Era of Communications "Used by People" Might be Ending

Debates about how access providers should deal with “over the top” apps never end, for a simple reason. It remains unclear which strategy is best, long term: embrace the dumb pipe access role; compete with OTT or adopt a hybrid approach.

And even if a hybrid approach is deemed optimal, so far it has proven exceedingly difficult for any access provider to compete successfully with the OTT brand names.

The debates about OTT strategy, one might argue, are indicative of deeper and more structural problems, namely the exhaustion of all revenue models based on services for humans. At some point, people derive only so much value from connected phones, PCs and tablets.

Once use of communications-capable phones and computing appliances reaches saturation (everybody has them, everybody uses them), there is almost no room for additional revenue growth.

So we are on the threshold of a truly new era, where service provider growth and relevance are no longer driven by the value of services provided to people, but by value provided to third parties (enterprises and app providers) with revenue models based on machines or devices with only an indirect end user value.

In other words, though people will continue to buy services that support their direct interactions with appliances and devices, industry growth will saturate in those areas. The new frontier, many now believe, will be in communications services related to sensors and edge processors not directly used by people.

In fact, one might argue the intense interest in “Internet of Things” is a tacit recognition that successive waves of business models built on selling applications to human beings are nearing a limit.

Up to this point, nearly all communications services have been sold to “people.” IoT implies the next wave of revenue will be built on sales of services to entities running networks of sensors and controllers.

In other words, many developments in the telecom business are indirectly built on a search for new business models, not mere technology or even architectures.

That applies as much to thinking about fifth generation mobile networks as IoT. Some might argue that, in addition to all the technology standards and features, 5G will succeed or fail largely as a platform for new revenue models and lines of business.

That switch to revenue growth by machines, not people, is why present debates about "over the top" services sort of miss the point. All services consumed directly by people will soon saturate. Machine communications is the future. If not, the industry likely has a tough and declining future ahead of it.