How rampant is online Piracy?

The author of a new study commissioned by NBCU has released a video presenting claims of huge increases in the amount of online piracy over the last two years.  I'm always a bit skeptical of industry-backed research in this area, particularly when the study doesn't provide details on their methodology or definitions, and reports claims of significant numbers in a somewhat dishonest manner.

This report seems to fit that pattern.  Hidden in the passing discussion is the result that their study of online piracy in 2010 reported that 23.8% of all online traffic was pirated content.  Still, while expanding the scope of their study to include new forms of pirated content, and claims that the amount of pirated content distributed via the internet had skyrocketed in absolute terms (160% increase in the amount of "pirate" data traffic), along with an increase in the number of people regularly trading in pirated content (up more than 10% to 317 million unique users), the report still suggests that in 2012, a whopping 24% of all online traffic was pirated content.  Yes, that's right - in relative terms, a nonsignificant increase of 0.2% of total global online data traffic - and that's with a broader definition of "pirated content."

The claim of huge increases in absolute amounts of content, even if accurate, is confounded by the rapid increase in both the number of Internet users in the three areas examined (North America, Europe, and Asia) and the even more significant increase in online traffic driven by growth in video content (and its much larger data files) and the expansion of broadband connectivity.  Put in that context, and looking at share of data traffic, the increase is minimal.  Similarly, a 10% growth in the number of internet users accessing pirated content regularly sounds high, until you compare against the growth in the total number of internet users globally - which is up 17% over just the last year.  The 317 million number also seems a bit suspect when you consider that it amounts to 17% of the internet users in those areas.  Do 1 in 6 internet users really traffic in pirated content at least monthly?

I'm not going to claim that online piracy isn't a problem, or profess any real knowledge of how significant the problem is, or how negative its impact.  (Although I'll point the interested to a study for the WIPO that found that while piracy of broadcasting signals was rampant, the economic impact was slight as the vast bulk of that piracy was in areas where signals weren't being marketed anyway, and/or where populations were unlikely to be able to afford first-world prices).

But I will point out that the trumpeted claims of online piracy becoming a significantly bigger problem in the last few years is contradicted by the report's own numbers, once they are placed in the context of the continued rapid growth of internet use and increased data traffic.

Source - Online piracy of entertainment content keeps soaring, LA Times
Study on the Socioeconomic Dimension of the Unauthorized Use of Signals, Part III - WIPO SCCR/21/2

Goin' Mobile - Speeds and Content

Some quick notes on the expanding mobile broadband/online video front -

The last leg in mobile broadband for most people will be their home, office, or public WiFi loop.  Telecomm research from the Dell'Oro Group note that the wireless LAN market (i.e. WiFi) grew 17% in 2012.  But even more significantly, the new 802.11ac standard, which offers speeds up to 1 Gigabit/second data rates will be increasingly available on hardware devices this year - contributing to a convergence of wired and wireless data speeds.

There's a massive data speed war in Japan, with multiple operators offering 1 Gbps services over fiber-to-the-home (FTTH) networks, and one operator announcing the rollout of the Nuro 2Gbps FTTH residential service.  So-Net's initial pricing for 2Gbps runs around $50 a month, significantly lower than competing 1 Gpbs services. Meanwhile, Japan telco NTT is said to be working on a 10Gbps residential network, to be available in a few years. 1 Gbps networks are popping up sporadically in the U.S. and Western Europe - Google's test markets offer 1 Gbps data plus multichannel video at around $100-150, and independent 1 Gbps network operators are pricing their services at $200-250 per month.  For most potential residential subscribers, there is little noticeable difference between 2 Gbps and 1 Gbps top data speeds, or for that matter 100 Mbps (corrected  from Gbps) speeds, so there is minimal incentive to switch to ultra-broadband services - aside from bragging rights, and price.  So many analysts are cautious about the rush to ultra-fast broadband, wondering if the cost of upgrading network speeds is recoverable from residential subscription fees.

On the content front, research from ABI is predicting substantial growth in use of the movie industry's UltraViolet "content locker" initiative.  Ultraviolet offers those with accounts online access to selected movies they've purchased on home media and registered with the service.  Ultraviolet currently has 6-8 million accounts; ABI estimates that the global market is likely to reach 65 million users (100 million if several major movie distributors join the program).  What's holding up growth at the moment, the report concludes, are consumer attitudes about trust and usability.

Consumers don’t yet trust the concept, with most still opting for subscription and digital content rental services such as Netflix and Hulu. “The ease of accessing and storing digital video libraries must approach that of digital music,” noted ABI practice director Sam Rosen.

Sources -  Wireless LAN Market on Fire,  CableFAX Tech
Broadband operators must beware the dangers of FTTH 'speed race',  telecoms.com
ABI: UltraViolet Could Radiate 65 Million Accounts… or More,  CableFAX Tech

Edited to correct typo in broadband speeds in middle story.

Infographic: Internet Goes Zettabyte in 2015

From Cisco, a forecast of the growth in online data traffic.

Goin' Mobile: News from the Mobile World Congress

There's some interesting reports coming out in connection with this week's Mobile World Congress (WMC) in Barcelona.

Cisco's been downgrading earlier estimates of the rate of growth of mobile data traffic (from over 70% annual rate of growth, to 66% - details in this post).  Cisco's report mentioned a number of factors, from the spread of tiered pricing in mobile data plans, to declines in sales of mobile-connected laptops.  But underlying these is an interceding behavioral change - users and operators are managing data traffic better, shifting high-usage traffic to WiFi and off-loading it to wired networks (about a third of mobile data traffic was shifted and offloaded to wired nets in 2012).  This is helping to flatten demand and peak load demands.  Between business, home, and free hotspots, WiFi usage is changing the mobile data value chain - offering users a low-cost but somewhat location-limited alternative for low-value and/or high-content apps and data streams.  What's a bit amazing is how quickly and widely users have recognized the value differential and adapted to tiered data plans - 98% of iPhone users also use WiFi, as do 89% of Android smartphone users. Consumer usage patterns are beginning to shift, with mobile data usage increasingly focused on high-value, high-immediacy, and highly-localized apps and uses.
  The shift is actually good news for mobile operators.  The ability to offload via WiFi as a low-cost alternative is helping to improve data traffic flows and reduce peak demand levels; this will slow demand for in-network capacity upgrades.  The low-cost WiFi option, in the meantime, provides a place where users can explore new apps and uses, allowing them to establish values for new apps, as well as exploit relatively low-utility markets like entertainment content, gaming, and social media.  Now, mobile operators can focus on identifying, marketing, and siphoning off the high-value apps.  Doing so will help operators better monetize their mobile bandwidth.
  And doing so may well become critical. It's becoming more and more apparent that data is on its way to becoming the dominant revenue stream for mobile operators.  The problem is particularly acute in Europe.  There, major mobile operators are seeing their voice and SMS revenues falter.  Growing competition within mobile, as well as low-cost alternatives (IP telephony, online conferencing, social media) in an increasingly connected world, are shrinking margins.  While average revenues per user has risen 25% over the last five years in the U.S., it's actually fallen by 15% in Europe.
  Swisscom's CEO, for example, has publicly predicted that their voice and SMS revenues will just about disappear within three years.  The European mobile market is seriously overcrowded (100 operators, compared to 6 in the U.S.), and heavily regulated.  That, and the poor economic conditions have resulted in four years of declining revenues have hit margins, and company valuations, hard.  European telco stocks are trading at half the earnings multiple of U.S. mobile operators.  And this has hurt their ability to raise the $800 billion the GSMA trade group has estimated is needed to upgrade to 4G by 2016.

For Bernstein analyst Robin Bienenstock the problem is European telcos have no confidence that investing in networks to offer superior service than rivals will pay off.
"So they don't invest, they just cut costs and tweak pricing, locking themselves in a vicious cycle of selling an increasingly commoditized service," she said.
"If you are an American consumer, especially in a big city, there has been a tangible improvement in what you're being offered on mobile speeds, whereas for Europeans, there has been a deterioration in quality."

  Successfully negotiating the shift to data, and building out 4G's mobile broadband services, looks to be critical for mobile markets.  Where data-focused and 4G systems are well on the way (U.S., several Asia-Pacific markets), operators are establishing that the demand (and monetizable values) for data-based mobile apps is there, and showing the potential for rapid growth.  With their early success, and the dismal forecast for older cellular services (voice, SMS) in Europe, it's expected that European mobile operators will use the WMC to push EU regulators to get out of the way and give them a viable shot to grow the mobile broadband market.  Good luck with that.

Sources -  Improved traffic distribution indicates that operators are managing assets more effectively, Telecoms.com
Divide between European and US telcos widens, TelecomEngine
Cisco Visual Networking Index: Global Mobile Data Traffic Update, 2012-2017, Cisco white paper
Understanding today's smartphone user: Demystifying data usage trends on cellular and Wi-Fi networks, Informa white paper.

Traffic updates from Cisco

Cisco's Global mobile and visual data traffic reports and forecasts are out for 2012 and beyond, and the key finding is that they've significantly lowered their forecast data traffic growth rates in some key areas from their 2011 forecasts.  They attribute the revision to several fundamental shifts in usage patterns in 2012.

  Now data traffic is still growing rapidly across the globe, and mobile data traffic grew 70% in 2012.  In fact, Cisco notes, last year's mobile data traffic (885 petabytes per month) was twelve times the entire global data traffic in 2000 (75 petabytes per month).  Last year was also the first that saw mobile video traffic account for half of all mobile data traffic.  Last year also saw mobile data connection speeds doubled - avg. download speeds for smartphones were just above 2 Mbps, for tablets, average connection speeds were near 3.7 Mbps.  And data traffic is still projected to grow exponentially, just at a slightly lower rate.

  2012 also saw the number of mobile-connected tablets increase 250%, reaching 36 million, and the number of 4G mobile subscribers approached one percent of all mobile connections.  Still, even with that low early penetration, 4G mobile subscribers generated 14% of all mobile data traffic.  These high-end mobile devices all push mobile data traffic higher, so that continued diffusion will continue to drive continued rapid growth in mobile data traffic.
  As for the changes, they're attributable to shifts in usage patterns driven by pricing strategies interacting with improved mobile devices.  The report notes that the growth rate for mobile-connected laptops has slowed, as users move to smartphones and tablets as their primary mobile devices.  The report also notes that the rise of mobile devices has shifted some use from wired connections to mobile, and particularly WiFi wireless connections.  In particular, Cisco indicated that 2012 saw "higher than expected tablet usage on WiFi."  Finally, 2012 saw the widespread implementation of tiered and capped mobile data plans from mobile operators.  The new plans and caps also pushed a lot of mobile traffic to WiFi home nets connected to fixed network providers.  The report suggested that about a third of all data traffic generated by mobile devices was offloaded to the fixed network, rather than remaining on the user's mobile service.  To the extent that shifting data usage was a strategic goal (to prevent overloading of older, low bandwidth mobile services, this can be interpreted as attempts to make more efficient use of the current mix of data services and access technologies.
  Another way of looking at this is that consumers are becoming smarter - shifting some uses to mobile devices for convenience and 24/7 accessibility, shifting high-data-traffic usage to cheaper and free access points, and shifting emerging usage patterns as mobile service plans evolve to usage-based pricing.

  Lost in all this is the transformation of mobile service business model.  The foundational services of voice and SMS are experiencing declining revenues as users shift to free IP Voice and conferencing services, and the fact of declining costs continues to drive price competition among competitors. 

Swisscom’s CEO believes that the company’s voice and SMS revenue will be gone within three years. If we strip away these declining revenue streams, we’re left with the future of an operator’s business, namely internet/data connectivity.

  Thus, finding the best options for monetizing data carriage is becoming critical for mobile and wireless operators.  The growing number of Internet users and rapidly rising demand for a wide range of Internet services and content suggests that there's a growing market for online content and services that can be tapped.  The still rapid growth in mobile and mobile video data traffic, as seen in the latest Cisco report amply reflects continuing demand.  The report also suggests that usage patterns are still evolving, and can be influenced by pricing strategy.  Understanding the motives and behaviors of users, particularly in response to pricing changes and strategies, will be vital for long-term business success, either as a access provider or content and service provider.

Sources -  Improved traffic distribution indicates that operators are managing assets more effectively,  telecoms.com
Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2012-1027, Cisco press release.
Cisco Visual Networking Indes: Global Mobile Data Traffic Forecast Update, 2012-2017.  Full report from Cisco.

Smartphone Carrier Data Usage

A new study of smartphone data usage through wireless carriers (not including data transfers using WiFi) shows some interesting trends.  One is that data usage among iPhone users (dotted lines) is generally higher than among Android smartphone users (solid lines).  Another is the drop-off in data usage last December. iPhone data usage seems to be quite volatile, with large shifts from one month to the next. Finally, that Android smartphone carrier data usage by Verizon subscribers is consistently the lowest. 

The results are based on a sample of 1500 smartphone users with installed data tracking apps.  For those who noticed that there's no dotted line for T-Mobile, the research firm noted that there were too few T-Mobile iPhone users in the sample to provide reliable measures.

Source - Average Android, iOS smartphone data use across Tier 1 wireless carriers, through December,  FierceWireless

Infographic: Global Internet Map 2012

From TeleGeography, a map showing Internet connections (and capacity) among the countries of the world.

(There's also an interactive version where you can zoom in to look at various areas)

It may be a bit of a surprise initially, but they show International Bandwidth Growth rates slowing (falling to around 40% annual growth rate for the last year).  But that's partially the result of the fact that a lot of the basic international infrastructure has already been established, combined with the utilization of already-installed dark fiber.  (Fiber optic cables are installed in bundles - those that aren't immediately used for traffic are called "dark fiber" and are held in reserve to handle traffic as demand and utilization grow.  Thus growth doesn't necessarily require rebuilding whole networks).

They also show that despite the huge increases in traffic and network expansion, the prices for IP Transit Service (moving data across networks) continues to fall.

Sources - Global Internet Map, TeleGeography
Global Internet Geography, TeleGeography

Smartphones rely on Wifi for data

A new study of smartphone use in the UK finds that almost 80% of data traffic to Android phones is carried over Wifi.  The Nielsen study used an app that recorded how data was received, on a sample of 1500 Android smartphone users.

“Wifi is on average three-and-a-half times more dominant than 3G when it comes to delivering mobile internet data services,” said David Gosen, managing director for digital at Nielsen Europe.  “It peaks around midnight as users gravitate towards social networks, driven by their desire to stay connected through all waking hours."

The big difference is pricing, I suspect.

Source - Wifi carries 78% of UK Android data,  telecoms.com

edit - added headline