Fixed telecom providers facing cable competition have had for about a decade one basic strategic imperative. Knowing they will lose some amount of voice market share, they essentially must take some cable provider video share. The business case has some subtleties: the contenders have to trade equivalent-margin services, at similar average revenue per subscriber, at equivalent rates, or else make adjustments. 

 

If the requirement for upgrading plant from narrowband to broadband seems challenging if the goal is simply to trade market share, you have the picture correct. Assuming the only new services are broadband access and video, and that cable and telco competitors in a local market will essentially split market share for that service, the strategic upside for a fiber upgrade is to enable the “trading market share” strategy. 

 

Not all that much has changed over the last decade, in that regard. Some service providers have an easier time, notably those with significant national wireless assets. In that case growth of mobile revenues has been the single biggest contributor to revenue growth. 

 

And though global growth figures are illustrative for the global business overall, they sometimes obscure the fact that most mobile subscriber growth occurs in emerging markets, not the developed markets where mobile markets have reached near subscriber saturation, if not revenue saturation. 

 

TeleGeography (News - Alert) notes that, globally, wireless increasing by 15 percent during the year and broadband by 14 percent. but those are global cumulative growth rates, not the rates discrete providers in developed markets have seen. 

 

The largest 20 service providers, with heavy exposure to developed markets, grew aggregate revenue (not subscribers) by less than two percent, on average. 

 

Globally, by the end of 2011, the number of wireless subscribers will approach six billion, says TeleGeography. The larger point is that, according to the International Telecommunications Union, wireless broadband accounts already outnumber fixed broadband accounts, with a higher growth rate as well. 

 

For most of the last decade, fixed service providers have been trimming overhead, headcount and capital expenses in an attempt to maintain profit margins. But there is one salient fact. Lost revenues on the voice side have not been equally matched by gains from video and broadband access. 

 

If one were to characterize the process, consider even the fundamental business imperatives Verizon (News - Alert) executives now say they see. In the wireless business, the key objective is additional mobile broadband revenue, not subscriber growth or voice revenue growth.

 

In the landline business, the key objective is cost control, and that at a company which has made extensive investments in state-of-the-art fiber access and digital video. 

 

What that tells you is that the fixed network, even the fixed broadband network, is no longer a “growth” business, but rather a mature business where financial performance hinges on wringing more cost out of the business. 

 

Happy talk about revenue growth is disingenuous to some degree. For most providers, what must be done now, while new growth drivers are sought, is to wring more cost out of the fixed network business. That is not to say Verizon, and others, will not strive mightily to grow new revenues.

 

But the industry has been at this for a decade and has found that new revenue sources are not large enough to offset lost revenue from the declining voice business. This not a case of a “glass half full.” The glass is emptying.