Telcos Must Adapt or Face a Dismal Future

Carl Weinschenk
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Wireline telecommunications executives who want to have a peaceful and happy Thanksgiving are advised to wait until Black Friday—which, in this case, could be renamed Blue Friday—to read the report released this week by the Telco 2.0 Initiative.

The bottom line is that telephone companies in nine countries (the U.S., Canada, France, Germany, Spain, the UK, Italy, Singapore and Taiwan) will lose almost $100 billion between last year and 2018. The numbers are daunting, according to the story on the report in CIOL:

It includes detailed forecasts for nine major developed markets (U.S., Canada, France, Germany, Spain, UK, Italy, Singapore, Taiwan), in which the total decline is forecast between $92 billion (-25 percent) and $172 billion (-46 percent) on a $375 billion base between 2012 and 2018, giving telcos an $80 billion opportunity to fight for.

That certainly is enough to lead execs to have an extra slice of comfort food. However, the idea that $80 billion is on the table means that all is not lost. Informa’s IP&TV News identified the silver lining:

However, the research goes on to show that telcos can fight to reduce this loss by $80bn through intelligent optimisation of prices and bundles, service enablement, exploiting new standards such as WebRTC and VoLTE, creative approaches to own brand OTT services, and a greater focus on enterprise communications…

The story goes on to quote from the report. Of course, whether the numbers work out as Telco 2.0 predicts—concerning both the assumed losses and the money that will be salvaged—depends on many variables. Perhaps the most important is how quickly and fully the established carriers, which are called incumbent local exchange carriers (ILECs), at least in the U.S., embrace new technology.

The report certainly was prepared before Tom Wheeler took over as chairman of the Federal Communications Commission (FCC) and almost immediately redoubled the commitment to complete the transition to an all-IP network. That’s a good sign for the industry.

On November 19, Wheeler posted a blog mapping out the immediate way forward. The bottom line is that the FCC will use a December 12 meeting to hear recommendations from the Technology Transitions Policy Task Force on collecting comments on the best way to set up a “diverse set of experiments,” how to collect data from those experiments, and how the FCC should wend its way through the legal, policy and technical thickets the transition entails.

WirelessWeek offers comments from other FCC Commissioners and a positive reaction from AT&T Senior Executive Vice President of External and Legislative Affairs Jim Cicconi.

Telecommunications networks are changing. No reasonable interpretation can be made in which the status of the ILECs isn’t fundamentally changed and somewhat lowered. It is a law of business, or should be, that the incumbents react slowly to radical change, since its entire existence—both physical and psychological—is moored in the old world.

In this case, the change to IP makes it much easier for upstart entities to get involved. In other words, even assuming an instantaneous and complete transition, the ILECs will lose a tremendous amount of revenue. What remains to be seen is whether they can cut the losses and, by introducing their own entrepreneurial products and services, neutralize them, at least to some extent, on the bottom line.

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