Sometimes You Cannot Move Up the Stack, Sometimes You Must

In many ways, discussions of “moving up the stack” are only relevant for some parts of the service provider business. Keep in mind that the term “moving up the stack” does not mean a service provider adds value to its service in some way, but that the firm moves to occupy a different part of the value chain, with separate and different revenue streams and roles.

One might argue that is going to be a key strategic issue for mobile service providers as subscriptions, voice and eventually even mobile data cease to drive the business.

In the capacity part of the business, some examples might be a capacity provider getting into the content delivery business or the carrier-neutral data center business. Many would say such moves have been rare, and modestly successful when attempted.

source: Vermont IT Group

Opportunities arguably are more feasible, and arguably more important, in the retail parts of the business. At least in part, that is because retail operators actually sell to end users, business and consumer. They are therefore closer to the actual end users of services. Capacity suppliers arguably do not need to know too much about their customer requirements, beyond “how much do you need, and from where to where?”

In the retail business, some recent successful examples have been Comcast buying NBCUniversal, giving Comcast sustainable revenues in the content networks business, different from the “access” services it already offered.

In the internet of things business, similar examples are Verizon’s connected car services business. Eventually, one would expect at least some other tier-one service providers to move beyond connectivity and create roles either in the platform area or applications for connected cars, unmanned aerial vehicles, connected health, connected home and other areas.

Home security might illustrate one new role, in that regard.

Moving up the stack has some key differences from adding new exclusive features to an existing service. For example, when T-Mobile US offers free Netflix to buyers of its unlimited internet access usage plans, or when AT&T offers free HBO to customers on unlimited plans, that really is not “moving up the stack.” That is enhancing an existing product.

Moving up the stack happens when a service provider starts earning revenue in some way other than providing one or more legacy (access) services.

source: Survey Monkey