No time for evolution in telecommunications

05 Nov No time for evolution in telecommunications

Madison, Wis. – There is a revolution taking place in the telecom industry. Not an evolution – we don’t have that much time. Today, a dynamic shift is being driven by technological advances that, in turn, drive a convergence of many formerly discreet industries into one; that, in turn, create hyper-competition among long established and brand new companies; that, in turn, reward companies that can form alliances with others in the value chain.
Consumers and businesses are changing their demands for products and services far faster than any market research could fathom. They are empowered by information. They devour it and need constant access to it.
The telecommunications industry is not for the faint of heart. Surviving will take passion and perseverance. Companies that are committed to winning will be rewarded if they have the ability to change and adapt to consumer preferences and are willing to cross pollinate with industry newcomers.
The changes the industry is experiencing each year seem to be as great as the previous five years combined. A decade ago, we thought the industry was made up of telephone companies, cable companies, long-distance providers, and the manufacturers selling their products to both end users and service providers. Back then, we were just beginning to recognize cellular companies as a complement to telephone service.
Now, the list of industry participants has expanded to include such companies as: Yahoo!, Disney, Cingular, Comcast, Apple, Hewlett-Packard, NBC, Boeing, Intel, and AT&T.
Movie and network television content producers went from denying any access to their products over the Internet to embracing IPTV (Internet Protocol Television) as a major distribution channel. This change alone will have significant impact on the industry. Broadband demand is growing along with the demand for new broadband content; technology adaptations are allowing for these faster speeds.
Fearless forecasts
Forecasts have missed some trends completely and severely over and underestimated others (by orders of magnitude). For example, the analysts did not come close to forecasting the deep penetration of cellular service and that those services would move past being a complement to landline service and into being a total substitute. The forecasts of the growth of the Internet went from being vastly understated (in 1995) to being vastly overstated before the dotcom bust.
No one predicted the enormous success of Google, Skype, and YouTube. YouTube, just as one example, is less than two years old and was sold by their twenty something founders to Google for $1.6 billion. In 1995, no one felt that AT&T would be sold to SBC for a tiny percent of its 1995 market cap, but it did.
Public policy makers also have a direct impact on the industry. The rules set by legislators, regulators, and even the courts affect every industry component and are in a constant state of flux.
The forecasts for this newly converged industry have been consistently wrong. I will bet that when we look back at the forecasts we are making now in this frenetic environment, we will once again have to say they were wrong.
However, I will be bold and make some forecasts anyway:
• Strategic planning will be more important than ever. At the same time, the ability to change strategy and turn on a dime will become a survival skill.
• There will be many more “dry product holes” and wasted investment than before as we try to anticipate what will sell.
• Scale, at least within a geographical region, is important to the transport services and therefore I expect we will see a good deal more M&A activity – buying, selling, and trading.
• The most successful industry participants will supply only part of integrated products and services and will form mutually beneficial partnerships with other companies.
• Because the IP (Internet Protocol) world, as opposed to the traditional TDM (Time Division Multiplexing) world, has so many more network elements and endless applications, companies that are good at integrating them for individual customers will be winners.
• Service providers, who have historically invested huge amounts of capital in business plans that require 10 or more years to earn the cost of capital, will have to find ways of diversifying into much less capital-intensive businesses.
Exciting times
One thing is for certain, the next decade in the telecom industry will be the most exciting ever by a wide margin. New leaders will emerge, trusted leaders will guide the way, and our businesses will look different in the end. However, the strength still lies with the customer and the companies that can meet their demands day in and day out with solid customer service and valued products will win.
As consumers work harder to balance the rigors of work, school, volunteerism, and family obligations, the companies who develop telecommunications solutions to drive efficiencies will persevere. I’m confident TDS will continue to respond to these changing dynamics as we move forward and take part in the telecommunications revolution.