Telecommunications Industry Market Research

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Telecommunications OVERVIEW

No other industry touches as many technology-related business sectors as telecommunications, which, by definition, encompasses not only the traditional areas of local and long-distance telephone service, but also advanced technology-based services including wireless communications, the internet, fiber-optics and satellites.
     Telecom is also deeply intertwined with entertainment of all types.
     Cable TV systems, such as Comcast, are aggressively offering local telephone service and high-speed internet access.
     The relationship between the telecom and cable sectors has become even more complex as traditional telecommunications firms such as AT&T are selling television via the internet, and competing directly against cable for consumers' entertainment dollars. Consequently, the various organizations that monitor the global telecommunications industry have their own ways of estimating total revenues, and their own thoughts on including, or not including, specific business sectors.
     Does “telecom” include equipment manufacturing and certain types of consulting? Or, should it be considered as services only, such as subscriber lines and data networks? Information and Communication Technologies (ICT) is a term that is used to help describe the relationship between the myriad types of goods, services and networks that make up the global information and telecommunications system.
     Sectors involved in ICT include landlines, private networks, the internet, wireless communications, (including cellular and remote wireless sensors) and satellites. Globally, in the broadest possible sense (based on ICT), the telecommunications industry is expected to grow to about a $6.5 trillion sector

¹ Video Tip

For our brief video introduction to the Telecommunications industry, see www.plunkettresearch.com/video/telecommunications.

Consequently, the various organizations that monitor the global telecommunications industry have their own ways of estimating total revenues, and their own thoughts on including, or not including, specific business sectors. Does “telecom” include equipment manufacturing and certain types of consulting? Or, should it be considered as services only, such as subscriber lines and data networks?

Information and Communication Technologies (ICT) is a term that is used to help describe the relationship between the myriad types of goods, services and networks that make up the global information and telecommunications system. Sectors involved in ICT include landlines, private networks, the internet, wireless communications, (including cellular and remote wireless sensors) and satellites.

Globally, in the broadest possible sense (based on ICT), the telecommunications industry is expected to grow to about a $6.5 trillion sector in 2018. (This figure includes equipment and related services, as well as subscriber revenues and other business revenues.) The United States market is expected to grow to $1.8 trillion by 2020. These estimates come from the Telecommunications Industry Association (TIA). Telecommunications remains one of the major providers of employment in the world, with 694,000 employees in the U.S. alone as of mid-2020, and that number reflects only jobs in pure telecommunications service sectors.

There were approximately 8.2 billion wireless service subscriptions worldwide as of 2019, This is immense growth from about 4 billion at the end of 2008 and 1.41 billion in 2003. However, the actual number of individuals holding those subscriptions is somewhat less, as many people have more than one subscription.

Experts at Cisco, with their Cisco Visual Networking Index, estimate that by 2022, the global number of internet-connected mobile devices will reach 3.6 per capita (nearly 28.5 billion devices).

Wireless service providers have set service prices low enough to be affordable for vast numbers of people, even in very low-income nations. Inexpensive cellphones are now indispensable to consumers from Haiti to Africa to New Guinea. Simple handsets can be bought for as little as $20 in such markets, and they can be topped-off with a segment of prepaid minutes for as little as 50 cents. Smartphones are more expensive, but good smartphones that are internet-capable are on the market at modest prices.

The International Telecommunication Union (ITU) estimates global landlines at 934 million as of 2019, down from 1.21 billion in 2009. This is only 12.4 landlines per 100 global population. Clearly, the worldwide boom in telecommunications is in wireless subscriptions and internet access—not in old-fashioned landlines.

Several major factors are creating deep changes in the telecommunications sector today, including: a) a shift in business and commercial telephones to VOIP (Voice Over Internet Protocol) services, that is, telephone via the internet; b) a shift in residential and personal telephone use from landline services to wireless; c) intense competition between cable and wired services providers; d) soaring growth in the amount of data and video accessed via the internet and over wireless devices for information and entertainment, especially video; the e) introduction of advanced, more cost-effective satellites, f) rapid growth in machine-to-machine communications (the Internet of Things) and g) the continuing evolution of advanced wireless technologies, including more powerful smartphones and upcoming introduction of ultra-high-speed 5G services. Simply put, a growing number of telecommunications service users prefer to make their phone calls, download data, view entertainment and otherwise access the internet via smartphones, not fixed telephones or PCs plugged into the wall.

Ingenuity, innovation, cost control, mergers between large companies and a reasonable approach to spending and investment will help to move the telecom industry ahead while it goes through these evolutionary changes. New technologies promise continuous advancement. The cost of a cellphone call has become a bargain worldwide. Meanwhile, competition among handset makers is more intense than ever. On the higher end, manufacturers are adding advanced new features to smartphones on a regular basis. These phones now contain significant computing power and memory, to the extent that today’s smartphones easily have more computer processing power than a PC of 15 years ago, at a fraction of the size and weight of a PC. Improved cellphone service has prompted tens of millions of consumers to cancel their landlines altogether, eating into traditional revenue streams at AT&T and Verizon, among others.

As more consumers recognize the promise, and good value, of phone service using VOIP, millions of households and businesses worldwide have signed up for this less-expensive service as an alternative to landlines, often through their cable providers as part of a bundle of services. A handful of firms, such as Comcast, lead the VOIP market, along with relatively young companies like Skype (acquired by Microsoft in 2011) and Vonage. Savvy consumers realize that some VOIP services are free, such as certain international calls on Skype or Viber.

At the same time, local phone companies, led by Verizon and AT&T, as well as some cable companies, are laying fiber-optic cable directly to the neighborhood, and even into the home and office, in order to retain customers with promises of ultra-high-speed internet connections and enhanced entertainment offerings online. If cellphone owners are dropping their landlines, while VOIP over cable takes even more landline customers away, then the best weapon that traditional telcos can use in their battle for market share is very high-speed internet. AT&T and its peers are focusing on bundled service packages (combining wireless accounts, very high-speed internet access and TV, in addition to VOIP or landlines).

AT&T took a significant strategic step in mid-2015 by completing its acquisition of satellite TV firm DIRECTV for $48.5 billion. This will turn AT&T into America’s largest TV distributor. In June 2018, AT&T completed a massive acquisition of Time Warner, Inc., adding such entertainment content as HBO, Warner Bros. and Turner to AT&T’s business. AT&T clearly has the opportunity to offer compelling service bundles, including wireless subscriptions, to its customers.

Telephone giant Verizon completed a strategic acquisition of AOL in 2015, largely to acquire AOL’s superb online advertising technologies. In mid-2017, Verizon acquired Yahoo!’s online businesses, also to boost Verizon’s advertising capabilities.

In addition, government regulations are evolving quickly, which will bring even bigger changes to business strategies. In Europe, and to some extent in the U.S., regulators want much greater control over the practices of internet carriers. Overall, the telecommunications industry is in a state of continuous technological and economic flux driven by intense competition and new technologies.