Connectivity Providers Cannot Escape Their Role in the Value Chain

Connectivity providers might not like their role in the internet ecosystem and value chain, but it cannot be wished away, as one occasionally hears from policy experts looking at tourism-driven economies. 

As with other economic realities--nations with lots of cheap energy, mineral abundance, productive farmland, good seaports, high educational attainment, social cohesion, strong rule of law, abundant clean water and other resources--nations must begin with what advantages they have been given. Or cope with the disadvantages of not having those things. 

source: Kearney

It is always possible to “zoom in” and emphasize some parts of the value chain (data centers, subsea networks, access networks (mobile and fixed). But by some measures, the “digital economy” might represent nine percent of U.S. economic activity, for example. Connectivity is a fraction of that. 

Most of the economic activity generated within the internet ecosystem happens elsewhere: components, devices, infrastructure, applications, advertising and commerce. If global gross domestic product is about $80 trillion, annual connectivity provider revenues amount to perhaps $1.6 trillion, or about two percent of global GDP.  

source: Bureau of Economic Analysis 

As with other utility-like industries, the value of goods and services produced using electricity, roads, railways, airports, bridges, communications networks and other energy networks is vastly more than is spent on the infrastructure services and facilities themselves.

Economic activity directly supported by connectivity keeps growing. E-commerce, though, is still only about 15 percent of all retail commerce, and connectivity get  none of that in a direct sense. 

If you have been in the connectivity business long enough, you have heard executives talk virtually continually about how they will emerge as leaders in new adjacencies or parts of the value chain. 

You also know how hard that is to accomplish. You also will have become accustomed to equity analysts arguing such efforts should be resisted, even as other analysts argue such diversification is necessary. 

Wishing it were not so does not help.