Telco AI Monetization on the Revenue Front Will be Difficult

Mobile executives these days are talking about ways to monetize artificial intelligence beyond using AI to streamline internal operations. Generally speaking, these fall into three buckets:

• Personalizing existing services to drive higher revenue, acquisition and retention (quality of service tiers of service, for example)

• Creating enterprise or business services (private 5G networks with AI-optimized performance,, for example)

• AI edge computing services for autonomous vehicles, for example

Obviously, those are AI-enhanced extensions of ideas already in currency. But some of us might be quite skeptical that such “AI services” owned by telcos will get much traction. History suggests the difficulty of doing so. How many “at scale” new products beyond voice have telcos managed to create? Text messaging comes to mind. Mobile phone service also was a big success. So is home broadband. 

All those share a common characteristic: they are network services owned directly by the service providers. Generally speaking, other application efforts have not scaled well. 

Mobile service providers have been hoping and proclaiming such new revenue opportunities since at least the time of 3G. But many observers might agree there has been a disconnect between the technical leaps (faster speeds, lower latency, better efficiency) and the ability to turn those into new revenue streams beyond the basic "sell more data" model. 

That is not to say that service providers have had no other ways to add value. Bundling devices, content and other measures have helped increase perceived value beyond the core network features. 

But the core network as a driver of new products and revenue is challenging for a few reasons. 

• Open networks mostly have replaced closed networks (IP versus PSTN) 

• Applications are logically separate from network transport (layers)

• Permissionless app development is the norm (internet is the assumed network transport)

• Vertical control of the value replaced by horizontal functions (telcos had full-stack control of voice, but only horizontal transport functions for IP-based apps)

As I have argued in the past, modern telcos have a hybrid revenue model. They are full-stack “service” providers for voice and text messaging. But they are horizontal transport providers for most IP apps and services, and sometimes are app providers (owned entertainment video services, for example). 

The point is that most new apps and revenue cases can be built by third parties without telco or mobile operator permission, which also takes transport providers out of the direct revenue chain. 

So I’d argue there is a structural reason why telcos and mobile service providers do not directly benefit from most of the innovation that happens with apps. Think about all the customer engagement with internet-delivered apps and services, compared to service provider voice and messaging. 

In their role as voice and text messaging providers, telcos are “service providers” (they own and control the full stack). For the rest of their business, they are transport or access providers (capacity or internet access such as home broadband), a horizontal value and revenue stream. ISPs get paid to provide “internet access,” not the actual end user apps. 

And that has proven a business challenge for now-obvious reasons. Once upon a time, voice services were partly flat-rate and partly usage-based. In other words, telcos earned money by charging a flat fee for access to the network, and then variable usage based on number, length or distance of voice calls. 

In other words, greater usage meant greater revenue. But flat-rate voice and texting usage subverts the business model, as  most of the revenue-generating services become usage-insensitive. That is the real revolution or disruption for voice and texting. 

In their roles as internet access providers, some efforts have been made to sustain usage-based pricing. Customers can buy “buckets of usage” where there is some relationship between revenue and usage. 

Likewise, fixed network providers have used “speed-based” tiers of service, where higher speeds carry  higher prices. Still, those are largely flat-rate approaches to packaging and pricing. And the long-term issue with flat-rate pricing is that it complicates investment, as potential usage of the network is capped but usage is not.  

So as much as ISPs hate the notion that they are “dumb pipes,” that is precisely what home or business broadband access is. So internet access take rates, subscription volumes and prices are going to drive overall business results, not text messaging, voice or IoT revenues. 

To be sure, we can say that 5G is the first mobile generation that was specifically designed to support internet of things applications, devices and use cases. But that only means the capability to act as a platform for open development and ownership of IoT apps, services and value. And even if some mobile service providers have created app businesses such as auto-related services, that remains a small revenue stream for mobile service providers.  

Recall that IoT services are primarily driven by enterprises and businesses, not consumers. Also, the bulk of enterprise IoT revenue arguably comes from wholesale access connections made available to third-party app or service providers, and does not represent telco-owned apps and services (full stack rather than “access services”). 

Optimistic estimates of telco enterprise IoT revenues might range up to 18 percent, in some cases, though most would consider those ranges too high. 

Region/Group	Total Mobile Services Revenue	IoT Connectivity Revenue (Enterprises)	Automotive IoT Apps Share of IoT Revenue	% of Total Revenue from Automotive IoT Apps
Global Average	$1.5 trillion (2025 est.)	10-15% (2025, growing to 20% by 2027)	25-35%	2.5-5.25%
North America (e.g., Verizon)	$468 billion (U.S., 2023, growing 6.6% CAGR)	12-18% (2025 est.)	30-40% (high 5G adoption)	3.6-7.2%
Asia-Pacific (e.g., China Mobile)	$600 billion (2025 est.)	15-20% (strong automotive industry)	35-45% (leader in connected cars)	5.25-9%
Europe (e.g., Deutsche Telekom)	$400 billion (2025 est.)	10-15% (CEE high IoT reliance)	25-35%	2.5-5.25%
Top 10 Mobile Operators	$1 trillion (2025 est.)	12-18% (based on 2.9B IoT connections)	30-40%	3.6-7.2%

Though automotive IoT revenues (again mostly driven by access services) arguably are higher for the largest service providers, their contribution to  total business revenues is arguably close to three percent or so, and so arguably contributing no more than 1.5 percent of total revenues, as consumer services range from 44 percent to 65 percent of total mobile service provider revenues. 

Category	Percentage of Total Revenue	Example products
Services to Consumers	55-65%	Driven by mobile data (33.5% in 2023), voice, and equipment sales; 58% in 2023
Services to Businesses	35-45%	Includes enterprise, public sector, and SMBs; growing at 7.1% CAGR
Business Voice	5-10%	Declining due to VoIP adoption and mobile data preference
Business Internet Access	15-25%	Rising with 5G, IoT (e.g., automotive apps at 2.5-9%), and enterprise demand

The point is that the ability to monetize AI beyond its use for internal automation is likely limited. Changes in the main revenue drivers (consumer and business mobile phone subscriptions and prices) are going to have more impact on revenue and profit outcomes than IoT as a category or automotive IoT in particular.

Most People Probably Pay Less for Home Broadband Than We Think

It always is difficult to ascertain what “most” consumers actually are paying for home broadband service, partly because people choose a range of plans (faster speeds cost more); partly because many buy service only in a bundle, so there is not actual discrete and identifiable cost. 

In the U.S.  market that is a pronounced issue, as an estimated 70 percent of home broadband services are purchased as part of a bundle. So most of the market arguably buys home broadband in a way that obscures the actual cost. Only about 30 percent of buyers choose a service with a clear recurring price. 

Platform	Typical Speeds	Data Allowance	Monthly Price Range	Common Characteristics
Satellite	~25–30 Mbps download ~3–5 Mbps upload	10–20 GB/month (with some unlimited options at higher prices)	~$75–$85	Mainly chosen in rural or remote areas; higher latency and data caps are common; plans often come with extra fees for overage.
Cable TV	~100 Mbps (often scalable to 200+ Mbps in some markets)	Unlimited data (with occasional fair-use policies)	~$55–$65	The most popular option in urban/suburban areas; offers a good balance of speed and cost; bundle options with TV/phone are common.
Telco (Fiber/DSL)	~100–200 Mbps (fiber often delivers symmetrical speeds)	Typically unlimited or very high data limits	~$60–$70	Fiber plans (e.g., Verizon Fios, AT&T Fiber) are prized for reliability and speed; DSL remains common where fiber isn’t available.
Independent ISP	~50–150 Mbps	Varies, but often unlimited or high caps	~$50–$60	Smaller regional providers often offer competitive pricing and personalized service; plan details can be more tailored.
Fixed Wireless	~25–50 Mbps	Often moderate data caps (e.g., 250 GB/month) or unlimited with speed throttling	~$50–$60	Frequently used in rural or underserved areas; installation can be simpler and faster; speeds may vary with weather and line-of-sight conditions.
Mobile Broadband	Varies (commonly 10–30 Mbps when used as a home hotspot)	Often included as part of an unlimited smartphone plan or separate data allotment	~$55–$65	Purchased as a hotspot or integrated into a mobile plan; flexibility for on-the-go usage, but performance depends on network congestion and coverage.

And estimates vary dramatically when bundled service costs are considered. Where the estimated cost of a cable TV stand-alone service might be between $55 and $65 a month for 100 Mbps service, that same service might “cost” only about $30 to $40 a month when purchased as part of a bundle. 

Platform	Estimated Broadband Cost Portion	Notes
Cable TV	~$30–$40/month	Cable bundles often offer broadband at a discounted rate compared to standalone options, as the service is cross-subsidized by TV/phone components.
Telco (Fiber/DSL)	~$35–$45/month	Fiber bundles tend to emphasize higher speeds and reliability; the broadband portion may carry a slight premium compared to cable but still remains competitively priced in a bundle.
Fixed Wireless	~$30–$40/month	Often offered in rural or underserved regions, these bundles provide broadband at rates similar to cable bundles, though speed and data policies can vary.
Mobile Broadband	~$30–$40/month	When integrated into smartphone or home hotspot bundles, the effective broadband cost is often reduced as part of multi-line or data-centric deals.

Good Outcomes Beat Good Intentions: How Dumb Are We?

Good intentions clearly are not enough when designing policies to improve home broadband availability in underserved areas. In fact, since 2021, more than three years after its passage, the U.S. Broadband Equity, Access, and Deployment (BEAD) program has yet to install a single new connection.  

It seems we were determined to make the perfect the enemy of the good, preventing construction until we mostly were certain our maps were accurate. A rival approach would have proceeded on the assumption that residents and service providers pretty much know where they have facilities and where they do not; where an upgrade can be conducted fast and easily, and where it cannot. 

And perhaps (despite the clear industry participant interests that always seem to influence our decisions) we should not have insisted on the “fastest speed” platforms. Maybe we’d have prioritized “good enough” connections that could be supplied really fast and enabled the outcomes we were looking for (getting the unconnected connected; getting the underserved facilities that do not impede their use of internet apps). 

This is not, to use the phrase, “rocket science.” We have known for many decades that “good enough” home broadband can be supplied fast, and affordably, if we use satellite (geostationary or low earth orbit, but particularly now LEO) or wireless to enable the connections. 

To those who say we need to supply fiber to the home, some of us might argue the evidence suggests relatively-lower speed (such as 100 Mbps downstream) connections supply all the measurable upside we seek, for homework, shopping, telework. The touted gigabit-per-second or multi-gigabit-per-second connections are fine, but there is very little evidence consumers can even use that much bandwidth. 

Study/Source	Key Findings
Distinguishing Bandwidth and Latency in Households' Willingness to Pay for Broadband Internet Speed (2017)	Consumers value increasing bandwidth from 10 to 25 Mbps at about $24 per month, but the additional value of increasing from 100 Mbps to 1 Gbps is only $19. This suggests diminishing returns for speeds beyond 100 Mbps.
Are you overpaying for internet speeds you don't need? (2025)	Research indicates that many Australians are overspending on high-speed internet connections they don't need. Most households can manage well with a 50 Mbps plan unless they engage in high-bandwidth tasks like 4K streaming or online gaming.
Simple broadband mistake costing 9.5 million households up to £113 extra a year (2024)	Millions of UK households are overpaying for broadband by purchasing higher speeds than necessary. Smaller households often need speeds up to 15 Mbps but pay for over 150 Mbps, wasting £113 annually.
ITIF (2023)	- US broadband speeds outpace everyday demands - Only 9.1% of households choose to adopt 250/25 Mbps speeds when available - Clear inflection point past 100 Mbps where consumers no longer see value in higher speeds
ITIF (2020)	- Average existing connections comfortably handle more than typical applications require - A household with 5 people streaming 4K video simultaneously only needs 2/3 of current average tested speed - Research shows reaching a critical threshold of basic broadband penetration is more important for economic growth than faster speeds
European Research (2020)	- Full fiber networks are not worth the costs - Partial, not full end-to-end fiber-based broadband coverage entails the largest net benefits
US Broadband Data Analysis	- Compared to normal-speed broadband, faster broadband did not generate greater positive effects on employment
OpenVault Q3 2024 Report	- Average US household uses 564 Mbps downstream and 31 Mbps upstream - Speeds around 500 Mbps sufficient for most families
FCC Guidelines	- 100-500 Mbps is enough for 1-2 people to run videoconferencing, streaming, and online gaming simultaneously - 500-1000 Mbps suitable for 3 or more people with high bandwidth needs

We might all agree that, where it is feasible, fiber to home makes the most long-term sense. But we might also agree that where we want useful home broadband speeds, right now, everywhere, with performance that enables remote work, homework, online shopping and all other internet apps, then any platform delivering 100 Mbps (more for multi-user households, but likely not more than 500 Mbps even in the most-challenging use cases) will do the job, right now. 

Good intentions really are not enough. Good outcomes are what we seek. And that often means designing programs that we can implement fast, at lower cost, with wider impact, immediately or nearly so. “Better” platforms that cost more and are not built are hardly better.