Reality Check Needed to Temper Telecom Optimism

by Matt Klassen on October 27, 2015

The global telecom market is in a state of flux, as carriers, particularly the giant multi-national variety, attempt to navigate their lumbering corporate behemoths through a changing competitive landscape; one where the entire industry is quickly becoming digitized and threatens to leave many of these relics of a now bygone telecom era by the wayside.

But amidst the general doom and gloom surrounding the telecom industry, credit rating agency Moody’s has upgraded the European telecommunications market from ‘negative’ to ‘stable’, while maintaining a ‘stable’ outlook for the American market, predicting a return profitability for companies on both sides of the pond who have been struggling to keep pace with the radical paradigm shift in their industry.

This is indeed optimistic news for carriers looking to become more than just the ‘dumb pipes’ the carry the data for the rest of the tech world’s digital revolution, due in no small part to the steady increases in broadband usage around the world (the reason behind Moody’s positivity). But if telcos are really going to reverse their fortunes and find ways to recapture their position in this digital age, this positive news may, ironically enough, be the worst news the industry could hear.

There’s a funny thing that happens to companies when they get positive news regarding predicted revenue patterns amidst industry flux and uncertainty, they generally want to adopt a “more of the same” attitude. The fact is that the last thing most companies want to do when things are looking up is maintain the status quo, a position none more popular than in a telecom industry known for its isolationism and stubbornness.

So if the telecom industry looks at Moody’s upgraded predictions and thinks that things are going to return to normal, that telcos will resume their place of dominance, and traditional revenue streams will be restored, well than such positivity is bad news indeed, because nothing like that is going to happen, and it telcos are unwilling to change, well they’ll be obsolete in short order.

As Alex Leslie of DisruptiveViews writes, “With roaming revenues likely to disappear next year, the pressures on telecoms companies gets worse not better. Even though most people agree that artificially inflated roaming fees are bad, and that getting rid of them will trigger a wave of new services, innovation and service take up, the status quo hates the idea.”

In fact, telcos needs to operate as if Moody’s downgraded the industry’s outlook, finding ways to recover whatever lost revenue it can, while finding ways (and quick) to generate new revenues.

One way for telcos to survive is to radically change the entire culture of the industry, foregoing its longstanding isolationism that clearly favours the status quo, in favour of strategic partnerships with the very digital community that is currently gobbling up traditional telco territory. As Leslie explains, “[Telcos] are going to have to partner with the very companies that are eating their messaging businesses. They are going to have to do this on a playing field, which is by no means level.”

The simple fact is, businesses, particularly large ones, don’t like change, they seem fundamentally opposed to it actually, and this is nowhere more evident right now than in telecommunications. Now with Moody’s upgrading its industry outlook, one gets the sense that the reaction from telcos will be to not rock the boat, not to make waves, and continue on the same course. The ironic thing, of course, is it will be that exact course of action that will spell the doom of the telecom industry.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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