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Operators face data cost-revenue crunch in 2017 – report

crossroads confusion

Veteran telecoms industry analyst Tom Nolle reckons this is the year the cost of delivering data becomes greater than the revenues derived from doing so, according to a Light Reading report.

This bleak assessment is the result of a survey of 47 operators around the world, in which the vast majority saw their revenues-per-bit falling below their cost-per-bit at some point in 2017.

The central problem is that, while data consumption continues to increase exponentially, thanks largely to video, the charging model, especially for fixed-line, is usually unmetered. That means cost-revenue convergence has been inevitable for some time, and that time is now upon us.

Since the genie is already out of the bottle regarding consumption, operators urgently need to address the classic dilemma faced by any company looking to improve its profitability: increase revenues or reduce overheads. The latter is the easiest and quickest to do, and so is usually the first option explored, which in this case is bad news for telecoms vendors.

“With operators facing this kind of cost-revenue convergence, the first and easiest answer is to spend less on infrastructure, because no one is going to hemorrhage money, what they are going to do is they are going to spend less,” Nolle told Light Reading.

In his 2017 predictions blog, Nolle looks at the other main cost-saving measure currently being explored – greater efficiency via cloud technologies such as NFV and SDN, but concludes the savings they offer are too little, too late to have a significant effect this year and a more general focus on software automation will result.

On the revenue side Nolle points to the pro-OTT bias of regulators as an issue that needs resolving, to allow operators to monetise their traffic more creatively. The issue of net neutrality constrains network operators from things like premium pricing tiers, bespoke services, etc and a regulatory rethink might reduce the pressure to reduce overheads.

On the whole Nolle anticipates less spending from operators in 2017 and as a consequence a tough year for vendors, which have already started making portentous announcements. This could be the year when necessity brings about the kind of fundamental change from both operators and kit vendors that most commentators agree has been needed for some time.

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