Wednesday, December 31, 2014

Telecom Ecosystem Tension Grows as Business Model is Stressed

A lawsuit filed by five banks for losses related to credit card hacking illustrates in a new way the business tensions within an ecosystem can erupt. In a lawsuit filed by five banks, the plaintiffs are seeking to recover their costs of coping with a massive data breach at Target, alleging that Target was negligent.

The cost of replacing credit and debit cards from a 2013 data breach has been estimated at $400 million.

In the telecommunications business, similar tensions exist between content owners and networks and video subscription distributors over the price, terms and conditions of content rights.

Networks want higher per-subscriber fees and carriage of many new channels. Distributors want lower costs and fewer requirements to carry many new channels with low viewership.

Device suppliers depend on service providers for distribution, but mobile service providers chafe at the notion the perceived value of mobile subscriptions is driven by the devices brands.

Operating system suppliers have a complex relationship with their device partners and service providers. In some cases, service providers have hoped at least one additional major operating system could arise to create more competition for Apple iOS and Android.

Some would-be suppliers have tried. But consumers and software developers have yet to be convinced.

Consumers generally have benefitted, with lower voice prices, lower mobile Internet access prices and lower fixed network Internet access prices, globally. In the developed world, where speeds have climbed, prices have declined on a “percent of household income  basis” since at least 2008.  

If you are a U.S. consumer who purchased 768 kbps or T1 Internet access in the mid to late 1990s, actual prices paid have dropped, even if speeds have grown by an order of magnitude or more.

Any industry relies on a complex web of relationships between value chain participants, from end user customers at one end to regulators and infrastructure suppliers at the other end. And those relationships often are unsettled, especially when competition and profit margins are under pressure.

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