Service Providers Seem to See Little Growth in Connectivity Services
Innovation in the access provider business that is significant enough to move the revenue needle never is easy. For the largest tier-one service providers, any single initiative--to have revenue impact--has to produce US$1 billion or more, ideally, and do so quickly.
The world's 25 biggest telecom companies generated $1.2 trillion in revenues in 2016 and $88 billion in profits. For any single firm generating revenue of perhaps $100 billion annually, even an increase of $1 billion to several billion hardly has any impact on overall results.
Also, few opportunities will produce that magnitude of incremental revenue, and few will do so quickly enough to boost the top and bottom lines fast enough.
Smaller companies have a different problem: they cannot afford to invest--at relevant scale--to take advantage of many opportunities elsewhere in the ecosystem, even if relatively smaller new revenue sources could have impact.
“A consensus is emerging that operators should focus on growth that supports their core connectivity business, and that their explorations of new areas (if any) should be limited to a small number of opportunities,” Analysys Mason says.
The problem, as outlined by Analysys Mason, is that of the four options for growth, half are largely unrealistic. Growth by subscriber or average revenue per user growth, or even internet of things connections is going to be difficult.
In many markets, subscriber growth already is impossible (except for taking market share). In many markets, ARPU is falling. And it is not hard to forecast that most of the upside from internet of things, as with all other communications-related opportunities, will accrue to application, platform or device suppliers.