a year ago has fallen under the I Will Save You Money banner (already).
Much of the merger mania is based on synergies - or that at scale the same amount of people can take care of more revenue, which adds margin. A few of the mergers are due to a debt burden that becomes due. That was Intermedia's problem in 2001. No one learned that lesson. Avaya faces that problem today with a debt load that cannot be serviced by its revenue.
But direct sales, channel managers and partners face declining revenues across the board. This means less commissions, less margins, less profitable quarters.
When cablecos stop paying commissions on modems sales (like ILECs did with anything TDM or DSL), what will the channel do? I ask because all the SD-WAN hype is about a branch office utilizing broadband - DSL, cable modem, fixed wireless, 4G, satellite or a combination - for lowered costs but improved performance via that special little white box of SD-WAN.
Also with the shackles off at the FCC, we will see bigger mergers and most likely port blocking will become a thing again. OTT VoIP providers will have to figure out how to circumnavigate the waters pf port blocking on broadband circuits at SOHO, branches and rural locations. It will be interesting.
But that is all down the road. Right now we face consolidation of vendors but price erosion, which may be accelerated by the MPLS to SD-WAN transition. Oh, Goody!
I say this a lot but we have to sell a lot more, faster to maintain.
We need to Land and Expand. Get the pipe but start taking apps and voice, backup, DR, security. It will become imperative to take a chunk of the whole customer IT/telecom budget to survive.
Carriers can help by stopping pushing product and going to a holistic package approach of bundling products into a turn key solution like UC + 4G + Internet + POS + Compliance + backup.
Or savvy partners will start bundling multi-vendor solutions themselves to get more of the pie. The carrier will be stuck being a component.
Co-Selling will be a see-saw. The carriers will like it to protect their own offerings and sales numbers but will hate paying twice one the sales.
We are in for a ride about as smooth as dealing with the airlines! Happy Travels! Back to CP Expo 17 now.
]]>"The U.S. (and the world) is in the midst of a sea change in how we spend our leisure time. Young people are less inclined to indulge in America's favorite pastime: zoning out in front of the TV. On average, people ages 18 to 24 spend half as much time watching live and recorded television as 35-to-49-year-old Americans, according to Nielsen...... Young people are definitely watching video, but it's more likely something from YouTube or a friend's Snapchat story on their phone than the episode of "Grey's Anatomy" their parents are watching on the living room TV."
"All told, traditional cable, satellite and telco pay-TV services (not counting OTT offerings) lost a net of about 1.64 million video subscribers last year as compared to a loss of some 980,000 in 2015." [telecomp]
Telco TV was too late to the party. It cost the telcos billions of CAPEX dollars to find out that cord cutting was real and OTT video - Netflix, Hulu, YouTube, Amazon Prime, Sling TV -was going to be the winner.
The economics look upside down. Bear with me here. Right now the cable operators are winning the war for both broadband and voice. In many areas, cable is now the incumbent voice provider.
With triple-play the operator sees ARPU of about $161. If the customer only buys broadband - which is happening more and more - the ARPU drops to $65. Never mind the tax implications for federal, state ad local government (they are screwed either way), just consider what this does for revenue numbers.
The ripple effects are already being seen. ESPN, the Disney owned sports channel, is in a tail spin with a loss of about $500M in revenue per year from cord cutters. Cable channels are either being closed by the content owners or re-named and re-tooled. There aren't 500 useless channels; there are 1M with all of the streams and social media. This will be a real problem for content creators, actors, writers and advertisers.
Windstream, CenturyLink and other RLECs (Frontier, Fairpoint, TDS, et al) have been working hard to get the percentage of revenue from residential/consumers from the average of 75% to a 50/50 mix with business services. Windstream bought EarthLink; CenturyLink bought Level3. TDS bought managed IT firms and data centers. Fairpoint sold itself to Consolidated Comms. Frontier keeps buying states from Verizon and AT&T; consequently, their mix is still heavily consumer.
Everyone has a revenue problem. Pricing pressure has squeezed every operator. It will get worse. Millennials don't want to pay a cable company. They have a huge cellular bill and student loans totaling $1 Trillion. Couple that with stagnant wages and a bleak jobs future that is getting darker with all the investment in robotics and AI, the economic outlook doesn't look bright. As I have asked before: if wages are stagnant, how does someone continue to keep the economy spinning with buying?
I hope, unlike cord cutting, that operators don't have their head in the sand on this issue.
With 5G trials rolling out, will the next generation - who aren't buying homes and aren't buying cars - buy wireline broadband? A few analysts say Unlikely. I already know several twenty-somethings and thirty-somethings that do NOT have terrestrial / wireline broadband. It is all smartphone and hotspot at home.
What does that do to the economics of the network? Business revenue will become even more important. And as revenues decrease, price increases will result, which will mean less subscribers.
Planet Networks believes that rural and under-served areas will still be on wireline because 4G and 5G will not get there any time soon. That may be true - so RLECs will be happy - but the majority (80%) of the population lives in urban areas.
In other nations, cellular (including fixed cellular) are sometimes the only available network. It is cheaper to put up towers and radios than to dig up streets and sidewalks to lay fiber.
]]>The Age of the CLEC - the competitive carrier - is at end. They fill gaps now, like Birch, Bullseye and Granite for POTS and other legacy services. XO is part of Verizon. EarthLink absorbed by Windstream to become like AllWorx, USLEC and Paetec, a memory. Level3 will be a division of CenturyLink, where it will cease to be a rival to the RBOC in the Enterprise.
Net Neutrality is going away. That zero rating investigation to determine if giving some content a free rideover all other content was fair has been closed.
It is simply cable or ILEC. And both groups have to be wondering how much longer they can continue to carry their massive debt. The big dilemma is that ARPU is stagnant but subscriber counts have peaked. Cord cutting is a real issue for cable, telco, satellite and content owners. NBCU closed two channels recently and re-branded another. Apparently, twenty five cents per subscriber per channel per month isn't enough any longer. And advertising rates are a little off too. The economics of many legacy businesses are being blown up!
The cost of services increases as more small cells are deployed to blanket coverage for 4G LTE, LTE-Advanced and how much will 5G cost? If ARPU is stagnant for cellcos in this price war, yet the cost to build and maintain the network remains constant and you don't lose any subscribers, all is good.
Sprint and T-Mobile have waged a brand battle against Verizon and AT&T. It has worked to a degree. But all 4 carriers are losers. The foreign owned T-Mobile and Sprint can afford to lose money for a while, but how long?
With the subsidized phones are gone so are contracts and large ETFs. More churn. Higher cost of customer acquisition. Ma and Pa Bell already saw this small business broadband and voice. Then they lost the consumer broadband and voice market. Now the cellular market is up for grabs.
Verizon is looking at buying Charter now. Rumor has Comcast looking at buying its 4G backup partner, T-Mobile. The cablecos denied cord cutting until it was too late. Telcos denied cable competition until it was too late. There really aren't any visionary CEOs in our space.
The problem remains the same: at some point you have to be make money, not just on paper.
Debt payments, network CAPEX, stock dividends, payroll and pension liabilities are a burden to ILECs - all of them: Frontier, AT&T, Verizon, CenturyLink, even Windstream and Fairpoint (who sold out to Consolidated).
Revenue is getting crushed as the cost of bandwidth, transport and transit collapse. Voice revenue has declined. Text revenue is flat. OTT apps have taken video calls (Skype, Facetime), some voice calling (Messenger, WhatsApp), SMS/MMS. What's left? The Enterprise market and the Government market.
What happens when there are just 4 carriers? Is the channel necessary to sell monopoly services? Well, see.
Some other points:
With subsidized phones gone, how will that affect phone makers long term? Will we see the leaps in tech that we have so far? Unlikely. Google Pixel at $649. The iPhone 7 is $700. Not that many folks are going to drop that cash every 18 months to two years. (Note to self: Get in the smartphone/device insurance business!)
When will the next highly desired device come along to prompt an exclusive carrier deal (a la AT&T and the original iPhone) to drive signups?
Even Sprint is Buying into the business of streaming media with a $200M investment into Tidal, another money losing music streaming service.
As someone at lunch pointed out, many foreign LECs like Vodafone, BT, Telstra, even NTT, are sitting on tens of billions in cash. They could buy into the US market.
We sit at the nexus point of some interesting times.
Did you notice that UCaaS consolidation halted? Yeah, me too.
]]>Google Fiber stopped over-building fiber to the home (FTTH) to give fixed gigabit wireless a chance. This isn't even 5G. This is current non-millimeter tech.
AT&T is trying to get BPL (broadband over power lines) to work with Project AirGig. Will it work this time? The power infrastructure is still pretty old/antiquated, ut technology has gotten better.
API isn't talked about like that. Integrations are. UCaaS as a stand-alone platform is not that impactful to the employee work day. Integrated with CRM, email and other work day applications is. [All About API is at ITEXPO.]
Intelepeer just announced a platform that integrates with Cisco Spark. Hope they demo that at ITEXPO.
The IDEA Showcase is Thursday evening. I always get amped at startup events because there is great energy (hope, promise, excitement) that we kind of lack in telecom.
If you like startup stuff, the week of Feb. 13 is Startup Week! Techstars runs that globally.
Channel Vision Expo is collocated with ITEXPO again. This is the first channel partners event of the year. And it is collocated with MSP Expo. Should be interesting because more and more referrals and indirect sales are making a difference for cloud providers. 8x8 notes, "New monthly recurring revenue (MRR) sold to mid-market and enterprise customers and by channel sales teams accounted for 60% of total new MRR booked in the quarter."
I don't understand Blockchain. (There I said it!) Maybe I will get a chance to see what that is about on the show floor next week as well at the Blockchain Event.
WebRTC is still a thing, according to Andy Abramson. We'll see as Real Time Web Solutions has a section of the ITEXPO as well.
Most of the noise in my email is about HPBX/UCaaS, SD-WAN or IOT. The IOT Evolution is happening at the same time in Ft Lauderdale but it is a separate show. Verizon, Amazon, Gogo, Sprint, T-Mobile, Cisco (but no AT&T) are speaking and/or exhibiting.
That is a lot of tech to take in at one time, but it also in one place. Where can you get that much info/demo/prezo in one place?
Some interesting stats from 451 Research Group.
Overall IT Spending vs. Cloud Spending. Cloud spending remains strong, and the growth rate continues to outpace overall IT spending. A total of 44% of cloud users expect spending to increase over the next 90 days, while 4% expect a decrease. In comparison, 38% expect an increase in their overall IT spending vs. 11% expecting a decrease.
Cloud Adoption. SaaS (64%, up 1-pt) remains the most popular type of cloud computing in use, followed by Infrastructure as a Service (43%, up 4-pts) and On-Premises Private Cloud (34%, down 2-pts).
On-Premises Private Cloud Vendors. The most popular vendor for on-premises private cloud is VMware vCloud (65%), with Cisco (33%) and Microsoft Cloud OS (30%) a more distant second and third.
Key Attributes. The most important attributes for on-premises private cloud vendors are Platform Reliability (66%), followed by Value for Money/Cost (47%) and Technical Expertise (36%).
If you are in Ft Lauderdale next week, let's grab coffee! Or join us for dinner on 2/7 HERE.
]]>"Put it all together and you can see a day when you're watching content that Google produced disseminated via infrastructure that Google owns on a phone that Google made using wireless service Google brokered." Amazon tried it and failed. Google's phones are nice, but the Fi service has done about as well as Google Fiber.
The opposition - the cellcos, the RBOCs, the ILECs - don't want to be just dumb pipes. That's why Comcast owns NBCU; AT&T is buying TimeWarner; and Verizon owns AOL and is buying Yahoo. They want to own the whole OSI stack - Layer 1 to 7 - the walled garden that was AOL.
Facebook wants the same thing. Amazon, Microsoft and Google, too. Live in their ecosystem, where they collect as much data as possible to target you better to sell you more.
Amazon is selling ISP service, as a retail channel for Comcast and Frontier, not as a virtual network operator.
Meanwhile, a bunch of articles over the last two weeks talked about the ILECs lack of investment in broadband. Cable Will Keep Ruling US Broadband.
LightReading states, "All seven of the top MSOs registered broadband subs gains in the summer quarter. Over the past year, the cable companies have added more than 3.5 million data customers. Once again in contrast, five of the seven leading telcos lost broadband subscribers overall in the third quarter as they focused mainly on upgrading their DSL customers to fiber lines, not bringing on new customers." Once again telcos are late to the game - in TV and in competing against DOCSIS. Telcos were even late to get in the DSL game, afraid of losing T1 business. They have always had short term thinking.
"More than 80 service providers have opted out of participation in the Lifeline broadband program for at least part of their territories," writes Telecompetitor. Verizon, AT&T, Cox, Windstream, Charter, CenturyLink, FairPoint and Frontier have all opted out to the FCC. Part of it is "rural carrier stand-alone broadband pricing"; and part is the 10MB x 1MB requirement which DSL can't meet.
Meanwhile, telcos have to re-think their TV strategy in the wake of OTT video. A consortium of them should buy DISH Network and its Sling TV.
After Google Fiber's debacle in 2016, all providers will re-evaluate fixed wireless instead of a wired strategy.
Maybe g.fast makes its way past some trials in 2017.
Will Comcast, Charter or Google become the number 4 cellular provider in 2017 after AT&T, VZW and a combo of T-Mobile+Sprint.
FiberLight, LUMOS, Sprint wireline, Fatbeam, Wilcon, Towerstream, and some others will likely be part of some M&A this year. No one saw Fairpoint getting picked off by Consolidated - or the pending Level3+CenturyLink disaster.
Another year of turmoil coming at you! With a new FCC.
One thing all this says: we don't know what will disrupt in 2017.
]]>One big story was Google Fiber laying off and the CEO quitting. I tend to agree with Beranek on this: Google didn't want to be a network operator. They just wanted to scare the Duopoly into building out broadband networks, so that Google could get more page views a la YouTube.
People don't understand how much obstruction the Duopoly has in telecom. From lobbying to lawsuits, the phone and cable companies hate competition. They do everything they can NOT to compete. So given an upstart - Google Fiber or Covad or a muni network proposal - they go to town throwing up hurdles to success. Big is Bad for Consumers. Period.
The Election: Not getting political but it looks like Net Neutrality will be rolled back. Soon the 4 cellcos will make it look like 1996 again when it was Prodigy, AOL, CompuServe and DELPHI. Walled gardens are coming back. This will make it harder for any new entrants to get a foothold.
Devices: It was the year of device panic from Samsung's blowing up to Apple eliminating the earphone jack. Add in the mix, the hacking of the IOT devices used for DDoS attacks against Krebs and DYN. It was 100K hacked cameras and DVRs that took down the Internet in October. It is only going to get worse. For a society obsessed with guns, why don't we protect our information and devices? The Info War is going to set you back.
BTW, did you see that Quest Diagnostics was hacked? 34,000 accounts. Would you want your medical history online?
It was the year of hacks. Just ask the DNC.
Hacks and outages all year.
A lot of noise about Fake News (true), self-driving cars (almost) and SD-WAN (soon).
It was the Year of Uber. Of all the ride sharing apps including Lyft, Uber seemed to dominate. Close to 25 ride sharing apps have been funded to date, but it is Uber that leads the race, despite famous battles with cities around the globe.
VR got bigger (just as Scoble!) But like Augmented Reality, other than entertainment and early adopters I have no idea who is paying attention.
IOT was big. Everyone is still trying to figure it out. Or more precisely figure out how to monetize it for themselves.
Speaking of which, IAAS has blown up with one clear winner, AWS. At $13 Billion in revenue, it is all of the profit that Amazon shows. Rackspace, a rival, went private this year when a private equity firm acquired them for $4.3B. Like Dell, going private allows them time to pivot without the stock market beating them up. And speaking of Dell and pivots, what a year they had buying and selling. If the smoke ever settles in Austin, it will be an interesting story.
Artificial Intelligence is something I tend to think of as analytics and data mining. (We went from Big Data to AI.) From Siri to Alexa to IBM Watson, AI is entrenching in our world. A doctor friend uses Dragon Speak Medical Edition to transcribe his notes into the EHR system. That's the kind of tech we need.
Microsoft added its Skype real time translation service to cell phones and landline. In a global economy, this will be a game changer. And this is on top of Skype4B crashing past 50 million seats.
What else did we see a lot of? UC&C or UCaaS. So much of it. But when you have 2000+ companies plus thousands of resellers trying to gain some ground, the noise level will go up. Most of that noise is pure hype, spin and hullabaloo. More on that in another post.
Is there anything I missed? Is there something you are watching? Let me know.
]]>Content and ad money is the only area of growth for the Duopoly.
An analyst is projected that Cable companies will be the Incumbent Phone company in 2017 due to the number of cable phone lines sold compared to telco. The RBOCs have been trying to get out of the incumbent label for years, much to the chagrin of their ILEC brethren like Frontier, Windstream, CenturyLink and Fairpoint, who wish that the RBOCs would shut up.
The RBOCs have cellular, voice, data, broadband, big pipe, managed services, data centers and cloud in the catalog but the cash cow was the consumer triple play. Much like EarthLink and AOL floated on dial-up revenues for years, ILECs float on wireline revenues. Unfortunately, cable is eating their lunch in the broadband market.
Easier to dump a billion or four into a company that will provide some top line revenue than spend $24 billion on fiber to the home, where Verizon lost money.
Telco has pension and union liabilities that cable does not. These liabilities are now mainly under the RLEC umbrella in the form of CenturyLink, Fairpoint and Frontier, who purchased assets from many other ILECs and RBOCs, including the pension liabilities. It is quite the financial burden.
Content is the next revenue stream for the telco, following in the footsteps of cable, who have owned TV stations and content for years.
No idea how the telcos arrived at advertising as a viable revenue stream (maybe they are following Google's model). Yet "AT&T reports $1.5 billion and growing in annual revenue for its AT&T AdWorks division. That unit aggregates 14 million households and 35 million set-top-boxes nationwide, managing ad inventory across national ad-supported cable networks. AT&T claims it's the largest addressable advertising network in the industry, thanks in large part to its acquisition of DIRECTV." [telecomp]
It looks like we will soon be back in the days of AOL and Prodigy, where your ecosystem will be defined by your cell phone operating system (Android or Apple) and cell provider and broadband provider. The cellcos are providing free bandwidth for staying inside the ecosystem, making it tough for companies like DISH/Sling, Netflix and Layer3. Captured users, eyeballs, viewer habits, buying habits, ads, etc. will result in big money per user. It is a similar model that Amazon uses with Prime and Kindle. Users of a Kindle device buy Prime and spend more than 3x what a non-Prime member spends. And we keep it in the ecosystem. Google, Apple, Amazon, AT&T, Verizon and Comcast all competing for you.
]]>Telcos spent billions on both fiber and TV services. [Verizon reportedly spent $23 billion rolling out FiOS since 2004, some of it from rate hikes, some from government subsidies.] Unfortunately, by the time telco TV, like Windstream's Kinetic, is widely available cord cutting is accelerating.
From DSLR, "Telco TV and satellite TV providers saw record pay TV subscriber losses last quarter, according to the latest analysis by Leichtman Research. According to Leichtman, the pay TV sector lost about 210,000 subscribers last quarter, though this figure is dramatically lower than the 430,000 subscriber net loss stated by Wall Street research firms like SNL Kagan. While traditional cable providers "only" saw a net loss of 90,000 video subscribers last quarter, the telcos were particularly hard hit, losing 375,000 video subscribers last quarter -- compared 45,000 during the same quarter last year."
In the broadband realm, "Cable companies added a net of 775,000 broadband subscribers last quarter, compared to a net loss of 150,000 broadband subscribers during the same period," writes DSLR. [see chart here]
For consumers, it is all about the Internet and smartphones, according to Pew.
Telcos didn't want to get into the DSL game. Mainly to protect a highly profitable T1 business. The same way they threw obstacles at Google Fiber, the LECs threw obstacles at the newly minted DLECs - NorthPoint, Rhythms and Covad. Sure, some of it was incompetence on the part of the DLECs and GF, but the hurdles kept tripping them up. After they all filed bankruptcy, the RBOCs decided to get into the DSL retil game, to the chagrin of the independent ISP, who was finally making money on DSL. Undercut by the vendor, many ISPs failed or limped along for years, which affected many small businesses as the ISP was usually the local computer expert and Internet Provider. This was something that the LEC could not provide: personal service to the small business. To this day, the Duopoly can only supply commodity service with almost non-existent support. As they have gotten bigger and bigger to take advantage of scale, the support to the small business has suffered.
Small business is 99% of the businesses in America. Yet every provider wants to go up market.
There are almost 28 million small businesses in the US and over 22 million are self employed with no additional payroll or employees (these are called nonemployers). Over 50% of the working population (120 million individuals) works in a small business. But it is under-served by the Duopoly.
From the FCC's 2016 Broadband Report:
Think about those numbers. VZ spent $23B. Other telcos spent billions. The FCC donated billions in BTOP, BIP, ARRA, CAF, CAF II and USF funds to the effort to build out broadband across America. Private companies (PCOs, ISPs, WISPs and CLECs) have invested hundreds of millions more. Cable dropped bilions. Yet not everyone has good Internet????Or a choice of more than 1 ISP?
I have to wonder where this goes. The telcos spent billions to get triple-play just as that bundle becomes undesirable. They now have to build out fiber to stop losing broadband subscribers, so more hundreds of millions. At a time when their debt is High - and the pies for TV, broadband and voice are stagnant. Even cellular has peaked.
They are all chasing Enterprise, which I imagine means 500+ employees. There are only 30K businesses in the US with more than 500 employees. So Comcast, Charter, AT&T, Verizon, CenturyLink and Windstream are fighting desperately over the same 30,000 businesses and government contracts. With VZ acquiring XO (approved today); C-Link acquiring Level3 (ugh); and WIND Buying EarthLink, that leaves Zayo as the sole big indie.
What happened? Bad short-term decisions that cost jobs, revenue losses and more CAPEX spending than if they had just done it from the beginning. To still see announcements from the telcos about Gigabit deployments in select cities is just plain sad. The monopolies that were the Bell companies re-constituted but lost their edge. It's like they don't know how to compete at all. They just lean on their brand and hope for the best.
EoC wasn't widely enough deployed and sold. Yet everyone is banking on SD-WAN, which will likely just make SLAs crumble.
Small business has suffered from this mess -- and further with the mega-mergers and consolidation. Small businesses - all businesses - rely on telecommunications to do business. The Internet is vital to our economy. Let's hope we don't stifle it anymore.
]]>CS&L, the telecom real estate investment trust (REIT) spun out of Windstream last year, owns the copper and fiber assets that Windstream exclusively leases for its network. CS&L bought Tower Cloud and PEG Bandwidth to add to its fiber portfolio. CS&L lost $4.1 million during its 2016 third quarter on $200M in revenue of which 82% comes from WIND. CS&L will "acquire Network Management Holdings LTD, a private company that owns and operates 359 wireless communications towers in Mexico, Nicaragua and Colombia" for $65 million. Towers are like real estate for a REIT. Fiber is still an asset to rent in a REIT. Surprisedly, Level3 nor others have spun out fiber, data centers or other assets into a REIT as a tax savings entity.
As I wrote my column for Internet Telephony magazine last night, Tony Thomas must have read my mind. WIND CEO says that SD-WAN and UCaaS are the driving forces for the WIND-EarthLink merger -- and where success will come from for similar telecom providers.
Cellular companies have started counting all Internet connected devices as number of handsets slows down. In the latest quarter results (see here), it is all about the notes:
"Subscribers include retail and wholesale connections of both traditional and new connected device categories (e.g. M2M). Verizon Wireless subscribers include Strategy Analytics' estimates for wholesale and connected device volumes. Sprint subscribers and net adds exclude affiliate subscribers, but include wholesale."
The blended ARPU is diminished by M2M and IOT device revenue. And this will continue. Family plans, hotspot add-on, tablets at $10 per month - these are the tricks that will need to improve going forward for ARPU to not slide off. Or they will have to break out M2M and IOT which they can't do.
]]>CenturyLink just sold off its data center business that was a combo of Qwest Cyber Centers and SAVVIS to a group of PE firms for $2.15B in cash and C-Link keeps a minority stake worth $150M in the new company. CL bought Savvis for $2.5B in 2011. Buy High; Sell Low. Bell-Head Mentality.
The PE coalition that bought the data centers also grabbed 4 cyber-security firms in order to announce this global security co, to be run by Manny Medina, former CEO of Terremark Worldwide.
Wired's headline says it best: The World's Telecoms Are Under Threat From All Sides.
Broadband, cellular and voice are all flat or declining markets.
IAAS and PAAS are ruled by Amazon, IBM and Google. Microsoft only got into the game recently and is doing better than all the telco's combined.
PE firms are buying up data centers as the world adjust to cloud computing, an app market and streaming TV and radio.
DDoS attacks are happening too often. So are Hacks. There are not enough fingers to fill all the holes in this dyke.
UCaaS is ruled by 8x8, Vonage Business, RingCentral, Fuze and a bunch of other providers that are not a telco. The PBX market may be shrinking but not fast enough for the other Hosted VoIP players. Cisco and Microsoft have chunks of the enterprise UCaaS business that the telcos don't.
Comcast Business is at $6B in annual revenue, which makes it a bigger CLEC than almost all that are left. WIND does $5B. EarthLink less than $1B. Birch and TelePacific are private. Level3 does $8B. CenturyLink does $17B (much of it ILEC revenue). Zayo is $2B.
Apps like Messenger, WhatsApp, Skype and Slack are replacing voice and SMS and even email. It is a topsy-turvy world. What's a telco to do? Well, merge! Get bigger because bigger solves nothing, but it makes money for top execs in the C-Suite and the Board room and on Wall Street.
Our economy spins on e-commerce and the Internet. When the companies that provide that Internet are too clunky to do it properly, what happens to our economy?
We went from a five nines voice network of reliability to cell phones and VoIP that quite frankly can't be more than three nines. Have you noticed the number of outages lately by telcos and cablecos?
There is a lot going on. There are many areas of opportunity, but the fall back from these guys is "more of the same", "do what I know" and "one more quarter!". None of these transactions is good for the industry, the economy or the consumers. They are stop gap, short term money movers. We are going to wake up shortly and realize that it is 1970 all over again. It makes the NSA job easier when there are few players, but what about the customers?
In the data center space, one master agency contacted me after the C-Link announcement to tell me that the folks at CenturyLink have no details about the sale. How can that be when Monroe has been trying to sell the DC division all year? Great planning, guys!
Whose customer is it? Will the agent still get paid? Will the customer see a price increase? Who is the billing entity? Who will the customer be paying? These are good questions that bothered some TELX customers when Digital Realty took over.
I keep seeing executives at master agencies say these deals are good. Do they say that in print because they have to?
Don't forget that you can leave a public comment with the FCC on any of these mergers. You can voice your opinion here. You will need a docket number but you can google it after the filings are in the system.
]]>Yet, this headline: "75% of internet use will be mobile in 2017 according to forecast" is kind of misleading. "Zenith Media has released a forecast which says that mobile devices will account for 75% of global internet traffic in 2017." Globally that would appear to be on point since much of the world is mobile only. Laptop and desktops aren't booming. I wonder if tablets are considered mobile or only if they are on a 4G plan.
Mobile internet use passes desktop for the first time, study finds. "The combined traffic from mobile and tablet devices tipped the balance at 51.2 percent, vs. 48.7 percent for desktop access, marking the first time this has happened since StatCounter began tracking stats for [global] Internet usage."
Keep in mind that Mobile vs Desktop has unique User Behaviors. Maybe 55/45 is as far as we go.
"For someone in telecom, the surface-level answer seems obvious. Millennials grew up in the age of cell phones and the Internet. They expect constant connection, mobility, and innovation. This explains why millennials are shaking up personal mobility and communications. But how is it that they're having such an impact on business communications and collaboration too?" from this report.
To continue, "Millennials are becoming the majority in the workforce. They're already the largest generation in the U.S. workforce and should be more than half of the global workforce by 2020. Millennials are becoming managers and leaders. Their preferences and early-adopter tendencies are shifting the conversation about tech in the workplace."
This might be why so much emphasis is on 5G and mobility, but let's not forget that the 2 RBOCs get about half their revenue from mobile, so they will hype up the biggest half of their business.
I don't know how 5G will trump fiber to the home, especially for Boomers and older. Reading tablets and phones with old eyes is a challenge, believe me.
As we have recently witnessed with IOT and hacked phones, security will be an issue. A big issue. No idea how we handle that going forward since people still use password for password (and 1234 for PINs).
If 5G is sold in buckets of data, how does that compete against cable wi-fi or an almost unlimited fiber pipe? "Wi-Fi Expected to Carry up to 60% of Mobile Data by 2019". Is that still mobile only?
Fiber has had set-backs, especially with Google Fiber, but it is also on the rise. More than 600 independent telcos have FTTH projects in the works. Getting pole access via telco, power and government entities is a maze of red tape. Yet cell towers are facing bigger hurdles as no one wants one in their neighborhood. Companies like Crown Castle and Zayo are building out small cells along their dark fiber routes to help 4G fill-in. No idea how dense it will need to be for 5G -- or the lasting effects of that many radios and wi-fi routers per block.
What about the economic effects of fiber? "The evidence is mounting: investment in fiber improves the economic performance of a community as well as its quality of life," said FTTH Council President and CEO Heather Burnett Gold. Would fixed 5G present the same economics?
We will see a certain amount of the market go wireless only. "The latest data from the Centers for Disease Control paints the picture of a growing mobile first society in the U.S., with nearly half (45.4%) of U.S. households wireless only," from the CDC's National Health Interview Survey (NHIS).
5G will change things for a few companies. Point to Point licensed wireless has made a few CLECs happy (and profitable). But it isn't for everyone or for every where.
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