These are, in many ways, trying times for many telecom, mobile and cable TV service providers, both within the United States and internationally.
Virtually all of the major legacy products are maturing, including mobility services, high speed access and video entertainment services that have driven recent revenue growth.
Network neutrality rules are being applied in ways that directly affect profit margins, revenues and costs.
In many markets, competition is growing. South Korea, which has had a rather stable mobile business, now likely will face the addition of a fourth mobile operator, In many markets, including the United Kingdom, India and the United States, new competitors also are entering the market, will enter the market or new leaders are created as firms merge.
In China, all three mobile companies, for example, recently have had negative revenue growth and negative income growth. That has been the case in many European markets as well.
Globally, some analysts expect, mobile industry revenue will begin declining in 2019.
It therefore is fortunate that a number of potentially-significant new revenue streams, ranging from connected cars to machine-to-machine applications, healthcare, home security and monitoring services seem to be developing in the broader Internet of Things realm.
But even in the near term, many firms find that newer “strategic” services, typically involving IP and Ethernet services for business, consumer Internet and TV, are driving growth.
Firms such as CenturyLink, for example, already find that strategic services comprise a majority of total revenue. For CenturyLink, strategic revenue includes MPLS and Ethernet services, high-speed Internet and “PrismTV,” CenturyLink’s linear video subscription service.
Legacy revenue almost predictably declined in the first quarter of 2015, due primarily to access line losses.
Still, service providers are counting on creation of big new revenue segments now expected to flow from the broad Internet of Things trend. That is a big “if.”
Competition and regulatory trends also are troublesome. Across the globe, regulators are considering or implementing rules about network neutrality that have a direct impact on future Internet service provider revenue models, retail packaging methods and profit margins.
In fact, though the initial impact is in the consumer Internet access business, where packet prioritization and zero rating (sponsored data access) are forbidden, there now also is impact in the carrier interconnection area.
Where traditionally interconnection reflected volume of exchanged traffic, it increasingly is difficult for retail-facing Internet domains to negotiate bilateral interconnection agreements that reflect the volumes of delivered traffic.
The biggest disparities occur when content domains interconnect with retail end user domains (Netflix and any other retail ISP).
Regulatory rules related to network neutrality also direct limit retail packaging models.
The Indian Department of Telecommunications, for example, is highly likely to recommend that zero rating (sponsored apps) should not be lawful in India.
That would ban Internet app practices that are functionally equivalent to toll-free calling. Any such bans would mean that entities such as Internet.org could not provide access to some key Internet apps without requiring purchase of a mobile Internet access plan.
Likewise, it would be unlawful to offer an Internet app form of toll-free calling, where a sponsor pays for a consumer’s use of network resources.
The Indian agency apparently will adopt a policy banning zero rating under network neutrality rules that ban all paid prioritization or app throttling.
All such rules of course shape and condition the retail plans ISPs can offer.
Bharti Airtel, for example, had proposed and then withdrawn its “Airtel Zero” program that w allowed application providers to underwrite usage of their apps.
Google has a similar zero rating initiative called Google Free Zone that has been offered in a handful of countries like Kenya, Sri Lanka, Thailand and the Philippines.
“Zero rated apps” such as provided by Internet.org have proven effective ways of introducing non-Internet users to the benefits of using the Internet. Under the Internet.org program organized by Facebook, mobile customers can use apps without paying for a data plan.
But such policies are viewed as a violation of network neutrality principles by some.
So here we have an issue of “good things” in conflict. One is the notion that innovation is promoted when every app has an “equal chance” of being discovered and used (even if, in practice, that rarely is true, or possible).
The other good thing is the ability to provide people access to useful apps without those people having to pay. That is especially useful for encouraging non-users to sample the Internet, and useful for people who have not, in the past, purchased mobile Internet access plans.
And it appears one or the other of those good things will not be lawful, eventually.
Should such a framework remain in place for a long time, more new apps are going to move away from “Internet” delivery, though. Some apps work better when quality of service measures are available. And some apps might have life-threatening consequences if absolute low latency or bandwidth is unavailable.
Such apps will move away from the public Internet and into “walled gardens.” That might be useful, in some instances. Medical apps, driverless cars and other automated processes arguably would benefit from higher performance guarantees than can lawfully be provided using the consumer Internet.
Altogether, service providers face a challenging environment. Their core legacy revenues are mature or maturing. They face new limits on retail pricing and packaging. Promising new replacement services are visible.
But lots of hard work remains before service providers can assess how important those new revenue sources might be in the future.
But service providers are hopeful. By 2020, Business Insider Intelligence estimates that 75 percent of cars shipped globally will be built with the necessary hardware to connect to the internet.
In other words, those vehicles will be connected cars, equipped with internet connections and software that allow people to stream music, look up movie times, be alerted of traffic and weather conditions, and even power driving-assistance services such as self-parking.
Those connections will virtually certainly rely on mobile networks.
The overall connected-car market is growing at a five-year compound annual growth rate of 45 percent, Business Insider researchers say.
In 2020, that will mean 69 million connected vehicles, and an installed base of perhaps 220 million total connected cars on the road globally in 2020.
Perhaps 88 million of these vehicles will represent sales of connected services to vehicle-based systems, rather than tethering in the cars to user smartphones or other devices.
Embedded connections will win, Business Insider Intelligence argues, since those sorts of capabilities also allow auto companies to collect data on cars’ performance and send updates and patches to cars remotely, avoiding recalls related to the car’s software.
Separately, Research and Markets has forecast the connected car machine-to-machine services market in the United States will grow at a compound annual growth rate of 14 percent.
The firm also forecasts the connections (access) market for the U.S. connected car M2M will grow at a 28.5 percent compound annual growth rate between 2015 and 2019.
The connected car M2M services market includes driver assistance, safety and security, infotainment, vehicle management and on-drive management, for example.
Such is the magnitude of the opportunity. Service providers will need plenty of such opportunities.