Most professionals in the telecom industry, if asked what key forces explain industry margin pressures and revenue shifts, will tend to include “competition” and “over the top” apps and services.
Less frequently, one might hear that changes in end user preferences (mobility, especially) or technology (including the internet and TCP/IP, Moore’s Law, optical fiber, signal compression, wireless, cloud computing, virtualization) are key reasons for changes in revenue composition and magnitude.
Some with longer memories might say that industry deregulation and national telco privatization are contributors. And though different participants might argue about which of these forces was “most important,” all have played key roles over the last 40 years.
There would be little competition save for deregulation and privatization. The shift to OTT would not have happened without embrace of TCP/IP and the creation of the internet. And technology would not have advanced so fast, cutting infrastructure and operating costs, except for Moore’s Law.
Vastly lower computing and communications costs, in turn, enabled remote computing, which supported and transformed the way people and businesses use software. In a direct way, the consumer shift to “I want what I want, when I want it” propelled the value and use of mobility, creating a substitution effect.
People found mobile the way they preferred to use voice, while messaging enabled by mobility became (with email) a substitute for the need to “talk,” in many instances. And changes in tariffs helped drive the change.
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.
After 2000, all fixed network providers lost share, as demand shifted to mobility, largely because AT&T introduced its Digital One Rate plan, which eliminated the cost distinction between domestic long distance calling and a mobile phone minute of use.
Where before a caller might have paid 10 cents a minute to 25 cents a minute to make a long distance call, after Digital One Rate the cost was simply the cost of using a mobile phone for a minute.
And since Digital One Rate was available only on mobile phones, and, at first, only on AT&T’s mobile network, it was rational for consumers to want to make outbound long distance calls on their mobile phones, instead of using a landline phone and service.
And even if the internet had come a “thing” by about 2000, the real reason for the precipitous fall in long distance revenue was a massive shift to use of mobile phones, not displacement by voice over IP alternatives.
For this reason, some of us would not agree that VoIP and OTT messaging have caused most of the industry revenue losses.
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