"Value" is Key for Internet Access, as for All Telco Access Services: 5G Might be the Answer

Consumer perceptions of the value of internet access largely explain the divergence between telco and cable products since about 2006, when cable operators deployed DOCSIS 3.0 platforms.

But that does raise an important question: telcos have to boost “value” (perceived quality in relationship to price) to compete in the internet access business. That is a “defensive” move, designed to preserve as much consumer access revenue as possible, even if such access revenue is not expected to drive overall revenue growth.

Unless you believe it is possible for a tier-one access provider to divest the consumer assets, and retain only assets to support its enterprise, small business and mobile businesses, ownership of the mass market access network is unavoidable.

So the challenge there is to retain as much legacy revenue as possible, with margin, while focusing revenue growth efforts elsewhere.

That is true even if one also believes that capital must be reserved for other important purposes, such as investing in new apps (and revenue) “up the stack” or making horizontal acquisitions to boost access scale in the near term, plus other business model requirements such as paying dividends.

source: FCC

Consider the key matter of market share. “When overall industry revenue growth is stagnant, as it is with most telco markets, market share movements become the determining factor of an operator’s top-line performance,” says James Sullivan, J.P. Morgan head of Asia equity research (except for Japan).

In other words, telcos cannot afford to sacrifice more consumer internet access market share, as that directly affects top-line revenue performance. That is why there is so much interest in fixed wireless, combined with deep-fiber networks and use of small cells.

Aside from what those investments mean for the health of the mobile business, the same set of core investments should enable a new alternative for consumer internet access, namely gigabit fixed access without full capital investment in fiber to the home.

In that sense, 5G might be the most important innovation in the fixed network access business we have seen to date, as important as G.fast and FTTH are.