How Telecom Industry Will be Like the Airline Industry

Sometimes, you have to say what nobody really wants to hear. So here is a nugget from Bell Labs: By 2025, the global telecom service provider industry is going to shrink from 800 firms to about 110, lead by just five global giants, according to Bell Labs. That is a reduction of 86 percent, by 2025.

To use an analogy, the future telecom business (eight years from now) will look like the global airline industry. A handful of firms will operate globally. About a hundred firms will be local partners, affiliated with one or more of the global entities into a “network” such as “Star Partners.”

In recent years, three global alliances have gotten 73 percent passenger share.

source: ITC Infotech

There are other similarities. Both airline and telecom industries are nearing maturity (already mature in developed regions, still in growth phase in many developing regions) and facing declining average revenue per unit.

source: Ryanair

source: Deepak Nagi

In the telecom business, a new competitive landscape will emerge, characterized by “the emergence of a new global-local duality of new service providers with either global or local focus,” says Bell Labs. There will be 10 global service providers that offer global connectivity, cloud and contextualized control and content (C&C) services.

In addition, there will be  100 local cloud-integrated network providers that offer domestic, hyper-local connectivity, edge cloud and contextual C&C services.

“Stitching it all together: a global-local alliance framework that connects and interworks the local and global service providers, similar to that of the airline industry,” says Bell Labs.

Will you be working for one of those 110 firms in 2025? And, if so, what do you need to know, today, to get ready?

That is the key challenge that underlies “Telecom Week,” a five-day training program created by the Pacific Telecommunications Council and aimed at mid-career telecom professionals, regulatory staffs and C-suite executives who will have to evaluate what 5G means for their businesses.

The premise is that, within a decade, there will be a dramatic, stunning reshaping of the global telecom business, and that, to survive, telecom professionals, regulators and suppliers need to prepare right now, for a cataclysmic change.

Instructors for telecom week will be leading discussions of what will future networks--and your business--will look like in the future, and what must you do now, to get there.  

The strategic problems the leaders of tomorrow’s telecom companies be grappling with, and what can today’s middle managers do--now--to prepare for the day when they are part of those leadership teams, also are key.

Telecom Week, to be held in Bangkok beginning 18 September and concluding on 22 September, is an unparalleled effort by PTC to quickly train telecom professionals on the profound changes coming in mobile and fixed telecommunications, with two full days looking at mobile and 5G, and three days looking at the broader strategic context for the telecom industry.

By the end of the week, attendees will have learned what 5G means, where the industry is headed and how they need to think about a vastly-different industry, and new roles within their companies.

The program begins with two days of training on 5G/mobility, at Spectrum Futures. The program continues with three days of management training at PTC Academy, introducing mid-career professionals to the strategic issues they and their firms will face in the near future.

Attendees at each of the programs will earn a certificate of completion, as well as gain key insight on where the industry is headed, what will happen and how to prepare for the coming changes.

Register now for Telecom Week events Spectrum Futures and PTC Academy. Your future may depend on it.

By 2025, There will be Just 105 Service Providers, Down from 810

By 2025, the global telecom service provider industry is going to shrink from 800 firms to about 105, according to Bell Labs. That is a reduction of 87 percent, by 2025.

Will you be working for one of those 105 firms in 2025? And, if so, what do you need to know, today, to get ready?

That is the key challenge that underlies “Industry Transformation Boot Camp,” a five-day training program created by the Pacific Telecommunications Council and aimed at mid-career telecom professionals, regulatory staffs and C-suite executives who will have to evaluate what 5G means for their businesses.

The premise is that, within a decade, there will be a dramatic, stunning reshaping of the global telecom business, and that, to survive, telecom professionals, regulators and suppliers need to prepare right now, for a cataclysmic change.

Instructors for telecom week will be leading discussions of what will future networks--and your business--will look like in the future, and what must you do now, to get there.  

The strategic problems the leaders of tomorrow’s telecom companies be grappling with, and what can today’s middle managers do--now--to prepare for the day when they are part of those leadership teams, also are key.

Telecom Week, to be held in Bangkok beginning 18 September and concluding on 22 September, is an unparalleled effort by PTC to quickly train telecom professionals on the profound changes coming in mobile and fixed telecommunications, with two full days looking at mobile and 5G, and three days looking at the broader strategic context for the telecom industry.

By the end of the week, attendees will have learned what 5G means, where the industry is headed and how they need to think about a vastly-different industry, and new roles within their companies.

The program begins with two days of training on 5G/mobility, at Spectrum Futures. The program continues with three days of management training at PTC Academy, introducing mid-career professionals to the strategic issues they and their firms will face in the near future.

Attendees at each of the programs will earn a certificate of completion, as well as gain key insight on where the industry is headed, what will happen and how to prepare for the coming changes.

AI Is Going to Disappoint, in Terms of Impact, for Some Time

 Quite often, big new information technology projects or technologies fail to produce the expected gains. That “productivity paradox,” where high spending does not lead in any measurable way to productivity gains,  is likely to happen with artificial intelligence and machine learning, at least in the early going. And that “early going” period can last far longer than many believe.

To note just one example, much of the current economic impact of “better computing and communications” is what many would have expected at the turn of the century, before the “dot com” meltdown. Amazon, cloud computing in general, Uber, Airbnb and the shift of internet activity to mobile use cases in general provide examples.

But that lag was more than 15 years in coming. Nor is that unusual. Many would note that similar lags in impact happened with enterprises invested in information technology in the 1980s and 1990s.

So prepare now: artificial intelligence and machine learning are eventually going to have the impact many now expect. It simply will take far longer than many expect.

No doubt, spending is growing. Some surveys suggest enterprises have dived into machine learning (artificial intelligence).

Half of those adopting machine learning are looking for insights they can use to improve their core businesses. About 46 percent report they are looking for ways to gain greater competitive advantage. Some 45 percent are looking for faster gleanings of insight. And 44 percent are looking at use of machine learning to help them develop new products.

source: MIT Technology Review

source: Tractica

Crown Castle Small Cell Plan Hightlghts Value of Trunking Fiber

The rationale for fixed network optical fiber deployment has in the past been driven by three different use cases: enterprise data networking; consumer TV/internet access and signal distribution (trunking or backhaul).

These days, spending on optical fiber in the U.S. market is driven more by distribution and enterprise apps than consumer retail services (at least in a direct sense, using fiber as the access media).

The reason is the coming use of millimeter waves to support 5G networks. Millimeter waves will not propagate as well as lower-frequency signals used to support mobile networks. That means much more “fiber deep” deployment of the trunking network, especially to reach small cell sites.

That, in turn, is pushing immediate spending towards trunking fiber that can support small cell deployments.

Crown Castle, for example, plans to deploy 25,000 small cells within the next two years, according to Guggenheim Equity Research. That, in turn, is driving Crown Castle efforts to secure much more trunking (distribution network) fiber.

“Among the three publicly traded tower companies, Crown Castle has uniquely chosen to focus on small cell development to supplement its macro site tower business,” Guggenheim’s Robert Gutnam argues.. “Currently, this segment comprises 16 percent of total revenue, and generates six percent return on investment, expected to grow to about 10 percent as second tenants are added.

Moving Up the Stack: 1/2 of Addressable Mobile IoT Opportunity?

Moving up the stack in the internet of things ecosystem will not be easy for mobile operators, if necessary.

The most-logical approach for many tier-one service providers is to create an application enablement platforms for IoT connections. Essentially, using the frameworks mean IoT devices will be “plug and play” on a specific network.

Such platforms generally supply a set of tools that simplify the process of building IoT solutions. Most solutions support analytics, data integration tools and run-time environments and are “horizontal” in focus, rather than aimed at specific industry verticals.

source: Analysys Mason

Several roles seem now to make sense. Mobile operators can offer a horizontal enablement platform, supplying device management for developers. That might represent a global market worth about US$20 billion in 2025.

Some mobile operators might try to create solutions for industry verticals. Such platforms might make sense in the healthcare area, as that overlaps with the “health and fitness” category where personal monitors already are routine.

That might represent a US$10 billion opportunity. A few mobile operators might develop end-to-end solutions for verticals such as fleet management. That might be worth US$19 billion, Analysys Mason predicts.

Mobile IoT Access Might Not Generate as Much Revenue as You Expect

As important as internet of things is likely to be for telecom revenue opportunities in the 5G era, it is not at all going to be easy to realize those gains. In a real sense, IoT and 5G represent the first era of mobility where the real upside has to come from applications, not access. 

Even if connectivity revenue has driven industry growth for all of its history, that is likely to begin a historic change in the 5G era. This is more than a new emphasis on "moving up the stack."

Eventually, if not so clearly at first, revenue either will be dominated by applications or total telecom revenue will shrink. 

By 2025, Analysys Mason predicts, global mobile operator revenue will reach about $888 billion (fixed network revenue not included). Some expect or hope that special-purpose wireless networks and fixed networks will play connectivity roles, with direct or indirect revenue models, as well. But the direct mobile opportunity seems to lie outside connectivity, per se.

Connectivity revenues earned by mobile ISPs will amount to about $28 billion. With the caveat that the forecasts might be too pessimistic, if correct, that prediction suggests there is not as much internet of things connections revenue as many might believe.

If correct, that reinforces the argument that most of the potential revenue upside from IoT for ISPs will come from participation in other segments of the ecosystem.

It always is important to differentiate between robust growth of broad IoT revenue streams and the portion that specifically will accrue to mobile and other ISPs in the form of connectivity revenue.

It is the same issue we faced early in the development of either internet retailing, mobile payments and smartphone markets. Total transaction value (the value of merchandise purchased through online channels) is not revenue for telecom providers. Nor is transaction value the same as profit, for any ecosystem participants.

Analysys Mason estimates total revenue from IoT solutions enabled by mobile operators (devices, applications, connectivity) of something greater than US$200 billion in 2025, with revenue growing at a compound annual growth rate of 18 percent.

But telecom access revenues, though growing, might still represent just about three percent of total telecom industry revenue by 2025. Machina Research research suggests “connectivity” might be the absolute smallest revenue opportunity within the ecosystem.

source: Machina Research

When Telecom Markets Stabilize, What Will the Structure Look Like?

 We are now some several decades into a process of regulatory, competitive and technology changes that change the shape of telecom markets. Where once every market was a sanctioned monopoly, we have moved to new market structures where there are multiple providers. What is not clear is how new stable market structures will develop, and what form those structures might take.

In a competitive industry, one might expect to find a stable structure where the market share leader has twice the share of provider number two, while provider number two has twice the share of provider number three. So a 40-20-10 structure would be possible.

In many highly fragmented industries, there could be scores of firms with single-digit share, with a 20-10-five structure, or even more fragmented than that, in terms of brands.

In the smartphone market, the leader market share of the top-three providers was 35-23-five, for example, in 2016.

source: newzoo.com

In the U.S. browser market n 2015, Chrome had 40 percent share, followed by Internet Explorer at 31 percent, then Firefox at 16 percent.

source: softpedia.com

Telecom, for course, is a highly-capital-intensive industry, with the consequence of oligopoly structures. Whether stable markets eventually will be lead by two, three, four or even more providers is unclear.

In South Korea, Korea Telecom had in 2014 43 percent share; SK Telecom 22 percent, LG Uplus 17 percent.

In Japan, in 2007, NTT had 53 percent, KDDI 29 percent, Softbank 17 percent share. By 2013, NTT had 41 percent, Softbank had 30 percent, while KDDI had 29 percent share.

In many mobile markets, there is a tendency for three providers to hold significant share, with a range from 40-percent range for the leader to 20-percent range each for the others.

source: Infinita

source: Point Topic

But even some app industries show an oligopolistic pattern. In the U.S. mobile advertising market, Google has 32 percent share, Facebook 20 percent, Twitter four percent.

source: eMarketer

The point is that, eventually, an oligopoly structure lead by just a few firms (three or two) is a reasonably safe bet, in either mobile segment. In larger markets with multiple fixed and mobile providers, it is possible a stable structure could develop with four or more providers. We just do not know, yet, as telecom markets arguably have not reached a stable state.