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online services providers telco revenues

GSMA says Google, Facebook, others are squeezing telcos’ revenue

The global body of mobile network operators, GSM Association (GSMA), has said that online services providers such as Google, Facebook (Meta), and Netflix, among others, are generating more revenue from the internet at the expense of telecommunications operators who are investing in the infrastructure to provide access. online services providers telco revenues

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The GSMA, in its 2022 Internet Value Chain Report says the situation has created imbalances between network operators and online services providers, warning that this may put global growth prospects at risk across multiple sectors of the internet-based economy, if not addressed.

According to the telecoms body, its recent study shows that although the internet value chain is growing strongly, the benefits and returns are flowing principally to players in the online services segment, while the telecom operators are building and running the connectivity infrastructure which underpins these services are not benefitting as strongly as expected.

Commenting on the report, GSMA’s Chairman José María Álvarez-Pallete said: “The internet connects 4.6 billion people and drives the global economy. It is transforming business models, unlocking new opportunities, and uplifting communities across the world. 

“But as some sectors in the internet value chain thrive, the demands of investing in the infrastructure those sectors rely on for growth are squeezing network operators. We welcome the growing recognition of this issue by policymakers, and as the internet-based economy expands across all sectors over the next decade,” the Chairman added.

GSMA in the report urges business leaders and policymakers to fully appreciate the critical role of the internet infrastructure and work to ensure that market distortions, regulatory requirements, or other factors are not limiting the ability of participants to make sufficient returns in all segments of the ecosystem and that all segments can make a fair return.

This would sustain long-term investment and not just those businesses with the biggest platforms and scale. The telecom operators have an important role to play and need the right incentives to keep investing in networks, both in core network capacity and increase in edge functionality,” the body stated.

Other findings of the study online services providers telco revenues

  • GSMA says the study also finds that revenues across the internet value chain nearly doubled in five years, from $3.3 trillion in 2015 to $6.7 trillion in 2020. Much of this growth comes from online services; they saw a 19% increase in revenue per annum in 2020.
  • Paid-for online services will soon exceed $1trillion in revenues, driving huge capacity demand on global networks. With an annual growth rate of 7.5%, the number of users being connected to the internet globally shows no sign of slowing.
  • Traffic per user grew at 27% per year, with almost 80% of that being driven by video traffic.

Conclusions

Overall, the internet value chain continues to grow at a steady 15% per year and shows no sign of slowing down. There is no shortage of developments, innovation and expansion into new areas of technology that will enable and
also drive the continued shift of activities that used to be offline into an online format, whether that is in the form of cloud-based business services and processes for enterprises or by the acceleration of consumer behavioural shift
towards online, which results in an increased share of time and money spent online. As innovation moves into entirely new segments and platforms, most notably metaverse-type developments, future developments may be less
about the next big service, and rather about the emergence of entirely new, parallel ecosystems.

In the enterprise space, as ever more businesscritical assets and activities are migrated to publiccloud-based infrastructure, the fabric of the internet becomes increasingly integral to the daily operation of enterprises and economies, as the almost instant transition to remote working during the pandemic highlighted.
However, as these new revenue opportunities openup across the value chain, the telecom operatorsbuilding and running the underlying and enabling infrastructure are not necessarily benefitting as much as one might expect.

Despite the growth across the overall value chain since 2015, the ROCEs of the telecom operators, which were
already below 10%, have declined further. The returns to their shareholders have been equally low, raising questions about the ongoing robustness of investment in capacity, coverage and speed of the networks that connect internet users with services. online services providers telco revenues

 

Driven by wanderlust and a passion for tech, Sandra is the creative force behind Alertify. Love for exploration and discovery is what sparked the idea for Alertify, a product that likely combines Sandra’s technological expertise with the desire to simplify or enhance travel experiences in some way.