Business Model Changes on Horizon for Telcos

Consumers continue to display great demand for the latest communications devices. But a  survey released by IBM indicates that marketers in the telcos industry should not take their good fortunes for granted. A continued economic downturn could force consumers to cut back. Almost 1/​3rd of survey participants said a long economic downturn could result in spending reductions of between 10%-20% when it comes to mobile communications.

And consumers have clear ideas about which communications and media expenditures they don’t want to cut from their budgets. Here’s a list of percentages associated with the devices they are least likely let go:

  • Mobile phone 51%
  • Broadband Internet access 26%
  • Landline 26%
  • Pay TV 12%
  • Newspapers/​magazines 11%

These results show a clear threat for telecos that specialize in landline services. And it’s not just consumer opinions that matter. Telco companies are facing competition from Internet firms, voice-​over-​IP (VoIP) operators and cable firms.  The new competitive and economic uncertainty clearly threatens smaller marketers. But IBM analysts believe that even larger players will be forced to take up new business models in the next 4 years to generate profits.

For example, IBM analysts predict that landline service will increasingly be offered as part of a more complete package. And operators may be forced to cut back on features like unlimited data plans.

On a macro-​economic scale, here are 4 market models that IBM analysts believe could come to the telco industry depending on the course of the recovery currently underway:

Survivor Consolidation:  If the economic recovery stalls, surviving operators will merge to try to improve profitability as consumers cut costs.

Market Shakeout: If the economic recovery stalls, private investors may focus their efforts on large population areas and target consumers with premium services while government agencies may extend basic service to less profitable, rural areas.

Clash of Giants: If economic growth becomes robust, telcos will compete with over-​the-​top (OTT) providers by focusing on niches such as the smart grid or e‑health. Consumers will choose providers with the best quality of service.

Generative Bazaar: If economic growth becomes robust, telecos will face more competition from smaller operators that “package connectivity with their own services.” Consumers may also be willing to use services from a variety of different providers.

Regardless of what happens, telco operators will continue to roll out new marketing plans to attract customers as the competitive nature of the industry changes.

[Source: Telco 2015: Five Telling Years, Four Future Scenarios. IBM Institute for Business Value. IBM​.com. 2010. Web. 23 Aug. 2010] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.