What Next, After Mobility, and Why?

Mobility has been the primary source of revenue growth in the global telecom business for decades. But all that is about to end, sooner in developed nations than developing regions, but certain, just the same.

Subscriber growth will slow close to zero as markets reach saturation. Mobile internet access revenues will boost growth for a while, after subscription growth ends. But sooner or later, even that growth engine will become exhausted.

That is why many believe a shift into content businesses is coming next.

You might or might not agree that U.S. consumers or global consumers are tapped out and unable to boost their discretionary spending.

What seems clearer is that consumers can only spend so much on any single item in their household budgets, and that communications spending, as a percentage of total household income, does not change much, from year to year.

In the U.S. market, communications spending tends to run between 2.2 percent and 2.5 percent of household income per year (defined as percentage of gross national income).

source: BEA

The big implication for communications service providers is that the “pie is not growing,” so it is not possible, over the longer term, to continue growing revenue by relying on inflation. Some providers might build a strategy on taking market share, but that will not hold for the market as a whole, as the market is not growing.

In fact, there are signs the market is either approaching a top, or is at a top. In other words, we might be nearing, or be at, peak telecom, the period in industry history when revenue is at its highest level.

That has important strategic implications. Communications service providers can only grow their legacy business so much, if they can grow that segment of their business at all. To continue growing, service providers will have to move into adjacencies (other parts of the communications, app and content ecosystems).

Though some might criticize service providers for getting into content production, content networks or advertising related to those assets, some moves of that type now are fundamental, not optional.

If growth in the legacy business is not possible, then growth elsewhere must be found.