Something quite interesting is shaping up in the next generation networks business. For a number of reasons, leadership in the U.S. telecom industry could be reshaped over the next decade, displacing traditional leaders in a growing number of industry segments.
Consider only a few of the trends that could lead to a big shakeup in market structure, ranging from the new leading role of cable TV companies, the demise of satellite video providers, emergence of independent Internet service providers including, but not limited to, Google Fiber, the increasing integration of fixed and mobile access, fifth generation network standards and emergence of cloud computing and virtualized networks.
Each plays a part in creating the conditions for a reshaping of industry leadership. Cable TV firms already are the leading providers of Internet access services and are the low cost providers, as well.
Cable companies have emerged among the top ranks of “telecommunications service providers” and will eventually enter the mobile business, likely establishing themselves in that segment as among the leaders as well.
Many of the large legacy telecom companies increasingly get their revenue from mobile or business customers as well, raising the possibility that legacy telcos ultimately will be mobile and enterprise specialists, while other firms (cable TV, Google Fiber, independent ISPs) lead the consumer services market.
Other segments are essentially disappearing. DirecTV already is simply part of AT&T and Dish Network has made no secret of its view that it cannot continue on as a satellite TV provider, and must become a mobile service provider.
Google Fiber and scores of independent ISPS, many with local government sponsorship, meanwhile are springing up all over the United States, challenging both telcos and cable TV as the market share leaders in Internet access services.
Cable TV and some independent firms, meanwhile, are preparing to test the notion that a mobile business can be built using a mix of leased capacity and Wi-Fi assets. Aside from enabling new competition, at lower costs, the ability to mix fixed and mobile assets widens the range of business niches competitors can exploit.
Google Fi, meanwhile, is starting to test the notion of “access independent” mobile services, basing its mobile service on a “use the best access” approach (Wi-Fi, Sprint or T-Mobile US networks).
That will become a common capability of fifth generation mobile networks sometime after 2020, and could allow many new contestants to enter the “mobile” business with different business models and underlying costs.
Even the emergence of cloud computing will have an impact. Over time, Internet-based apps and services are becoming the dominant products used by consumers and businesses.
Voice and messaging still are essential features, but do not drive the revenue models.
So as devices and apps become platforms for voice, messaging and services, new combinations of device-app-access-computing become possible.
Google and Facebook already have become Internet access providers, while device suppliers might also eventually bundle access functions more tightly. In other words, device or app suppliers might become “access providers” as well.
Once access becomes a more virtualized capability, it is likely new providers are going to bundle access with some other core product.
All of that is made possible because the architecture of modern computing relies on cloud processes and Internet Protocol. Under those conditions, value shifts to the data centers that house the apps people want to use, as “any access” generally will suffice.
Much the same argument might be made about the edge devices that source functionality using cloud mechanisms.
Content companies are prime candidates for such reliance on cloud computing, and Netflix provides a good example.
Netflix is shutting down its last owned data center, making it a leader among large enterprises relying fully on public cloud computing.
Netflix has been 100 percent cloud-based for customer facing systems for some time.
In five years almost 50 percent of respondents said they will be moving their IT entirely to the cloud; in 10 years, that number will climb to nearly 70 percent.
Nearly all of those companies are small or medium-sized businesses. By 2022, just slightly more than 20 percent of large enterprise companies are expected to operate entirely in the cloud.
Not every business can run as Netflix can. But Netflix illustrates the importance of the shift to cloud computing as the fundamental architecture of most services. What matters are the capabilities of the edge device and the ability to reach the content servers.
But if that is so, the intermediary networks will struggle to define a role other than that of “dumb pipe,” especially as new competitors enter with the goal of providing that connectivity at lower retail prices.
In many ways, that is why the fifth generation mobile network standards are important for traditional service providers. The 5G standards are expected to rely on virtualized, programmable network cores that can tune features and capabilities to specific application scenarios.
That could mean not only more optimized transmission service, but lower-cost feature support as well.
Taken all together, the underlying trends create at least an opportunity for market share leadership to change in fundamental ways.
It’s a big deal.