The FCC has issued a Notice of Proposed Rulemaking (NPRM) that proposes new rules for wireless broadband operating in frequencies about 24 GHz. The NPRM proposes to create new flexible use service rules in the 28 GHz, 37 GHz, 39 GHz, and 64-71 GHz bands. It proposes to make these bands available using a variety of authorization schemes, including traditional wide area licensing, unlicensed, and a shared approach that provides access for both local area and wide area networks.
These proposed rules are an opportunity to move forward on creating a regulatory environment in which these emerging next-generation mobile technologies – such as so-called 5G mobile service – can potentially take hold and deliver benefits to consumers, businesses, and the U.S. economy.
"Building off of years of successful spectrum policy, this NPRM proposes to create new flexible use service rules in the 28 GHz, 37 GHz, 39 GHz, and 64-71 GHz bands. The NPRM proposes to make these bands available using a variety of authorization schemes, including traditional wide area licensing, unlicensed, and a shared approach that provides access for both local area and wide area networks.
In addition, the NPRM provides a path for a variety of platforms and uses, including satellite uses, to coexist and expand through market-based mechanisms," the FCC wrote in a press release.
CTIA vice president of Regulatory Affairs Scott Bergmann called the NPRM an "important step" towards clearing additional spectrum. He wrote in a statement:
"Today’s action also reminds us that the diversity of 5G applications will require a broad range of spectrum types, including low and medium band spectrum, below 3 GHz and between 3 – 6 GHz, as well as streamlined infrastructure siting and more backhaul. The move to bring to market high band spectrum in bands above 24 GHz offers the potential for increased capacity and speeds, lower lag time and high density connections to unleash the Internet of Things. We look forward to working with the Commission to address a flexible framework for service in these bands that encourages continued investment and innovation to deliver the next waves of connected wireless applications."
Diminishing Outlook for a DISH Spectrum Deal As Small Cell Deployments Gain Momentum, by David Dixon, FBRWed, 10/21/2015 - 12:04 — Alan Weissberger
Attribution: This blog post was written by David Dixon of FBR and edited by Alan J Weissberger
Competition is dampening returns, but VZ's strategy is on track. Though behind on IoT, densification is helping to address 75% YOY data traffic growth; usage per customer should help augment revenue growth. Chicago and New York should benefit from the launch of unlicensed LTE in 2016 at relatively low cost, with AWS 3 spectrum utilized in 2017/2018. While DISH spectrum leasing provides a free option, VZ is also well positioned to leverage more low-cost capacity spectrum via 150 MHz of 3.5 MHz spectrum (70 MHz of priority access + 80 MHz of unlicensed spectrum).
The industry has rallied around the 3.5 GHz spectrum to build an effective ecosystem that should allow the spectrum to be put into use quickly. This, combined with refarming opportunities in the 850 MHz and 1.9,Ghz bands, has VZ well positioned on the spectrum front. We still think a DISH spectrum acquisition is unlikely, but a leasing agreement could be a useful Plan B, should VZ's small cell strategy run into speed bumps.
■ 3Q15 earnings recap. Consolidated revenue of $33.2B (+5.0% YOY) was ahead of consensus' $33.0B but below our $33.5B estimate, driven by a 5.4% YOY increase in wireless revenue, partially offset by a 2.3% YOY decline in wireline revenue. Consolidated EBITDA of $11.5B were below our Street-comparable estimate of $11.8B. Retail postpaid net adds were 1,289,000, with churn of 0.93% and a retail prepaid net loss of 80,000. The 3Q15 adjusted EPS of $1.04, after a $0.05 non-cash pension re-measurement adjustment, compared to our Street-comparable estimate of $1.02.
■ Divestitures and accounting changes drive lower EPS growth in 2016. Specifically: (1) Converting from a subsidized to installment wireless phone model increased earnings in 2015, as 100% of the equipment sale was recorded as revenue. However, 30% of the base is now not on subsidized pricing (expected to increase to 50% in 2016), normalizing the earnings impact); (2) divested Frontier properties are classified as discontinued operations, driving a $0.13–$0.14 EPS lift from discontinued depreciation expense; (3) a loss of higher-margin properties with stranded centralized costs, with some of the cost savings realized after the labor agreement; (4) losses for start-up businesses.
■ Estimate changes; lower price target. We lower our FY15 and FY16 estimates to account for divestitures, accounting impacts, and lower phone sales volume in 4Q (anniversary of iPhone 6 launch in 4Q14). FY15 revenue/EBITDA/ EPS estimates decline to $131.1B/$46.2B/$3.95, from $131.8B/$46.5B/$3.96; FY16 revenue/EBITDA/EPS estimates decline to $133.0B/$47.2B/$4.03, from $137.1B/$48.4B/$4.12.
Our Thoughts - Time Frames for Impact:
1. Aside from being well positioned on spectrum for the macro network, how what is the small cell opportunity as an alternative to more macro network spectrum going forward?
A change in the industry network engineering business model is underway toward using small cells on dedicated spectrum to manage more of the heavy lifting associated with data congestion. Verizon demonstrated this shift during the AWS3 auction: It modeled a lower-cost small cell network for Chicago and New York. We expect CEO Lowell McAdam to manage this shift from the top down to mitigate execution risk due to cultural resistance from legacy outdoor RF design engineers, whose roles are at risk as the macro network is de-emphasized.
Enablers include the advent of LTE, increased spectrum supply across multiple spectrum bands including LTE licensed, unlicensed (500 MHz of 5 GHz spectrum) and shared frequencies (150 MHz of 3.5 GHz spectrum), amid a fundamental FCC spectrum policy shift from exclusive spectrum rights to usage-based spectrum rights, which should dramatically increase LTE spectrum utilization (similarly to WIFI).
Previously, outdoor small cells co-channeled with the macro network proved challenging: While they can carry substantial load, they also destroy equivalent capacity on the macro network due to mis-coordination and interference, so the macro network carries less traffic but still looks fully loaded. AT&T discovered this in its St. Louis trials that, in part, steered it toward buying $20 billion of AWS3 spectrum.
However, the industry trend is toward LTE underlay networks, where small cells are put into other shared or unlicensed spectrum with supervision from and/or carrier aggregation with the macro network. It still requires good coordination across all cells for this to work; while Verizon initial proposals for 5 GHz are downlink only, we think uplink will also be used longer term because uplink needs more spectrum resources for a given throughput; we see higher uplink usage trends in the Asian enterprise segment and from Internet of Things (security cameras).
Time frame:12 to 18 Months
2. Does Verizon have sufficient spectrum depth to drive revenue growth longer term? Or does it need to aggressively acquire spectrum in future spectrum auctions or in the secondary market (DISH)?
The short answer is yes. Verizon carries 80% of data traffic on 40% of its spectrum portfolio; its combined nationwide CDMA and LTE spectrum depth is 115 MHz, ranging from 88 MHz (Denver) to 127 MHz (NYC). We expect AWS3 capacity spectrum to be deployed in 2017/18. Investors may not be crediting Verizon with potential to source more LTE spectrum from refarming of CDMA to LTE (22 MHz to 25 MHz) used today for CDMA data (22 MHz to 25 MHz).
Critically, network performance data show Verizon network close to the required performance threshold for a VoLTE-only service, suggesting there is additional refarming potential for the 850 MHz band (25 MHz) used today for CDMA voice and text. This band is likely to be transitioned in 5 MHz x 5 MHz LTE slivers to run parallel with the expected linear (voluntary) ramp, versus exponential (forced) ramp in VoLTE service.
More low-band spectrum is key for the surging IoT and M2M segments, which are proving to be more thirsty than "bursty."
Time frame: 2 Years+
This is a follow on to the recent post noting opposition to the FCC reclassifying linear OTT suppliers as pay tv providers.
A Millward Brown global survey of 13,500 multiscreen viewers concludes that the lure of online video extends to adults of all ages. The survey polled people who own a TV and either a smartphone or tablet—in 42 countries on what they think about video advertising. People are spending as much time watching online video as they spend watching TV, The survey also found an average online viewing time of 204 minutes a day for people ages 16 to 45, split evenly between TV and online.
Forty-nine percent of people liked mobile-app videos that reward people with virtual incentives like points for playing games, and 31 percent of consumers responded favorably to skippable mobile preroll ads. Only 14 percent of people said that they liked mobile pop-ups, the ads that take over a screen, and 15 percent tolerated nonskippable video ads.
Lot of new OTT players, competing with Netflix.
Source: “Premium Prospects for OTT in the USA” study from MTM, Ooyala and Vindicia
FCC chairman Tom Wheeler has said there'll be a final vote this fall on his proposal to define real time (AKA date/time or "linear") over-the-top video services as pay TV services that are delivered by multichannel video programming distributors (MVPDs).
Regulation of MVPDs stems from the 1992 Cable Act (approved despite veto of President Bush Sr). The act was created in order to amend the Communications Act of 1934 to provide increased consumer protection and to promote increased competition in the cable television and related markets, and for other purposes.
Currently, the MVPDs include cable, satellite, and telecom companies that offer pay TV service. However, real time (date and time or linear) Internet based video services like Dish Networks Sling TV, HBO Go, ESPN3, etc aren’t considered to be MVPDs under the current law. The FCC has proposed changing that law for linear OTT, but not for Video On Demand (VoD) providers.
Wheeler's stated goal is to insure non-discriminatory access to programming for both cable and broadcast. To do that he is seeking to read out the "facilities-based" requirement in the definition of MVPD. Cable operators and over-the-top services alike have registered reservations about that move (see For and Against below).
U.S. law requires that pay TV distributors (like Comcast, Time Warner Cable, and DirecTV) and programmers (like NBC, ESPN, and CNN) negotiate “in good faith” over the rights to broadcast content to customers. The distributors have to pay for the content, and the programmers aren’t allowed to indiscriminately withhold those rights.The law established a cumbersome term for pay TV service providers (MVPDs).
The Federal Communications Commission released a Notice of Proposed Rulemaking (NPRM) proposing to classify over-the-top (OTT) video programming providers as MVPDs if they delver "linear" programming. The FCC proposes that it will facilitate the availability of cable and broadcast television programming to OTT providers and enhance consumer choice and competition in the video market.
The reclassification would require OTT providers to carry certain programming and to comply with other regulations currently imposed on MVPDs like cable providers. The proposal would also give OTT video providers certain legacy negotiating and carriage rights with respect to both cable and broadcast programming.
The most important implication of that rule change is that programmers would then be forced to negotiate with Internet TV services just as they have to negotiate with cable companies.Services like Dish's Sling TV and Sony’s PlayStation Vue currently offer small bundles of channels from companies with which they have been able to strike deals. The same is expected of Apple's widely expected (but unannounced) Internet TV service. However, if the definition of MVPD is changed to include these new services, they could have access to many more channels, and thus offer a more diverse programming line-up.
The exact implications of reclassification aren’t yet clear, since these Internet-only services are intentionally offering fewer channels than traditional pay TV packages. It’s also worth noting that the rule change wouldn’t affect Netflix and other subscription services that only offer on-demand video; it only applies to live television services. Still, the prospect of a rule change clearly has many companies nervous.
For and Against:
1. The TV network affiliates of ABC, CBS, Fox, and NBC, which aren’t owned by the larger companies of the same name, filed their own comment in favor of the rule change. They’re excited because it would require that internet TV services gain their consent for retransmitting their broadcasts, just like cable companies have to under the 1992 Cable Act.
2. Disney, Fox, and CBS filed a joint comment to the FCC explaining that they were firmly against changing the definition of MVPD to include internet TV. “The proposal to expand the definition of MVPD raises significant and complex questions that could jeopardize the nascent state of the over-the-top market,” the companies said.Essentially, they argue that market forces have created a healthy environment for internet video to thrive, and that more government regulation is not only unnecessary, but could, as they put it, “limit the opportunity for consumers to obtain their desired video programming in a variety of new manners.” Other programmers, like AMC, and many cable companies, like Cablevision, are against the rule change for similar reasons.
1. Rep. Frank Pallone (D-N.J.), in his first media policy speech as ranking member of the House Energy & Commerce Committee, recently advised the FCC to "hit the pause button on regulating streaming video...In the case of defining online video providers as cable companies, I do not think we can say yes," he said. Pallone added: "Some have urged the FCC to help prop up some video business models through additional regulation. The companies that first asked for help claimed that new entrants must be defined as cable companies if they are to get access to content. They were essentially worried that they could not compete with traditional cable companies without importing cable regulations to the online world.But consumer demand since then has driven the market to create new business models and new ways to distribute programming."
2. Ajit Pai was one of two FCC commissioners to state his reservations about the proposed rule change after it was announced by Wheeler. Speaking at a Churchill Club breakfast on Friday July 17th, he made his position to the rule change official: "This morning I’d like to make it clear I strongly oppose this proposal.” Pai went on to lay out the reasoning behind his decision. He said it was important to perpetuate an environment where: “21st century entrepreneurial spirit isn’t saddled with 20th century rules and regulations.”
Mr. Pai claims the benefits provided to OTT video providers covered by the rule change are illusory. He said that even with the rule change, OTT providers would not fit the definition of a pay TVprovider being used by the patent office. So, it is likely the online companies would still not be able to benefit from the statutory license which allows MVPDs to carry local TV channels. However, hewarned that this would create a burden on OTT providers, because if a local programmer wanted carriage on their service the OTT provider would be required to negotiate with them. Further, Pai saidonline providers might end up facing other MVPD regulations on pricing, ad volume, employment practices, and even on the wiring inside a customer’s home; though it is unclear what these MVPD regulations mean in the OTT world.
3. Assistant Attorney General Bill Baer remarks on October 9, 2015 Keynote Address at the Future of Video Competition and Regulation Conference Hosted by Duke Law School:
"With respect to video programming, the streaming option is transformative. Programmers now have the Internet as an alternative to distribution over traditional broadcast, satellite and cable networks. Over the top programming via broadband Internet connections increasingly competes with what consumers used to access solely from their cable or satellite provider.
In 2009, there were two scripted original series delivered exclusively through online services – by 2014, there were 27. This new distribution option also lowers barriers to entry for non-traditional content, like YouTube and e-sports, and allows established programmers to deliver more tailored services. Networks can offer content a la carte, like CBS All Access and HBO Now/Go, or expand programming through services like ESPN3.
The FCC also took smart and measured action to protect competition with its recent Open Internet Order. That Order set out some simple, bright-line rules: broadband providers may not block access to lawful content; they may not throttle lawful content; and they may not take money to favor some lawful content over others. The Order, which the Justice Department is proud to help defend in court, effectuates the public policy Congress mandated in 1996 by ensuring that cable companies or other broadband providers don’t disadvantage competitors offering consumers video services via their broadband connections. This helps protect consumer choices and ensures that incumbents that sell both video and broadband internet do not use their control over broadband to suppress competition in video.
Sometimes the concern with undue restrictions on competition stems from incumbents seeking laws and regulations that would impede opportunities for rivals to challenge their control over the pipeline. We see that debate playing out in efforts by some internet service providers to seek state laws precluding local communities from encouraging alternatives to local broadband monopolies. The FCC, through its Municipal Broadband Order, targets those obstacles in order to allow municipalities to expand broadband availability. This helps bring greater competition to exactly the part of the industry that needs it the most.
The future of video competition should be left for the market to decide. Our role as antitrust enforcers and competition advocates is not to pick winners or losers. Our job is to make sure that existing bottlenecks are eliminated, that mergers don’t create new ones, and that our enforcement and policy efforts let competition thrive and innovation continue for consumers’ benefit."
What's Your Take?
Readers are invited to weigh in with their opinions via the comment box below this article. Alternatively, you can email the author at: email@example.com
Comment from Ken Pyle of Viodi View:
Excellent summary. This has been a long time coming. This 2008 obscenity ruling foreshadowed the long reach of the FCC into the Internet using video as its Trojan Horse. http://viodi.com/2008/06/24/fcc/
China's Subsidized Broadband Investments Boosts Growth in Global CPE Market (IHS & China State Council)Fri, 09/25/2015 - 00:35 — Alan Weissberger
IHS-Infonetics raised its outlook for the broadband customer premises equipment (CPE) market, which includes DSL, cable, fiber-to-the-home (FTTH), residential gateways and mobile broadband CPE. In a September 2015 report, the firm noted it increased its 2019 worldwide broadband CPE forecast by 8 percent, to US$12.4 billion.
BROADBAND CPE MARKET HIGHLIGHTS:
- The big story this quarter is FTTH optical network terminals (ONTs) in China, unit shipments of which more than doubled year-over-year, from 9.8 million to over 20 million from 2Q14 to 2Q15
- In 2Q15, the global broadband CPE market grew 5 percent from the previous quarter, to $2.9 billion; unit shipments grew 11 percent, to 61 million
- Worldwide total broadband CPE revenue is up 7 percent from the year-ago second quarter, when it was just under $2.7 billion
- Quarter-over-quarter, from 1Q15 to 2Q15:
- DSL CPE unit shipments were down 1 percent to 23 million, with VDSL IADs posting the highest growth (+11 percent)
- Cable CPE units were up 1 percent to 11.6 million (90% of which were WiFi-enabled), with DOCSIS 3.0 modems posting the highest growth (+13 percent)
- Fixed LTE CPE shipments grew 4 percent
“The primary source for raising our global broadband CPE forecast is the massive investment currently ongoing in China. Despite reported economic headwinds, the Chinese government continues to subsidize telco investments in fiber infrastructure to expand accessibility and throughput. The result is heavy spending on GPON and EPON ONTs,” said Jeff Heynen, research director for broadband access and pay TV at IHS.
“At the same time, the shift from fiber-to-the-building (FTTB) to FTTH architecture is well underway in China. A primary reason for this architectural shift is that FTTB plus ADSL take-rates at China Telecom have been disappointing; consumers aren't interested in a connection that offers only a marginal improvement over what they already have. If they are to subscribe to a home broadband service, it needs to provide a minimum of 8MB to 10MB speeds,” Heynen said.
BROADBAND CPE REPORT SYNOPSIS:
The quarterly IHS Infonetics PON, FTTH, Cable, DSL, and Wireless Broadband CPE market research report tracks DSL, cable and FTTH CPE; mobile broadband routers; and residential gateways. The research service provides worldwide and regional market size, vendor market share, forecasts through 2019, analysis and trends. Companies tracked include Alcatel-Lucent, Arris, AVM, Cisco, Comtrend, D-Link, Dasan Networks, Fiberhome, Hitron, Huawei, Mitsubishi, Netgear, OF Networks, Pace, Sagemcom, SMC Networks, Sumitomo, Telsey, Technicolor, TP-Link, Ubee Interactive, Zhone, ZTE, ZyXel, and others.
From a May 2015 BBC report titled China reveals ambitious broadband plan:
China is to accelerate the development of its high-speed broadband network to raise speeds but cut prices, its State Council has said. Fewer than half of the country's population has internet access and those who do can often experience slow connections. The country's premier also urged telecoms companies to cut fees, including data roaming charges. It was not revealed how much money would be invested.
Besides the government investment, Premier Li Keqiang also urged telecoms companies to cut their prices and up their speeds, according to China's cabinet the State Council. He also said they should cut data roaming charges for Chinese tourists, although he acknowledged that it was ultimately for the market to decide. He did, however, announce a round of investment infrastructure improvements to the same end.
"China has more cell-phone users than any other country, but its internet service speed ranks below 80th in the world due to underdeveloped information infrastructure," the premier said, according to a release from the State Council.
He added that "speeding up the construction of information infrastructure will boost investment and support" in China, as well as helping "mass innovation."
Mr Li did not say how much investment would be needed, but officials have previously earmarked around 2tn yuan ($322bn, £204bn) to improve China's broadband infrastructure by 2020.
China's internet penetration rate was only 47.9% last year, with connectivity especially low in smaller cities and rural areas. This compares with about 75% of people in the United States. In the UK, 73% of households have broadband access, Ofcom said in December 2014.
The Chinese cabinet's statement added that the nation would look to open up the telecoms market and encourage increased competition, including through expanding a pilot scheme for broadband services this year.
"There is still not enough competition, which has led to telecoms fees being relatively high while there is still a lot of room to improve the quality of service," the statement said, citing an official at China's official State Information Centre.
IHS-Infonetics CABLE WEBINAR:
Join analyst Jeff Heynen Sept. 29 at 11:00 AM ET for Delivering Cable Services in the Cloud Era, a free, live event that examines how virtualization will impact the MSO network and takes a look at key residential and commercial offerings enabled by NFV and SDN. Register here.
by David Dixon, FBR & Co., edited by Alan J Weissberger (emphasis added in BOLD font)
We believe there is a supply shift in (cellular) capacity spectrum coupled with an increase in spectrum utilization beginning with 150MHz of 3.5GHz LTE spectrum to be auctioned by the FCC in late 2016.
Last week, Verizon CEO Lowell McAdam provided an update on the company's thoughts on DISH spectrum. More specifically, CEO McAdam noted for the first time that he would be interested in leasing spectrum from DISH, but was also quick to point out that he is not interested in acquiring DISH for access to the spectrum. Many believe this opens the door for more dialogue with DISH that could lead to a deal, but we believe this is simply a wise, short-term insurance option exercised by Verizon as it develops the 3.5GHz ecosystem in parallel. Both Verizon and T-Mobile plan to deploy LTE-Unlicensed (LTE-U) and LTE Assisted Access (LAA) at 5GHz and our checks indicate solid interest in 3.5GHz spectrum for LAA or autonomous use for indoor capacity.
We believe urban network designs are changing and industrywide support of 3.5 GHz is moving quicker than expected, which should continue to weigh on DISH spectrum value.
■ 3.5 GHz support moving quickly. The FCC issued an Order in April 2015 where it proposed to introduce the 3.5 GHz band (currently occupied by the Department of Defense) to create a Citizens Broadband Radio Service (CBRS) with a three-tiered spectrum sharing system on 70MHz of the total 150MHz. Tier 1 access will be made available to radar systems for the U.S. Navy which currently uses this band. Tier 2 will be priority access licensees (PAL) which will likely be wireless carriers who will acquire 10 MHz licenses for a renewable short term through auction (in late 2016). PAL users will agree to protect government users from interference, but receive no protection from government users. Tier 3 provides general authorized access (GAA) to all public users, including carriers, enterprises, or unlicensed users, which suggests utilization will closely match the Wi-Fi ecosystem today. Our checks show the 3.5 GHz spectrum works and the ecosystem is developing very quickly with broad support from carriers and manufacturers of chipsets, handsets, and radios (i.e., T-Mobile US, Verizon, Alcatel, Nokia, Intel, Qualcomm, iconectiv (Ericsson), and Federated Wireless).
■ Deciphering VZ comments. While DISH spectrum is most aligned with VZ's spectrum portfolio, we do not believe VZ views wholesale access to DISH spectrum as a long-term solution to capacity management. We think Verizon views a potential spectrum leasing deal with DISH as a nearterm spectrum insurance play as development, testing, and support for 3.5 GHz continues. VZ has been the most aggressive proponent of 3.5 GHz spectrum and is in the forefront of 4G small cell implementation amongst all carriers.
Important Information: FBR is the global brand for FBR & Co. and its subsidiaries.This report has been prepared by FBR Capital Markets & Co. (FBRC), a subsidiary of FBR & Co.FBRC is a broker-dealer registered with the SEC and member of FINRA, the NASDAQ Stock Market and the Securities Investor Protection Corporation (SIPC). The address for FBRC is 1300 North 17th Street Suite 1400, Arlington, VA 22209.All references to FBR & Co. mean FBR Capital Markets & Co. (FBRC) and its affiliates.
Company-Specific Disclosures: FBR acts as a market maker or liquidity provider for the company's securities: DISH Network Corporation For up-to-date company disclosures including price charts, please click on the following link or paste URL in a web browser: www.fbr.com/disclosures.aspx
AT&T today named San Antonio as the fifth Texas city to receive its GigaPower gigabit service, which is a FTTH based version of it's Uverse triple play service. The four other Texas cities to get GigaPower are: Austin, Ft. Worth, Dallas, and Houston. The service, which offers super high speed internet services, quick enough, according to the company, to download an entire movie in 36 seconds.
San Antonio Mayor Taylor announced in July that Google is deploying Google Fiber Internet service which competes head on with AT&Ts GigaPower.
Five things about AT&T GigaPower and how it relates to Google Fiber:
1. Both Google Fiber and AT&T offer speeds of up to one gigabit per second. That’s really, really fast. You can download 25 songs in one second, a high-definition television show in three seconds and a high-definition movie in 36 seconds, according to AT&T.
2. Gigabit speed in other cities costs about $70 per month for both Google Fiber and AT&T GigaPower.
3. San Antonio is the fifth market in Texas to get AT&T GigaPower. The service is already available in Dallas, Fort Worth, Houston and Austin. Nationwide, GigaPower is up and running in 15 markets, with four more on the way.
4. GigaPower will be available in San Antonio on Monday, September 28. Google Fiber is still planning its rollout of the 4,000 miles of fiber optic cable it will install throughout the city.
5. Although AT&T and Google Fiber have won headlines, neither are the first to offer gigabit speed Internet in San Antonio. Feisty little Grande Communications offered it earlier this year, but it’s only available in a few neighborhoods around San Antonio.
Caption for above Figure: AT&T Tech pulling Fiber cables
Last week, in a speech to the American Enterprise Institute, Federal Communications (FCC) Commissioner Ajit Pai said that the agency's decision to impose utility-style regulation on broadband has slowed infrastructure investment and deployment, referencing recent capex research that showed a 12% decline in capital expenditures by major wireless companies during the first half of 2015.
According to USTelecom analysis for wireline, wireless and cable broadband providers, U.S. broadband providers invested $78 billion in network infrastructure in 2014, which was $14 billion, or 22%, greater than the $64 billion invested just five years ago in 2009. However, these surging investment levels have taken place during a period of light regulation. Now, with the FCC order to require broadband providers to follow Title II rules, numerous economic analyses forecast negative long-term consequences on investment, innovation and other long-term economic benefits.
On Sept 18, 2015, Tara Shields wrote in a TechZone360 blog post:
"The FCC can only be called “embattled” when it comes to the legal storm brewing around Net neutrality. It’s facing lawsuits from several broadband providers, and one of that group’s top industry associations argues that regulation of the world of the Internet will have a chilling effect on investment."
“This policy shift is particularly unfortunate given that the nation and economy have reaped substantial benefits from broadband investment over the last couple of decades,” said Patrick Brogan, vice president of industry analysis at USTelecom, the industry association, in a blog. He added, “The recent FCC decision to reverse course and regulate broadband as a Title II utility risks dampening broadband investment, thereby slowing the pace of innovation over the long term. As USTelecom has written, the rules dampen expectations of long-term revenue growth, increase compliance costs, and increase the risk-adjusted cost of capital.”
Brogan added, “The U.S. approach to date has emphasized light regulation and investment in competing facilities rather than resale, leading to more facilities-based competition than most of the rest of the world.”
Continued wireline industry investment will be essential to network modernization and international competitiveness of course, to support demand for cloud computing and data centers, telework, video and audio streaming, video calling and conferencing, data analytics and other services based on the growing Internet of Things. Meanwhile, nearly all mobile broadband traffic depends on fixed network backhaul or offload onto Wi-Fi-enabled fixed networks. Thus, wireline providers are among the critical contributors to our nation’s innovative capacity.
FCC regulation threatens that, according to USTelecom and its members.
“While it is hard to isolate the impact of regulation among all relevant factors, and it takes time for a major regulatory shift to reveal the full extent of its market impact, at least one independent financial analysis predicts a 4.5 percent decline in wireline and wireless telecommunications services capital investment in 2015, excluding cable,” Brogan warned.
IHS Residential Gateway Survey Highlights + Softness in Cable Broadband Equipment Market to End Later This YearWed, 09/16/2015 - 20:50 — Alan Weissberger
DEFINITION & SURVEY:
Residential gateways (RGs) combine a DSL, FTTH, cable or 3G/LTE modem with routing and switching capabilities and a WiFi access point, and are increasingly used by service providers to deliver voice, data and video services. For example, this author has a RG for AT&T U-verse, which includes a VDSL modem, WiFi AP for home internet use, and a separate WiFi bridge/ private network for U-verse wireless receivers.
IHS-Infonetics conducted in-depth interviews with service providers across the globe who use residential gateways to provide broadband services and found that only 31% of respondents plan on virtualizing their residential gateways by 2017.
RESIDENTIAL GATEWAY SURVEY HIGHLIGHTS:
- 75% of respondents currently offer Gigabit Ethernet connections on residential gateways, growing to 88% in 2016.
- Among the wireless interfaces IHS asked about, 802.11ac shows the most growth, with 69 percent of respondents saying they plan to include it in their residential gateways by next year.
- Consistent with last year's findings, Arris topped the list of perceived top residential gateway vendors, followed once again by Pace.
"Despite the obvious benefits of virtualizing residential gateways in the home-namely shortening of provisioning time and elimination of truck rolls-our survey respondents aren't completely convinced it's something they will implement in the next couple of years. Nearly 70 percent said they weren't planning on doing so or didn't know if they would be virtualizing their gateways by 2017," said Jeff Heynen, research director for broadband access and pay TV at IHS.
"Unlike the data center, where virtualization has been in place for some time, it will take longer for service providers to virtualize their residential access networks and CPE," Heynen said.
The 25-page 2015 "IHS Infonetics Residential Gateway Strategies and Vendor Leadership: Global Service Provider Survey" captures service providers' strategies for deploying residential gateways and delves into which applications will be the primary drivers for residential gateway deployments. The study also covers service provider opinions of manufacturers including Actiontec, Alcatel-Lucent, Arris/Motorola, Comtrend, D Link, FiberHome, Huawei, Netgear, Pace, Technicolor, ZTE, ZyXel, and others.
Separately, IHS Infonetics said that softness in cable broadband equipment spending seen in the first quarter of 2015 continued into the second, with global revenue dipping 2 percent quarter-over-quarter, according to IHS. Traditionally, the second quarter has been a very good one for cable broadband expenditures.
“Right now, the cable broadband market is like seeing the forest for the trees. The second quarter of the year was slower, but looking at year-over-year revenue comparisons, the market grew by double digits. There’s no question that the continued rollout of 100Mbps+ services via DOCSIS 3.0 today and DOCSIS 3.1 later this year will continue to drive the market forward. There are committed initiatives in place at Comcast and Liberty Global, with others certain to follow as the year progresses,” said Jeff Heynen, research director for broadband access and pay TV at IHS.
In an email, Mr. Heynen wrote to this author: "First, let’s make sure we are talking specifically about the cable broadband CPE market only (DOCSIS modems, etc.) and not the CMTS/CCAP business, which is network infrastructure. If we are comparing revenue for just DOCSIS CPE (no set-top boxes), then pre-Motorola ARRIS had around a 20-25% market share in terms of global revenue, compared with Cisco’s 15-20%. Once ARRIS gobbled up Motorola Home, its global revenue share jumped to 35-40%, while Cisco’s stayed at roughly 15%."
Author's Note on Arris:
In an email, Kim Howard, IHS-Infonetics Marketing Manager (and this author's principal contact at the firm) wrote:
"We’ve been tracking ARRIS for as long as I can remember. The report I looked at goes back only to 2005, but we have older data too. At that time, ARRIS’s cable broadband equipment revenue was only about a quarter of Cisco’s, but then they pulled ahead of Cisco in 2009 by a bit."
From an April 13, 2010 Forbes article:
"Time Warner Cable and Comcast have increased their business offerings through Arris. Arris has upgraded its modems to the latest DOCSIS 3.0 technology which supports higher broadband speeds up to 100 Mbps. Cable operators like Comcast and Time Warner Cable are now offering higher broadband speeds through Arris modems."
In April 2013, Google sold its Motorola Home business to Arris. (Google later sold it's Motorola mobile handset business to Lenovo). Motorola Home covers cable TV modems/set top boxes and internet devices, which combined with Arris' existing businesses creates what it's calling "the Premier Video Delivery and Broadband Technology Company."
In a June 10, 2015 report IHS-Infonetics said "ARRIS dominated the cable broadband market again in 1Q2015, supported in part by the early availability of its E6000 CCAP-capable product."
CABLE BROADBAND MARKET HIGHLIGHTS:
- Global CCAP, CMTS, CMC and edge QAM revenue totaled $465 million in 2Q15
- In the key North American market, DOCSIS channel shipments were down 25 percent sequentially in 2Q15 after increasing 13 percent in 1Q15; revenue was also down 19 percent due to a slowdown among a handful of larger operators
- Coax media converters are being used in emerging markets, particularly China and Southeast Asia, to provide lower-cost C-DOCSIS services to multiple dwelling units; IHS expects this trend to continue through at least 2019
- Thanks to the early availability of its CCAP-capable product, Arris dominated the cable broadband market once again in Q2, capturing over half of worldwide revenue
To purchase any of the IHS-Infonetics reports, please visit www.infonetics.com/contact.asp
WEBINAR: CABLE SERVICES IN THE CLOUD ERA
Join Jeff Heynen Sept. 29 at 11:00 AM ET for Delivering Cable Services in the Cloud Era, an event examining how virtualization will impact the MSO network and looking at key residential and commercial offerings enabled by NFV and SDN. Register here.
IHS-Infonetics: Mobile Infrastructure Market= $11.4 Billion in Q2; Maturing Market ROI; Ericsson OutlookWed, 09/09/2015 - 11:38 — Alan Weissberger
Driven by strong 3G W-CDMA capacity projects in EMEA and unabated LTE activity in China, the global macrocell mobile infrastructure market was up 2 percent in the 2nd quarter of 2015 (2Q15) from the prior quarter, and up 2 percent year-over-year, according to the IHS Infonetics Mobile Infrastructure Equipment report from IHS (NYSE: IHS).
“This time around, W-CDMA alone pulled the 2G/3G market out of the dumps and contributed to the growth of the whole mobile infrastructure market. Substantial 3G deployments took place in Brazil, India, the Middle East, Myanmar, Thailand and Vietnam,” said Stéphane Téral, research director for mobile infrastructure and carrier economics at IHS.
“Brazil kicked off a massive 2G GSM to 3G W-CDMA migration, and Thailand has ordered mobile operators to shut down their GSM network to re-use the spectrum for LTE,” Téral said.
MOBILE INFRASTRUCTURE MARKET HIGHLIGHTS:
- In 2Q15, the worldwide macrocell mobile infrastructure market totaled $11.4 billion
- LTE revenue was essentially flat (+1 percent) in 2Q15 from 1Q15, but grew 10 percent from the year-ago 2nd quarter
- IHS believes LTE will peak at $23 billion in 2015 and then start to decline as a result of diminishing rollouts worldwide
- 422 commercial LTE networks have been launched as of July 2015, 363 of which are of the FDD (frequency division duplex) variety
- Ericsson and Huawei share the LTE infrastructure market share lead in 2Q15, each claiming just over 20 percent
- Mobile infrastructure software is forecast by IHS to grow at a 5-year (2014–2019) compound annual growth rate of 8 percent
MOBILE INFRASTRUCTURE REPORT SYNOPSIS:
The quarterly IHS Infonetics Mobile Infrastructure Equipment market research report tracks more than 50 categories of equipment, software and subscribers based on all existing generations of wireless network technology, including radio access networks (RANs), base transceiver stations (BTSs), mobile softswitching, packet core equipment and E-UTRAN macrocells. The research service provides worldwide and regional market size, vendor market share, forecasts through 2019, deployment trackers, in-depth analysis and trends. Vendors tracked include Alcatel-Lucent, Cisco, Datang Mobile, Ericsson, Fujitsu, Genband, HP, Huawei, NEC, Nokia Networks, Samsung, ZTE, others.
CLOUD RAN WEBINAR:
Join analyst Stéphane Téral Sept. 15 at 11:00 AM ET for How to Achieve Full-Blown Cloud RAN, an event exploring the benefits and challenges operators can expect to encounter on the road to a full-blown cloud RAN architecture. Register here.
- Good News for Mobile Networks in Large Venues: Carriers Adding More DAS
- 5G Hype Aside, True 4G Is Finally Materializing, Says IHS
- Mobile Services Market Dragged by Europe Again
- Operators Spent $67B Outsourcing Network Tasks in 2014
- LTE Peaking at $6 Billion a Quarter – Not Enough to Offset 2G/3G Decline
- Mobile Operators Using EDGE, HSPA+ to Improve User Experience on Road to LTE
Mobile Infrastructure Equipment Market:
The latest report from telecoms research firm Dell’Oro Group (July 2015) forecasts a 2% annual decline in the global mobile infrastructure market between 2014 and 2019.
What are the reasons behind this decline? Firstly, large-scale rollouts of LTE networks in the US and China, the world’s two biggest economies, are coming to an end. In China, operator rollouts of LTE are reaching their peak. Meanwhile, in the US, both Verizon and AT&T have announced their intention to slow down their capital spending after years of intense LTE investment.
Regardless of the rate at which data consumption is growing, CAPEX investment by operators is projected to grow globally at just 1% between 2013 and 2019, with most of this growth coming from emerging markets. In contrast, mature markets such as North America and Western Europe have already slowed to a halt and show negative CAPEX growth for this period.
Revenue trends for the period also highlight the problem for operators to monetize data. Globally, revenues are set to only grow by 1.6% annually up to 2019: once again, it will be emerging markets, and not mature ones, that will deliver this growth (source: Ericsson). This is a clear sign that mobile broadband (like voice before it) is on course to become a commoditised service that offers operators only limited opportunities for differentiation.
A maturing market with limited ROI:
It’s therefore high time to acknowledge that the network equipment market, after almost thirty years, has transformed from a fast-moving, high-growth emerging sector into an established mature market that delivers much lower returns.
The explanation for this is quite simple. Thirty years ago we had no mobile subscriptions and no mobile networks: today we have 7.1 billion mobile subscriptions worldwide and networks that cover 90% of the world’s population.
The success of the mobile industry was built with investment money attracted by the promise of lucrative growth prospects. In those early days, telecoms vendors made a fortune selling expensive infrastructure equipment for operators to build their networks.
However, those days are at an end: technology advances means that today, every node in the network not only costs just 10-20% of what it did 15 years ago, but can also handle 100x more network traffic.
With 90% of the world now covered by mobile networks, new rollouts are also coming to an end. Operators simply have no need to continue building out their macro networks at the same rate and scale as previous years.
Installing new infrastructure – for example, to deliver better coverage in rural areas: or to improve indoor coverage levels – is expensive and delivers only limited returns. Add in the paradox of the sharp rise in data traffic versus flat revenues for operators, and it’s easy to understand why operators are struggling to find new ways to boost margins and deliver growth.It’s this quest for better margins and an uptick in growth that explains the current trend for operator consolidation and the popularity of network-sharing deals. Of course, for equipment providers, these developments mean that their operator customer base is actually now shrinking.
From standardisation to commoditization:
Today’s global mobile telecoms sector could never have achieved the growth and the success it has without standardisation in the industry. This was vital in the early days in order to build a truly international market. Today, however, standardisation serves vendors rather less well. Infrastructure equipment has become a standardised commodity where large scale is all that matters. As a result, we now only have three global vendors competing in a market of ever-decreasing margins and returns.
Ericsson has long been a leader in the global mobile infrastructure market, holding a market share of over 30%. However, its share has declined over the past three years due to a technology shift from CDMA to 3G-4G/LTE and growing competition from lower cost China vendors Huawei and ZTE. The company’s mobile infrastructure equipment revenues have been down 6% since 2011, and this trend is expected to continue in the near future, with the Nokia-Alcatel Lucent merger emerging as a threat in the U.S. and Huawei presenting a serious challenge in Europe.
Ericsson has an operating margin of 6-8% on equipment sales. It’s also currently undertaking yet another cost reduction program. The company is looking to build its capacity in the LTE equipment domain, mainly in markets such as India and China, where the LTE presence is still limited. While the technology shift from CDMA/2G/WCDMA to 3G-4G/LTE has negatively impacted Ericsson, the company is not dwelling much on its dominance in the older CDMA domain. Instead, it is evolving with the market, investing in research and development (R&D) related to 4G/LTE and 5G technologies.