Communications policymakers in nations where the government does not directly own and control key national carriers in their markets always must balance their preferred regulatory outcomes with the possible responses private firms will make to those initiatives.
Put simply, too much regulatory pressure will lead to reduced investment and innovation, not more. The other issue is that every government considers its national communications infrastructure to be a matter of national interest.
That being the case, most governments will not willingly weaken their own carriers.
So take a look at how AT&T and Verizon equities have fared over the last year or so, compared to the Standard & Poors 500 index. Not so pretty.
What that tells you is that investors believe neither company has much in the way of "growth" ahead of it. In fact, many would argue both companies will increasingly be challenged, in coming years, to stay where they are, given major changes in the underlying business models each company faces.
That suggests policymakers should be cautious about making incorrect assumptions about the underlying financial prospects for the firms that arguably are most important to the national communications infrastructure.
It is not as though either firm were Apple, creating whole new industries and muscling its way into other substantial industries with some regularity. Quite to the contrary, innovation and revenue upside nearly universally are now seen as attributes of the application and handset parts of the communication value chain, not the "access" providers as such.
To be blunt, there may be times when regulatory restraint is the right policy. But there also are times when an industry with national economic and security implications faces enough fundamental challenges that "protection or promotion" is the right policy framework.
It is not the job of other ecosystem participants to worry about the financial health of other segments. But it always is the job of national policymakers to do so, when the issue is the health of the underlying national communications infrastructure.
First-quarter 2010 results posted by AT&T suggest the outlines of the problem. Simply, wireless now is the driver of revenue growth.
But wireless is saturating, forcing mobile providers to find new revenue sources. Also, mobile voice, which has been the segment mainstay, increasingly will come under pressure as landline voice has proven to be a product in a declining lifecycle.
The point is that the appropriate regulatory framework for a fast-growing, vibrant industry is different than for an industry that is fundamentally challenged. That is not to suggest industry executives are unaware of the problems, or that they have failed to show agility in the past; they have.
The point is simply that it might be a grave mistake to assume carriers can bear any burden where it comes to regulations that choke off their ability to create new services and revenues. The financial markets already are signaling their views how the industry is situated.
Thursday, April 22, 2010
Verizon and AT&T Equity Performance is a Warning Sign
Labels:
att,
business model,
consumer behavior,
Verizon
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Subscribe to:
Post Comments (Atom)
What Declining Industry Can Afford to Alienate Half its Customers?
Some people believe the new trend of major U.S. newspapers declining to make endorsements in presidential races is an abdication of their “p...
-
We have all repeatedly seen comparisons of equity value of hyperscale app providers compared to the value of connectivity providers, which s...
-
It really is surprising how often a Pareto distribution--the “80/20 rule--appears in business life, or in life, generally. Basically, the...
-
Is there a relationship between screen size and data consumption? One might think the answer clearly is “yes,” based on the difference bet...
No comments:
Post a Comment