Service Providers Must Expect to Lose 50% of Legacy Revenue in 10 Years

One fundamental rule of thumb I use when looking at revenue sources in the global communications business is that service providers must plan for a loss of about half of current revenue every decade or so, as markets continue to evolve. 

This graph illustrates the point. In 2001, about 65 percent of total consumer end user spending for all things related to communications and video services went to "voice." In 2011, voice represented only about 28 percent of total consumer end user spending. That is easily a reduction by half. 

To be sure, this graph only shows relative spending, not absolute amounts. But you get the point. 

Over that same period, mobile spending grew from about 25 percent to about 48 percent. Again, you see the pattern: growth of about 100 percent (losses of 50 percent require gains of 100 percent, to return to an original level,  as equity traders will tell you).

Video entertainment spending likewise doubled. 

In the U.S. market, one can note roughly the same pattern for long distance and mobile services revenue. Basically, mobile replaced long distance revenue over roughly a decade. 

It is worth noting that voice revenue trends have been through two fundamental cycles, with a third on the way. 

At one time, international long distance was the highest-margin product, followed by domestic long distance. 

That changed fundamentally between 1997 and 2007. 

Over that 10-year period, long distance, which represented nearly half of all revenue, was displaced by mobile voice services.

In the next displacement, broadband is going to displace voice.