Some might think it is mere hyperbole to argue that connectivity service providers literallly must replace half their current revenue every decade. But that has historically been the norm in the competitive era of connectivity. To use the most-obvious examples, nearly all revenue and profit in the period before 1980 was earned selling voice. Does anybody think that is the case today?
Instead, globally, mobile service is what drives both revenue and revenue growth. On the fixed networks, internet access (home broadband) drives revenue, not voice. In developing markets, mobile subscriptions still drive growth. But in developed markets internet access is the revenue growth driver.
In the enterprise wide area networks market, X.25 once drove revenue, followed by frame relay. ISDN and ATM nver caught on. Now it is dedicated internet access, Ethernet transport or MPLS that are key revenue generators. And MPLS is being replaced by SD-WAN.
The colloquial way of expressing this is to say "my top revenue-producing product in 10 years has not been invented yet." Again, that might seem hyperbolde. But think about 4G, 5G and 6G. Each successive next generation network was introduced 10 years after the prior generation. And each successive generation displaced prior generation customer accounts,
Part of the reason for revenue change of that magnitude is product obsolesence. The other issue is declining average selling prices.
This graph of mobile termination rates--the fee a mobile network charges another network for completing an inbound call--illustrates a couple of principles relevant to the connectivity and computing industries. To the extent that computing costs are driven by chip-level capabilities that double about every 18 months, cost-per-operation drops over time.
In other words, the cost of executing a single instruction or operation will fall rather sharply every decade, as they essentially fall by half every two years. In this example of mobile termination rates, costs fell from seven cents per minute to less than two cents per minute over a decade, or more than half--and close to three times--in 10 years.
All other things being equal--such as holding traffic volumes steady--that means termination revenue would have fallen by close to three times, and clearly more than half, over that decade. In practice, since call volumes rose, the decline was likely less, in absolute terms.
For example, the global number of mobile subscriptions grew about 52 percent between 2010 and 2019, so there were more people making mobile phone calls. But per-minute charges dropped faster, close to 100 percent lower in some countries.
Other charges also declined. Between 1997 and 2022, for example, the cost of U.S. mobile 41phone subscriptions dropped by 50 percent. So the actual rate of decline for recurring service was not as fast as the decline of calling costs per minute.
The actual change in revenue sources was complicated. Revenue was boosted by additional subscribers, replacement services (mobile internet access in place of voice and messaging) and higher possible usage in some cases. But revenue was diminished by lower average unit rates for subscriptions, calls and text messaging.
That illustrates a second point about revenues in the connectivity business: about half of all current revenue earned by a service provider will be gone, every decade. That might sound like an exaggeration. It is not. How many service providers sell ISDN, X.25, frame relay or ATM anymore? At one time, each of those services was, or was supposed to be, a key driver of wide area network data revenues.
How many access providers sell dial-up internet access anymore? And, over time, what is the typical downstream package purchased by half of all customers? At one point it might have been 1 Mbps or less. At some point that changed to perhaps 10 Mbps, then 100 Mbps, then higher. The point is that in each generation, the “product” changed.
International and national long distance calling rates show the same pattern.
source: U.S. Department of Justice
The general point is that revenue sources changed over that decade, as they tend to do every decade.
In fact, calling revenues now are minor enough that it is difficult to find statistics on calling volume or revenue, as internet access now drives revenue models.
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