Differences of opinion are what makes markets: for every seller there must be a buyer. And in the case of AT&T and some other tier-one service providers, those differences might tend to center on near-term issues such as debt loads, while longer-term strategic issues center on whether any tier-one service provider can make a sustainable business out of access services, and only access services.
In the former case, acquisitions such as DirecTV and Time Warner are problematic mostly because of the implications for debt load. In the latter case the objection is that investment capital should be spent elsewhere.
My own views are clear enough: surviving tier-one service providers must move up the stack, must take on additional roles in the value chain, must develop big new revenue sources beyond connectivity.
In large part, that belief flows directly from the marginal cost or near-zero levels of pricing for all connectivity services. Pricing that falls to nearly zero is a problem for the telecom or any other industry selling products.
But stranded assets also are a growing problem in competitive markets, as competition increases capex per customer and increases business risk.
The big strategic problem is that the global telecom service provider market is likely very close to an absolute peak, the point at which future revenues are smaller. For that reason, a simple reliance on access revenues is a guarantee of shrinking revenues.
Issues such as debt loads and other typical financial ratios are important. Mistakes can be fatal, in that regard. But beyond proper management, there are larger strategic issues, such as the future role of access services in the internet, app, retail and other parts of every ecosystem that uses communications.
If you believe telecom access revenue is bound to start a permanent decline, then business leaders must--absolutely must--develop new business models.
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