"Over-simplistic" analysis of the mobile service provider, or fixed-line business, is easy to understand. It's a complicated business in many ways, and complicated stories are hard to tell. "Rich service providers gouging customers" is a vastly-easier storyline than many others.
Chetan Sharma (News - Alert), an independent analyst, estimates that U.S. carriers will generate about $165 billion in revenues in 2010. Of the total, nearly $55 billion will come from sales of data services alone. That factoid, taken in isolation, can be used to argue that mobile service providers are making way more money from their capital investments than might be justified, or at least that such investments prove the business is sound, since carriers invest about $30 billion to $50 billion annually.
Others might argue that mobile data demand is growing so rapidly that operators are struggling just to keep up. But the revenue and investment story is not so simple. Mobile data demand is growing, mobile data revenue is growing, and the need for investment is growing. But the overall business includes other trends of even-greater magnitude. Growth is slowing, average revenue per user is declining and voice revenues, which have been the mainstay of the fixed and mobile business, are not going to be the revenue drivers in the future.
No static or simple analysis can account for all of those trends. No matter how profitable carriers are, the stability of existing revenue streams is in great question. The challenge is better understood if one assumes mobile service providers will have to replace the bulk (perhaps as much as 80 percent) of current voice revenues over time.
The storyline then becomes something a bit more like that of the U.S. steel, U.S. textile and U.S. auto industries, or perhaps Netflix or even Apple (News 
- Alert). In the case of steel, textiles and most likely autos, the industries could not reinvent themselves as providers of new services or products.
Netflix arguably is about to do so, and Apple has done so with some regularity. Static revenue analysis does not tell us very much when large industries are changing in fundamental ways. Arguing that mobile service providers are doing quite well is like arguing Netflix will do fine renting DVDs, Apple will do fine selling Macintosh computers, and steel mills, textile mills and auto plants are doing well and "not to worry."
Firms such as Netflix, Apple and mobile service providers do have to worry, because the products what got them to where they are will not keep them there. All of those sorts of businesses must assume that, over time, 80 percent of current revenue must be replaced by new sources.
That's a very different sort of business problem than faced by firms that can assume stable demand, stable pricing and low competition over a decade or so.
Though nobody would agree that the comparison is completely identical, it might be mostly correct to argue that voice services are a bit of a "sunset" industry or segment, while "broadband" and "mobile" remain "sunrise" industries or segments, in terms of core revenue. Core value or core functionality is a different question.
We can assume that the value of a mobile device and service will increasingly be based upon its ability to support many key apps, including voice, video, music, Web, texting and mobile applications. In that case, the value of being able to talk and text might not be fully reflected in the overall cost of using the services. But a mobile "phone" that can't handle voice is an iPod.
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by
Tammy Wolf
