Saturday, May 19, 2018

More Evidence that Telcos Have to Replace Half Their Revenue Every 10 Years

Trends in global text messaging revenue nicely illustrate my contention that service providers have to replace about half their current revenue about every decade.

In the messaging area, over the top apps have displaced as much as half of the former mobile messaging revenue stream, and as much as 81 percent reduction in text message revenue in a little more than a decade, in some countries.

Between 2017 and 2022, global SMS revenue (person to person) is likely to drop about 42 percent, according to researchers at Ovum. “Unfortunately for most telcos, P2P SMS has become essentially value-less, since they have had to bundle unlimited SMS into mobile tariffs to remain relevant to their customers, an increasing number of whom use chat apps such as WhatsApp, WeChat and Facebook Messenger,” Ovum argues.

The same sort of trend can be seen in fixed voice revenues. From 1984 to 1994, for example, the cost of a fixed network call dropped from more than 30 cents per minute to perhaps 10 cents. The cost of a mobile call dropped from more than 60 cents in 1994 to about seven cents in 2004, a decade.

The decline of fixed network voice is a direct result of mobile substitution, as consumers globally have chosen mobile phones as their method of choice for using voice services.

So it is not hard to make the argument that even mobile internet access, the big drivers of mobile revenue in recent years, will suffer the same fate. And as hard as it might be to fathom, fixed network internet access will likewise mature.

Wireless substitution remains a controversial prospect, as some argue that  5G is a substitute for the National Broadband Network, while others doubt that will happen, as fixed network access “is always better” than mobile.

But it is likely dangerous to make predictions based on past expectations. It is not at all clear to some observers that fixed network internet access speeds always and everywhere, to say nothing of speeds in many markets, will “always be better than mobile.”

In fact, some already say 5G will be faster than copper-based networks supporting the Australian National Broadband Network. If that proves true, then assuming 5G tariffs are set competitively, the mobile 5G network could well be faster than all but fiber to home networks.

And if history provides any guide, it is that, for some current use cases, mobile substitution for internet access already is a reality. Once 5G launches, the amount of substitution could skyrocket.

"I truly believe that 5G will be enough bandwidth for the average consumer, and you won't need a fixed line broadband service," said Boost Mobile CEO Peter Adderton . "You talk to some of the carriers in the U.S., they agree with that."

"You'll still need fibre to run offices and that kind of thing, but for the next generation, they're going to be entirely happy on 5G,” Akkerton argues.

Millimeter wave and small cells are the enablers. In fact, millimeter wave use to support mobile operations is the obvious rebuttal to the argument that mobile can replace fixed line.

Simply put, millimeter wave, used in small cells,  increases capacity so much that mobile operators actually can entertain retail tariffs competitive with fixed line alternatives.

At the same time, millimeter wave and small cells allows access speeds to climb easily within the range of fixed network alternatives (hundreds of megabits per second up to perhaps gigabits per second, eventually).

But many 5G observers also suggest that speed will not be the decisive change, where it comes to use cases. In fact, that might be a change that comes from 5G ultra-low latency, which might will be the killer feature for 5G, compared to other access networks.  

Source: The Australian

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