Though internet of things connectivity and fixed broadband services will be important revenue drivers for the large enterprise and small and medium-sized enterprise (SME) segments over the next five years, information (software, apps, computing) products “will be the main driver of business revenue growth” for telcos serving enterprise and SMB customers, according to analysts at Analysys Mason. “Connectivity alone is unlikely to be enough to sustain a B2B operator.”
One might expect prices to increase in line with inflation, but that has not happened. Though inflation rates peaked at between 12 percent and 15 percent in many Western European countries and at between seven percent and nine percent in North America in 2022, in many cases average revenue per user has declined for business mobile services and business fixed data services, Analysys Mason argues.
Part of the reason is long-term contracts signed with enterprise customers, which limit the ability to raise prices.
The advice to “increase value” is to be expected. Precisely how that might be accomplished is always the issue. It might be noted that some revenue increases have been captured by others in the value chain, not connectivity providers. And some revenue sources, such as “private cloud,” might include large contributions from “connectivity” rather than “cloud computing” operations and services.
If, as the Analysys Mason analysts argue “connectivity alone” is unlikely to be enough to sustain a B2B operator, the issue is how much value add can be created, and if that is not sufficient, how connectivity providers can add other lines of business.
That has historically proven to be an extreme challenge, with a few exceptions. In fact, one might point out that mobile service itself, now driving 60 percent to 80 percent of global connectivity revenues, was itself driven by the search for new revenue sources.
Aside from mobility services, internet access and home broadband have proven to be the most-significant revenue drivers in the consumer space, along with video subscriptions.
Successful information technology initiatives have been very rare, if they can be said to exist at all. Mobile operators failed at becoming major mobile app stores. Most telcos have not had robust success at operating data centers, or becoming cloud computing suppliers.
Mobile operators have hopes of creating a role in edge computing. A few mobile operators have been able to build substantial mobile money businesses.
It probably is one thing to recommend “creating more value.” It is likely quite another matter to suggest connectivity providers can do so by entering new lines of business, even if that has been of huge importance with respect to connectivity products, mobility and internet access being the huge examples of transformative products.
Mobile money and entertainment video have helped, especially in consumer customer segments. But some would say it remains to be seen how well telcos might fare as suppliers of other information technology products to business customers.
