Friday, October 17, 2008

Telco Business Model Transformation? Been There; Done That

Some people think the global telecom industry is not lead by people capable of fundamental business model transformation. Nobody can say for sure whether that opinion is correct.

What might be useful to reflect on, though, is the fact that the global already has managed several fundamental shifts in its revenue. 

In 1995, for example, U.S. telcos earned about $19.49 a month selling consumers basic dial tone. But telcos earned $42 a month selling enhanced services and long distance. 

In other words, 68 percent of consumer revenue was generated not from the basic dial-tone product but from other services and applications. For an industry generally considered at that time to be an "access lines" business, the appellation already was inaccurate. 

In 1997, nearly half of all local telco revenue came from long distance alone. By 2007, long distance represented just 18 percent of total revenue.  So a business once based on "lines" then became a business based on long distance and enhanced services, only to be replaced by a business where half of all revenue was generated from wireless services.

Also, consider that over the last decade we have seen the broadband access business grow from single digits to "near saturation" levels. 

The point is that business model transformations have happened several times in industry history, sucessfully. The next transformation likely will involve wholesale and business partner services of various types, augmented by content services. 

One can argue telco executives can't make this next change, even if they have transformed themselves before. I would not bet on that. 

No comments:

Many Winners and Losers from Generative AI

Perhaps there is no contradiction between low historical total factor annual productivity gains and high expected generative artificial inte...