No “Disruption” in Global Telecom Business?

Among the favorite words and concepts one hears in the software and hardware business is “disruption,” the process by by which new entrants attack and displace former industry leaders. The same idea can be applied in the telecom business.

But  some proponents of “disruption” would say “not much has changed” in telecom, from the standpoint of “new entrants” displacing “industry leaders.” But it often is useful to remember that when somebody says something “cannot be done,” it is better to translate the statement as “I or my firm cannot do that.”

That is a huge and key difference. For some competitors who want their own firms to displace the legacy telecom firms in the access business, it might appear that “not much has changed.”

But consider that over the last few decades, former monopoly and state-run telecom companies have been forced to face growing competition. In many regions, new entrants have gained significant market share, in many cases reducing the share of historic incumbents to far less than 50-percent share.

Some further would complain that service providers--especially the important mobile providers--still have too much “control” over the business. To be sure, the mobile business requires an ecosystem approach in a way the fixed line business does not, as hardware and software have to be managed and integrated more extensively than on a fixed network.

But neither would it be fair to ignore the huge change Apple has forced on the whole industry, as well as the growing significance of the Android ecosystem. For the first time, a handset has gotten such huge traction with end users that Apple has gained significant control over the terms under which a mobile service provider can sell the iPhone, for example. That is a huge change.

Despite that, some will complain that there is little disruption or innovation in the mobile part of the communications business, for example.

So does disruption happen in the communications business, and if so, how?

Venture capitalists typically hope it will happen when new technology firms can create killer new solutions in software or hardware. The hope is that young upstart firms can somehow create value so important that communications service providers have to support the innovations.

Perhaps it would be more accurate to say that big, substantial new participants can do so. Apple and Google provide excellent examples. Neither is a “little start up.”

Though some would dispute the notion that the telecom business is “being disrupted,”  in the communications business, whole categories and industry segments have disappeared. There once was a hugely revenue-producing “long distance” industry in the United States, lead by firms such as AT&T and MCI, for example. That segment essentially has disappeared.

The function of carrying and terminating international or domestic calls remains, but that generally is not the foundation for a stand-alone business, except for Skype and a some aggregators who act as long distance outsourcers.

Mobile services once were a niche used primarily by business users. Now mobile services are ubiquitous and beginning to challenge and displace other established segments such as fixed network voice and broadband.

Surveys by U.K. regulator Ofcom might be illustrative. Of all U.K. households in which at least one person is using mobile broadband services, 44 percent do not have a land-line broadband connection.

Seven percent of U.K. households have only a mobile connection. Ofcom report

This mobile-only proportion is even larger among younger age groups, those who belong to lower socio-economic groups, or renters compared to home owners, the Ofcom report suggests.

This data demonstrates that product substitution is a reality. For a significant share of the U.K. population, mobile broadband  takes the place of a land-line connection to the Internet. That’s a disruption.

“We expect this group to grow steadily over the next four years as mobile network performance improves and prices remain competitive with land-line services,” says Declan Lonergan, Yankee Group analyst.

That doesn’t mean “most” consumers will do so; only that for many customer segments, this does make sense.




In the U.S. market, there once was a time when the mobile industry was not lead by AT&T, Verizon, Sprint or T-Mobile USA.

Some might not consider product life cycles to be “disruptions.” But for firms whose lead products are, in fact, facing declining demand, it is a fundamental challenge. Some might want “disruption” in the form of “my firm wins, yours loses.”

But vast innovation is happening, and legacy firms are being disrupted. It might take a large firm to do so, but cable has disrupted telco voice and leads in fixed broadband. Telcos and satellite are disrupting cable TV video services.

It is hard to say what could happen in the future, as far as bigger involvement by Apple, Google, Amazon or others in the “service” part of the business. But it seems safe to say that if further disruption happens, it will be caused by other big firms, not “start ups.”

It is a scale business, and even a disruptor needs “scale.”


Gary Kim is an active industry writer and analyst, editor of Mobile Marketing & Technology,  Content Marketing News and Carrier Evolution. He is a frequent contributor to IP Carrier and TMCnet, and a good friend of Razorsight. Keep up with all his industry insight -- follow him on Twitter @garykim.