As society becomes ever more dependent on connectivity, telcos face a growing risk of being regulated like traditional utility companies. This report details how operators can avoid falling into “the utility trap” and drive growth in the next decade.

Is connectivity now a utility?

In 2024 it is undeniable that connectivity is critical to the functioning of society, similar in importance to a traditional utility such as water or electricity. Access to the internet is essential to how we learn, work and socialise – a factor that was emphasised during the pandemic. Therefore, we can no longer consider connectivity to simply enhance our lives, it is now an integral part of them.

This shift in paradigm has been recognised by governments and organisations worldwide, who understand that access to connectivity is now a fundamental requirement for an individual’s wellbeing. For example, expanding internet access has been included in the UN’s 2030 agenda since its inception in 2015; it is also no surprise that targets to increase access to the internet were given significantly shorter deadlines than the overall 2030 agenda (The agenda originally targeted universal, affordable internet access by 2020).

Consumers and enterprises certainly share the same sentiment in regard to the importance of the internet, as illustrated in the graphic below.

Connectivity is critical

Source: STL Partners

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There is disparity in the regulation of connectivity and traditional utilities

Whilst connectivity has achieved a comparable level of importance in everyday life as traditional utilities, it is not usually regulated in quite the same way. Typically, where traditional utilities are administered by private companies instead of by a government, it is in a heavily restricted fashion where they have little autonomy in pricing and infrastructure buildout. These companies are usually selected through a licensing system and will be legally bound to minimum quality of service (QoS) standards with punitive measures for those who fall short.

Telcos on the other hand enjoy more freedom in their pricing of connectivity and often have a considerable degree of independence in how they position and progress their network infrastructure. As an indicative example, the table below illustrates this disparity in regulation between telecoms and other utilities in the UK.

Is telecoms regulated like a utility in the UK?

Source: STL Partners

Whilst there are many commonalities in how traditional utilities and connectivity is regulated, and likewise this report is not trying to assert that telcos are not already subject to a high-level of regulation, given the position of connectivity as fundamental to society, it faces less stringent regulation than comparable essential services. Therefore, there is a risk of a convergence to this utility-level of regulation through what we at STL Partners define as the “utility trap”.

What is the utility trap?

The utility trap is the process by which telcos can provoke regulators to impose regulation of the type that traditional utility companies face, resulting in telcos having less freedom to compete and innovate. Given connectivity’s critical role to society, regulators will quickly intervene to restrict telco actions that they believe threaten consumers’ and enterprises’ ability to access it, through the imposition of more stringent regulation. Therefore, if telcos are to avoid falling into the utility trap and being treated like a traditional utility company, they must carefully consider how they position their connectivity services.

Table of contents

• Executive Summary
  • The utility trap is a tangible threat for telcos
  • How does the utility trap work in practice?
  • Steps to capture growth in the face of utility-like regulation
• Introduction
  • Is connectivity now a utility?
  • There is disparity in the regulation of connectivity and traditional utilities
  • What is the utility trap?
  • Why is the utility trap a pressing issue in 2024?
• What is the mechanism behind the utility trap?
  • Inflation-linked price increases: How telcos in the UK fell into the utility trap
  • Rogers Communications’ network outage: Pricing strategy is not the only way to fall into the utility trap
  • The full-fibre market in Canada: Telcos must also consider the competitive landscape
• Telcos must collaborate closely with regulators
  • The ABPI Code of Practice
  • What would a telco code of practice look like?
  • Connectivity targets: Telcos and regulators must establish a shared vision
• There is a limit to what telcos can control
  • Argentina: The regulatory response in an economy with spiralling inflation
• Utility-like regulation does not necessarily preclude growth
  • South Korea: How telcos can thrive in the face of utility-like regulation
• Building layers beyond connectivity
  • Quantitative analysis of regulation and service diversification
• Conclusion
• Index

Related research

• Future Skills Tracker report
• Telecoms 2030 Part 1: The telecoms industry problem
• Inside the cloud-native telco
• Stakeholder model: Turn growth killers into growth makers

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George Glanville

George Glanville

Research Analyst

George is an analyst at STL Partners, with experience working across a diverse range of topic areas, including 5G, open RAN, telco enablement and gaming. He specialises in consumer services and network innovation, contributing to reports, articles and tools within both of these practice areas. George joined STL Partners after obtaining a BSc in Economics from Bristol University.