Point Topic Analysis of Fixed Broadband Tariffs from 300 Operators in 90 Countries

Point Topic has published the analysis of more than 4,000 fixed broadband tariffs from 300 operators in more than 90 countries. The new research, which looks at trends in broadband prices and speeds in Q2 2020, reveals:

  • Driven by the drop in the average cost of fibre broadband, the average monthly charge for residential broadband services fell by 2.2% compared to Q4 2019. This was despite the slight increase in the average cost of cable and copper connections.
  • The average bandwidth provided to residential subscribers has gone up by 17% compared to Q4 2019. The boost was caused by the increase in bandwidth provided over cable and fibre networks – 24% and 11% growth from Q4 2019 respectively.
  • The drop in the cost of cable and fibre connections has driven the average monthly charge for business broadband down by 3.2% compared to Q4 2019.
  • Asia-Pacific has retained its position as the fastest and cheapest region for residential broadband. In the business market, where the cost per Mbps is lowest in Western Europe, Asia Pacific leads in terms of the average bandwidth.
The complete tariff report is available by clicking on the link below (no subscription or registration is required):

Fixed broadband tariffs – key trends in Q2 2020

As always, we have ranked 84 countries by the median, entry-level and average broadband tariff.

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For the complete ranking tables, see Broadband tariff country scorecards – Q2 2020

The data behind these reports is taken from Point Topic’s Broadband Operators & Tariffs service.

Access to the full version of this report and our latest tariff database featuring more than 5,000 services from over 90 countries are available to subscribers of Point Topic’s Broadband Operators & Tariffs as well as Double Play and Triple Play services. To find out more, please telephone +44 (0)20 3301 3303 or e-mail simona@point-topic.com.

References:

http://point-topic.com/free-analysis/residential-broadband-tariffs-ranking-by-country-in-q2-2020/

Cogent Communications service revenues and connections increase; uncertain COVID-19 impact

Backgrounder:

Cogent Communications offers a variety of data communications services which include:

Dedicated Internet Access, Ethernet Point-to-Point, Ethernet VPLS, and Colocation Services to Enterprise customers, Carrier & Service Providers and Application & Content Providers.

For more information about the Cogent, please refer to this IEEE Techblog post.

1Q 2020 Earnings Report:

Today, the company reported first-quarter service revenues up 5.1 percent to $140.9 million for the quarter, up 5.6 percent on a constant currency basis.  Total customer connections increased by 5.7% from March 31, 2019 to 87,213 as of March 31, 2020 and increased by 0.8% from December 31, 2019Gross margins increased to an all time high of 60.5 percent in the quarter, which was a 70 percent YoY increase.  Traffic growth was 36 percent YoY.

On-net [1.] revenue was up 6.5 percent to $103.5 million, as the company increased the number of on-net buildings by 117 over the year and 22 since December to 2,823 at end-December. On-net customer connections increased by 5.8% from March 31, 2019 to 75,163 as of March 31, 2020 and increased by 0.8% from December 31, 2019.

Note 1. On-net customers are located in buildings that are physically connected to Cogent’s network by Cogent facilities.

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  • Off-net customer connections increased by 5.2% from March 31, 2019 to 11,721 as of March 31, 2020 and increased by 0.5% from December 31, 2019.
  • Net cash provided by operating activities decreased to $28.5 million for Q1 2020.
  • EBITDA decreased by 4.4% from Q4 2019 to $50.4 million for Q1 2020 and increased by 6.0% from Q1 2019 to Q1 2020.

According to Zacks, the current consensus EPS estimate is $0.26 on $145.68 million in revenues for the second quarter and $1.05 on $586.21 million in revenues for the current fiscal year.

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COVID-19 Impact:

During the first quarter, the impact of the Covid-19 pandemic on Cogent was limited, the company said. In the last two weeks of March, it saw a positive impact on net-centric revenue but a slight slowdown in corporate installs. There was also a material increase in traffic on the network. Most of its staff have transitioned to remote working.  Field engineers continue to install, maintain and upgrade Cogent’s wireline (mostly fiber) network.

The ultimate impact of COVID-19 is unknown as this time due to uncertainty, said Cogent Communications CEO David Schaeffer on the company’s 1Q-2020 earnings call:

We hope everyone remains safe and healthy during these times. We value our employee safety and take all of the necessary precautions to keep our Cogent colleagues safe in these difficult times. While we believe we are a beneficiary of a stay at home model, we are uncertain about the long-term implications for economies around the world. With the large number of employees staying at home and the increased rate of unemployment globally.

On the previous (4Q 2019) earnings call, Mr. Schaeffer said:

The Cogent Network remains the most interconnected networks in the world, with direct connectivity to 6,950 networks. Less than 30 of these networks that connect to Cogent are settlement free peers with the remaining over 6,920 networks being paying Cogent transit customers. We are currently utilizing approximately 29% of the lit capacity in our network. We routinely augment this capacity, as portions of our network need those augmentations to maintain these low utilization rates.

Cogent’s Network Scope, Scale and Traffic Growth:

On the May 7th (1Q-2020) earnings call, Dave talked about the scope and scale of Cogent’s network:

At quarter end, we had over 961 million square feet of multi-tenant office buildings connected to the Cogent network.

Our network consists of over 36,000 metro fiber miles and over 58,000 intercity route miles of fiber. The Cogent network remains the most interconnected in the world, and we directly connect to over 7,040 networks. Of these networks, less than 30 are settlement-free peers. The remaining networks that we connect to are Cogent customers.

We are currently utilizing approximately 35% of the lit capacity in our network. We routinely augment capacity on parts of our network as we see increases in traffic to maintain these low utilization rates. For the quarter, we achieved sequential traffic growth of 12% and year-over-year traffic growth of 36%. We operate 54 Cogent-controlled data centers with over 606,000 feet of space and those facilities are operating at approximately 33% capacity.

Our business remains completely focused on the Internet and IP connectivity services, as well as data center co-location. Each of these services are a necessary utility for our customer. Our multiyear constant-currency long-term growth target of approximately 10% and our long-term EBITDA margin expansion rate of approximately 200 basis points should continue for the foreseeable future. Our board of directors approved our 31st consecutive increase in our regular quarterly dividend.

During the Q&A, Dave answered a question related to trends in data (non-voice) traffic growth:

We support a number of key applications, video conferencing, audio conferencing, and all of that traffic has materially increased as we’ve gone to a more work from home environment. People will eventually return to their offices, and there will be a reduction, maybe not a complete revert to where we were before, but a reduction in that type of traffic. That traffic is de minimis compared to streaming video traffic, which is the primary driver of unit volume growth.

We see this broad mix of OTT business models, accelerating their displacement of linear television. That is a permanent trend, not a temporary trend. What is temporary as people may be watching more minutes a day of video, but what is permanent is the migration from linear to over the top. And while we saw a material spike up in the rate of acceleration, that rate of acceleration has returned to a more normalized rate of acceleration, but we’re off of a higher base.

And we do expect our rate of traffic growth for the full-year 2020 to be above that of 2019.

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About Cogent Communications

Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent’s facilities-based, all-optical IP network backbone provides services in over 200 markets globally.

Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.

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References:

https://www.prnewswire.com/news-releases/cogent-communications-reports-first-quarter-2020-results-and-increases-regular-quarterly-dividend-on-common-stock-301054299.html

https://www.cogentco.com/en/news/events/1392-cogent-communications-first-quarter-2020-earnings-call

https://www.fool.com/earnings/call-transcripts/2020/05/08/cogent-communications-group-ccoi-q1-2020-earnings.aspx

https://www.cogentco.com/files/docs/news/media_kit/cogent_fact_sheet.pdf

Cogent Communications still growing strongly -18 years after the Fiber Optic Bust

https://www.fool.com/earnings/call-transcripts/2020/02/27/cogent-communications-group-ccoi-q4-2019-earnings.aspx

https://techblog.comsoc.org/2016/02/28/analysis-of-cogent-communications-group-results-by-david-dixon-of-fbr-co/

Cisco’s Annual Internet Report (2018–2023) forecasts huge growth for IoT and M2M; tepid growth for Mobile

According to Cisco’s newly renamed Annual Internet Report [1.], networked devices around the globe will total 29.3 billion in 2023, outnumbering humans by more than three to one.  The number of overall connected devices: 29.3 billion networked devices by 2023, compared to 18.4 billion in 2018.

The report also anticipates that the internet of things (IoT) will spread to 50% of all networked devices through machine-to-machine (M2M) technology and that the internet will reach 5.3 billion people, compared to 3.9 billion in 2018.

“There is a lot of growth that still can happen from a user perspective,” said Shruti Jain, senior analyst with Cisco.  “Machine-to-machine is going to grow phenomenally,” she added.

Note 1.  Cisco’s Annual Internet Report was formerly titled Visual Networking Index or VNI)

Global Internet user growth

Figure 1.  Global Internet user growth

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Global device and connection growth

Figure 2.  Global device and connection growth
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Cisco said that about 70% of the global population will have mobile-network-based connectivity by 2023, with the total number of mobile subscribers growing from 66% of the population in 2018 to 71% of the population (5.7 billion) by 2023. Of those, about 10% will be 5G connections by the end of the forecast period, with the number of global mobile devices rising from 8.8 billion in 2018 to 13.1 billion, with 1.4 billion of those being 5G-capable.

Global mobile subscriber growth

Figure 6.   Global Mobile subscriber growth

5G speeds are anticipated to be 13-times faster than the average mobile connection speed: 575 Mbps by 2023.   Ms. Jain noted that as mobile network speeds approach those of wireline networks, it opens up new possibilities for mobile applications.

“Soon, those speeds are going to get very close to WiFi and [wired] broadband speeds, and be able to support a lot of new applications and experiences,” she said.

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Other key findings from the 2020 Cisco AIR:

-The number of devices per person will continue to rise, from 2.4 networked devices per-capita in 2018 to 3.6 devices by 2023.

-The number of public WiFi hot spots will increase fourfold by 2023, to nearly 628 million.

-Almost 300 million mobile applications will be downloaded by 2023, with the most popular ones being social media, gaming and business applications.

-Power users’ impact is dwindling. Cisco found that globally, the top 1% of mobile data users accounted for 5% of mobile data in 2019. That has dropped significantly since 2010, when the top 1% of mobile users accounted for 52% of mobile data usage.

Increasing video definition: By 2023, 66 percent of connected flat-panel TV sets will be 4K

Figure 3. Increasing video usage: By 2023, 66 percent of connected flat-panel TV sets will be 4K

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Summary: Multi-domain innovation and integration redefines the Internet

Throughout the forecast period (2018 – 2023), network operators and IT teams will be focused on interconnecting all the different domains in their diverse infrastructures – access, campus/branch, IoT/OT, wide-area, data center, co-los, cloud providers, service providers, and security. By integrating these formerly distinct and siloed domains, IT can reduce complexity, increase agility, and improve security. The future of the Internet will establish new connectivity requirements and service assurance levels for users, personal devices and IoT nodes, all applications (consumer and business), via any network access type (fixed broadband, Wi-Fi, and cellular) with dynamic security. Through our research and analysis, we anticipate innovation and growth in the following strategic areas.

Applications: Across virtually every business sector, there is an increased demand for new or enhanced applications that improve customer experiences. The Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML) and business analytics are changing how developers build smart applications to simplify customer transactions and deliver new business insights. Businesses and service organizations need to understand evolving demands and deliver exceptional customer experiences by leveraging technology.

Infrastructure transformation: The rapid growth of data and devices is outpacing many IT teams’ capabilities and manual approaches won’t allow them to keep up. Increased IT automation, centrally and remotely managed, is essential for businesses to keep pace in the digital world. Service providers and enterprises are exploring software-defined everything, as well as intent-driven and context-powered infrastructures that are designed to support future application needs and flexibility.

Security: Cybersecurity is a top priority for all who rely on the Internet for business and personal online activities. Protect every surface, detect fast and remediate confidently. Protecting digital assets and content encompasses an ever-expanding digital landscape. Organizations need the actionable insights and scalable solutions to secure employees’ devices, IoT connections, infrastructure and proprietary data.

Empowering employees and teams: To achieve business agility and prepare employees for the future, empowering global work forces with the right tools is a must. Automation, collaboration and mobility are essential for managing IT complexity and new customer expectations and demands. Business teams, partners and groups in all types of organizations need to collaborate seamlessly across all application mediums that are relevant to various roles and responsibilities. Employees and teams need accurate and actionable data to solve problems and create new growth strategies.

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For more information:

Several interactive tools are available to help you create custom highlights and forecast charts by region, by country, by application, and by end-user segment (refer to the Cisco Annual Internet Report Highlights tool). Inquiries can be directed to ask-ciscoair@cisco.com.

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References:

https://www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/annual-internet-report/white-paper-c11-741490.html

 

Point Topic: Fixed Broadband Tariff Report for Q4 2019

Point Topic has published the analysis of more than 5,000 fixed broadband tariffs from over 300 operators in more than 90 countries. The new research, which looks at broadband prices and speeds in Q4 2019, reveals:

  • Globally, the overall average monthly charge for residential broadband services increased by 2% from the previous quarter to reach $93 PPP.
  • The average bandwidth provided to residential subscribers increased by 5% compared to Q3 2019. The boost was caused by the increase in bandwidth provided over cable and fibre networks.
  • At the end of Q4 2019, the average combined cost per Mbps for business broadband packages dropped by 4% and stood at $1.06. In comparison with Q3 2019, copper connections became considerably more expensive – their cost per Mbps went up 20%.
  • In Q4 2019, the lowest priced business tariffs were offered in Western Europe and North America. While being the fourth most expensive market, Asia-Pacific offered the highest average download speeds

 

The complete tariff report is available by clicking on the link below – no subscription or registration is required:

Fixed broadband tariffs – key trends in Q4 2019

As always, we have ranked 84 countries by median, entry-level and average broadband tariff.

Dell’Oro: Cable Broadband Access Equipment Revenue to Decline from $13B in 2019 to $11B in 2024

According to a newly published report by Dell’Oro Group, sales of cable broadband access equipment will decrease with a meager 2 percent CAGR from 2019 to 2024. The virtualization of network infrastructure, which is already playing out in the cable market, will extend to other equipment areas, thereby reducing traditional hardware revenue.

The cable broadband category includes both network infrastructure and consumer premises equipment.

That expected decline will be driven by multiple factors, including a saturating broadband services market in regions such as North America and Europe. Another key factor is the lack of a near-term need for many cable operators to move ahead with big access network upgrades following their recent migrations to DOCSIS 3.1, a technology that gives cablecos the ability to deliver 1-Gig services, Jeff Heynen, senior research director at Dell’Oro Group, said.

“For the North American cable operators, there isn’t a competitive incentive for them to really force upgrades at this point,” Heynen said.  “Virtualization, coupled with subscriber saturation in some mature markets will result in gradually declining revenue for broadband access equipment globally,”Heynen added .

Additional highlights from the Broadband Access 5-Year Forecast Report:

  • Virtual CMTS/CCAP revenue will grow from $90 Million in 2019 to $418 Million worldwide in 2024, as cable operators move to these platforms to expand broadband capacity.
  • Mesh-capable routers and broadband CPE units will reach 30 Million units in 2020.

Although AT&T is pushing FTTP and having some success in upgrading some of its existing customers, that has not had much of an impact on major US cable operators such as Comcast and Charter Communication, which added 424,000 and 313,000 broadband subs, respectively, in Q4 2019.

“There has to be a driver for them to spend, and I really don’t see it,” Heynen said.

The cable industry is fast at work on DOCSIS 4.0, a next-gen specification that will support multi-gigabit speeds alongside lower latency capabilities and a higher level of network security. An even longer-term target being pursued is “10G,” a cable industry initiative that’s aiming for 10-Gig symmetrical speeds on multiple types of access networks, including hybrid fiber/coax (HFC), FTTP and even wireless.

Speaking on the company’s Q4 earnings 2019 call last week, Tom Rutledge, Charter’s chairman and CEO, made it clear that these are longer-term initiatives that include features and capabilities that can be added on an incremental basis. “There’s no immediate need to deploy a new upgrade to the marketplace today,” Rutledge said. Charter wrapped up its D3.1 network upgrade in late 2018.

That scenario also gives operators time to push ahead with related projects, including migrations to distributed access architectures and network virtualization.

Even as the move to D4.0 is still out on cable’s horizon, virtualization efforts are expected to ramp up in the next few years. Dell’Oro expects virtual cable modem termination system (CMTS) and converged cable access platform (CCAP) revenues to climb from just $90 million in 2019 to $418 million worldwide in 2024. Heynen said the 2019 total represents about 12% of the total for the CMTS/CCAP core market.

Comcast, along with some small and midsize operators in the US and Western Europe, has begun to deploy virtualized access networks. Harmonic, a lead partner for Comcast’s virtual CMTS rollout, is set to announce Q4 2019 results later today and is expected to offer an update on its vCCAP business.

The bigger broadband picture
And cable isn’t the only market feeling some pain. Dell’Oro projects that revenues for the broader access equipment market, including DSL and PON technologies, will decline from $13 billion in 2019, to $11 billion in 2024.

A big culprit there is the ongoing decline of DSL spending, Heynen said. Another contributor to the decline in hardware revenues will come as the PON market starts to virtualize the OLT (optical line terminal), he added.

Dell’Oro’s forecast currently does not include opportunities around fixed wireless. Fixed wireless will have a role in the broadband market, but “I’m still reluctant that fixed wireless will be as big as others predicted it to be,” Heynen said.

References:

Broadband Access Equipment Revenue Set to Decline from $13 B in 2019 to $11 B in 2024, According to Dell’Oro Group

 

https://www.lightreading.com/optical-ip/fttx/cable-access-hardware-revenues-to-dip-as-virtualization-takes-hold—analyst-/d/d-id/757259?

 

 

Kagan: Broadband Wireline Internet growth slowing with cable leading telcos; U.S. vs Europe cord cutters compared

Broadband service providers continued to gain customers ahead of widespread competition from pre-standard 5G wireless offerings, but growth is slowing as nearly four out of five homes in the U.S. now subscribe to a wireline internet connection, according to a new report released today.

Kagan, a media research group within S&P Global Market Intelligence, estimates cable and telecom providers combined added 339,000 residential subscribers in the second quarter. The momentum was largely driven by the cable industry. Cable operators saw the rate of growth shrink on a sequential and annual basis, but they did not however lack market share gains, adding nearly half a million new residential customers versus a net loss for the telecoms of 155,000 customers.

Ian Olgeirson, Research Director at Kagan commented: “We estimate wireline broadband penetration increased slightly to 78.5% of occupied households. Cable’s residential gains did not match the levels from the previous or year-ago quarters, but net adds in the trailing 12 months are still higher at 2.8 million when compared to the same period in 2018. Telco broadband slumped in the second quarter, returning to a pattern of six-figure losses after holding steady in the first quarter. Growth in telco fiber-to-the-home connections was not sufficient to overcome losses to legacy copper and fiber-to-the-node DSL connections.”

Separately, Kagan says that Americans are not the only ones cutting the cord. The vibrant and free-to-air broadcasting options available in most of the EU countries we surveyed makes paying for TV a hard sell, subscription video on demand or otherwise.

For instance, when Kagan asked cord cutters and “cord nevers” why they cut the cord or never added a video service, 35% of German cord cutters/nevers answered that “rabbit ears” fulfill their video entertainment needs. All respondents from EU countries surveyed scored above 15% on this metric. But just 10% of U.S. survey-takers felt the same way.

Kagan thinks the longer history with pay TV in the U.S., one that was forecast by Paul Kagan in the late 1960s, has left Americans with more paid TV options than Europeans, leading to fewer viewers stateside who mostly use over the air, or OTA.

But the longer pay TV history in the U.S. does not imply Americans like paying for the service.

Nearly half of American cord cutters/nevers said price was the main reason they cut the cord or never connected, the highest rate among all seven countries we reviewed. Americans pay close to $100 per month on average for traditional multichannel video services, with EU countries coming in lower. Sweden’s average monthly fee for video is under $10 and survey-takers there were consequently less concerned with pricing. A significant factor in lower pay TV access prices in Europe is that sports and premium channels are only included in top TV tiers, with basic packages boosted by a large number of OTA (over the air) channels.

U.S. survey-takers were also the only ones to say online video services were more important than free OTA in terms of why they cut the cord or never added a cord. For instance, while 10% of Americans said rabbit ears were enough reason to cut the cord, 14% said the same about online video services, including Netflix. Again, this could be a case of the U.S. being first to market with online video services and remaining relatively ahead of the pack.

As traditional media companies look towards a digital future it’s important to remember that what matters to US consumers might matter less overseas.

About S&P Global Market Intelligence:

At S&P Global Market Intelligence, we know that not all information is important—some of it is vital. We integrate financial and industry data, research and news into tools that help clients track performance, generate alpha, identify investment ideas, understand competitive and industry dynamics, perform valuations and assess credit risk. Investment professionals, government agencies, corporations and universities globally can gain the intelligence essential to making business and financial decisions with conviction.

S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI).  For more information, visit www.spglobal.com/marketintelligence

Brazil launches first phase of 100G fiber project, expands 4G and edge cloud networks

Brazil’s Ministry of Science, Technology, Innovation and Communications, in partnership with the National Education and Research Network (RNP), has launched the first phase of the Ciencia Conectada program, which will expand the broadband infrastructure using optical fiber in the North and Northeast regions. The academic internet network is expanding its speed from 10 Gbps to 100 Gbps, benefiting federal universities, federal institutes and research units, in addition to fostering economy and local development.

The first phase of the program will reach 77 locations, six states, 16 cities, and 64 federal, state and private institutions this year. By 2021, the 16 metropolitan networks that will allow the connection of 1,317 schools to the internet will be completed.

https://www.telecompaper.com/news/brazil-launches-first-phase-of-100-gbps-fibre-project-in-northeast–1304172

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4G networks reached 144 new cities in Brazil in the first half of 2019, taking the total to 4,573, where 96 percent of the population live, according to data published by Telebrasil. In the period January-May, 12.3 million new 4G Sim cards were activated, for a total of 142 million 4G users.

Over the 12 months to June, 24 million new 4G Sim cards were activated (20%). In the same period, 146 new cities were connected to 3G networks, taking the total to 5,433 cities, where 99.7 percent of the Brazilian population lives.

The number of mobile internet users reached 207.6 million, according to the industry group. If fixed connections are included, there were a total of 239.3 million internet users at the end of May. Of these, 31.7 million were fixed broadband subscribers, a segment that grew 4.6 percent in 12 months, with 1.8 million new accesses.

https://www.telecompaper.com/news/brazil-extends-4g-networks-to-144-more-cities-in-h1–1304151

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TIM Brazil is expanding its edge cloud network using Nokia AirFrame servers that feature 2nd-gen Intel Xeon Scalable processors to virtualise its data centres by 2021.

The news will make TIM the first operator in Latin America to adopt the AirFrame technology for its data centre servers, improving server capacity and delivering better quality, internet access and video consumption for its users in Brazil.

“Virtualisation is important to improve user experience in our network, which will count with more speed and data usage stability,” said Leonardo Capdeville, CTIO, TIM. “With this core virtualisation, TIM is leading with a 5G pilot project over the network. This process also allows us to strengthen our customers’ data protection.”

The rollout will comprise of 1000 state-of-the-art AirFrame servers that will virtualise network functions to guarantee better customer experience. As well as creating edge data centres the agreement with Nokia also moves TIM Brazil a step closer to 5G, which requires a cloud core for network activities.

“Nokia’s unique solution, designed to support precisely this evolution to 5G, will give TIM Brazil a crucial ongoing competitive advantage as they evolve their core networks into cloud,” added Leandro Monteiro, Nokia sales director in Brazil. “Nokia is proud to partner with TIM as it invests in cloud native technologies to maintain its position as one of Latin America’s most efficient networks.”

https://www.capacitymedia.com/articles/3824033/tim-brazil-expands-edge-cloud-capabilities

Comcast earnings beat with strong broadband subscriber growth; AT&T is still largest U.S. pay TV provider but bleeds video subs

Despite much higher video subscriber losses than in the past, Comcast generated healthy revenue and profit margin increases in Q2-2019, based on the strength of its performance in the broadband, wireless, business services and other sectors.   Comcast, the largest cable and broadband provider in the U.S., reported steady revenue and subscriber gains nearly across the board on July 25th, with the glaring exception of its slumping Xfinity pay-TV business.  It also racked up revenue gains in its NBC Universal cable networks, broadcast TV and theme park units, as well as customer revenue gains at its new Sky operation in Europe.

On the pay-TV side, Comcast suffered less collateral damage than most of its peers (e.g. AT&T Direct TV and Direct TV now bled subscribers in the most recent quarter – see Editor’s Note below).  The cableco/MSO saw its video subscriber losses increase in the second quarter as cord-cutting by consumers accelerated. The company shed 224,000 video subs (209,000 residential and 15,000 business subs) during the quarter, far worse than its loss of 140,000 subs a year earlier. That reduced its total video base to 21.64 million, maintaining its status as the nation’s second-largest pay-TV provider behind AT&T.  Despite these much heftier sub losses, Comcast’s video revenues declined just 0.6% on a year-over-year basis to $5.59 million, thanks to price hikes and subscriber tier upgrades. More importantly from the company’s perspective, video ARPU increased by 1.3%, as the operator, like a growing number of its peers, continues to shift its focus from low-margin to high-margin customers.

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Editor’s Note: The second quarter is typically the worst of the year for pay-TV providers. For example, AT&T lost 778,000 premium TV subscribers in the second quarter, including DirecTV satellite and U-verse television customers – a sharp acceleration in subscriber losses from the 544,000 that cut the cord in Q1-2019.  The total number of premium TV video connections fell to 22.9 million, its lowest total since June 30, 2017, when it stood at almost 25.2 million, an overall net loss of 2.3 million.

AT&T also lost 168,000 streaming DirecTV Now accounts and AT&T said it expects a similar level of video losses to continue in the current quarter. It’s somewhat surprising that AT&Ts video streaming offering is seeing a mass exodus with the number of subscribers peaking at 1.858 million in September 2018 to 1.34 million now, a decline of more than 500,000.

 

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Comcast is by far the largest broadband provider in the U.S.  (that’s right- ahead of AT&T, Verizon and CenturyLink).  The cableco/MSO added 209,000 new broadband Internet subscribers (182,000 residential and 28,000 business) in the spring quarter, boosting its total broadband base to 27.8 million at the end of June. While that’s down markedly from its gain of 260,000 broadband subs a year earlier, the year-ago total marked the company’s best-ever broadband quarter. Comcast executives stressed that they’re well on their way to their 14th consecutive year of 1 million-plus broadband subscriber increases.

Broadband revenues surged 9.4% to $4.66 billion in the 2nd quarter, due to the impressive increase in broadband subscribers. Residential broadband ARPU (average revue per unit) rose by 4.2% year-over-year, as fewer bundling discounts and subscriber upgrades to higher-priced speed tiers lifted revenues even without price hikes.

“The ARPU is growing, broadband revenue is growing, and it’s margin accretive, so it’s helping the EBITDA growth,” said Comcast Cable President and CEO Dave Watson, in the cableco/MSO’s Q2 earnings call. “So overall, I think we have a solid pipeline for broadband innovation.”

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On the wireless front, Comcast’s Xfinity Mobile service continued its steady, if slightly slower, ascent to profitability. The MSO added 181,000 mobile lines in Q2, raising its total to nearly 1.6 million lines. The strong mobile line gains were off from adds of 204,000 lines in the year-ago period but up from adds of 170,000 lines in Q1.

As a result, Comcast’s mobile revenues rose 21.0%, to $244 million. Operating cash flow from Comcast’s mobile business improved as well to $88 million, down substantially from a year earlier, as the new unit edges ever closer to profitability.

Speaking on the company’s earnings call Thursday morning July 25th, Comcast Senior EVP and CFO Mike Cavanagh said Xfinity Mobile is “already positively impacting [customer] retention and attracting new customers” to the company’s cable offerings. He predicted that the mobile unit will start producing positive economic results when penetration rates reach “the mid-to-high single digits.”

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Similar to other large North American pay-TV providers that have reported Q2 earnings so far.  “We’ll continue to emphasize our approach to this segment,” said Comcast Cable President and CEO Dave Watson. “We’re not going to chase the low end.”

Comcast officials still had no early results to share about Xfinity Flex, a new video streaming product for broadband-only customers that’s powered by the MSO’s cloud-based X1 platform (including the X1 voice-based navigation and search system) and integrated with OTT offerings like Netflix, Amazon Prime Video and YouTube. But executives said more information will come soon.

“It’s an important long-term product,” Watson said Flex on the company’s Q1 earnings call in April, noting it’s early use in a “targeted fashion” to build a broader video relationship with the operator’s broadband-only subs. “We think Internet-delivered video is a good thing for the cable business.”

Also on the streaming video front, Comcast executives revealed a bit more about the forthcoming OTT-delivered video service from the conglomerate’s NBCUniveral (NBCU) unit. Plans call for the OTTP offering, to be based on the existing Now TV platform of Comcast’s Sky service in Europe, to launch in April.

The new ad-supported service mainly will feature acquired movies and TV shows, rather than exclusive originals, at least at first, said NBCU CEO Steve Burke. Despite a market crowded with incumbents like Netflix and Amazon, as well as such new entrants as Disney, WarnerMedia and Apple, Burke is not worried, he said, in a statement.

“Our service is very different from Netflix,” said Burke. “We believe we’ve got some ideas that are innovative and don’t really want to share those until we get right close to launch, but we’re very pleased to have The Office and very optimistic about our streaming plans at this point.”

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In a fresh research note issued after the earnings call this morning, Craig Moffett, a principal analyst at MoffettNathanson, gave an approving nod to this strategy:

“As cable operators stop chasing low-value video subscribers, their margins will rise with mix shift, their margins will improve further with improvement in video economics on those that remain; their margins will expand still further as broadband ARPU accelerates (fewer bundled discounts), and their margins will expand still further as their non-programming costs fall as a percentage of revenue.  Almost predictably, Comcast raised its cable margin 2019 guidance yet again (now to ‘over’ 100 bps for the year, from previously ‘up to’).”

Comcast Business kept up its steady growth pace of the past decade and a half. With close to 2.4 million commercial “customer relationships,” the cableco boosted its business service take to $1.93 billion in the second quarter, up 9.8% from a year ago. As a result, the company is now on target to approach the $8 billion mark in annual business revenues this year.

References:

https://www.lightreading.com/services/broadband-services/comcast-broadband-mobile-growth-engines-keep-purring/d/d-id/753019?

http://www.broadbandworldnews.com/author.asp?section_id=472&doc_id=753022&

https://www.cnbc.com/2019/07/25/comcast-q2-2019-earnings.html

https://www.cmcsa.com/financials/earnings

https://seekingalpha.com/article/4277488-t-mass-exodus-continues

Paul Budde: What Does ‘Peak Telecom’ Mean for 5G? Asian Telecoms Maturity Index

By Paul Buddeedited by Alan J Weissberger

Peak Telecom and 5G:

Peak telecom” is described as the maximum point of expansion reached by the traditional telecommunications industry before the internet commoditized the industry to a utility (dumb) pipe.

I thought of this when I read the recent outcomes of the famous Ericsson Consumer Lab survey. The company used the results of the survey to counteract market criticism regarding the viability of the telco business models in the deployment of 5G.

It will come as no surprise that Ericsson, as a manufacturer of 5G gear, has given the report a positive spin. However, I remain skeptical about the short-term business models for the deployment of 5G (so does the editor). Once full deployment happens over the coming decade, I certainly can see long-term opportunities. These will revolve around content and apps as well as areas such as IoT in smart homes, cities and energy. However, the question is, will this lead to new financial opportunities for the telcos? Peak telecom questions such an outcome.

What exactly do these broader 5G opportunities mean for the telecommunications operators — the companies who have to build the infrastructure? It is here that we can see that we have reached peak telecom. For several years now, we have seen that growth in the telecom industry is rather stagnant. Profits are still being made but mostly generated by lowering costs. For example, new telecom access speeds are provided at no extra cost to the users. Basically, consumers are getting more for the same price.

There has continuously been the promise of new revenues that could be generated through a range of new telecoms development (internet, broadband, smartphones). The telcos have, however, largely failed to move into the content/app market where the new profits are occurring. Companies such as Amazon, Facebook, Google, Alibaba, Tencent and Netflix have been the primary commercial beneficiaries of these developments.

The Ericsson report mentions that mobile access in congested areas and in mega-cities is becoming a problem and that 5G will assist here. I agree, but will customers pay extra for it?

It also mentions opportunities for 5G to be an alternative to fixed broadband and for it to become a key technology in fixed wireless networks. There certainly will be niche market opportunities here, but this is a highly price-sensitive market. The economics of mass fixed infrastructure favors it over mobile infrastructure. Any gains here will basically be a substitution of a fixed service they already provide, so the overall net gain for the industry will be neglectable.

The report indicates that 20% of smartphone users are prepared to pay a premium for 5G. The current commercial 5G service in South Korea is charging a meager 10% premium. No doubt, in coming years, through competition even that premium will disappear.

The report indicates that consumers expect new innovation such as foldable phones, VR glasses, AI, 360-degree camera, robotics and so on. All true but it all depends how affordable these products and service will be and again who will develop these next “must-have” products? Here, also, the telcos will most likely be missing out.

I fully agree with the report’s assessment that we have to look at 5G over the more extended period. As mentioned, there are good reasons to believe that once full deployment exists, it will open up many new business opportunities.

However, will this promise be enough for telcos to make the substantial upfront investments that are needed? This without a clear indication if they can extract any significant new revenues from 5G? The more likely scenario is that the digital giants are going to be the ones that will reap the real profits of those innovations.

I stick to my argument that the key reason for the telcos to move into 5G is because of network efficiencies, which lead to lower costs.

–>This is absolutely critical in this peak telecom market.

To end on a more positive note for the industry, there is the first mover advantage with short term premium price opportunities for those who can tap into the early adopters’ market. There is always a group of users who simply do want to have the newest of the newest, whatever the price. The size of this market varies — depending on how “hot” the new product is seen by this market segment — and could be anywhere between 10% and 25%.

This is certainly attractive for the telcos as it allows them to recoup some of the initial investment rapidly. In relation to mobile products and services, this mainly relates to “must have” gadgets and, in particular, the smartphone. The current price (in Korea) of a 5G phone is approximately US$1,500 (AU$2,153), without any outstanding features.

The lack of attractive smartphones could be another negative for some of the early adopters. Time will tell.

By Paul Budde, Managing Director of Paul Budde Communication – Paul is also a contributor of the Paul Budde Communication blog located here.
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Asia Telecoms Maturity Index:

This index, created by Paul Budde, analyzes the Broadband, Mobile and Fixed Line markets of a specific country as well as a range of parameters to help you evaluate the economic development of a country.

BuddeComm’s Telecoms Maturity Index measures and ranks the maturity of a country’s telecoms industry on a scale of 1 to 100. All countries are placed into one of three categories: ‘Market Leaders’, ‘Market Challengers’ and ‘Market Laggards’, according to their Market Index score.

The Telecoms maturity index is used to fuel regional analysis, it provides a unique approach and allows a comprehensive country vs region comparison. Asian Telecoms Maturity Index example

Asia – Mobile Network Operators and MVNOs

Asian countries in the Market Leaders category have fixed broadband penetrations in the range of 25% and 42% and mobile broadband penetrations in the range of 98% and 135%. South Korea is the top-ranking country in Asia with a Telecoms Maturity Index score of 92, followed by Hong Kong (90) and Macau (86).

Find more information on the Asian telecoms market or Contact Us.

For more information on BuddeComm’s Telecoms Maturity Index, see:

https://www.budde.com.au/Research/Buddecomm-Telecoms-Maturity-Index

 

Dell’Oro: Broadband access revenue declines 2% y/y in Q1-2019

In a new report published Monday June 10th, Dell-Oro Group said that global revenue for broadband access equipment declined 2 percent Y/Y in 1Q 2019, reaching $2.9 Billion. Increased shipments of XG-PON1, XGS-PON, NG-PON2 OLT ports, and DOCSIS 3.1, CPE offset CCAP (Converged Cable Access Platform) spending declined for the second straight quarter.

“The 10 Gbps FTTH deployments continue to build momentum,” said Jeff Heynen, Research Director, Broadband Access and Home Networking. “The next-gen fiber increases nearly offset the weakness in cable CCAP spending, as cable operators push off new capacity purchases while they determine how to move forward with distributed access architectures,” Heynen added.

Following are additional highlights from the 1Q 2019 Broadband Access Quarterly Report:

  • Total cable access concentrator revenue decreased 38 percent Y/Y to $275 M, driven by a strong slowdown in CCAP channel purchases in North America and EMEA.
  • Total DSL port shipments decreased 21 percent Y/Y, with ADSL ports down 71 percent and VDSL ports down 20 percent.
  • Total PON OLT port shipments increased 7 percent Y/Y, with XGS-PON ports up 337 percent.
  • Total SOHO WLAN units increased 13 percent Y/Y, driven by the driven by 19% Y/Y growth in broadband CPE with WLAN and 125% Y/Y growth in mesh router units.

According to Dell’Oro Group’s Q1 2019 Broadband Access Quarterly Report, total cable access concentrator revenue was down 38% year over year to $275 million, driven by the slowdown in CCAP channel purchases in North America and EMEA.

Reference:

http://www.delloro.com/news/broadband-access-equipment-revenue-dipped-2-9-b-1q-2019

Dell’Oro PRESS RELEASES: