Times are tough all over. But, in an effort to see where “bright spots” still exist for service providers, xchange recently did a series of interviews with various luminaries. Below is a Q&A based on an interview xchange Editor in Chief Paula Bernier did last week with analyst Tom Nolle of CIMI Corp. While very short on bright spots, Nolle had no shortage of opinions.
Paula: In an effort to spread holiday cheer and help service providers identify opportunities for the year ahead, I’m looking for guidance on what opportunities remain for service providers despite the grim economy. Your thoughts?
Tom: “The service providers I talk with, which is pretty much all the big ones, their focus has pretty much moved away from killer services and they’re now less service-focused than what I’ll called ecosystem-focused. The thing I’ve seen, the big transition in the last six months, has been the notion of what the GSMA calls third-party access, which is that the service providers are kind of taking an iPhone-ish look at the future service market. They’re saying that if revenues are going to be generated increasingly by consumer services and by innovative services, then we have to focus on creating an ecosystem where third parties will build those services rather than trying to build them ourselves.”
Paula: So what can service providers do to position themselves to grow their businesses in light of this new model, this ecosystem?
Tom: “They’ve sort of got to forget about bits. There’s very little opportunity to make incremental revenue from selling connection and transport because revenue per bit has declined by 50 percent per year for the last five years, and there’s no indication that’s going to stop happening. So as revenue per bit drops, then even the difference between what some call thin fits and fat bits — or QoS-oriented vs. non-QoS-oriented bits — wash out, because the difference between zero and one-one-hundredth of a cent is still only one-one-hundredth of a cent. So, realistically speaking, most operators have determined, I think, that premium bandwidth is something you could probably incorporate in a higher-level service framework, but if you don’t know what that framework is, there’s not much value in worrying how you’re going to create it.”
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