The Brain Gain Boxing out commoditization with a platform position Most, if not all telecommunications companies have felt the effects of commoditization as well as the But the time looming threat of the more nimble, digital disruptor. Despite the havoc, the post-COVID world has opened up a window of opportunity for the Communications to act is short. Service Provider (CSP), directly tied to connecting and monetizing value chains in an era of edge computing and platform ecosystems. The time to move is now.
The Brain Gain: Boxing out commoditization with a platform position 2 The threat of commoditization looms large for CSPs
The traditional business of CSPs has hit the wall. Investors have noticed, resulting in lower trading multiples Established CSPs around the world have seen their core (Price to Earnings ratio) for CSPs compared with disruptors offering—business-to-consumer (B2C) and business- and other infrastructure-based companies. CSPs today trade to-business (B2B) connectivity—remain stuck in a at a P/E ratio of 10 to 15, a far cry from the 100 to 150 that modern period of stalled growth for years, even as demand for infrastructure-based companies enjoy. And, their current business bandwidth and digital services has never been higher. model continues to require significant capital investments to keep pace with market expectations, putting a lot of pressure on CSPs’ CSPs face challenges from all sides of their business. ARPU cash position and ability to innovate. (Price to Earnings or P/E ratio) has tanked, falling 28 percent globally in the past decade, and growth is flat (Figure 1)—while Making matters worse, disruptors are upending the value chain the costs to acquire new customers continue to climb. At the itself. These aggressive competitors are taking advantage of a same time, stiff competition in B2B and B2C services and modern cloud-based, agile technology stack, along with an innate offerings from Amazon, Microsoft, and Google have made ability to subsidize their products, to gain market share at scale it difficult for CSPs to break out of their “connectivity and build lasting, high-value customer relationships through wholesaler” box. continuous product, process, and ecosystem-driven innovation.
The Brain Gain: Boxing out commoditization with a platform position 3 Figure 1: The commoditization of CSPs Mobile ARPU -28 percent 2010–2019. Revenue growth 2.8 percent CAGR 2014–2019