Ernst & Young has a report out about the Top 10 Business Risks of the Telecommunications sector. The big one is thinking voice is still going to be the bread winner. Cellcos have gotten the memo that it will be all data all the time for profits. Top US Cablecos understand that too, I think. Voice is just extra revenue. For Hosted UC and Cloud Comm providers, they have NOT gotten this memo. They still think it is all about Voice. Hello? McFly?!
"Failure to capitalize on new types of connectivity." E&Y mentions M2M, but it took a while for telcos to embrace Ethernet too. Telcos are never the first to market. It is always new comers that force their hand. Another example: UC.
If you don't want to read the report, you can watch the video.
Another risk for US telcos is unions and pension requirements. AT&T just tied up 7000 workers for a year. VZ still has union issues, including their union clamoring that the SpectrumCo deal will end competition (what little competition there is).
"AT&T and Verizon don't really compete with one another--they copy one another," said Parul P. Desai, the communications policy counsel for Consumers Union, the policy and advocacy division of Consumer Reports magazine. Look at the cellular data sharing - copycats.
And if you thought there was little competition before, "Verizon CEO Ponders Killing Off Rural Phone and Broadband Service and just rake in wireless profits." One point is that VZW and FiOS have less union workers - which is a big savings for VZW. [Read the transcript.] CLECs in VZ territory are screwed. (Not that it has been a picnic thus far.] And because it is all about shareholder value, rural America will not have broadband, which will stymie the economy. We live in a service world. ATT and VZ are both abandoning wireline and rural despite the USF funds that they collect.
E&Y mentions poor M&A. No kidding!
On the regulatory front, I think that is hogwash. Except for the ATT-T-Mobile merger and possibly USF Reform, when have the ILECs not gotten what they want? The problem is that all their markets atre flat, so they have to get innovative with billing to keep profits flowing.
I think it boils down to watching the share price too much and not the customers enough. I understand that the burden of debt is huge in telecom - $66B at ATT; $51B at VZ; LVLT is $8.5B; $23B at CTL; $8.9B at WIND; $8.3B at Frontier; and Fairpoints BK left them with only $1B in debt. All this debt is tied to share price. So it is an ugly circle.
AT&T is trying to innovate with Hack-a-thons and The Innovation Pipeline. But this has more to do with apps for cell phones than any technology advances. And that won't move the needle on the revenue dashboard.
I don't think this is true:
"Over the next 5 years, all of the major US telcos and MSOs are expected to lose small business customers to a new crop of hosted service providers that will offer PBX-like voice services at lower reoccurring costs and with minimal site equipment expense," according to a new market research study from The INSIGHT Research Corporation. (March 2012).
I think with metering and copper disappearing (and the econoomy tanking), revenues are going to fall - across the board. People can't keep paying more and more for cell and broadband. It's just not there.
The new Microsoft Office automatically uses cloud services. What if you have crappy broadband? or none? Or its capped or metered? The telcos and cablecos are a utility that the rest of the IT industry relies on. Bleak.