The study identifies important industry trends that are highly predictable, combined with critical variables of which the outcomes are far from certain. Mapping the extremes of the possible outcomes reveals four contrasting scenarios depicting what the industry could look like five years from now.
- Survival Consolidation will occur as a result of reduced consumer spending leading to revenue stagnation or decline. Investor' loss of confidence in the sector produces a cash crisis and elicits consolidation.
- Market Shakeout will happen when, under a prolonged economic downturn or a weak and inconsistent recovery, telcos are forced to disaggregate their assets into separate businesses. The market is further fragmented by government, municipalities and alternative providers such as utilities.
- Clash of Giants results from carrier cooperation and alliances (such as GSMA's Rich Communications Suite initiative) that pave the way for global consolidation in response to increased competitive threats from over-the-top providers and device manufacturers.
- Generative Bazaar transpires when infrastructure providers integrate horizontally to form a limited number of network cooperatives that provide affordable and unrestricted open connectivity to any person, service provider, device or object, unleashing a wave of generative innovation.
Today there is skyrocketing demand for services, traffic growth is going through the roof, customer numbers and volumes are at an all-time high. Significant structural, corporate and competitive change brings further opportunity. The complicating factor is that telco revenues and profits do not reflect this boom.
Survivor Consolidation, and to a lesser extent, Market Shakeout, are clearly less attractive scenarios for telcos to benefit from this opportunity. Both scenarios exhibit continued low value realization from the industry and at present are the predominate outcome trend. To return to growth and improved value realization, the telecom industry needs to act collectively to create the conditions necessary for the more dynamic and profitable scenarios of Clash of Giants or Generative Bazaar.
They can begin to accomplish this through greater global industry cooperation on common capabilities and platforms to improve competitiveness with global OTT providers. The role of service providers can be enhanced in adjacent vertical markets, enabling new business models in health, smart grids, banking and more. Further growth can be achieved through pervasive, open connectivity for any person, object and a multitude of connected devices. Telcos must play a stronger role in stimulating third-party innovation on open connectivity, and platforms and must create value-added platforms and services that enhance the OTT propositions, yet enable the telcos to capture a greater share of the OTT, VAS and adjacent industry value chains.
It is important to note that these scenarios are potential outcomes for markets at national and regional levels triggered by a distinct combination of factors across several dimensions: economic/financial, technological/investment, regulatory/competition and market-place/customer-related.