What If Quality Internet Access is Unsustainable with Current Business Models?

Mobile service providers in many emerging nations might be facing an industry-altering problem: high capital investment and regulatory risk that makes the business model unsustainable.

Put in simplest terms: is there enough potential revenue in some emerging markets to support robust investment in  network bandwidth?

If there not enough revenue, and investment requirements cannot be radically reduced, then business models could go upside down.

Be clear, that also means most service providers cannot stay in business, without radical changes in service provider cost structure, growth of end user demand, plus ability to sustain business models over time.

Put simply costs must drop much more, consumers must perceive the value of Internet services and be able to pay for such services, or alternative methods of subsidizing end users must be created.

Some of us would argue all of those developments are required. That is why developments such as Telecom Infra Project, Free Basics, Project Loon, unmanned aerial vehicles, unlicensed and shared spectrum, use of millimeter wave radio and creation of new apps and services that drive value are so important.

Without serious innovation in the access networks business, it might literally not be possible for many service providers to continue operating.

Bringing stakeholders together to understand changing supply and demand issues, and the business model for Internet access, is a key focus of the Spectrum Futures conference. Here’s a  fact sheet and Spectrum Futures schedule.

Also, access providers are capturing a smaller share of overall ecosystem value. Bluntly, one might say, access providers really are becoming commodity dumb pipe providers while value and revenue shift to app providers, device suppliers and others.

“Even after accounting for Wi-Fi and new technologies and alternate business models, there will be still significant global wireless data demand that is not economically possible to serve,” says James Sullivan, J.P. Morgan head of Asia equity research.

Sullivan will share his thinking at the Spectrum Futures event.

The inevitable conclusion is that major changes in business model are essential if everyone, everywhere, has use of the Internet, while providers can sustain delivery on a sustainable basis.

It is not impossible to solve such problems. But it will be hard, for many in the ecosystem.