The evolution of wholesale

20 Dec 2016

Wholesale telecommunications services are the industry’s critical infrastructure, and yet they have proved - in recent years - to deliver the lowest growth. The contradictions afflicting the wholesale voice industry got to the heart of the industry’s dilemma. Where would we be without voice services or bandwidth? The answer is totally nowhere, and yet wholesale has endured a slow and well documented decline even as volumes have increased.

Wholesale has been caught in a spiral of shrinking margins and falling revenues as demand for its suite of services has grown. Some veteran observers of the wholesale industry believe that enough is enough. Hot Telecom senior advisor Andreas Hipp has gone so far as to say that the wholesale industry is crying out for a revolution, ‘a revolution of the mind and attitude.”

Hipp, who has been both industry insider and outside, documents the decline of the old style wholesale market as we knew it, and says that it all started going wrong in the “innovation era.”

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In the innovation era we are in, new services require far more IT, software, mobile and wireless technology know-how than they did in the past,” he writes. “This type of knowledge is not part of the DNA of most carriers’ wholesale groups, and the path to obtaining it is long, complicated and full of human obstacles.”

Hipps’ viewpoint is intentionally confronting and dogmatic. He asks if wholesale needs ‘evolution” in the Darwinian sense, at the end of which it would have evolved into a new species. But then he goes on to call instead for a revolution and ‘brave ideas and people to develop and push them.”

The good news for wholesale is that there are new ideas out there, and they are definitely being pushed. They even present a new post-voice future which, if not a revolution, is at least a future where the reliance on voice has diminished, and new services have come to the fore.

Trends which Telecom Asia identified in last year’s Wholesale report continued to gather pace in 2016.

  • OTTs such as gaming and cloud companies are buying more capacity. The market for cloud transit, or Layer 4 pipe, has developed rapidly and come from a very low base. The Asian market remains attractive to OTT players and new entrants continue to launch services. In June, for example, Australian company OTT Premium launched its streaming service across Asia Pacific. Their point of difference is tailored viewing and multilingual channels.
  • The mobile market continues to expand. According to Ericsson, there are almost 4 billion mobile connections in the Asia-Pacific as of 2016. This is tipped to rise to 4.6 billion by 2021, comprising just over 51% of the global total. Mobile of course doesn’t only mean voice, the growth markets are in messaging, roaming, data analytics and video. The mobile video advertising industry is ramping up as brands look to reach more Asian consumers via their smartphones. According to Telstra subsidiary Ooyala, 55% of the average Singaporean’s online viewing time is on a smartphone or tablet.
  • With the growth of the mobile market, Asia will see the launch of more MVNOs, not just offering the traditional voice and data offerings but new models specializing in areas such as health, connected homes, and video conferencing. Compared to Europe and North America, Asia’s MVNO market is relatively under-developed, and has been hampered by regulation. More MVNOs mean more demand for both traditional and non-traditional wholesale services.
  • Bandwidth continues to be more flexible, and responsive to volatile demand across data centers and different locations. Just as capacity in data centers is scalable and on-tap through the cloud, some operators are offering pay-as-you-go and on-demand bandwidth models. This represents a significant shift in the service mentality of wholesalers, and shows a willingness for them to change with the market.

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