Why Global Connectivity Revenue will Close to Double Over 10 years

Though executives and participants might prefer a higher rate of revenue growth (not inflation adjusted), a two-percent annual revenue growth rates, which is around consensus, still manages to approximate a doubling of revenue in a bit over 10 years.

The global connectivity services market represented $1.8 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 6.2 percent (not inflation adjusted) from 2020 to 2030, according to Grand View Research estimates. 

Statista also forecasts revenue in about that range as well. 

In simple annual terms, that implies an annual growth rate just a bit under two percent, with growth close to doubling over the 10-year period (not inflation adjusted). To actually double in 10 years, a CAGR of about 7.2 percent is required. As with all such forecasts, some analysts predict slightly higher growth rates, while some project slightly lower.  

Given the relatively saturated nature of developed country markets, it might come as a surprise that growth rates in the U.S. market, for example, are nearly identical to global growth rates, as shown by Grand View Research estimates.

The issue is how much revenue growth can be gotten outside the mobility segment of the business, which in 2022 represented more than 76 percent of total service provider revenues globally. Consumer revenue represents about 60 percent of total, with “business” revenue generating about 40 percent of total revenue. 

Some observers believe that the share of business revenue will drive incremental revenue growth in the 5G and 6G eras. We will have to see. That 60/40 revenue split between consumer and business revenues has been consistent in both fixed and mobile segments for decades, varying more by geography (urban area versus rural; economically robust or not) than customer type. 

For all the hopeful talk about the internet of things driving new revenue, Grand View researchers see little chance that segment will grow very much between now and 2030. In part, that is because no matter how many devices are attached, with new subscription revenue, the revenue per connection is small, compared to a mobile phone connection. 

Also, there exist many other alternatives for connecting sensors and devices, including Wi-Fi, Bluetooth and specialized data networks. 

We also can see that little growth is seen for fixed network voice or subscription video services. 

To the extent private networks or edge computing drives new revenue, it is recorded in the fixed network access services category, which does show growth. 

Since about 1980, global revenue growth rates have slowed dramatically, despite the huge increase in global population using mobile phones. Mobile service subscriptions now represent 75 percent of total service provider revenue. 

Year	Annual Growth Rate
1980	10.2%
1981	8.4%
1982	6.7%
1983	7.3%
1984	8.2%
1985	9.1%
1986	8.9%
1987	8.6%
1988	8.3%
1989	8.0%
1990	7.7%
1991	7.4%
1992	7.1%
1993	6.8%
1994	6.5%
1995	6.2%
1996	5.9%
1997	5.6%
1998	5.3%
1999	5.0%
2000	4.7%
2001	4.4%
2002	4.1%
2003	3.8%
2004	3.5%
2005	3.2%
2006	2.9%
2007	2.6%
2008	2.3%
2009	2.0%
2010	1.7%
2011	1.4%
2012	1.1%
2013	0.8%
2014	0.5%
2015	0.2%
2016	-0.1%
2017	0.0%
2018	0.3%
2019	0.6%
2020	0.7%
2021	1.9%
2022	2.4%

Are Mobile Services and Home Broadband Really Recession Proof?

Are mobile services and home broadband now “recession proof?” Maybe “recession resistant” is a better characterization. A recession will temporarily halt revenue growth patterns for most suppliers. The bigger question is “how much?” and “how long” the dip will last. 

The probable answers are that growth will turn mildly negative, with that trend lasting perhaps “12 to 18 months. In a worst case scenario of a major and severe recession, the revenue growth dip might be more severe, but probably would not last any longer than a mild recession would cause. 

To be sure, this story is cyclical, not secular; short term rather than long term. The exception to the general trend is the widespread economic shutdown caused by the Covid pandemic, which arguably increased the level of spending, most connectivity suppliers would say. 

Cyclical trends are those which correlate to business cycles while secular trends tend not to correlate. The amount of money consumers spend on various types of products tends to be cyclical: up in good times, down in bad. 

Secular patterns tend to persist across business cycles, such as more spending or engagement with digital products; greater reliance on remote or cloud computing; greater reliance on e-shopping compared to place-based retail. 

As recession looms, we’ll see many more stories about how consumers and businesses are reacting to recessionary conditions. As virtually always is the case, discretionary spending will drop. 

And the issue always is whether mobile phone service, home broadband or other connectivity services are more discretionary or more essential. The historical data suggests mobile phone service and home broadband are more “essential” than “discretionary.”

In recent recessions, consumer spending on mobility and home broadband has dipped, but only slightly. On the other hand, a severe recession, such as happened in 2002 and 2008, will cause significantly more disruption, doubling or tripling the percentage declines. 

Product	Percent Change During Recessions	Percent Change in Buying Behavior for Prior Recessions
Mobile Phone Service	-2%	-5% in 2002, -1% in 2008
Home Broadband	-1%	-3% in 2002, -1% in 2008
Video Entertainment	-2%	-5% in 2002, -1% in 2008

So much depends on the severity of the coming drop, though some (a minority) observers believe it is conceivable no drop will actually happen. Most observers believe a recession will happen, and the issue is whether it is a mild or severe. 

Some might argue that mobile service and home broadband are “recession proof.” Some might argue “recession resistant” is a better characterization.

AT&T Finalizes FTTH Joint Venture, Joins a Growing List of ISPs Doing So

At some point in the future, we will be able to assess the extent to which multiple fiber-to-home and gigabit-per-second networks can survive in any single residential area, as we are reaching a point where some areas might have three to four suppliers of gigabit-per-second internet access.

The general issue is whether three or four providers is sustainable long term, as a general rule of thumb is that sustainable operation requires an installed customer base of at least 20 percent of passed locations, with operating costs scaled to match. 

And the number of suppliers is growing, including a number of joint ventures whose business models are based on reducing costs, boosting market share potential, or both. 

The Gigapower optical fiber joint venture between AT&T and BlackRock’s Diversified Infrastructure unit announced in December last year, is among the latest entrants. The venture has been finalized (the deal has closed), AT&T says. 

The joint venture is the latest to be formed by incumbent service providers in the U.S. market. Among the largest efforts is Nuvia, a joint venture between T-Mobile and Nokia, which aims to pass about 10 million locations by 2025. 

Atlanta, Charlotte, and Nashville are the areas where Nuvia expects to have its network operating by the end of 2023. It appears Nuvia is building first in “underserved” areas of those communities. 

Joint Ventures	Number of Locations
AT&T and BlackRock	1.5 million
Cox Communications and Google Fiber	2 million
CenturyLink and DigitalBridge	1.2 million
Frontier Communications and Google Fiber	2 million
T-Mobile and Nokia	10 million

One might argue about whether the strategy is to reach “underserved” neighborhoods or “most lucrative” neighborhoods where the demand is highest, irrespective of the number of existing ISPs serving those areas. 

The Buckhead area of Atlanta already is served by gigabit-per-second networks owned by Cox Communications and AT&T, with Google Fiber serving some parts of Buckhead as well. So Nuvia would be the fourth gigabit provider and the third FTTH provider. It is hard to say Buckhead actually is underserved. 

Nuvia Initial FTTH Build Areas
Nashville	Midtown, East Nashville, West Nashville, Sylvan Park, Green Hills, Belle Meade, Forest Hills, Brentwood, Franklin	100,000
Atlanta	Midtown, Buckhead, Downtown, Morningside, Virginia-Highland, Decatur, Sandy Springs, Alpharetta, Roswell	200,000
Charlotte	Uptown, Dilworth, Myers Park, South End, NoDa, Plaza Midwood, Ballantyne, Huntersville, Cornelius	150,000

Nuvia is T-Mobile’s first facilities-based effort to enter the fixed networks business as a FTTH supplier. 

Gigapower is intended to serve customers outside of AT&T’s traditional 21-state wireline service footprint. The original indications were that some 1.5 million new locations would be served by the wholesale network, open to other customers. 

In addition to Las Vegas, Gigapower now expects to expand beyond its previously announced fiber deployment in Mesa, to the Chandler and Gilbert areas of Arizona.also plans to build fiber in parts of Northeastern Pennsylvania (including Wilkes-Barre and Scranton) as well as parts of Alabama and Florida that are outside AT&T’s current service areas.

AT&T itself will be the initial anchor tenant. “Recently our first wholesale customer, AT&T, activated end-user customers on the Gigapower fiber network in Mesa,” AT&T Gigapower CEO Bill Hogg. 

Much of the current activity seems targeted at “tier two” cities.

Tier 1 Cities	Tier 2 Cities	Tier 1 Attributes	Tier 2 Attributes
New York City, Los Angeles, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas, San Jose	Atlanta, Austin, Boston, Charlotte, Cincinnati, Cleveland, Denver, Detroit, Indianapolis, Jacksonville	Large population, major economic center, strong job market, high cost of living, diverse population, cultural and educational institutions, international airport	Smaller population, growing economy, moderate cost of living, less diverse population, fewer cultural and educational institutions, regional airport