Enterprise Customers Say More Cloud, More Consolidation of Service Providers was Trend in 2013

Moving applications to the cloud and providing more mobility support for an enterprise's customers are the two notable emphases for respondents to a Forrester Research survey. 

Among the bigger changes is attitudes toward cloud-based apps, up sharply. That suggests stronger markets for cloud-based hosting services and bandwidth, if the trend holds up in 2014.

Also notable was the significantly higher interest in consolidating communications suppliers. Look for more supplier churn, if that trend continues. 

Nearly as big a change is the desire to consolidate or change equipment suppliers, as well. 

Does the Telecom Industry have a Life Cycle?

Though the roster of contestants within any industry changes over time, few entire industries actually disappear.

Much depends on how one defines "industry." One might argue that the computing industry has gotten bigger over time, even though the "mainframe," minicomputer" and now "personal computer" segments have declined.

One might ask the same about the telecommunications industry.

In some ways, the question seems odd.

Over nearly every time period, global telecom revenue grows. The only possible exceptions were the years 1929 and 2001, but even there the dips were relatively slight.

For that reason, many consider telecommunications “recession proof,” a theory that was tested in 2000 and 2008. For the most part, aggregate revenue remained fairly stable, though there were some changes in composition of revenues.

And that generally remains the present revenue trend, where annual revenue, on a global basis, grows about 2.7 percent.

That, however, is a secular trend that was in place before the recessions, so the actual impact of specific recession-induced changes is hard to measure.

So while revenue growth might slow, the 2008 global recession did not halt revenue growth. The impact of the Great Recession beginning in 2008 is easy enough to describe. According to TeleGeography Research, revenue growth  slipped from about seven percent annually to one percent in 2009, returning to about three percent globally in 2011.

To be sure, growth prospects vary between regions. In fact, growth in Western Europe has gone negative, perhaps the first time in history that communications revenue actually has seen a declining trend.

The point is that any particular telecom product or service has a life cycle. The bigger question is whether telecommunications, as an industry, also has a life cycle. That does not necessarily require that people “stop communicating.”

The issue is whether the presently-constituted communications industry represents the way people do those things, in the future, or to the same magnitude.

Glimmers can be seen in the role cable TV companies now have assumed in the communications business.

Whether “communications revenue” earned by the cable TV industry has shifted to “another industry,” or whether cable TV providers simply have become part of the communications industry, is a judgment call.

From a telecom service provider’s perspective, it does not really matter how one classifies the revenue and market share. Telecom providers have lost revenue and market share to new providers, across the consumer and business segments, and across the voice and data services markets.

To be sure, telcos have compensated by earning new video entertainment revenues and by making the formerly distinct “mobile communications” business a core part of the telecommunications business.

So the question of industry life cycle is no mere speculation. Can a telco go bankrupt? A few already have, though so far no former incumbent telco has literally disappeared altogether.

But it remains an open question, albeit not a major issue, whether the way communications services and access will be provided exclusively by today’s telcos, cable TV companies and other access providers in the future.

Google Fiber poses the challenge in somewhat concrete terms. Again, one can argue that revenues earned by Google Fiber are simply “communications revenues” earned by a new provider in the traditional business.

But one might also argue that Google Fiber might eventually be something else, namely part of a shift of the traditional access business to a new industry.

It’s a bit of a stretch to label Google Fiber access or video entertainment revenues as “application” revenues. Google’s advertising revenues generally are measured as a distinct business from that of communications access.

But the boundaries are getting porous, as Google manufactures and sells mobile devices and Internet access as supports for its application and ad revenues business.

Indian Mobile Market Illustrates Key Principle About Retail Pricing

This chart of subscribers and price per unit in the Indian communications market illustrates a principle that economists always point out: when the price of a desired product goes down, demand goes up (the reverse also is a key principle).

Economic rules apply in telecom, no less than in other markets.

Why Sprint is Certain to Launch a Price War

SoftBank cut retailer fees 35 percent to defend its small merchant point of sale service, operated with PayPal, from an attack by rival Square.

In October of 2003, SoftBank had launched a price war with Rakuten, Japan’s biggest Internet mall, by cutting fees for merchants to use SoftBank's online shopping portal. 

Those moves are consistent with SoftBank's approach to pricing for mobile service. SoftBank, it is fair to say, surprised the two larger Japanese mobile firms when it launched a price war upon acquiring Vodafone's Japan business, which had struggled to get market share.

Since 2006, SoftBank has maintained it always would offer lower prices than the other carriers.

So many believe Sprint will do so as well, once SoftBank has put all the necessary pieces into place in the U.S. market.

T-Mobile US already is attacking the market with lower prices, and seems to be taking market share primarily from AT&T.

A Scary Bit of History

This is a scary chart, not that history repeats. And then there is the opposite view. We might hope for the latter, as much as we fear the former.

 Be careful out there.

Video Traffic is Moving from "North-South" to "East-West"

A recent Bell Labs study forecasts total metro traffic will increase 560 percent by 2017, largely driven by IP video and the increasing adoption of cloud/data center services and applications.

IP video and data center (DC)/cloud traffic are the largest drivers for growth. According to the study, metro video traffic (including subscription TV and Internet video) will increase 720 percent.

Metro cloud and data center traffic will increase 440 percent by 2017, the study predicts.

As the demand for video content increases, video caching is now being implemented within metro networks, moving content caching deeper into the network.

As a direct consequence, traffic between data centers in metro areas will grow, keeping much traffic off the backbone networks. That’s a significant change.

Until recently, metro traffic had a “north-south” flow from a content source to the end user with content sources typically located at a national central location and delivered over the wide area

backbone network.

But there is a change coming, Alcatel-Lucent says. The north-south flows increasingly will be replaced by “east-west traffic  flows for traffic flows from data center to data center, increasingly located within metro centers.

There are revenue implications for providers of high-capacity metro networks.

Rare Earth Elements Underpin Modern Electronics, and Really are Rare

Rare earth elements really are rare, in the sense that replacements are difficult to non-existent, according to a study. Rare earth elements are used in smart phones and other modern electronics. 

In looking at substitution potential for 62 different metals, researchers found that, for a dozen different metals, the potential substitutes for their major uses are either inadequate or appear not to exist at all.

Those 12 elements are rhenium, rhodium, lanthanum, europium, dysprosium, thulium, ytterbium, yttrium, strontium, thallium, magnesium, and manganese.

Further, for not one of the 62 metals are exemplary substitutes available for all major uses.