Thursday, January 9, 2020

How Will Industry Replace $35 Billion in Annual Revenue Losses Every Year?

Globally, mobile operator voice revenue will drop to $208 billion by 2024 from $381 billion in 2019, Juniper Research now forecasts. That is not a new trend, as voice revenue has been under severe pressure for two decades, and not principally because of VoIP substitution

After about 2000, consumers began to place more and more of their long distance calls directly from their mobiles, instead of landline phones, in large part because of financial inducements to do so. The net impact, shown here in the U.S. market, was a decline in fixed network calling, a decline in purchasing of fixed network voice lines, and, as a consequence, a decline in voice revenue. 

In fact, one can argue that it was a shift of consumer demand to mobility, with domestic long distance calling included at essentially no charge, that drove mobile demand.

Starting about 2001, a domestic long distance call might still have cost an additional 10 cents per minute on a fixed line, but a zero incremental charge when calls were placed from a mobile device. 

That disrupted the industry profit model, which was built on long distance revenue. 


Of course, competition did not help, either, and that process had already been driving lower prices, since at least 1983. 

If Juniper Research estimates prove correct, $173 billion worth of revenue will be removed from service provider ledgers, in total, between 2019 and 2024, to the tune of roughly $35 billion annually. Those are significant numbers, as all that revenue has to be replaced, somehow. 

For any single service provider, no matter how large, $1 billion in annual new revenues is not easy to acquire, harder still to build. 


All that is why some observers believe connectivity service providers must discover or create a few new and big sources of revenue to replace voice, messaging and now even video entertainment revenue. My own prediction is that the new revenues will have to have magnitude of about 50 percent of present revenue in 10 years.

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