What is the Best Way for AT&T or Verizon to Generate Billions of New Revenue?

What is the best way for a tier-one carrier to generate an extra $1 billion in annual revenue?

Long term, you might argue carriers will need to explore a range of potential new businesses. That’s why you hear all the movement around home security, mobile payments, mobile wallet, machine-to-machine applications, health care applications, content delivery networks, over the top apps and so forth.

In the near term, Verizon Wireless and AT&T might wring even greater returns simply by reducing original equipment manufacturer device subsidies, without taking what some might say are the “drastic” steps T-Mobile USA is undertaking to end all retail device subsidies.

Oppenheimer analysts think that AT&T and Verizon Wireless, for example, will be able to cut payments to device manufacturers by significant amounts.

AT&T’s subsidies could drop from 15 percent per phone to five percent over time, Oppenheimer predicts.

With more than 100 million phones being sold every year, Oppenheimer thinks the carriers could save up to as much as $100 per phone, or $10 billion dollars in annual savings. That’s a lot more new revenue than AT&T or Verizon Wireless are likely to generate from the other new initiatives.

Beyond that, Oppenheimer analysts even think there is a chance AT&T and Verizon Wireless could recapture some of the influence they used to have before the advent of loosely-coupled networks.

There is at least a possibility that carriers could host, invest in and own applications provided in a carrier context, with the greater importance both of mobility and cloud computing. Some might find that thesis a bit optimistic.

But there is little question AT&T and Verizon Wireless are in a different strategic position than their counterparts in other regions such as Western Europe.

Globally, telecom revenue is growing. But not in Western Europe, it appears. The mobile industry’s combined revenues from voice, messaging and data services in the EU5 economies (United Kingdom, France, Germany, Spain and Italy) will drop by nearly 20 billion Euros, or four percent a year, in the next five years, and by 30 billion Euros by 2020, according to STL Partners.

The obvious implication is that mobile service providers in the United Kingdom, France, Germany, Spain and Italy will have to create new revenue streams worth 30 billion Euros, just to stay where they are, by 2020.