Telcos at Risk of Becoming Internet Service Providers Only — Carriers

According to the GSMA, the global association of operators around the world, telecommunications companies are at risk of becoming primarily Internet Service Providers due to a declining business model.

The association found that as consumers move online, they spend more time and money online. He added that since 2015 the internet has continued to grow at a steady pace and there were more than 4.6 billion users in 2020, representing 59% of the world’s population.

He said revenue for the segments that make up the internet value chain was $6.7 billion in 2020, up from $3.3 billion in 2015.

In his report “The Internet Value Chain: 2022 (May 2022)”, he said: “At a time when a greater load is being placed on the Internet connectivity infrastructure, forcing network operators to increase speed, capacity and coverage, their business model is in a hurry.

“First, companies are replacing high-margin MPLS and VPN services with more basic Internet access services, resulting in an overall loss of revenue and margin for carriers. Second, the operators’ field of activity is shrinking.

“As the virtualization of core network functions occurs, hyperscalers can scale and run these services globally, playing a larger role in core and network service orchestration, while carriers many markets separate their infrastructure (i.e. into fiber and tower companies) and the sale of selected assets.

“If these trends fully materialize, telecom operators risk becoming primarily Internet service providers, fulfilling the sales and service function, but with significant investment needs to build and maintain the infrastructure of access.”

The GSMA said that while the Internet value chain grows, the benefits and returns accrue primarily to players in the online services segment, while telecom operators who build and operate the connectivity infrastructure that underpins these services do not benefit as strongly as expected.

He added that while carriers continue to invest in complex networks that enable the entire ecosystem, low returns raise questions about the robustness of continued investment in capacity, coverage and speed. networks to connect Internet users to services.

He said telecom operators faced declining returns by slicing infrastructure assets and sharing them to increase asset utilization. He said there were also infrastructure investment funds to meet investment needs.

The GSMA explained that in financial terms, this replaces the need for upfront investment with a long-term operating cost, putting pressure on operators’ margins and returns.

He said: “The obvious consequence of such an outcome is that with lower revenues and margins, the potential for investment in critical access infrastructure could also be reduced in the long term.”

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