The last thirty years have been good for the telecommunications industry; a wave of privatisations, regulatory reforms and technological change drove the sector and company profits.
As populations around the world adopted mobile phones users started enthusiastically calling and texting, Telco profits exploded.
Twenty years later the massive growth to the industry has peaked as customers have moved to using their cellphones for less lucrative data services.
So where do the telecommunications companies go next for growth and profit? Today and tomorrow I’m attending the Ovum 2020 Telecoms Summit where they’re looking at the future for the industry.
Salvation from the internet of things
The great white hope for the telco industry is the internet of things and the machine to machine (M2M) technologies; the hope being that putting SIM cards into every car, kettle and shipping container that this will be another lucrative revenue stream.
Martin Creighan, Managing Director for Australia and New Zealand at AT&T, points out that by the end of the decade there will be seven times as many connected devices as live mobile phones. This is where the opportunity lies.
The problem with the M2M vision is annual revenues per user (ARPU) for connected devices are a fraction of those from voice and messaging over the last twenty years and telcos will need more than that to maintain their revenues, let alone grow.
Moving into the cloud
One of the other revenue streams is adding cloud services, again this is a low margin business and involves competing with global giants like Amazon and Google along with the myriad of specialist companies.
Another possibility is in providing professional services as Jennifer Douglas, Director of Fixed voice and platinum for Telstra, described in the company’s home support product.
The problem with both the cloud and professional services model this requires a change in culture for the telcos, the traditional contempt telecommunications executives have for the end user doesn’t cut it in the professional services and cloud computing industries.
For the telcos, this major change is something that’s been experienced by many other industries. That a comparatively protected industry like telecommunications companies are subject to these disruptions illustrates just how no sector is safe from being uprnded.