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Bandwidth to Entertainment

Communication Service Providers (CSPs) are going through significant change, from just bandwidth providers to entertainment providers and cloud providers. With advancement of technology and wireless connectivity widely adopted, these players are seeing a huge shift in their business. They are key backbone providers for not just voice, data and entertainment, but for Internet of Things and machine-to-machine communications. They are key enablers of cloud, mobility & social networks, which are an integral part of life today.

The key trend observed with these providers is not surprising. As enablers, they do not get the major piece of the pie – i.e., they can be seen as “just the pipe.” Take the example of Netflix, which adopted video streaming and revolutionized the industry. Internet providers gained very little while building the infrastructure on which Netflix exists. Communications companies are seen as the “dumb pipe” that can be replaced easily. Hence, these companies are moving toward providing platforms, which can enable and run the applications in addition to providing bandwidth. This shift not only makes them sticky but puts them right in the middle of the business case, thereby increasing their ARPU.

On the other side, the CSP business is seriously threatened by the Googles, Apples and Amazons of the world today. As these players have established their eco-system very effectively, they see major revenues by providing the last mile of connectivity to their products and services. Imagine Google becoming the wireless provider while integrating connected cars and homes. Or Apple providing wireless plans, worldwide roaming and data to its 300M+ users. The traditional CSPs like AT&T, Verizon and Sprint will lose the foothold and be pushed out of the market.

Interesting times for the Communication Service Providers.

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