Tier-one connectivity provider business strategy hinges on product life cycles, and the effort to create replacement products as legacy products are harvested. Key examples include the harvesting of fixed network voice and promotion of mobility as a substitute product; the waning of long distance calling revenues and its replacement by a combination of mobility and messaging revenues; the harvesting of voice in general and its replacement by internet access.
Entry into linear video services is a growth strategy for some service providers, while others are harvesting linear services while building over the top replacements.
Investment is required before a product is launched. In the telecom industry, this includes standards work, product development by infrastructure suppliers, some amount of lobbying work with government or regulatory entities and then marketing and capital investment.
There is a predictable corollary to these initiatives. Work on the next generation of products has to be underway before the legacy revenue driver is exhausted.
In the early days, as with most big new product launches, building brand awareness and gaining market share are key, while profit margins often are less important. Once a product is mature, though, strategy shifts to defending market share and increasing profit margins.
In product decline phase, revenue has to be harvested, assets divested or operations halted.
One big question might be “what comes after mobility?” Another question could be “what comes after internet access?” Other questions could be asked about what comes after entertainment video. Not all service providers, in all markets, will have to create answers for these questions immediately.
But some must grapple with the issues now. In some markets, voice, internet access, messaging, linear video entertainment and even core business customer services are either mature, or facing product substitution, or both.
Globally, telecom service provider revenue growth rates are about one percent, STL Partners estimates.
Mobile voice revenue, for example, might fall from $380 billion in 2019 to $210 billion in 2024, at least in part because of increasing usage of over-the-top apps, including WhatsApp and Viber, says Juniper Research.
The big point is that connectivity providers must continue to search for new revenue drivers beyond voice, mobility, internet access and entertainment video.
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