Introduction to the Telecommunications Industry

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, as well as the software and hardware that enable these fields. Telecom is also deeply intertwined with the delivery of content and entertainment of all types. Cable TV systems, such as Comcast, have long been 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 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 hardware, software, services and networks that make up the global information and telecommunications system. Sectors considered to be ICT include landlines, private networks, the internet, wireless communications, (including subscriber fees) and satellites. ICT is also generally considered to include cloud computing, computers and software. Globally, in the broadest possible sense, ICT was expected by Plunkett Research to grow to $7.4 trillion by 2023.

Telecommunications remains one of the major providers of employment in the world, with 646,400 employees in the U.S. alone as of 2023, and that number reflects only jobs in pure telecommunications service sectors.

There were approximately 7.0 billion wireless broadband internet subscriptions worldwide as of 2023, according to the International Telecommunications Union (ITU). In addition, the ITU estimated another 1.5 billion fixed broadband internet access subscriptions. However, the actual number of individuals holding those subscriptions is somewhat less, as many people have more than one device. Experts at Cisco, with their Cisco Visual Networking Index, estimated that by 2023, the global number of internet-connected mobile devices would reach 3.6 per capita (nearly 28.5 billion devices).

Wireless service providers have set 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 at very low cost. These low-cost handsets tend to be popular in very low-income areas, such as parts of sub-Saharan Africa. Smartphones are more expensive, but reasonably good smartphones that are internet-capable are available on the market at modest prices.

The International Telecommunication Union (ITU) estimates global landlines at 861 million as of 2023, compared to 915 million as of 2019 and 1.21 billion in 2009. This is only about 10 landlines per 100 global population. Clearly, the worldwide boom in telecommunications is in wireless subscriptions and internet-based services—not in traditional landlines, which are steadily declining in popularity.

Several major factors are creating deep changes in the telecommunications sector today, including: a) growth in business and commercial telephony (including video conferencing such as Zoom and Teams, as well as “unified communications” systems) and VOIP (Voice Over Internet Protocol) services, that is, telephony via the internet; b) a shift in residential and personal telephone use from landline services to wireless; c) intense competition between wireless, cable, satellite 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, much more cost-effective satellites, including small, efficient low-Earth orbit (LEO) satellites f) rapid growth in machine-to-machine (M2M) communications (enabling the Internet of Things); g) the continuing evolution of advanced wireless technologies, including more powerful smartphones and high-speed 5G services; and h) the adoption of artificial intelligence (AI) tools and capabilities in smartphones. Simply put, a vast number of telecommunications service users prefer to make their phone calls, download data, view entertainment and otherwise access the internet via smartphones or Wi-Fi enabled laptops, 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, such as AI, to smartphones on a regular basis. These phones now contain significant computing power and memory, to the extent that today’s smartphones have vast computer processing power, at a fraction of the size and weight of a PC. Improved cellphone service continues to prompt 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 lead the VOIP market, such as Skype (a Microsoft subsidiary), Zoom, WhatsApp, Webex, Google Voice and Microsoft Teams. Savvy consumers realize that some VOIP services are essentially free, such as local and international calls between Viber users, (Viber is owned by Japan’s Rakuten).

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 directly into the home and office, in order to retain customers with promises of ultra-high-speed internet connections and enhanced entertainment offerings online. If mobile phone owners are dropping their landlines, while VOIP grabs market share with business landline customers, then the best weapon that traditional telcos can use in their battle for market share is to offer very high-speed internet. Many telecom companies are focusing on bundled service packages (combining services such as wireless accounts, high-speed internet access and TV).

AT&T took a significant strategic step in mid-2015 by completing its acquisition of satellite TV firm DIRECTV for $48.5 billion. However, in 2021, AT&T spun-off its TV subscription businesses (DIRECTV, AT&T TV and U-Verse) into a joint-venture with private equity firm TPG Capital.

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 businesses. However, by May 2021, AT&T announced plans to spin off its media assets and merge them with Discovery, Inc. in a $43 billion deal. The spin off was completed in April 2022, with the newly named Warner Bros. Discovery, Inc. owning the Discovery Channel, Warner Bros. Entertainment, CNN, HBO, Cartoon Network, Discovery+ and HBO Max and major franchises including Batman and Harry Potter.

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