Where is the Value of a Fixed Line?

One often hears it said that “broadband is the anchor service” for fixed-line service providers in the future. One also frequently hears that new value-added services would be a healthy antidote to service providers becoming “dumb pipe” access providers. One sometimes also assumes the growing use of "connected devices" benefits mobile service providers (it does), but not fixed-line providers.

All of those statements are true, but analysts and observers might be missing the growing potential of the “dumb pipe” access business, especially as the home and business environments increasingly feature the use of many different “untethered” devices, and as more users get used to switching even their mobile devices to untethered fixed line connections (Wi-Fi). Razorsight Blog


the value of a fixed-line broadband connection will grow as each additional connected device is added.

In August 2011, for example, the share of non-computer traffic for the U.S. market increased to 6.8 percent. The largest percentage from this share came from mobile devices, which drove 4.4 percent of total digital traffic in the U.S. market. The second largest driver of non-computer traffic was the tablet category, contributing nearly two percent of total traffic.



As the share of U.S. non-computer traffic rose over the past four months, the percentage of that traffic driven by tablets has risen from little more than 20 percent to nearly 30 percent. In May 2011, 22.5 percent of non-computer traffic came from tablets. By August 2011 that figure had grown to 28.1 percent, eating into the share of traffic garnered by mobile devices and other web-enabled devices.

That is but one example of how use of connected devices is changing the value and use of fixed-line broadband connections.



In fact, the GSMA expects the number of total “connected” devices to increase from nine billion in 2011 to more than 24 billion in 2020. “Mobile connected devices” (presumably those with a subscriber information module) will grow 100 per cent from more than six billion in 2011 to 12 billion in 2020.

Charter Boosts Speeds

In markets where Charter Communications has deployed DOCSIS 3.0 technology, about 95 percent of its service area, the company is increasing Charter Internet Express download speeds from 12 Mbps to up to 15 Mbps, and increasing upload speeds from 1 Mbps to up to 3 Mbps.

"Charter Internet Plus" download speeds are being increased from 18 Mbps to up to 30 Mbps, and upload speeds are being increased from 2 Mbps to up to 4 Mbps.

Those changes are being made with no increase in cost. In 2010, for example, cable companies outgained telcos about two to one for net additions (new customers less departing customers). 2010 net broadband additions

The speed boosts are the cable company's fourth speed increase in the last three years.

Future of Fixed-Line Telephony?

It is clear fixed line telephone services in the United States are beginning a rapid decline, with users favoring mobile phones and computer-enabled telephony, some would argue. Bill Reidway, Neustar Vice President of Numbering Services Product Management Reidway, is among them.


“As the fixed line network begins to fall by the wayside” explained Reidway, “the notion of telephone numbers associated with a specific geography falls with it.” Neustar’s Vision on the Future of Telephony That doesn't mean numbers are less important, just useful in a new way. 


Reidway also explained that although telephone numbers no longer have rigid location sensitive significance, users still generally prefer to associate their phone numbers with a location, and that is particularly important for business users. While it is certainly possible for a business or individual to use an area code, or even country code from any point in the world, he believes an area code “still says something about the identity behind the number.”


One might argue that, over time, the role of a fixed network will change, with users relying on fixed networks for some services and features that are superior to wireless, including bandwidth, cost and features. Business users are likely to derive higher value from fixed line voice than consumers will, for example. 


Most popular personal consumer devices will sport Wi-Fi capability, for example, meaning that "untethered" connectivity is becoming more important over time. 


Fixed networks, in other words, will become the primary broadband connection used inside homes. Given the existence of mobile data caps, it will make sense for most consumers to switch even their mobile devices to Wi-Fi connections when at home.

Most consumer devices use, will use, Wi-Fi

U.K. Will Not Reach 30 Mbps Broadband Access Goal by 2020

Rural fiber infrastructure cost

BT Group Director of Strategy and Policy Sean Williams considers the EU target of 30 Mbps to all citizens by 2020 as "not achievable for any country." 


That doesn't mean complete or even substantial failure. In fact, one might argue the opposite. 


BT does seem to believe it will be possible to provide 30 Mbps access to about 90 percent of the U.K. population. 


For the final 10 percent of homes or locations, 2 Mbps might be more reasonable, for all sorts of good reasons related directly to the cost of building communications infrastructure in rural and isolated areas. Some might argue that the cost curve looks very much like the curve that describes the cost of providing health care to people, where most of the cost is incurred late in life. 


Likewise, the cost of building facilities to the last couple of percentage points of locations is very high. That's one reason satellite broadband providers have a business. The core market is about two percent of U.S. households, for example. 


The high cost of reaching the last 10 percent of locations in either the U.K. or U.S. markets always will be a problem, at least when using fixed networks, whether the services are narrowband or broadband . EC broadband target unreachable 


So some might argue that 90-percent coverage of the United Kingdom with 30 Mbps service by 2020 is not in any way "a failure." It is a success. But the problem with all infrastructure goals is that it always is a stretch to reach the last 10 percent of potential customers with networks of any kind.

Dish Will Launch Mobile Video Service?

Dish Network will use the S-band wireless spectrum it acquired via its $2.775 billion purchases of DBSD North America and TerreStar Networks to push a mobile video strategy to complement its wired video delivery service, according to Dish Chairman Charlie Ergen. Dish's Ergen: Spectrum will enable mobile video play

"So the way I look at it is, we believe that the wireless business is a place where, if we're in the video business, we need to be more than fixed, we need to be a mobile video as well," Ergen said. 


Though it also remains possible that Dish Network might look at other wireless services as well, some of that thinking might hinge, in part, on what happens with the AT&T bid to buy T-Mobile USA. 


If approved, it is expected there will be required divestitures, and that could be something Dish Network might be able to take advantage of. If the merger is not approved, there are other possible opportunities that could arise. Some of those possibilities could include the ability for Dish Network to rather quickly acquire market share in the mobile broadband and voice business, for example.


Though that might not have seemed so logical in the past, much is changing in the consumer services business. Cable TV operators, for example, increasingly are talking about broadband access as the core service, with a corresponding lessening of emphasis on video services. 


Ergen still believes there is an opportunity for stand-alone video services, as cable operators increasingly seem to be embracing the value of a "lead with broadband access" strategy.


Having said that, Ergen said the other macro trend is that people continue to use more data. And the key point is that such data could be video, could be voice, could be lots of other things. 


"So I think that strategically, we believe we have to be in something other than a standalone video business as a company, and we are in the transition of being able to do that," said Ergen.  "hat's going to take some time and that is unclear where that is going to be a smart business decision or not."


That's a rather more candid assessment than many CEOs might make, but Ergen is a straight shooter. The larger issue is that the traditional telecom and video entertainment businesses are unstable in a new way. Broadband is becoming the lead offer for cable operators as they continue to lose market share to telcos and satellite, while wireless now is the lead offer for telcos. 


Even "bundles," which have driven growth for more than a decade, though still important, are losing some marketing emphasis in favor of concentration on the lead offers. For Dish Network, a new lead offer might emerge in the future. 

Only 5% of U.S. Homes Do Not Buy At Least 1 Broadband Service

There’s an interesting bit of data in the most-recent Nielsen “Cross Platform” report on media behavior of U.S. consumers. The study shows that 72 percent of households buy both broadband access and a video subscription service. Broadband drives consumer spending

About 18 percent of households buy video service but no broadband, while five percent buy broadband but not video service. About five percent of households do not buy either video service or broadband.

Add it all up and just five percent of U.S. households do not buy at least one broadband service, with the dominant pattern being “video plus broadband access.”

That doesn’t mean narrowband services are unimportant, either in terms of gross revenue or profit margin. It does mean that when forecasters say the telecom business will in the future be built on broadband services, “tomorrow” already has arrived.