2015 Broadband Growth

S vurveOne of the things I’ve figured out about the telecom industry is that statistics are often used to tell very different stories. Consider this example regarding wireline broadband adoption:

In December Pew Research released the results of a survey that suggested that overall wireline broadband adoption had dropped to 67% in 2015, down from a high of 70% in 2013. This was the first time I had ever heard any suggestion that the total number of landline broadband connections have flattened out, let alone dropped.

Pew went on to say that main culprit for the drop in broadband adoption is broadband prices and that a lot of homes feel they cannot afford a broadband connection, and instead rely solely upon broadband from their smartphone. That sounds plausible, and Pew was comparing to a very similar survey they had given in 2013.

But the Leichtman Research Group just released a report saying that the big cable companies added 3.3 million broadband customers in 2015. They said that during the year that the large telcos lost 187,000 landline broadband connections, meaning an overall net increase of over 3.1 million new broadband connections for the year.

The Census estimates there were 124.6 million housing units in the country in 2015, so the big companies in total brought broadband to an additional 2.5% of the total market. That sure does not sound like a year in which broadband has declined as suggested by Pew. And Leichtman has shown total market growth for the last several years as well.

In this case you have to believe the Leichtman numbers. They gather total subscriber numbers from all of the large carriers – cable companies and telcos. Since almost all of these companies are publicly traded, and since Wall Street keeps a close eye on subscribers, one has to think that the Leichtman numbers are pretty accurate.

On the other hand the Pew numbers come from nationwide surveys. Pew did three surveys in 2015 with a total of 6,687 adult respondents. The 2013 numbers they are comparing to was based on surveys of 6,010 adults.

I have always been suspicious of nationwide surveys. Our firm gives surveys and I have found that local surveys can be very accurate and the results can often be correlated with externally collected facts. For instance, I’ve had clients do surveys to find out how many customers their competition has in a market, and these surveys often prove themselves to be valid by also accurately showing the market penetration of my clients. That makes it easy to believe that the numbers for the other competitors in the market are also accurate.

I know that Pew is very careful about how they randomly choose survey subjects. For instance they will call people with cellphones as well as those with landline telephones. If you crunch through the statistical formulas that describe the predicted accuracy of a nationwide survey, then the Pew surveys should be very accurate.

The Liechtman numbers are not a 100% count of broadband customers and only count the customers of the biggest broadband providers – but those providers are something like 95% of the whole market. I know enough about a lot of companies in the rest of the market, the smaller carriers, to know that many of them are still seeing healthy broadband customer growth.

I have no way to explain this difference and I suspect that Pew can’t either. Their survey should be pretty accurate. Yet sometimes nationwide surveys just don’t give accurate results. This can often be seen with elections where different surveys given at almost the same time show fairly disparate predictions. The trouble is that surveys from groups like Pew influence decision makers and there are now going to be those who think that broadband growth has topped out. I was just on a call last week where somebody mentioned the Pew numbers. And while the Pew numbers of total broadband users might not be totally accurate, one can still believe that  their observation that some people are finding broadband increasingly expensive probably is valid. The problem is, you just can’t really know how many people that might be.

Are We Ready for the New Digital Divide?

digital-divideYesterday I briefly discussed a few of the major predictions that have come out of a Pew Research survey of industry experts that ask what we’ll be seeing from broadband applications by 2025. They predicted such things as a major use of telepresence, greatly enhanced virtual reality and closer daily tie between us and our computers. Today I want to talk in more detail about one of the negative predictions where many of the experts predicted that we will see a new digital divide that will be more extreme than the current one.

The digital divide today is between people who have broadband and those that don’t. Those without broadband fall into a few categories – those that live in rural areas where broadband is not available, those who are too poor to afford broadband and those that don’t want it. I’ve talked about this before, but these experts are saying that the future digital divide will be more extreme because it will separate those who can participate in an all-digital world and those who cannot.

The future digital divide will matter because there are going to be essential services that require big bandwidth. Businesses without enough bandwidth will not be able to take part in telepresence, and this is going to cut them off from much of the world. Both their suppliers and customers are going to expect them to be able to communicate virtually. Homes are going to need big bandwidth for education, medical care and even shopping. Anybody without big bandwidth is going to be left out of the mainstream and will have to accept something less.

Those that have access to the bandwidth and the kinds of applications that are predicted for a decade from now will have a major advantage over those who do not have good enough broadband. This means people with big broadband will get the jobs, enjoy better health, be able to live in their homes to an older age and be better educated than those that don’t have big broadband. The gap today is not nearly this extreme, but with the future that the experts all foresee, broadband becomes a necessity and not something that is nice to have.

Big bandwidth services are going to require a landline broadband connection, be that fiber or an upgraded cable network. Wireless is going to have its place to keep you connected to the basic services while on the move, but telepresence, virtual reality and most IoT services are going to be landline-based.

It is almost certain that a lot more people will fall on the wrong side of the digital divide than today. Today there are tens of millions of households and businesses for which the broadband they have today will become totally inadequate in the future. Many of the technologies we use today that deliver okay bandwidth – DSL networks, older generation cable networks and WISP wireless networks – are not capable of delivering the kind of bandwidth that will be needed in the future. These technologies today can provide bandwidth speeds that most people find acceptable. But when we start using applications that are going to require speeds of a hundred megabits or maybe many hundreds of megabits, these technologies are all going to be inadequate.

The only two technologies that can deliver the kind of bandwidth needed in the future are fiber and updated cable networks. We all know that fiber is capable of incredible speeds and normally requires an upgrade in lasers and electronics to go faster. But there are upgrade paths for cable networks that ought to be able to provide gigabit speeds. The problem is that the cable network upgrades are complicated and costly. In many cases it’s not just electronics that needs to be changed for a cable network to go faster. It can mean building a lot more fiber into the cable network and sometimes even having to replace much of the coaxial cable. It means changing the cable headend, the settop boxes and the cable modems. It means almost a whole new network to get to gigabit speeds. But it can be done.

One has to realistically ask how many communities are going to get very fast, yet still affordable broadband. Certainly some of the major cities are getting gigabit fiber from Google and a handful of other providers. But even in those communities it looks like fiber isn’t going everywhere. Fiber is being put into neighborhoods willing to pay for the advanced services but it’s largely bypassing poorer neighborhoods and apartment buildings. In those same communities the cable companies are responding to fiber competition by upgrading speeds.

But what about all of the places that don’t get fiber over the next decade? Will the cable companies make the needed investments in smaller markets to get faster speeds? Much of small-town America that has broadband speeds today between 3 Mbps – 15 Mbps due to older technology and its not hard to bet that they are not going to upgraded.

One of the new industry buzzwords is that fiber is a utility, and is something that every community needs to be able to thrive. While this may be somewhat true today, within a decade fast data speeds will be essential for businesses to operate and for homes to partake in the services that come only with speed. The demands for faster broadband will become louder as more and more communities that have okay broadband today find that same broadband to be totally inadequate tomorrow.

What Does a Gigabit Get Us?

Alexander_Crystal_SeerPew Research did a survey of 1,464 industry experts and asked then what killer apps we can expect if the US is able to significantly increase customer bandwidth between now and 2025. About 86% of the experts thought that bandwidth would improve enough by then to provide a platform for supporting widespread new applications.

The question does not suppose that everybody will have a gigabit of download speed, although by then there will many homes and businesses with that much speed available. But one can also suppose that by then that there will be many people with download speeds of hundreds of megabits. The cable companies are on a path with DOCSIS 3.1 to be able to increase speeds significantly on their networks if they so choose. So the biggest chance for fast speeds for the masses is not having fiber built everywhere by 2025, but rather of having the cable companies stepping up over the next decade. Most experts are thinking that they will to some extent (and I agree).

There were a few applications that a number of the experts agreed would become prevalent if download speeds increase:

Telepresence. There was a feeling that telepresence will have come a long way over the next decade. We already see the beginning of this today. For example, Julian Assange from WikiLeaks recently appeared at a summit in Nantucket via hologram. That is the precursor for having routine meetings with people by hologram. This would not just be speakers at conferences (but it would make it easier to get more impressive speakers when they don’t have to travel). But it means having salesmen make calls by telepresence. It means having staff meeting and other business meetings by telepresence. This is going to have a huge impact on business and could represent huge cost savings by reducing travel and the wasted costs and hours due to travel.

But there is also going to be a huge market for residential telepresence. One of the most popular features today of an iPhone is Facetime that lets people easily see each other while they talk. And Skyping has become wildly popular. One can imagine that people will grab onto telepresence as soon as the associated hardware is affordable, as a way to spend time with family and friends.

The experts also think that telepresence will have a big impact on medicine and education. Telemedicine will have come a long way when if a patient can spend time in the ‘presence’ of a doctor. Telepresence also will be huge for shopping since you will be able to get 3D demos of products online. In fact, this might become the first most prominent use of the technology.

Virtual Reality. Somewhat related to telepresence will be greatly improved virtual reality. We have the start of this today with Oculus Rift, but over a decade, with more bandwidth and faster processors we can have improved virtual reality experiences that can be used for gaming or for blending the fantasy world with the real one. There was also news last week that Microsoft demonstrated a 3D hologram gaming platform they are calling GameAlive that brings something akin to a holodeck experience into your living room. Over a decade virtual reality is likely to move beyond the need for a special helmet and will instead move into our homes and businesses.

Imagine being in a gym room and playing a game of tennis or some other sport with a friend who is elsewhere or against an imaginary opponent. Imagine taking virtual tours of foreign tourist destinations or even of visiting imaginary places like other planets or fantasy worlds. It is likely that gaming and virtual reality will become so good that they will become nearly irresistible. So I guess if computers take all of our jobs at least we’ll have something fun to do.

Internet of Things. Within a decade the IoT will become a major factor in our daily lives and the interaction between people and machines will become more routine. We are already starting to see the beginning of this in that we spend a lot of our time connected to the web. But as we become more entwined with technology it means a big change in our daily lives. For example, experts all expect personal assistants like Siri to improve to the point where they become a constant part of our lives.

Just last week we saw IBM roll out their Watson supercomputer platform for the use in daily apps. That processing speed along with better conversational skills is quickly going to move the web and computer apps deeper into our lives. Many of the experts refer to this as a future of being ‘always-on”, where computers become such a routine part of life that we always are connected. Certainly wearables and other devices will make it easier to always have the web and your personal assistant with you.

Aside from the many benefits of the IoT which I won’t discuss here, the fact that computers will become omnipresent is perhaps the most important prediction about our future.

Not everything predicted by the experts was positive and tomorrow I am going to look at a few of those issues.