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Telecom operators want to become techcos, but they need to keep being telcos too. Telecom techcos will be best positioned to find growth in the Coordination Age, but the path is not easy...
The telecom conundrum
Global growth in telecom stalled in the 2010s – the precise details vary by market, but the broad picture is the same. The telecom market grew dramatically during the 1990s, with the advent of mass-market mobile telephony and data connectivity. It was still strong during the 2000s thanks to continuing rise in mobile penetration, and the arrival of mobile data services and fixed broadband – but it had grown flat by 2010. Despite a slight uptick, at present there is no strong reason to expect strong growth to return.
Association between network tech and revenue growth has broken down
Building networks requires a lot of investment – but for a long time, the telecom industry was receiving rewards for its expenditure. Each time it laid out large amounts of capital expenditure (capex) for a new network technology bringing new functionality to users, this was followed by a surge in growth as demand for the new capabilities rose. But in the last 10 years or so, that relationship has broken down. Continued investment in the next generation of network technology has, to some degree, been required to meet growing demand or, rather, in anticipation of future demand for better connectivity, increasing bandwidth and network performance metrics. But some of this anticipation has already proved false – or at least questionable.
When it comes to 5G and fibre-to-the-premises (FTTP), the case for pent-up demand becomes weaker. According to the Ericsson Mobility Report, global mobile data growth in Q2 2024 had fallen to just over 20% year on year, from around 50% year-over-year four years ago. Demand for other capabilities of 5G beyond faster mobile broadband has failed, or been too slow, to emerge (though this could be because that functionality has likewise been very slow to become a reality). STL Partners’ report, How to sell full fibre to households, clearly lays out that FTTP performance is largely unnecessary for even the most bandwidth-hungry households.
Where is the new growth?
In 2018, STL Partners defined the Coordination Age – our vision for the third age of telecoms and technology. In this vision, the great demand for drastically more efficient use of human, financial and natural resources through more precise alignment of supply and demand is increasingly met through the use of connected technologies to create coordinated outcomes across both physical and digital domains.
STL Partners’ three ages of telecom (so far)
The Coordination Age should provide growth opportunities for telcos (if they can take advantage of them) because different types of connectivity will be embedded into multiple new services. The hope and expectation is that some of this will result in new revenues – not just because it results in more demand for connectivity, but also because specialised connectivity will be needed to do new things and provide new value as it is integrated into more services and applications. Many telcos have ambitions to take roles beyond connectivity in the delivery of coordinated services – and for some this may be possible.
We believe this vision is still valid and is currently emerging. More and more Coordination Age use cases and business models will emerge, with increasing levels of complexity within them. But are telcos ready to play a part in this, take on the roles they would like to play and seize the opportunities – or are telcos in fact currently an obstacle to the true realisation of the Coordination Age?
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Table of contents
- Executive summary
- STL Partners’ techco vision for telecom
- Infraco is non-negotiable
- Servco is key for accessing faster growth
- What to do next
- Introduction
- The telecom conundrum
- Where is the new growth?
- The telecom techco vision
- Becoming an infraco is essential
- Servco strength is the key to faster growth
- Integrated telecom techcos will reap most benefits
- The new telecom techco, servco and infraco in the Coordination Age
- The techco vision: How to make it real
- What to do now