Mobility has been crucial for consumers and suppliers of communication services for decades. Mobility has allowed most humans to use communications, where fixed networks were unable to do so.
Mobility has allowed service providers to make a major revenue transition from long distance to mobility as the key revenue driver. Mobility has allowed the industry to survive the "death" of fixed network voice as the key revenue driver.
One fundamental rule I use when analyzing telecom service provider business models is to assume that half of current revenue has to be replaced every decade. One example is the change in composition of Verizon revenue between 1999 and 2013. In 1999, 82 percent of revenue was earned from the fixed network.
By 2013, 68 percent of revenue was earned by the mobile network. The same sort of change happened with cash flow (“earnings”). In 1999, the fixed network produced 82 percent of cash flow. By 2013, mobility was producing 89 percent of cash flow. The fixed network was creating only 11 percent of cash flow.
The picture at AT&T was similar. In 2000, AT&T earned 81 percent of revenue from fixed network services. By 2013, AT&T was earning 54 percent of total revenue from mobility services.
Also, consider CenturyLink. In 2017 (assuming the acquisition of Level 3 Communications is approved), CenturyLink will earn at least 76 percent of revenue from business customers. In the past, CenturyLink, like other rural carriers, earned most of its money from consumer accounts.
The point is that CenturyLink now is unusually positioned with respect to business revenue, earning a far greater percentage of total revenue from enterprise, small or mid-sized businesses and wholesale services, compared to other major providers.
After the combination with Level 3, CenturyLink will earn no more than 24 percent of total revenue from all consumer sources, and that contribution is likely to keep shrinking.
Cable operators have done so as well. Where once video entertainment was 100 percent of revenue, Comcast now generates 63 percent of total revenue from other sources. You can see the same process at work in the mobile business. Where 100 percent of revenues essentially came from voice, today about 80 percent of total U.S. mobile operator revenues come from data services, according to Chetan Sharma.
That trend has been building for some time. Early on, text messaging was the driver. But mobile internet access now drives growth. But saturation is coming. In the first quarter of 2017, mobile data revenues actually declined for the first time, ever.
source: Infonetics
The big strategic issue is how revenue drivers will change over the next decade. As impossible as it seems, today’s mobility services are not likely to produce half of total revenues in a decade.
Some other big new revenue driver will have to be found. But the industry already has done it, and more than once. It simply now has to keep doing so, for the indefinite future.
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