Go Horizontal or Vertical in Acquisition Strategy?

Access services are a mature market in developed countries, and eventually will become mature even in developing markets, even as new revenue sources are created to replace declining legacy services. That has business consequences.

Most large tier-one service providers (cable, telco, satellite) eventually grow more by acquisition than organic growth. That is not the pattern for smaller firms, but you get the point. In any “mature” market, where accounts are essentially saturated, any provider tends to get account growth mainly by taking an account away from another existing provider.

So supplier consolidation is a long-term process in the global telecom industry. The only question is how fast, and how intense, that process is at any moment in time.

But what sorts of acquisitions make sense? The easy answer has been to make “horizontal” acquisitions to gain scale in the existing business. In other words, acquire more access assets.

That is the thinking when analysts float trial balloons such as Comcast buying Verizon, or Verizon buying Comcast or Charter, or when smaller telcos do the same sort of thing.

At least in the near term, doing so is a faster, surer way to boost gross revenue, and boost profit margins, than investing in “long game” moves “up the stack.”

To be sure, in the near term, such horizontal acquisitions are likely to be the main trend in the global telecom industry (in terms of revenue accretion). Moving up the stack takes time, and might often contribute less incremental revenue than a simple horizontal acquisition.

But taking the “long game” route to moving up the stack is possible.

Consider Comcast, which is among the U.S. access providers with the best execution “moving up the stack.” In the first quarter of 2017, Comcast booked $20.5 billion in total revenue. The access part of the company booked $12,9 billion in revenue, while the NBCUniversal portion of the company generated $7.9 billion in revenue.

So the “up the stack” (content) part of the company represented about 39 percent of revenue, access about 61 percent of total revenue.

If any other major telco could claim it now earns 39 percent of revenue from “application layer” sources, it would be considered a major strategic success.

In the second quarter of 2017, AT&T earned virtually all its $39.8 billion in quarterly revenue from access services. That will change, assuming AT&T’s acquisition of Time Warner is approved.

In the first quarter of 2017, Time Warner booked $7.7 billion in revenue. In other words, after the acquisition, AT&T would earn just about as much as did Comcast in its most-recent quarter. That would boost content revenue at AT&T to about 16 percent of total.

It might not seem like much, but that would mean AT&T earns significant revenue, for the first time, from “up the stack” sources. AT&T of course will eventually want to do the same in enterprise and business areas related to internet of things, for example. But that will take time, both because the IoT market is nascent, and because the available acquisition targets therefore also are small.

Verizon has made a similar, if smaller move, by acquiring first AOL and then Yahoo, to create a new advertising business. In the first quarter of 2017, Verizon booked $29.8 billion in revenue. Revenue from its telematics unit was negligible as a percent of total, while, revenues from the  “Oath” unit were not disclosed. The point is that Verizon has not yet gotten to a point where “up the stack” revenues are significant.

But you see the point. Moving up the stack is hard, risky and often not able to move the revenue needle quickly. So the an emphasis on horizontal acquisitions is going to be hard to resist. But if you believe the access business is going to be fundamentally challenged, moves to gain scale in businesses “up the stack” is necessary.

The issue is, how to balance horizontal acquisition that boosts revenue and profit now, with investments in “up the stack” growth. Or, in an ideal scenario, can access providers move up the stack now, by acquiring assets that throw off enough significant current cash flow, to move the revenue needle immediately?

Comcast is the model for the U.S. market.

That illustrates an asymmetry for Comcast and Verizon, if you wantt to speculate on where value might lie, even if the odds of such an event are slim.

Comcast might value Verizon’s mobile assets, significantly growing the amount of its access revenues. But if you think a reliance on access revenues, going forward, is problematic, then Verizon gains more in any acquisition of Comcast, as it immediately gains “up the stack” assets, in addition to greater horizontal scale.

That is why some observers might argue that vertical acquisitions, where the synergy is clear, make more sense than horizontal acquisitions that increase scale in the access business.

Some will argue AT&T erred in buying Time Warner. Some of us would argue it is the right move, to move up the stack, when total revenue includes almost no “up the stack” contributions. If Verizon remains a buyer of assets, not a seller, “up the stack” makes more sense than a horizontal acquisition that simply adds more scale in access.

Some would focus on strategic angles, such as a faster path to “fiber deep” or “bandwidth deep” assets.

Others of us might argue that firms such as Verizon and AT&T, if they wish to remain leaders in the future (and not sell themselves), must create much more “up the stack” revenue. It is the only way to reposition their value in the ecosystem and escape a “dumb pipe,” low value, low margin existence.

Up the Stack, Down the Stack Or Not?

One recurring and important strategic issue was raised at both the Spectrum Futures event and the following PTC Academy training course held in Bangkok, Thailand the week of Sept. 18, 2017: Can service providers move up the stack, and should they?

Russell Lundberg, Bangkok Beach Telecom CEO and founder, argued that “I’m a plumber; I can’t worry about moving up the stack.” Instead, his view is that service providers must “embrace their dumb pipes.”

Allan Rasmussen, Yozzo Co. managing director, took the other position. “You can move up the stack, but you must partner” to do so.

A third position was offered by Marc Olivier, Sigfox VP, namely that many new business opportunities in the internet of things area--especially for machine-to-machine sensor apps--are best handled by networks optimized for such applications. Olivier leaned towards the “stick to your knitting” approach, pointing out that a new ecosystem has to be built.

John Kjellemo of Yandex also provided his views about the internet of things, and believes that moving up the IoT stack is possible, and desirable.

source: Vermont IT Group

At the PTC Academy training event, session facilitator Chris Wilson, Time Dotcom Bhd. CEO of Asia, suggested that, whatever the merits, “few companies have ever succeeded at doing so.”

My own concluding argument at Spectrum Futures was that as difficult as it is to move up the stack, retail service providers serving business and consumers really do not have much of a choice. If one assumes half of all current revenue will be lost over a decade (every decade, in fact), huge new sources of revenue must be generated, and it is hard to see how that can be done any other way.

To be sure, not every actor, in every industry segment, has equal ability to do so. So the admonition to move up the stack is not useful advice for every firm, in every part of the ecosystem. “Not moving up the stack” makes good business sense for some companies, in some industry segments.

The trick is partly knowing whether such strategies make sense, and knowing where to look for opportunities to move up the stack.

Separately, “moving down the stack” also is a big trend, exemplified by firms such as Google becoming a device manufacturer, undersea network operator, retail mobile operator and internet access provider in the fixed networks realm.

These are asymmetrical challenges. Though one frequently hears the refrain that “telcos cannot innovate,” in truth, large firms often find it hard to innovate.

But there is a structural reason why moves up the stack are so much harder than moving down the stack. A telco has to work very hard to identify what a customer wants and needs, up the stack. Much knowledge of business processes is needed.

When a company at the application layer wants to move down the stack, the problems are simpler. Any company at the top of the stack “is the customer.” That firm knows exactly how it operates, where advantage down the stack might lie, and why business advantage can be gained.

The task then is simpler: identify the capabilities needed in the lower levels of the stack, and buy them. With enough scale, it also is possible to build such capabilities, without buying them on the open market. That is why many content and application firms build and operate their own undersea networks; access networks (fixed and mobile); data centers; create their own chipsets; create their own messaging and voice capabilities and take other steps to vertically integrate their supply chains.

You can Move Down the Stack on Your Own; To Move Up, You Have to Partner

It no longer is unusual for an app provider to become an access provider. Google Fiber provides only one example. Tucows, originally a domain name registrar, has become both a mobile services provider and now a gigabit Internet service provider.

Both Google and Facebook are developing entirely-new access platforms based on unmanned aerial vehicles and, in Google’s case, fleets of balloons. Facebook now leases transponder time to support Internet access operations in sub-Saharan Africa.

Facebook also is testing Wi-Fi services in India.

Virtually every major telco thinks about ways to enhance value by “moving up the stack” and bundling more apps.

That naturally raises questions. Is it easier to move up the stack or down the stack? In other words, is it easier for an app provider to move down the stack, and provide access, or for an access provider to move up the stack into new apps beyond voice and messaging?

Most of us will conclude that it is easier to move down the stack, compared to moving up the stack.

One can think of many reasons why that is so, even if the core competence, either way, is not present, when occupying new adjacencies in the ecosystem.

It is not necessarily the case that “access” is easier to learn than “apps,” though that likely is the case. The simplest explanation is that an app provider moving into access has one major advantage: it is the “customer” for access, and therefore knows precisely why such a move has value.

That also would be true for any app provider getting into the cloud data center or transport business. The move “down the stack” supports core app provider business operations.

Google, for example, even can quantify what “faster access” means for its core business model (at least the present business model). Faster access means more pages can be viewed in any unit of time. That, in turn, creates more ad inventory to sell.

That is a lot easier than figuring out where and how to spend money to move up the stack. The access, transport or data center provider is not the “customer” when moving up the stack. A firm does not necessarily “know” what the customer requires, finds valuable and will pay for, when moving up the stack.

So moving up the stack is more risky. All of that suggests any move up the stack will be less risky when a partnering approach is taken. Not riskless, by any means, but less risky than trying to be right about the end user value proposition, in a major way.

An illustration: service providers created the value of voice and messaging, and were able to build significant  businesses around enterprise need for connectivity. Cable operators were able to create a huge business model around video entertainment choice.

Other entities have been able to create meaningful businesses around enterprise computing (cloud computing and data center operations).

But the app creation function mostly has been separated from infrastructure operations. And it is app providers who must figure out what buyers (consumers) want, and will pay for. In many cases, that includes indirect revenue models, where the actual buyer is an advertiser, not the retail end user.

It all means that service provider app creation typically will require partnering with app providers. App providers, on the other hand, often can simply move into access, transport or data center operations themselves. They are the “customers” for such services.

So there are only three rules for service providers creating important new apps, and moving up the stack. Partner, partner, partner.

Combining Network Access and Apps Businesses a Growing Trend

Are new service provider models--combining connectivity and apps--emerging? Some point to the examples of Rakuten, the Japanese online e-tailer that also has entered the mobile service provider business, or Reliance Jio, which includes both the Reliance Jio mobile business and a collection of digital content, transactions and apps businesses. 

Others would point to moves by telcos and cable companies into content ownership.

“Infrastructure is intersecting with digital services such as you have seen with Rakuten and Jio,” says Steve Mollenkopf, Qualcomm CEO. 

Others might add moves by the likes of Google, Facebook into connectivity service provider businesses (satellite, fiber to the home, mobile service provider) or infrastructure (Telecom Infra Project) or devices (e-readers, smart speakers, video streaming devices). 

In fact, what all those moves show is expansion across the internet value chain by app providers into connectivity services, infrastructure and device portions of the ecosystem. Connectivity providers have made some moves into new applications, primarily entertainment video, and some are hopeful about new roles in edge computing or the internet of things.

At least so far, one might well argue that it has proven easier for app providers to move into adjacencies than for connectivity providers to do so. 

It might be a fruitful question to ask why that is the case, as any move into adjacent value chain roles involves moving outside the area of core competency. Such moves often also involve mastery of functions higher or lower on the protocol stack, so there is a possible challenge in terms of moving up the stack or down the stack.

source: Vermont IT Group

Some might argue it is--all other things being equal--easier to move down the stack than up the stack. When moving down the stack, the entity making the move is the “end user” or “business process” provider. Put simply, the advantage is that the business process provider knows exactly what it requires from lower levels of the stack. 

Matters are different for an entity moving from lower in the stack to higher levels. Lower levels increasingly are “horizontal” in focus, designed to support literally any conceivable buyer, entity or business function. A connectivity network is designed to support any device or user with a need for internet protocol communications, or any device using a specific standard, such as 4G or 5G or Wi-Fi. 

That is a lowest common denominator approach, and makes sense. In contrast, a business process provider knows precisely what it requires from lower levels, as those levels support its specific business. In many cases, it is not so much features but costs that are of concern. 

As “same functionality, lower price” or “higher functionality, lower price” always is an easily understood value proposition, so too are business process provider value drivers when moving down the stack. The reason hyperscale app providers build and own their own subsea networks is that they get what they want at lower overall costs. 

In other words, the business process provider knows precisely what it requires. The companies lower in the stack “have to guess” at what potential buyers will want, and have to be prepared to support all potential buyers (lowest common denominator) or optimize for a few verticals. 

The lowest common denominator strategy offers the greatest potential scale, but also the least differentiation. That is one reason many believe network slicing--the ability to create custom virtual private networks with distinct performance characteristics--is important. 

Network slicing might solve this problem (lowest common denominator versus optimized features), as experienced by connectivity providers.

There are some other, perhaps more subtle advantages for business process providers moving down the stack. Ubiquitous internet access helps app providers since their ability to gain and keep a customer requires internet access. That makes hyperscale app providers big supporters of ubiquitous, high quality, affordable internet access.

There are fewer obvious synergies for entities trying to move up the stack. It is hard to displace dominant suppliers in any of the stacks, so it almost always makes sense to specialize or differentiate when moving into any new adjacency, and especially up the stack. 

But that also poses a problem of scale, as differentiation necessarily means aiming for a segment of the market. Essentially, that narrows the potential financial return. Consider the possible roles for connectivity providers as internet of things platforms. 

Most would likely agree that no single provider can be successful in every business vertical. So Verizon has attempted to be a platform provider in the automotive space, and pitches its ThingSpace as a platform for connecting IoT devices to Verizon’s network. Some might note that the “platform” is mostly subscriber identification modules providing the communication function on Verizon’s mobile network. Some will question whether that is what it meant by the term “platform.”

Still, possible moves up or down the stack seem a growing issue for some tier-one service providers, simply because revenue growth opportunities in the core business are reaching, or already have reached, saturation. That can be seen in the percentage of total revenue coming from outside the communications service core. 

source: GSMA 

As this chart suggests, tier-one service providers are betting on growth outside their legacy communications core, and many have made substantial progress. 

If it is true that infrastructure and apps/content businesses are becoming synergistic, we can expect to see more moves blending the two--connectivity and apps--in the future, under common ownership.

Up the Stack or Forward in the Value Chain?

Sometimes, moving up the stack is a business strategy, as hard as it is to achieve. More often, horizontal acquisitions for scale have driven telecom service provider acquisitions.

Sometimes, moving forward into the ecosystem supply chain also can work. Paradoxically, moving forward in the video entertainment subscription business (often understand as integrating lower inputs into a finished product or service) also means moving up the stack.

Either approach--up the stack or forward integration--is risky, in part because such moves represent moves outside the present understood core competence, but also because other firms will tend to resist buying horizontal functions and services from a key competitor.

Moving up the stack sometimes can mean acquiring assets that are a foundation for today’s core offerings. That paradoxical move is not, strictly speaking, a move “down the stack,” but is an example of vertically integrating a “cost of goods” input.

The best examples likely are video content producers. Owners of networks provide the core value behind the purchase of streaming video services. Strictly speaking, they operate up the stack.

Functionally, they are the basis for service provider video entertainment offers, a cost of goods that is almost a “down the stack” input, in a business sense. In other words, a video service cannot be created without access to the content consumers want to buy. In that sense, content is a raw material needed to build a video entertainment service.

source: http://keydifferences.com

Most telecom acquisitions have been of the horizontal variety, where a company buys additional assets in its existing place within the ecosystem (more access assets). That is an example of growing scale within the same business, instead of growing scope by occupying new roles within any ecosystem.

source: http://keydifferences.com

You might argue that acquiring such assets, that are required horizontally for all suppliers in a market, are a logical way for access providers to move up the stack. It never is easy, for simple reasons.

When making a horizontal acquisition, the acquiring firm simply gets bigger, doing what it already does. That means the acquiring firm already understands the business, and can hope to take out costs.

Moving into a different role within the ecosystem means moving outside the area of believed core competence. That always carries more business risk.

v

Also, when a function, or set of assets, is required by all service providers in a particular market, those competitors will logically try and avoid using a set of horizontal assets owned by a key competitor. So it is harder to occupy a new horizontal role. New business competencies are required, but competitors also will try and escape using the horizontal platform, if they can.

In Defense of "Harvesting," Not "Moving Up the Stack"

“Telcos must climb the value stack and not become dumb pipe providers.”  That bit of advice is hard to dismiss. “Telcos need to protect their core business.” Also a reasonable platitude.

But there’s a problem with platitudes: they are worthless, or almost so.

In the former case, one might as well admit telcos are in one business, and need to be in another. In the latter case, one asks what might literally be impossible, long term.

I say that as someone who has been in business long enough to have tried both strategies in a media and content context, before and after the Internet, and who has made a conscious effort to track business model challenges in telecom for nearly 30 years.

Not to belittle reasonable efforts to make big transitions, which is precisely what telcos, cable TV companies, satellite TV providers and Internet service providers must do, but sometimes very little beyond slowing the rate of decline is feasible, in the legacy business.

“Winning,” in other words, might literally be strategically impossible. “Losing more slowly” might be best outcome.

In other words, the core business might not be strategically defensible. Climbing the value chain might work, but that is tantamount to “getting into a new business.”

If that is the case, platitudes are not so helpful. What is helpful is to make a fundamental decision that the core business is going to decline, and that the best outcome is a harvesting of cash flow, and then deployment of that cash flow elsewhere.

That is tricky, for lots of reasons. Public companies have to convince their investors that a transition plan really makes sense, and that the core business also can be sustained.

Even if some of us might say it is difficult to achieve the former, impossible for the latter, there are lots of reasons for executives to say it is possible.

The best example is what happened to AT&T, after the 1984 divestiture. AT&T tried mightily to maintain--and finally merely to harvest--its present business (long distance calling) while investing in many new growth initiatives.

It was a sound strategy, ultimately not executed well enough to allow AT&T to continue life as an independent entity. But then, no company in that original space managed to survive, either. MCI was absorbed first by WorldCom, then by Verizon. Sprint’s long distance unit continues as the “wireline” part of Sprint, but is a footnote.

And though the matter is not yet decided, one could ask what becomes of the “access” function. Already, huge shifts have occurred.

In part, access, though an essential function, is provided by “other companies or networks.” That is the case where cable TV companies provider high speed Internet access, video entertainment and voice.

That is the case when mobile companies provide voice, data access and messaging. And partial fulfillment is provided by third party Wi-Fi networks, satellite constellations, wireless ISPs and others.

To be sure, the traditional access function is far from “played out.” Telcos are gaining share in video entertainment while cable TV companies are gaining share in the business services market. High speed access is largely saturated in developed markets, with market share shifts between suppliers are the key change.

But product maturation is quite clear in the voice and messaging areas, where mobile has become the way most people prefer to consume voice, where competitors are taking share and where fixed lines are dropping every year.

Does attrition continue forever? Probably not, but largely because voice and messaging become features of the network or the service, not necessarily huge revenue contributors. As it is, much fixed network voice consumption happens because it is sold as part of a compelling bundle. Absent the bundling, fixed network voice take rates would be even lower.  

The clear point is that it might not, strictly speaking, be possible to “save” the voice business. The function will continue to be valuable and essential. It simply might not be a major revenue driver, in the end.

That leaves the “move up the stack” advice. Just as clearly, that makes sense. But what it actually means sometimes is not so clear.

The fundamental character of any Internet Protocol network is the separation of app from access. In essence, there is no “value chain” to be “climbed.” There are apps, and there is access.

An alternative way of phrasing matters is that access providers need to be in the “apps” business. Apps occupy different positions in the value chain.

Yes, it is possible, conceptually and in practice, for an app to be used in a walled garden or closed manner. Apps can be bundled with access.

But the notion of “climbing the stack” might not be the most apt way of describing the change. Occupying a different part of the value chain might be the better generic description, and better describe the business framework and mindset needed to succeed.

Apps can be bundled. Apps can be designed to work collaboratively with access services. But that might not be the “usual” way. Instead, apps are designed to work on any access and any device.

Having a big pipe and running the access business at lower costs will always be important. That function must be provided. So will “owning some of the content delivered over the pipe.”

What isn’t yet so clear is “who” the access providers will be, what the revenue models will be, and what former access giants will have done to recreate themselves. And, sometimes, it cannot be done, by most.

So “moving up the stack” might be a dangerous notion, in one respect. It implies doing “something else,” in addition to what one already is doing. Sometimes, better decisions are obtained by pursuing a  clean “do something else” strategy.

For major telcos, that might mean divesting first some, then possibly “all” fixed network assets. That isn’t as crazy as it sounds. In most of the world, “mobile” is the primary access platform, and service providers basically view fixed access as a niche platform.

That is not an instance of moving up or down the stack, but simply choosing a more relevant and sustainable platform and business model. It is “doing something else,” not “moving up the stack.”

In some cases, divesting fixed assets might be dictated by market conditions. In some cases, other providers will prove more successful (Google Fiber, cable TV companies, Wi-Fi), destroying the business case. In such cases, firms might do better by “doing something else” rather than trying to “move up the stack.”

Some might point out that over the top apps are examples of moving up the stack. That’s correct. The business issue is whether an embrace of OTT voice, messaging or video is “doing something else” or “protecting the existing business.”

Most of us might agree OTT voice, messaging and video is a clearer case of “doing something else” than “protecting the existing business.”

So the point is that sometimes, all that can be done is to harvest what is dying, to nurture what might grow.

Why So Many are Skeptical about "Moving up the Stack"

Generally speaking, as much as service provider executives talk about "moving up the stack" to avoid becoming a "dumb pipe," there is justifiable skepticism about whether that is possible, in many settings. History suggests it is hard to do, hard to do well, and almost never has resulted in significant revenue upside.

There are a few salient exceptions--mobile banking in some markets and video entertainment services in a growing number of markets.

But much depends on where a particular actor sits in the value chain, and what part of the industry that actor occupies.

If the core business is undersea capacity, it is easy to see why skepticism about such moves up the stack is worth attempting. When the core business is "pipe," moves "up the stack" are unlikely to be easy, and might actually be dangerous, as it is so far outside the core competence of the providers.

On the other hand, such efforts already have proven most successful for retail suppliers of communications services who historically come from the "applications" part of the business, and for whom "dumb pipe" has become a reality only in the internet era.

The best example is internet access service. That is the classic dumb pipe service. Traditional voice, messaging, specialized enterprise and business data networks, paging and video services were applications, where the network exists only to support delivery and use of the apps.

“Moving up the stack” might be among the most-difficult challenges a service provider ever faces. Arguably few such attempts ever have succeeded on a massive or even significant scale, where it comes to increasing revenue contribution.

And yet it is hard to argue that the effort must be undertaken. The reason service providers want to move up the stack is that the very structure of modern applications access makes this essential.

Virtually all applications now are delivered over the top, no matter who owns the assets. If you want proof, think about 5G. It now is the second mobile network where the standards were--and are--all about connecting computing devices. Voice support was an overlay for 4G, and so far is not even part of the discussion for 5G.

Think about that. A service that includes, as a core function, the ability to talk and text has, for the last two generations, treated voice as an afterthought. There is a very good reason. Voice--no matter who provides it--now is an OTT application, just like any other.

In other words, OTT is not a choice, it is a basic reality of the way value is delivered in the new communications ecosystem.

That is likely to be the case for internet of things as well. Value will be supplied in all sorts of ways. But the largest amounts of value, quantified as revenue, will happen in the services layer and the platform layer (all the OTT apps), according to John Kjellemo of Yandex.

Others might put the app layer at the top and the platform layer right below, but the net impact is the same. As much as 65 percent of total ecosystem revenue might accrue to the IoT apps enterprises and people want to use, or the platforms and integration services that support such use.

In what is a sobering forecast, Yandex, looking at available forecasts, believes it is possible that in 2020 less than one percent of mobile service provider total revenue will be generated by connectivity revenues, and a similar “less than one percent” of total IoT ecosystem revenue will be contributed by connectivity services.

In other words, even if 5G proves a resoundingly big deal for internet of things revenue, it still might be almost insignificant as a driver of mobile operator revenue, and will have relatively low profit margins as well.

Source: Yandex

Why it is Hard to Move up the Stack, Much Easier to Move Down the Stack

Vertical integration and adding new roles in any value chain are traditional ways firms seek to increase value or control costs and value. As much as connectivity providers talk about “moving up the stack,” app providers also can move “down the stack.”

And we might as well just acknowledge that it is easier for an app provider to move down the stack than for a connectivity provider to move up the stack. 

The reasons are somewhat obvious if you think about the issue long enough. Any app, service or product provider already knows lots about their customers. In other words, a business operating above the app level knows what its customers want, why they buy and how much they prefer to pay. 

A connectivity provider has to learn what its connectivity customers want, but typically has no direct knowledge of the intimate details of how those connectivity customers actually create value in their businesses.

In other words, firms operating at higher levels of the stack are intimately involved with the actual business functions connectivity supports. Transport and computing functions at the lower levels are less involved--if involved at all--in the higher level business processes. 

source: Vermont IT Group 

Bluntly, a connectivity supplier only knows what a class or type of customer typically wants to buy, in terms of computing and connectivity services, but has no direct and detailed knowledge of the connectivity customer’s actual business. 

That is why connectivity provider enterprise sales forces have to build domain knowledge. Those in the domain already know all that, in detail. 

It no longer is unusual for an app provider to become an access provider, for example. Google Fiber provides only one example, operating as a retail internet service provider and as an owner and builder of substantial wide area networks across the globe. Meta, Microsoft and other app providers also are anchor tenants if not full owners of WAN assets. 

Tucows, originally a domain name registrar, has become both a mobile services provider and now a gigabit Internet service provider. 

There also is movement by new providers into existing connectivity roles. Cable companies, satellite companies and other original equipment manufacturers likewise have moved into additional parts of the retail connectivity services business, ranging from internet access to mobile services. 

Facebook now leases transponder time to support internet access operations in sub-Saharan Africa and sponsors the Telecom Infra Project that develops new open source tools across the connectivity ecosystem. 

In other words, it is far easier to move down the stack than to move up the stack.