Telcos risk grabbing lion by the tail

Metaratings
10 May 2011
00:00
Article

Intense competition in the telecom space has become the norm since the heady days of deregulation and arrival of wireless networks.

Firstly between competing technologies such of CDMA and GSM and then with the intense battle for handset dominance that made Motorola, Nokia and Sony-Ericsson household names.

Competition in the personal computing and IT world has been no less frenetic, but it was dominated very early by Microsoft’s operating system with the main competition coming from hardware manufacturers vying for market share.

The internet had some impact on the way we accessed data, but it was mainly used for primitive searching and email for the longest of times, at least until Google and Yahoo floated to the top and offered advanced access to the deepest corners of the worldwide web.

Today the functionality of all three have seemingly merged. The interdependency of each is being blurred a little more each time technology advances in any one of the spaces. The dominant players in each are looking at ways becoming even more dominant, and even going outside of their traditional spaces to protect their positions and eliminate competitive threats.

In the telecom space many markets have become saturated, both in terms of consumer take-up and viable competition. The weak are slowly becoming vanquished, or acquired and we are starting to see another era of mega-entities emerging. The critical importance of communications to the success of IT, media and advertising is making the network operators look like a disparate herd of wildebeest to a pack of hungry lions.

Yes, there have been some notable mergers and acquisitions in the telecom space, but these have been sporadic and less than notable on occasions. Telcos are so busy looking inwards at transforming and modernizing themselves with the latest technology they could be letting down their guard and leaving room for the lions to get in.

With talk of reviewing peering arrangements between the networks and heavy users of network infrastructure such as Google, Netflix, etc., and the strong possibility they will be charged for traffic they push over the networks, it will only be a matter of time before the lions pounce.

We are already seeing seismic changes in the telecom landscape, particularly amongst the device makers and their market shares. We have seen Apple, with help from the rollout out of network-dependent devices and applications running on them become the world’s second largest corporation, even eclipsing the mighty Microsoft in IT and Nokia in smartphones.

Google just keeps getting bigger and more profitable as its coffers continue to bulge. Can you name one telco that comes remotely close to these Goliaths in terms of revenue, profitability and reserves?

What do you think will happen when the wildebeest start to dictate to the lions when and where they can eat and how much they will have to pay for the privilege? The result may even be too gory for National Geographic to cover!

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