The entrepreneurial environment which now exists in the communications industry is unprecedented. From service providers to application developers to network equipment manufacturers to commercial and residential end-users, the ability to profit by providing or adopting advanced communication services has never been greater. The market is already massive, yet the potential for growth is inarguable. For example, Cisco (a globally recognized leader in communications technology) estimates that, as voluminous as communications traffic is today, it will continue to grow in the United States at a compound annual rate of more than 23%, at least through 2017. This means that traffic will more than double in that period.
Competitive Service Providers (CSPs), though, have only partially tapped into this robust growth. Historically, CSPs have been focused primarily on commercial markets. While those markets will continue to grow at the rate projected above, they represent only 18% of today’s communications traffic. Further, as we enter the age of telecommuting and a resurgence of small, entrepreneurial companies, the small office/home office (SOHO) will be a critical component of CSP revenue streams.
In the past, the residential market may have been ignored by most CSPs because the monthly revenue per user was low; limited to that associated with those services valued by retail consumers. However, in today’s reality, sophisticated services such as secured, corporate networking, IP-PBX, distributed database access, video-conferencing with whiteboard sharing, etc. revenues can easily approach a few hundred dollars per month, or more. This level of spending places such a residence squarely into the small business revenue category.
A further point is that companies are now embracing telecommuting as a way to reduce office overhead expenses. Rather than dedicating an office (or cubicle) to an individual, corporate space is shared and made available on an as-needed basis to those who work, principally, from home.
Competitive Service Providers would do well to examine their product portfolio within the context of this new reality and the explosive growth potential indicated by Cisco’s projections. Having focused for such a long time on the market segment generating only 18% of the demand for services, strategies that would create a limited expansion of products to accommodate the telecommuter and SOHO demand in existing geographic markets should produce both top and bottom line benefits.
Cisco’s market research and projections are available at: http://www.cisco.com/en/US/netsol/ns827/networking_solutions_sub_solution.html
About the author:
David J. Malfara, Sr. – President/CEO, the ETC Group, LLC
Mr. Malfara is a telecommunications entrepreneur who specializes in defining, deploying and evaluating emerging business models for communications/broadband service providers. He has founded or co-founded and led eight successful communications companies over the past 35 years. Today, his management and engineering consulting company, ETC Group, LLC provides expertise in merger/acquisition due diligence, turn-around strategies and strategic-growth efforts and pro-competitive public policy advocacy.
Mr. Malfara co-authored the National Regulatory Research Institute white paper on IP Interconnection, along with noted economist Joseph Gillan. In addition, Malfara served for more than 10 years as a director of COMPTEL and was founding chair of the association’s Technology Task Force. He is a senior member of the Institute of Electrical and Electronics Engineers, the IEEE Standards Association and sits on the Executive Advisory board of multiple service providers.
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