Sometimes, macro trends don’t just continue – they accelerate.
That is just what is happening Stateside, where support for the insatiable demand for wireless data dominates business development and capital expenditure, while wholesale TDM voice revenues are on track to be more than halved by 2018.
Wholesale TDM voice revenues plummet
According to brand new projections from US Telecom Wired and Wireless Sizing and Share: 2013-2018 – the 19th edition of ATLANTIC-ACM’s annual market trends and opportunities study – the total market for wholesale TDM voice revenues in 2018 will drop below $5 billion, representing just 3% of the total US wireline market.
To give you an idea as to the rate of decline, in 2012 it was almost $11 billion at 6% of wireline, and in 2005 it was $26.6 billion and over 13%.
While TDM-to-VoIP migration is a longstanding trend, the Federal Communications Commission’s (FCC’s) Intercarrier Compensation Reform Order (ICRO) adds new, stricter regulations specifically geared to incentivise carriers to build up IP network capabilities and coverage.
This moves the wholesale voice market from facing a double threat to a triple threat – adding regulatory-driven shrinkage to the consistent pressures of technology migration and end-user substitution and adoption trends.
Price compression, on-net migration pressure wholesale data revenues
Despite rapid growth in end-user bandwidth needs, price pressure and revenue mix will drive wholesale transport (local + LD) revenues to remain relatively flat through the forecast period, with a compound annual growth of 0.6% from 2012 to 2018.
As carriers migrate from DS1/DS3 circuits to Ethernet connections at business end-offices and at cell sites – a trend compounded by the growth of Ethernet-over-Copper options for access sold to CLECs – price per unit (meg) of transport will significantly decline. Additionally, heavy competition for transport between major data centres and co-location sites will pressure revenues across massive traffic streams.
Wireless data dominates backhaul spending
Even though wireless backhaul in support of exploding retail wireless data demand has been the focal point for wireline wholesale growth opportunities over the past few years, the majority of wireless sites still lack fibre connections and Ethernet backhaul. T-Mobile and Sprint, for example, are still in the early stages of their 4G LTE roll-outs, while in many high-traffic sites, wireless carriers are circling back for additional upgrades in an effort to keep pace with demand.
These factors signal significant ongoing growth opportunities for telcos, as well as cablecos. For their part, cable players are focusing heavily on Ethernet for wireless backhaul and will capture more share as build-outs continue. ATLANTIC-ACM notes, however, that wireless carriers facing steep capex will target cost-saving alternatives, such as dark fibre, and could potentially turn to competitive offers from regional, fibre-only providers.
In a market crowded with diverse competitors and demanding customers, service providers countrywide need to focus their dollars on strategic services. For their legacy services, winners will opt for profitability in place of revenue growth.
As ATLANTIC-ACM’s Report Card Series has repeatedly shown, successful providers will be those who meet and exceed customer expectations for strong network performance and have a proactive sales team. To those seeking revenue growth in the wholesale US telecoms space, demand exists, but so does competition. The key to growth lies in differentiating and staying hungry.
