Friday, February 26, 2010
Telco Choice is Not "Dumb Pipe" or "Service Enabler" or "Service Provider"
That leads to a fear that the future is one of "dumb pipe" access services providing modest revenue and slimmer profit margins than any existing provider can tolerate, without significant downsizing of operational cost.
Many observers suggest service providers will gradually take on more "application enabler" roles, supporting third-party business partners.
At the same time, there is debate about the degree to which any existing video or voice service provider will be able to continue doing so in the future.
But those three choices are not mutually exclusive. For better or worse, "dumb pipe" access is a permanent foundation for every telco, mobile, cable, satellite or fixed wireless provider. That is precisely what "broadband access" is; a simple "access" service.
That does not mean "only" access will be provided. There likely will be some permanent role for managed video, voice, storage, backup and other services. At some combination of value and price, users simply will prefer to buy such "services" rather than use comparable applications.
At the same time, it is likely service providers will find ways to grow the percentage of their revenue earned by supplying services to business partners. That might include billing services, location and device information, hosted processing or storage services.
"Dumb pipe" access is not the only business of the future, but it is foundational, and permanent. In addition to that, though, today's service providers necessarily will have to grow the proportion of revenue they make from "enabling" services, as they manage a likely decline of "services" such as basic voice communications or multi-channel video.
And it is not necessarily that those services decline because of a shift in user demand. The simple existence of capable competitors means market shifts will occur, irrespective of any conceivable shifts of demand. In other words, one does not have to make a definitive bet on "over the top" voice or video to plan on lower revenue from existing voice or video sources. One simply must assume that capable competitors will take some amount of market share.
In other words, at the level of discrete enterprises, cable executives have to anticipate declining video customer base and revenue contribution, while telcos have to assume declining gross voice revenue. No shift of demand to online video or VoIP need be assumed.
To be sure, those forces likely will be factors. But it is not the case that a stark choice must be made between the "dumb pipe" access provider and the "service enablement" or "service provider" roles. All three will remain parts of the overall revenue stream.
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