Technology advances are increasing the bandwidth available to wireless communication services, making many wireline providers increasingly vulnerable to competition, according to a new report by Deloitte's Technology, Media & Telecommunications (TMT) industry group.
Hundred year storm: wireless disruption in telecommunications
Richard Knights, telecoms and technology partner at Deloitte, comments: 'The successful evolution of wireless technologies means that they now present a real alternative to wireline service provision. This is both in terms of the performance of these technologies (in particular their improved reliability, quality and bandwidth), as well as the additional benefits of mobility and flexibility provided by these technologies.
'Such developments present a real opportunity for players in this sector to encroach on market share traditionally held by wireline markets.
'The disruption of telecom markets by wireless technology is analogous to a 'hundred year storm': an once-in-a-lifetime event that our past experiences simply cannot have prepared us for.
'Wireline service providers now face threats from wireless technologies, which at first only appeal to their least-profitable customers - such as those requiring minimal telephonic sound quality, those who desire minimal cable channels, and those with specialized uses for WiFi technologies. However it is in these markets that the services that define tomorrow's landscape will be developed and perfected.
'Wireline service providers need to be reviewing their market positions ahead of the disruption posed by wireless providers - identifying which segments of their market are most at threat and looking at opportunities for collaborating or investing in wireless technologies of their own to defend their share of the market,' comments Knights.
The report identifies new ways for providers of wireless services to address competitive challenges and target new growth markets such as 3G voice services, Wi-Fi data, and pooled spectrum video. The innovations that have created these technologies have set the stage for disruption of the telco sector. The future that actually plays out will depend upon the commercialisation strategies chosen by specific players.
The report recommends that providers of wireless telecom services - whether voice, data or video - follow these strategies:
* Invest to meet the needs of mass-market local telephony users instead of continuing to focus on high-usage corporate customers;
* Start actively promoting and investing in wireless as a substitute for local wireline voice;
* Market to non-traditional consumers - who are generally the least demanding and least profitable.
By experimenting in carefully selected foothold markets, providers will be able to master new applications, essentially getting paid to develop and introduce improvements that will give them an advantage when moving into mainstream markets. Disruption will occur when wireless services begin to steal the growth in the wireline market, as well as penetrate the established base of customers.
By strategically identifying and following a disruptive approach, both new and incumbent wireless service providers can effectively navigate the storm while achieving better and faster results and avoiding costly and potentially even disastrous mistakes.
Current industry 'best practices' for growth can be summarized simply: identify the largest, most lucrative markets and boldly pursue them. However, according to disruption theory, this is a short-sighted strategy that can lead to over-competing in saturated markets. History has shown that markets with the most profit potential have often not been the most obviously attractive ones, and have often been overlooked.
'Telecommunications is one of only a few industries that has escaped frequent disruption,' comments Knights. 'The last time it happened was when voice telephony disrupted telegraphy services more than 100 years ago. As a result, no one alive in the industry today has experienced anything similar to disruptive threats incumbent providers now face.'
The report, The Hundred Year Storm: Wireless Disruption in Telecommunications, is available at www.deloitte.com/research/tmt.
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