Telecommunications companies are on the brink of becoming wholesalers of connectivity services but even that is being threatened. Revenues are shrinking despite the fast increase in demand, creating a unique and complex dilemma. The problem is there’s no single cause for this but several factors eating away at sales. Here are some of the biggest challenges faced by companies in the telecom industry.
1. The Challenge of Deregulation of Telecommunication
While the waves of deregulation occurred in the 80s and 90s, we’re seeing the full effect of it today. AT&T or American Telephone & Telegraph initially was the sole operator in the market with the government regulating prices. The general belief was that it was the only way to operate the telecommunication industry. With new technological developments rising in the 70s, so did a new way of thinking.
The following decade, AT&T was forced to let go of its Baby Bells, the regional branches, and had to focus on long-distance calls in a move to break the firm’s monopoly. However, this did little to relieve the Baby Bells’ control over their own regions. Their power made it difficult for alternative services to enter and boom in certain parts of the US.
In the 90s, another deregulation law was enacted to solve this problem. This situation of encouraging competition and creating a more level playing field among telecom companies was also mirrored in other parts of the world such as Japan, Australia and Canada. While new names eventually came in, it did little to shake the market share of the old guards until today.
2. The Challenge of Innovation and Technological Advancements
Since the boom of the internet, many fields have been disrupted but the telecom industry has managed to steer clear for decades, which may or may not have been a win for any of the parties. However, the changing times have started to close in and the outside pressure is forcing corporations to change as new industry sectors begin to emerge.
Service Brokers Entering the Scene
Many tech giants, such as Google, rely on fast internet to power their business, not just for internal operations but so users can access their services. Now, they’ve decided to make this one of their top priorities. The tech conglomerate that was once just a search results provider has recently launched Google Fiber and, even more recently, Google Fi.
Google Fiber is similar to other traditional telcos in that they offer wireless broadband internet but Google Fi threatens to change the game. It’s a new service that allows phones to choose between telecom operators based on their signal strength in the user’s current location.
It’s a win for consumers but strips industry players of the control they once had over their market shares and reduces them to white label telecom services with zero customer loyalty. With revenue decreasing, firms don’t have the leeway to compete solely on price, which is already a risky position for any business.
High-speed Space-based Internet
Meanwhile, Elon Musk is developing wireless internet connectivity without the use of fiber optic cables, powered by a network of satellites, Starlink, from his space tech company, SpaceX. The aim is to have thousands of connectivity-providing hardware floating outside Earth.
Internet speed is predicted to be much faster, since light can pass easily through air, almost 50% faster, than through fiber optic cables. Users can expect to have more seamless videoconferencing and over-the-top or OTT service as lag time reduces. Good quality internet connection would also be made available to more far-flung areas around the globe.
As the launch of the first rocket, Falcon 9, containing 60 satellites draws near, Musk warns the public that these might not work initially. He also said that there would have to be at least 6 more rockets launched, each with 60 satellites, to achieve minor coverage and at least 12 rockets total for moderate.
Even before this new technology has been introduced to the market, there’s already competition between big firms. Amazon is also claiming their stake in the game. They’ll have their own web of more than 3,000 satellites called, Blue Origin. In all aspects, outer space wifi has great chances of being the gamechanger for the digital era.
3. The Challenge of Mergers and Acquisitions
Movements in the industry have become an intricate, complicated web. Smaller companies have joined forces in an effort to gain bigger footprints in the telco sphere. Powerful names from other industries are now entering this field of business while telecom establishments are looking to expand their portfolio.
One well-known merger is the joining of forces between Sprint and T-Mobile, two of the biggest telecommunications service providers. It hasn’t been their first try to combine resources, and after several attempts, the government has now finally agreed to their plan.
While eyes have been on tech firms to disrupt and enter the market, an unexpected long-time media closed a deal with another conglomerate: Disney bought 21st Century Fox for $71.3 billion. The deal came with rights to several films and TV shows as well as television networks such as the National Geographic Channel, a movie studio, and 30% of Hulu, a streaming app.
Consolidations are happening at rapid rates in a world where keeping a major business afloat for the long-term means diversifying. As voice revenue continues to decline and messaging apps remain the preferred methods of communication, it won’t be a surprise if we hear telecom brands going into connected devices and the Internet of Things or IoT, launch a social media app, purchase a media company or more.
Undoubtedly, there are many ways a firm can stay relevant in today’s hyper-competition. The key lies in innovation and vision. If you’re a firm considering investing in alternative messaging, schedule a consultation with us and let’s discuss how you can help change the future of communication technology.