Myth #4: Carriers are holding back the future.

Click on downloads on the upper right to get all 10 myths.

 Myth

Carriers don’t want to invest in new technologies or in expanding their network. They simply want to ”harvest” returns from existing customers and infrastructure installed decades ago.

Where this notion comes from

New York Times Journalist David Carr wrote an article called “Telecom’s Big Players Hold Back the Future”, an interview with Susan Crawford.

 Facts

  • American carriers make up one quarter of the world’s internet infrastructure investment (Infonetics).
  • America leads the world in the adoption of 4G/LTE mobile broadband  (FCC).
  • American carriers made the largest fiber buy in 2011, some 18 million miles of fiber optic cable.  In the last few years American firms bought more fiber optic cable than all of Europe combined.[1]

 Analysis

Cable companies only used to sell pay TV.  The innovation called DOCSIS (data over cable service interface specification) allowed cable TV providers to turn themselves into broadband players.  In addition to TV, they offer broadband internet and voice/telephone services. They could only compete if they didn’t upgrade their network.  Furthermore the DSL provider now has to offer you TV to stay competitive with the cable company.

“We’re expecting a telecom capex hike in 2012 as operators around the world ramp their spending like crazy to launch LTE networks, modernize their mobile networks, and carry out national wire line broadband initiatives,” notes Stéphane Téral, principal analyst for infrastructure at Infonetics Research.

In addition to network upgrades, carriers bring the future in the important ways that ensure that consumers adopt the new technology.  These things include

  1. Free and reduced priced equipment, such as set top boxes, as part of cable packages
  2. Free delivery to content providers.  The business models of websites on the internet are predicated on free delivery of their content to end users.  Having to pay for content delivery would cripple Google and Netflix.
  3. Free and reduced price handsets.  The iPhone would have never become the success if carriers offered the phone at full price.

Data

  • “Service Provider Capex, Revenue, and Capex by Equipment Type Biannual Worldwide and Regional Market Size and Forecasts: 1st Edition”. Infonetics Research, 2012.

Reality

American carriers are in a race to for the future by upgrading their networks.



[1] CRU International Ltd, CRU Monitor: Optical Fibre and Fibre Optic Cable (London, September 2012), http://www.crugroup.com.