With most of 2Q17 results out, the topline revenue picture for service providers is improving. We expect the industry to grow by 2% this year – its best performance in five years. While this is a positive development, our outlook over the next five years is rather more downbeat.
Ovum's forecasts show that over the next five years, while the communications industry will add 1.75 billion of new network connections and usage grows by an extraordinary 235%, revenues will only grow by 7.5%. The drivers for this dramatic growth in the demand for connectivity are of a new order as consumers and enterprise connect a plethora of "things." This period heralds a new digital economy, with a vast array of new personalized and automated services – changing the way we buy and sell services more than at any other time. However, unless the industry quickly adopts new strategies and business models to capitalize on these new services, it will be a small number of internet players who take advantage to the detriment of service providers, just as they already are with voice, video, and messaging. In fact, by 2021, in each of these categories a few internet players will account for more than 30% of market share globally.
The good news is that we forecast that the industry will grow by 2% in 2017 – its best performance since 2012. This growth has been found in two places: The first is continued growth in connectivity, in particular 4G; and the second is bundling TV into broadband packages. The industry added 76 million new bundled subscriptions last year. But, once again, there is no time to celebrate; our forecasts show that 2016 represents "peak bundle" and that this figure is set to fall to just 12 million new subscribers by 2021, showing that growth in the future is going to be harder to come by.
To keep growing in the mid-term the industry will need to find new revenues.
At Ovum, we see that the next wave of digital disruption will materially change how services are produced. This is because, as everyday objects are increasingly connected to the internet, the resulting vast network of sensors will gather data on more aspects of our lives and preferences. The new digital economy will, therefore, favor a potentially small group of enterprises that can harness this customer information.
This is why tomorrow's Fortune 500 companies will therefore not only be those with the best product design, but those with the richest customer data sets and systems.
This fall, Ovum is launching its new Forecaster data service, a single platform where you can find detailed global forecasts and historical data for the important trends impacting the digital economy.
Forecaster has been designed specifically to help players in the industry gain a full integrated view of the converging TMT market. For the first time, we are able to analyze and compare how the adoption of new technologies, IoT, and digital video are impacting forecasts for service provider revenues, subscriptions, and KPIs, all in one place.
As a service provider, Forecaster can help ygrowou put in place the strategies necessary to address services and technologies in decline, and identify in which services and markets we must invest in order to grow.
We work with companies which are addressing these consumer expectations daily, from detergent companies personalizing their products by analyzing your washing machine's cycles, to pharmaceutical companies who are customizing drugs based on the data gathered by internal body sensors called "internables." In homes with intelligent devices, companies such as Hive will monitor your home and will detect when your appliances are not performing in the way they should.
We believe that the consequences of these changes could see the traditional telco squeezed out of the home and the workplace, while on the other hand, for those that choose to play a new role addressing the needs of smarter consumers, it could be their making.
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US team - +1 646 957 8878
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