It might seem fanciful in the extreme to predict that mobile services will not be the industry growth engine, much less the lead revenue driver, in a decade. But history suggests that will happen.
About every decade since 1997, the U.S. telecom business has had to adjust to a fundamental change in revenue drivers. In 1997, about half of total revenue was driven by long distance services. A decade later, such revenues had shrunk to less than a quarter, and mobile service revenues had grown to about half of total revenues.
After another decade, internet access arguably grew to support half of total revenues. Likewise, over about a two-decade period, Verizon mobile revenues displace fixed network revenues. In 1999, Verizon earned 82 percent of total revenue from the fixed network. By 2013, 68 percent of revenue was generated by the mobile network. The cash flow picture was even more stark.
In 1999, the fixed network produced 82 percent of cash flow. By 2013, mobility was producing 89 percent of cash flow. The fixed network was creating only 11 percent of cash flow.
The picture at AT&T was similar. In 2000, AT&T earned 81 percent of revenue from fixed network services. By 2013, AT&T was earning 54 percent of total revenue from mobility services.
Also, consider CenturyLink. In 2017 (assuming the acquisition of Level 3 Communications is approved), CenturyLink will earn at least 76 percent of revenue from business customers. In the past, CenturyLink, like other rural carriers, earned most of its money from consumer accounts.
The point is that several shifts have occurred:
- Long distance to mobility
- Fixed to mobile
- Voice to internet access
Another big shift is inevitable, as revenues that can be generate by services for humans and their smartphones has reached saturation.
As hard as it may presently be to conceive of a different future, in a decade, the revenue drivers will have changed again, and mobile subscriptions for human users will have ceased to be the big revenue driver. For at least a few tier-one service providers, content and other apps are likely to be part of the story.