With Telcos in Need of New Revenue Streams, the Transition Towards an Ecosystem Service Provider Presents a Potential Solution

When people typically think of telecommunications companies or telcos, most would assume that these entities will stand the test of time. After all, communication has become an indispensable part of our society, with western markets experiencing more than a hundred-fold increase in data traffic. However, the reality is that telcos are about to come to a significant crossroads in their history. For context, 2019 marked the third consecutive year that telecom companies had declining revenue. Gray Kim, a renowned telecom analyst, noted that telco firms need to replace about half of their revenue every ten years, and 5G will not be the solution to their dipping net revenue. Income will need to come from elsewhere.

Regulatory measures including the blocking of mergers, mandatory decreases in wholesale prices and the elimination of roaming charges have had a negative impact on revenue growth. Similarly, overcapacity, in the form of supply growing faster than demand, played a role in stymieing the revenue gains of telcos. Likewise, market disruption from challenger operators and over-the-top (OTT) services drove prices down. Telcos feel these factors across the western world, Europe in particular.

Faced with perpetually declining topline revenue, industry experts posit that telcos must find a way to innovate and develop new revenue streams. Namely, telcos' Rubicon will be the evolution from communication service providers (CSPs) to ecosystem service providers (ESPs). Many believe that this evolution is the natural next step for telcos to take worldwide – particularly as countries and governments begin to look at pressing societal issues, such as safety, traffic, and energy efficiency, through a more systems-thinking mindset.

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