Re-Birth of the Telecom Monopoly
Is the Industry Broken and Heading Back to Its Monopolistic Roots?
Remember when speed dialing on your phone was only possible because you switched from a rotary dial phone to a push-button touch-tone phone? It was sometime in the late 1970s/early 1980s when a majority of customers in the U.S. converted to push-button telephones and at just about the same time the first commercial cellular networks were launched in Japan and northern Europe and cable television moved from something only offered in remote communities to improve broadcast reception to PayTV services. It was also that start of the biggest change in the telecom industry model in at least 100 years.
In 1982, regulators in the U.S. made a crucial decision to liberalize the telecom market and break up telecom monopoly AT&T based partly on new technologies with significant mass-market disruptive power (such as cable TV and wireless) but also on an awareness that the Internet was going to be the next big phenomenon which required the deployment of new communications technologies. This kicked off a global move toward telecom liberalization which fueled the TMT revolution.
Thirty-two years later, the global telecom industry looks shockingly different. Mobile phone penetration is approaching 100% globally and the Internet has become the backbone of the global economy, but the telecom industry looks to be broken. It is close to ex-growth; the pressure to invest into the next ‘big thing’ is growing while the likes of Skype and WhatsApp are eroding its entry barriers and pressing down its returns; and its current business model raises more questions than answers.
What happened? This report argues that liberalization, infrastructure competition and unrestricted equal access to any on-line information (net neutrality) have helped to connect the world incredibly fast. However, this policy combination has failed to produce a stable telecom business model suited for the future world, where all humans will be connected and many will rely on smart machines, robots or complex global systems not only for their work, pleasure and convenience, but also security, finances, health or even life.
Hesitation of most policymakers to acknowledge the need for fundamental overhaul of telecom policies and to outline the direction of upcoming changes has led to weak and excessively short-term focused telecom strategies, unstable business models, preservation of inefficiencies as well as a culture that is unsupportive of innovation at local level.
This report suggests the case for reviewing of the key policies on telecom competition and net neutrality is now stronger than ever. It proposes an alternative model based on pragmatic, reality-driven compromises and industry-vision. It advocates: 1) retaining infrastructure competition in areas where it is economically beneficial; 2) creation of structurally separated natural monopolies elsewhere; 3) creation of a viable wholesale market; and 4) conceptually non-neutral networks with regulation assuring basic services and avoiding potential abuse.
This new model would produce a range of TMT and diversified service companies with varied backgrounds, product offerings and geographical reach, competing with each other on a basis of innovation and differentiation. Meanwhile, telecom infrastructure would be accessible to such companies on a wholesale basis.
Please click here for a PowerPoint on the “Impact of the Digital Revolution on Telecom Business Models” presented at the FTTH Conference in Luxembourg, February 2016.
Please click here for a PowerPoint on “Infrastructure-Light & Digital Service-Centered Future of Emerging Markets Teleco” presented at the TMT Finance World Congress in London, December 2016.
Authors: Dalibor Vavruska,Michael Rollins, CFA,Arthur Pineda,Thato Motlanthe,Kevin Toomey,Eden Bar Tal,Georgios Ierodiaconou,Lucio Aldworth,Justin Diddams,Andrew Davies,Karim Nasr,