Access Remains the Foundation for all Access Provider Revenue Opportunities

About half of revenue growth over the next several years will come from new lines of business, telco executives believe. But most of that opportunity still consists of line extensions built on current capabilities. That should not come as a surprise. 

What fundamental, unique and irreplaceable role do access providers play in the Internet ecosystem? Access. Service providers also provide applications (historically voice and messaging, more recently video entertainment). But the irreducible long-term role is "access" to the Internet. 

Unless a service provider wants to get out of the business entirely, the great bulk of revenue opportunities must hinge on access services. That suggests that the long term, most fruitful new lines of business will involve use of the network and its features, in some way, to add more value to "access."

Existing core services might provide upside up to about nine percent, STL Partners has reported. Vertical industry services have potential to provide as much as 10 percent of revenue growth. 

Infrastructure services (wholesale services, essentially) might provide eight percent of growth. 

Allowing third parties to embed communications features into their apps might drive 10 percent of growth. Providing other services to third party app providers could represent as much as 12 percent of revenue growth over the next three years. 

Telcos providing their own "over the top" apps might provide five percent of revenue growth.

The takeaway is not so much that half of potential new revenue will come from new lines of business, but more that each opportunity builds logically from what service providers already provide.

Echoing that line of reasoning, some would argue that telecom operators shouldn't bother trying to build an exhaustive suite of cloud services in an effort to compete with the likes of Amazon.com, Microsoft Corp. and Salesforce.com, says Sean Bergin, head of global telecom markets for Southeast Asia at BT Global Services. That will likely strike most of you as eminently sensible advice. 

Instead, access providers should strive to enhance the cloud services ecosystem, Bergin says.  "competing head-to-head" with cloud services specialists is pointless," Bergin said. If you think about the matter for only a very short time, that will make total sense. 

There's a reason all software these days is built using an open systems interconnect model that allows different functions to become virtual objects, so developers can innovate within a layer without needing to disturb all the other layers of functionality, Bergin argues. 

But that very model also means "network access" is a separate object from "applications." The fundamental skill sets, forms of organization and points of view are going to vary between software layer "objects."

Telcos, while able to develop and offer certain services themselves, such as virtual data centers, managed SIP-based communications and videoconferencing offerings, should look at aggregation models that play to their infrastructure strengths. 

Bergin wasn't saying "be a dumb pipe," but he was saying telcos need to stick to what they do best.