It is no secret that profit margin pressures and little revenue growth in the telecom business have forced operators to reduce costs, turning to open source, outsourcing, leasing instead of owning infrastructure, headcount reductions and more reliance on online sales.
Some might go further and suggest that there are going to be fewer tier-one operators in the future, as additional scale and continual margin pressure will force smaller operators to sell themselves.
Some also suggest that, in many countries, the experiment with connectivity provider competition could fail, leading regulators back to monopoly frameworks for connectivity services.
The emergence of the internet and choice of internet protocol (TCP/IP) as the telco next generation network platform also has led to wide scale virtualization. Apps are now separated from access; network ownership from service ownership; computing devices from app operation.
In fact, core network virtualization is a requirement for full standards-based 5G. In recent days telcos have begun to move in the direction of sourcing computing support from the hyperscale computing as a service suppliers.
Sales of tower assets have been going on for years, telcos concluding there are other places to deploy capital. Some suggest wholesale sourcing of active radio elements will be next on the agenda.
There are at least two strategic lines of thought conceivable here. The first is that virtualizing and outsourcing are simply the latest versions of the “build versus buy” decisions all firms make. The second is that competitive dynamics and participant roles could shift.
The former interpretation has few strategic consequences: firms simply spend their capital and operational budgets differently, while shifting employee responsibilities. The latter possibility could see tower asset owners emerging as wholesale suppliers to much of the industry.
If so, the additional possibility could arise of potential future emergence in retail roles as well. Few wholesale business models in telecom ever remain completely that way. Over time, some creep into retail tends to happen.
To be sure, channel conflict is a real barrier to such migration. As the saying goes, “do not compete with your customers.”
Still, unless huge new revenue sources are discovered, declining profit margins and flat revenue growth will eventually force more margin-supporting actions. Virtualization, consolidation and retrenchment are among the logical business choices for consumer-facing and business-customer-facing telcos.
No comments:
Post a Comment