The Attackers Advantage
In any competitive market, attackers often have some advantages, compared to defenders. In some cases, attackers benefit from “pro-competitive” regulatory or fiscal policies that offer new entrants the ability to compete with lower costs. Attackers often do not have universal service obligations, and can cherry pick their potential customer segments and geographies.
Those advantages often are magnified when the market is declining, rather growing, but remains large in terms of gross revenue. Under such conditions, defenders often face huge stranded asset problems, while attackers can spot deploy or incrementally deploy capital as required.
Simply, at attacker often can build a business model that allows it to grow revenues and customers even in a declining market, by taking market share. Legacy providers generally only can lose share, with a business model that gets worse with each lost account.
That, in a nutshell, illustrates why attacking service providers in the U.S. market, such as Comcast and Charter Communications, are better positioned, strategically, then telcos. They are trading market share with telcos in video entertainment, to be sure. But the rate of decline has been quite restrained, so far, and the video market is far smaller than the core telecom markets.
So cable faces marginal losses in a smaller segment--video--and big potential gains in the vastly-larger core communications market. And, in one important product segment--internet access--telcos have not found a way to remain competitive.
Roughly speaking, annual core telecommunications revenue is something on the order of $330 billion each year. Linear video is about $100 billion a year. Rough math: 30 percent of $330 billion is $99 billion; 30 percent of $100 billion is $30 billion. If telcos and cable companies trade market share at equal rates, cable gains an order of magnitude more revenue than do telcos.
In the important internet access business, cable already dominates. Since about 2007, U.S. telcos have steadily lost market share in internet access services, with cable now getting all the net new additions.
That explains why telcos are so focused on discovering and creating big new revenue sources, and why some attackers are well positioned, compared to telco defenders.