The Telecom Business is Getting More Like the "Internet"

One growing discontinuity in the communications business is the natural tendency to view the business through functional silos that are losing their meaning. These days, in many markets, people using smart phones are on the fixed networks for access, more than mobile access.

That discontinuity is going to grow, but should be familiar to anybody who works in the Internet ecosystem. Namely, devices and apps are agnostic to the underlying access medium. So even when a company “knows” its own revenue model is directly driven by a specific network (mobile, fixed, fixed wireless, satellite), the networks get used by people and firms with which the access provider has no direct relationship.

In other words, there is a growing disconnect between the concepts of “my customers” and “my users.” Virtually any provider of Internet access has more “users” than “customers.” To be sure, some will see that as a prod to think about ways of creating relationships with users who aren’t customers.

But the trend also explains why ISPs worry about becoming “dumb pipes.” But there is a crucial distinction: every ISP always and everywhere operates as a dumb pipe. What people want is access to the Internet.

One can argue that particular ISPs sell “smart pipe” services. There is some logic to that. But most of those smart features wrap around the dumb pipe function is some way. Traffic can be shaped to improve user experience. Content can be cached. Charging systems can be reconfigured.

And ISPs routinely also act as content or app providers (carrier voice and entertainment video are services, not “Internet” accessed apps).

It is not that the Internet access function itself is in danger of disintermediation. It is not. But the business context is morphing. Some might well argue that dumb pipe Internet access is in fact the foundation service of the future, with “carrier services” wrapped around that access.

Some telcos are trying to do what cable operators have done, namely vertically integrating (in a loosely coupled way) by becoming app or commerce providers. The trend will grow, especially for ISPs that find they cannot significantly reduce operating or capital costs to compete with lower-cost providers.

“Until three or four years ago, consumers primarily accessed the Internet through PCs and laptops but at the beginning of 2013, the picture is very different,” says Amanda Sabia, principal research analyst at Gartner.

“Consumers use multiple screens to perform various activities that require both fixed and mobile internet connectivity,” Sabia says. Consumers are screen-agnostic; they will use whichever screen is convenient, as long as it is ‘connected.’”

Gartner reckons that global mobile devices (other than smart phones with a mobile data plan) per household will increase by more than eight percent annually through 2016.