Sunday, September 30, 2012

“Pipe” Services Will “Always” Drive Most Service Provider Revenue

Communications service providers dislike the phrase “dumb pipe” for obvious reasons, since it implies–often falsely–that a telecom supplier is “just” a provider of low-value, commodity access services. The notion is partly accurate, but has nothing to do with profit margin on “dumb pipe” services.

What, after all, is “best effort” Internet access but a “dumb pipe” service? The access is one thing, while nearly all the content and services are provided by third party suppliers. But profit margins on U.S. high-speed access are in the 40-percent range, hardly a low-margin, commodity service.

There are threats, but those threats are potential future threats, such as ever-increasing amounts of supplied bandwidth, for the same, or less, revenue. But service providers already are moving to tie consumption to revenue in a more-logical fashion, so the potential danger is unlikely to surface as a present danger.

Also, very few service providers are “just” Internet access providers. Video, voice, security, business services and managed services are applications with lucrative revenue streams that use the access network. 

The point is that pipe services always will drive most access provider revenue. 

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