Service provider strategy has been getting more diverse since the 1980s, when it would still have been possible to argue that tier-one service provider strategy in nearly every market was the same. Since then, strategies have diverged.
Since the 1980s, service providers have taken different stances on mobile, international expansion, embrace of over the top services, digital media, financial services, information technology services for enterprise customers, entertainment video and consumer apps.
Fixed network service provider strategy remains as challenging as ever, as illustrated by product trends.
At the end of 2014, the largest U.S. cable TV operators had about 52 million high speed access accounts in service, according to Leichtman Research Group.
At the end of 2014, those same firms had some 49 million linear video customers. In other words, the major legacy product now has been surpassed by the “newer” high speed access product.
Likewise, at the end of 2014, the largest U.S. telcos had about 35.4 million high speed access accounts in service.
At the end of 2013, all U.S. telco retail consumer voice accounts in service, by all providers, had dropped to 36 million.
Using roughly the same methodology as used by Leichtman Research, the top U.S. telcos might have served about 30 million voice lines, or about one in four U.S. households.
As in the case of cable TV, the major legacy produce–voice–has been surpassed by the newer high speed access product.
For cable TV operators, revenue growth now is lead by business services, secondarily by high speed access. For fixed network telcos, revenue growth is more complicated.
In some cases, revenue growth is lead by video entertainment. In other cases, high speed access drives revenue growth. In yet other cases, business services are the leading growth category.
Among the areas of biggest upside for many service providers are enterprise and business services.
In its first quarter of 2015, Comcast Internet access revenues grew 10.7 percent while business services grew 21.4 percent.
Year over year, Comcast gained 407,000 high speed Internet access customers and 77,000 voice customers and lost 8,000 video customers.
In other words, not only does the “new” Internet access business represent more customers, it also is the fastest-growing consumer service. Video subscribers actually are shrinking. But it is business services that sport the highest growth rates.
At CenturyLink, a similar trend might be noted. CenturyLink is in many ways a hybrid company, including a healthy base of rural telephone access assets, several access networks in metro areas of the western United States and then long haul and enterprise assets originally part of Qwest Communications.
CenturyLink is not alone. Windstream and Frontier Communications are some combination of rural telephone assets and business-focused assets.
One might argue that, in all three cases, revenue growth is driven, on a net basis, by the enterprise and small-to-medium business operations.
At CenturyLink, strategic services sold to enterprises are growing, the legacy access business dwindling. Total business segment revenues in the first quarter of 2015 were about $2.7 billion, while consumer segment revenues were $1.5 billion.
At Windstream, total revenues were $1.4 billion in the first quarter of 2015. Consumer broadband service revenues in the first quarter were $123 million. Overall consumer service revenues in the first quarter were $312 million.
Enterprise and small business service revenues were $741 million in the first quarter, representing fully 53 percent of total revenues. Add in carrier service revenues of $177 million and the business segment represented 66 percent of total revenue.
At Frontier Communications, first quarter 2015 revenue amounted to $1,371 million. Total residential revenue was $617 million, while total business revenue was $616 million. So business revenues represented about half of total revenue.
At CenturyLink and Windstream, entertainment video likely will be a high-growth product, coming from a low base. It isn’t so clear whether video entertainment will do the same at Frontier Communications, which has been relying on satellite video, and experienced a net loss of 7,700 video customers in the first quarter, including 3,500 satellite video customers.
Windstream just launched its “Kinetic” IPTV service, so growth is almost certain. At CenturyLink, consumer segment revenue growth is lead by high speed access and television services.
The point is that fixed network revenue growth strategies now are distinct, at various firms. Sometimes the key revenue drivers are the business segment. In other cases it is high speed access or entertainment video, and sometimes all three are important.
Eventually, all three sources will dwindle. What comes next is key. So far, there is no clear answer, other than that the Internet of Things might hold the key.