Over-simplistic analysis of the mobile service provider, or fixed-line business, is easy to understand. It's a complicated business in many ways, and complicated stories are hard to tell. "Rich service providers gouging customers" is a vastly-easier storyline than many others.
As some of you know, I'd argue that the U.S. communications business faces very-serious challenges. In fact, fixed line providers face issues more analogous to the U.S. steel, auto and textile industries than anything else. That is to say, the traditional business of selling voice services for money is a sunset business. That is not to say voice communications is any less important for most people, most of the time, and for all people at least some of the time.
It is to say that a highly capital intensive business that is losing its historic business model has radical transformation before it, or an unpleasant demise. I think everybody would agree that broadband and mobile communications are an important foundation for economic success, and that such success cannot be taken for granted. For such reasons, virtually all observers might argue it is a wise policy to encourage investment in the business, as well as investment to create a higher-quality broadband access infrastructure.
Chetan Sharma, an independent analyst, estimates that U.S. carriers will generate about $165 billion in revenues in 2010. Of the total, nearly $55 billion will come from sales of data services alone. That factoid, taken in isolation, can be used to argue that service providers are making way more money from their capital investments than might be justified, or at least that such investments prove the business is sound, since carriers invest about $30 billion to $50 billion annually.
I wouldn't characterize matters that way. It now is tough to raise significant capital for infrastructure, as investors aren't generally dumb. They can see that the business model is challenged, and that new revenue sources beyond voice and even broadband access must be created. That is no less true of the mobile side of the business than of the fixed-line side of the business.
Mission-critical industries that are declining, are not places to create new burdens, one might argue. You might wonder why debates about communications, and what has to be done, so rarely are positioned that way. I'd argue there are sound reasons.
No executive of a public company is going to say anything contrary to the notion that "we face challenges, but have plans in place to meet those challenges." Critics of the industry will always position carriers and service providers as rich, monopolistic, uncaring providers who need to be reined in. Some will argue, in private, that they need to be vanquished, one way or the other.
That isn't to argue that the major providers are not powerful generators of revenue. It isn't so clear they are powerful generators of profit, but for the moment just focus on the revenue. If you believe an ultimate loss of perhaps 50 to 80 percent of the current revenue are inevitable, the strategic picture is quite different. The U.S. steel industry, or auto industry, once appears that way as well.
But those industries could not, or would not, radically change. The strategic challenges are huge. If somebody told you, whatever your current occupation or business, that you would lose half to 80 percent of your revenue in perhaps 10 years, and that every step of the way between here and there would feature more pressure, I doubt you'd appreciate being saddled with obstacles that reduced your current income faster, and limited your ability to reposition, as you fought to change.
The argument that advanced communications will be expensive and difficult to finance, and that obstacles should not be placed in the way, is just a practical response to market conditions that seem almost self evident. Sure, there will always be legitimate issues about abuse of power. But nobody worries about abuse of power in the textile, auto or steel industries, because their "power" evaporated with their business fortunes.
Advanced communications is too important to let wither, and there are clear obstacles to the investment we need to be making. Ripping the profit out of the business is a good way to block the advances we need.
