About seven years ago, someone asked me about the future of the telecom industry. The first thought that came to my mind was: A connected world of entertainment on the telecommunication platform. That was mainly because I was working in the domain of telecom, and media and entertainment with giants like AT&T, Verizon, Cox, Comcast etc. The next thought was how wonderful it would be if they could collaborate more. While I was elaborating on the idea, I was overwhelmed by the possibility of the merger of these two industries and the resultant opportunities. Will that create a monopoly? Will that increase customer experience? What changes might it incur?
Over time, the industry has more or less moved in that direction.
Over the last few years, growth of the telecom industry in North America has been quite static. The subscriber market has saturated. The movement of subscribers from one operator to another is driving the growth of cheaper service providers. Interestingly, the number of postpaid subscribers has increased as compared to prepaid subscribers, adding to the revenue potential. The big players in the Telecom and Media industries in the US market are: Telecom - Verizon, AT&T, T-Mobile and Sprint, and MSOs -Comcast, DirecTV/now AT&T, Charter, Dish, Verizon/FIOS, and Cox.
Changing customer needs and demands
Subscribers are a) moving to newer, cheaper solutions and monthly billing rate with the lure of unlimited data in the US market, and b) Cord cutters from the MSOs now prefer their selection of channels even when the subscribed channels or apps via mobile devices are sometimes (may be in the long run) expensive.
The demand for entertainment has not reduced. Content creators such as Hulu, Netflix have grown over the years. And the possibility of providing digital content over the OTT or other similar vehicles is making room for more content creators and players.
On the other hand, MSOs and those who are only content providers are losing subscribers due to lack of flexible subscribing models that suit the customers.
However, content provisioning is not a simple technology, the marriage of advertisement, where most of the revenue comes from and the delivery of programs are not easy to curate, manage and distribute over the network. So, MSOs are still relevant and hold a strong grip on the money.
The business potential
The general trend is that subscribers are moving from products to services. Subscribers now prefer new solutions to get information and entertainment on any device with instant internet connection –increasing mobility and flexibility of options. This creates the potential to offer and upgrade devices with new capability such as apps over OTT or simple app directly connected to a content creator.
Newer assets, enhanced screens for devices, user experience in not only viewing content but simultaneously reaching out to the social media, and personalized advertisements are some of the aligned business opportunities.
The way forward: Merge & survive
In the end, the backbone or platform via which the programs are provided by the Telcos will be very relevant. It will be equally crucial to provide the right entertaining content suitable to subscribers in future. So either the Telcos should acquire or merge with MSOs, which we have seen with AT&T and DirecTV merger1. Verizon’s FIOS2 is an example of how internet services was built for triple play similar to other operators.
The merger option of “any to any” such as AT&T to Dish or Verizon to Dish can always crop up as the market is for sure going towards this direction. The AT&T and Time Warner3 merger is a signal and no entity in future can hold this trend.
There are other potential options:
Monetization: Both Telcos and MSOs can leverage data monetization for B2B and B2C customers.
IoT: All the data interchange in the connected world, from cars to home to industries be it retail, shipping, airlines, mining, agriculture, is possible through telco backbone services.
Security: Enhancing data and information security.
Cloud provisioning: Telcos can diversify into Cloud hosting options with the likes of Amazon, Microsoft. Here, there are multiple opportunities and the potential to break the monopolies!
In short, the telecom industry with the backbone and the content providers are to come together to create new avenues to generate revenues. With consolidation, many new opportunities will be created, helping the subscribers keep the cost low and get better services.
With the advent of 5G, Telcos will approximately spend $100B from 2020 to 2025 to upgrade their infrastructure, enhance NFV/SDN etc4.
Advanced System Integrators and value-add partners will help with new edge technology transformation and merging of business across discrete platforms of Telcos and MSOs. Big Data, Cloud, Serverless Architecture, IoT, Security, Analytics and Data Science are some examples where the System Integrators can help achieve the goals faster.