Until recently, rural telecom providers (and, really, all providers) were able to identify the full extent of their networks. They knew what hard- and software made them run. They knew the geography of their service territories. And they knew precisely how their customers used the network…in other words, whether their customers made local or long-distance voice calls.
With the advent of broadband, however, providers are experiencing a profound shift in this model. No longer are customers bound by the limits of their providers’ networks in how they communicate and interact with one another, whether they are next-door neighbors or on the other side of the world. And neither are they limited to their providers’ choice of applications that can run over the big pipe. It’s no secret that with a reliable broadband connection, virtually anyone can determine how and to what extent that connection will help them realize what they want in terms of entertainment, commerce, education and even healthcare.
But this new reality brings with it a rather harsh reality for telecom companies, and of which we likely will not see a reversal: the inverse relationship between company and customer control. As the customer gains more control of his broadband connection, the less revenue the company will see from carrier-provided physical network services. In other words, OPASTCO member companies must learn how to compete with the greater “cloud” network—the limitless expanse of broadband-based applications and opportunities—in order to win back revenue that will be lost from the decline of traditional service offerings.
First Things First: Build Out the Best Pipe Possible
The following graph is courtesy of Technology Futures Inc. (TFI), and it tracks and forecasts the relationship of ILEC wireline access lines and broadband connections from 1995 to 2020:
In viewing this chart, please examine the lines, and importantly the areas between the lines. These areas represent or indicate service share or market share. The obvious trend is that total ILEC connections will continue to decline. TFI notes that the past few years’ rate of decline owes much to “the growth of broadband lines on digital subscriber line (DSL), [which] has helped stabilize the total number of [ILEC] lines (narrowband and broadband) to about 180 million lines.” But TFI also predicts that, “as is clear from the forecast, even with the continued growth of broadband, soon the total number of ILEC lines will likely decline dramatically, because further additions in broadband connections cannot make up for the precipitous decline in narrowband access lines.” In short, customers will continue to desire ever-greater amounts of broadband speed and bandwidth, which will not be able to be supported solely by a legacy wireline network.
Some of you reading this, no doubt, are skeptical that these amounts of speed and bandwidth will be necessary in the immediate future, or, say, in 2020. But another way to consider this would be think back to eleven years ago and 1998, when dial-up Internet access was the standard and access lines were still on the rise.
But The Pipe Itself Is Not Enough
It would be imprudent, however, to only treat broadband growth solely as the answer to decline in access lines. Broadband already is making a headway against another longstanding and lucrative carrier-provided physical network service: cable television subscription. Sure, you may have won over a customer for your company’s premier broadband offering…but that very broadband connection now opens up for the customer an array of video content, often for free and often the very same content you may have on offer within your cable packages, or that which rivals it.
There still exists, of course, the potential to make money with broadband, but it won’t be from only the pipe itself. Instead, revenues most likely will be earned from the many factors that go into making the best-possible customer experience, from connection reliability and customer service to the maintenance of the various devices the customer uses to access and navigate the cloud. Part II, which will be posted on June 8, will address this specific topic.
4 Comments
John:
Well done and right to the point. My residential second lines have plummeted since DSL was introduced here. Now Hulu and Netflix have taken VOD out of the picture for me. They also are pinching my IPTV take rate.
We need rollout of next generation infrastructure in the UK, the obsolete copper will not deliver the access we will soon be needing. Great article, makes a lot of sense, look forward to the next installment
It has been obvious that this paradigm shift was coming for a long time. Yet, what have the telcos been doing to move with the times? Instead of building brand and reputation, establishing word of mouth recommendations from satisfied customers, deploying best networks, they have sought to sweat their assets. What goes around comes around.....;o)
Your last sentence is the most intriguing one to me. I think we have only begun to think about how to enhance the customer experience for those connected to our broadband pipe. Keeping their equipment and network up and running and virus free is just the tip of the ice-berg. As Paul Harvey would say, "and now for the rest of the story . . . " (or did he just say "Page 2" and then go to a commercial?).