Telcos Realizing Markets Don't Just Grow Forever

from the maturing-markets dept

Mon, Feb 4th 2008 8:39pm — Mike Masnick

It's always interesting to see stories worrying about high growth markets maturing. When a market is growing rapidly, there are always those who believe they'll grow forever. But markets mature and run out of growth potential. The telco industry is now coming to terms with that, as 80% of Americans have mobile phones, and 79% of homes with computers have broadband access. At that point, it's no surprise that telcos might not have the same growth opportunities as before, and might start scrambling to try to find new avenues for growth. That's why you see both Verizon and AT&T pushing into the television market, while poking around in some other areas as well. It's also why Sprint needs to kiss and make up with Clearwire, and get a nationwide WiMax system up and running. Also, start expecting to see attempts to create more innovative uses of the telecom systems already in place, such as non-phone equipment making use of mobile networks (the Kindle was just the beginning). Either way, the scramble is now on for telcos who are used to growing at a certain pace to start aggressively seeking new avenues for growth. While that's happening, don't be surprised to see more aggressive attempts to poach customers from each other as well. That's going to be good for customers, as it's likely to force the various telcos to become more open as a way of attracting more customers by doing more than just dropping prices. No matter what happens, the telco industry recognizes that it needs to change and change quickly if it wants to keep up some form of growth.

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Filed Under: competition, growth, mature markets, telcos
Companies: at&t, sprint, verizon

18 Comments

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Amanda, 4 Feb 2008 @ 9:00pm

Losses
IBM recently fired 700 employees right after they decided the asian markets are growing and thats where they need to be.

http://www.techbanyan.com/archives/146

How does that factor into all this.
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bunnyRoy, 4 Feb 2008 @ 10:22pm

It's not about aquiring new markets
I don't see the focus being in new markets as the primary focus. I believe it's going to come down to litigate over innovate. By tightening the legal stranglehold they currently have, they will have greater power to upspin the same old product crippled and cheaper. Which is cheaper a team of lawyers or a group of R&D specialists?
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Bob, 5 Feb 2008 @ 1:52am

Can We Go Back to the Year I Made Money From Long
It was a good year 1996 Sprint, MCI, AT&T all sent me checks to go with their long distance service, if you exclude the basic phone service from the mix, I made money from the telco's that year.

Can we do that again?
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Twinrova, 5 Feb 2008 @ 3:47am

Telcos growth = consumers getting screwed
It bothers me when this article states "That's going to be good for customers, as it's likely to force the various telcos to become more open as a way of attracting more customers by doing more than just dropping prices." when this is CLEARLY not the case.

Verizon's growth has exploded over the last 5 years, to say the least. The first thing Verizon did was to drop a very respectable family plan ($39.99/mo + $5 for each phone) and raised its base rate to $69.99.

The moment these telcos start expanding into other arenas is doom for consumers. These companies won't be innovative as much as restrictive. After all, when was the last time a Sprint customer could use Verizon's features, and vice versa.

Have you ever thought to yourself, "Gee, I wish my service provider did this."? If so, then you'll see where the future of telco "growth" will lead.

Proprietary. DRM encoded for use on 1 device. Over priced.

But hey, isn't that what capitalism's all about?
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Ferin, 5 Feb 2008 @ 4:54am

Okay, here's something I don't get
Maybe somebody with an econ background can explain something to me. Why is growth such a big thing? The telcos are huge, well established companies, with possibly billions of dollars in reserve. They make tidy profits most quarters. So why is it they can't just sit at that level making a profit and have everyone be happy? Why does every company in the market, even ones that are comfortably well off, have to constantly grow to be considered successful?
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comboman, 5 Feb 2008 @ 5:14am

Obligatory Simpsons Quote
Did you know that disco record sales were up 400% for the year ending 1976? If these trends continue...ayyyyy!
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Todd Henkel, 5 Feb 2008 @ 5:25am

Re: Can We Go Back to the Year I Made Money From L
We can't go back...

The telcos were simply trying to buy customers. It was due to lack of differentiation. Once one carrier started it, all the others had to follow giving away $25, then $50, then $100 and so on.

It was odd working there at the time seeing people with long distance bills the same as mine with multiple "checks" that added up to more than I made. It was obvious it could not last.

At least long distance now is unlimited. Yours is now right? Right?
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Overcast, 5 Feb 2008 @ 5:25am

You know - in general I don't think business understands that. All you ever hear about is how Company X was *expecting* x% growth this year - and it laying people off because it didn't meet that goal..

Don't think it's just Telco's
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Anonymous Coward, 5 Feb 2008 @ 5:50am

Might start scrambling?

Do you know how long Verizon has been working on laying fiber? Do you think that happens on a dime? You think they just woke up and said "hey, lets spend $24 billion tomorrow?"

Technology really isn't the issue, business plans really are not the issue. Usually, executives know what needs to be done, but quite a few large companies just can't do what they need to do because they can't get their people to buy into the plan. People are always always always the biggest challenge.
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Wes, 5 Feb 2008 @ 6:03am

Opportuinites
I was thinking about this the other day and I came to an interesting conclusion. Telcos are too busy looking at the consumer market (i.e. how many handsets they can get in the hands of business and pepople)

It occured to me that there are many other applications that the cellular networks could easily be tweaked to pass updated data to all sorts of things. Instead of looking at their network as person to person communications, why not add the machine to machine element? I was driving by a bus station and saw the old outdated bus schedule and was thinking to myself, why not use the cellular coverage network to update the bus schedule for passengers in real time? This may not be the best example, but the point is these networks can be tweaked to deliver all sorts of real time messages and other data.

Opportunities like this exist all over the place, this was just my first thought, I'd say imagination is the only limitation on this one.
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Steve R. (profile), 5 Feb 2008 @ 6:06am

Endemic Industry Wide Problem
Market limits is an issue most companies "refuse" to acknowledge. The market is ultimately limited by our population. Within that population limitation, you can only sell so many copies of Quicken, MS Office, Norton anti-virus etc. Since these companies, as well as others, refuse to accept market limits they churn their products to force consumers to "upgrade".

Companies, as they reach marketing limits, should adjust their business model to recognize that their core products are in "maintenance mode" rather than a growth mode. Maybe all those little irritating bugs (err features) would finally get fixed. Unfortunately, the mantra of all these companies is growth, growth, growth, ever more growth.
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Anonymous Coward, 5 Feb 2008 @ 6:17am

Steve, are those "upgrades" not maintenance of the core product?

On Wall Street, if you are not growing, you are dying.
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Brian, 5 Feb 2008 @ 7:04am

Here's an idea
How about the telcos expand their broadband services into areas that don't have it? So people like my friends that live in the so called boonies, who are more than willing to give the telcos their money, can have broadband?
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Steve R. (profile), 5 Feb 2008 @ 7:35am

Even Growth Can Cause Death
To paraphrase Bill, it's how we define "upgrade".

Unfortunately "On Wall Street, if you are not growing, you are dying." is quite true. Admittedly, if you grow your company to match the market and you are in "maintenance" mode, you will have a smaller company. It's unfortunate that this is considered "bad" and Un-American.

One example of what is wrong, with the growth at any cost mentality, is the proposed acquisition of Yahoo by Microsoft. Acquiring Yahoo will not solve Microsoft's problems with its core product lines. In fact it will be a "detractor" since the management focus and corporate resources will now be devoted to "integration". (Of course, there is nothing conceptually wrong with a corporation re-envisioning itself.)

Time will tell, but this acquisition may be a repeat of the failed Time-Warner/AOL merger.
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Anonymous Coward, 5 Feb 2008 @ 8:08am

Don't fall into the rut of believing that mergers fail. You say that the Time-Warner/AOL merger failed, but how do you know? How did AOL turn out by not merging with Time Warner? You can't know that.

Mergers typically are not done from a position of strength. Where is Microsoft going? Where is Yahoo going? Both are facing tough times.
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Danny, 5 Feb 2008 @ 12:23pm

Re: Okay, here's something I don't get
I can answer that in one word: greed. Companies are always looking for ways to make money while doing as little as possible. Notice how businesses are going copyright/trademark/patent crazy and getting deals where they can be the only _______ carrier/service in the area. This allows them to make money with less work and less growth (and how much effort are you going to put into maintaining your infrastructure if you are the only choice in the area?). And cell phones are a good example.

In my area (which you can call the boondocks) the only cell phone carrier is US Cellular. Due to the lock they have in my area (and others like it) they don't have to worry about expanding into areas where there would be *gasp* competition. Cell phones now have become a very popluar want and in many cases an actual need so if you are literally the only game in town why bother going to another town where you would have to actually work to draw in customers? Look at broadband internet penetration and you'll see the same thing.
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Kobe Wadsworth, 8 Feb 2008 @ 8:57am

Telcos consumer friendly Airmaxed working on free
Airmaxed has created a way to deliver free voip phone service to end users. But don't worry service providers this looks good for everyone. It's truly a win win. Except for telcos who may not appreciate the concept favorably. At Airmaxed we are driven to innovate with the consumer in mind.
Kobe Wadsworth Airmaxed
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John, 9 Feb 2008 @ 8:38am

Re: Opportuinites
There are opportunities for things like this however there are a pair of problems with it.

The first one is the cost of sending data out via the cellular networks. North American telcos want a large chunk of money for that, you know. And then there's the fact that each cellular network has different transmission protocols which drive customers crazy so they just don't.

We won't see uses like you suggest until the telcos in North America are forces to switch to GSM as Europe and the rest of the world already have and transferring from one service provider to another is made both easier and transparent.

Oh yes, and far more secure than it is now.

ttfn

John
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