For modern-day capitalist countries, the trajectory of economic development has historically resembled an aircraft after take-off, encountering pockets of turbulence but steadily rising.
Recently, though, it has started to look more like a plane that has reached its cruising altitude. In a book published in 2013, Stephen D. King, the former chief economist of banking giant HSBC, surmised that stagnation could become the "new normal" as more people want for nothing and growth opportunities dry up. Per-capita incomes rose by just 4% between 2003 and 2013, he pointed out, after increasing by 36% in the preceding ten-year period.
While digital transformation and automation will continue to produce economic winners and losers, the telecom industry is one that broadly illustrates King's rationale. Following the broadband and mobile booms of the last 20 years, telcos have nowhere obvious left to expand.
Although the difficulty of growing sales is widely recognized in the industry, few would acknowledge that stagnation is an incurable malady. Most telcos still seem determined to unearth the next big growth opportunity, despite the probability it will never be found. "We are really in a business that needs to review the way it operates," says Bengt Nordström, the CEO of consulting company Northstream and a former C-level telco executive. "We've been dreaming of and hyping growth for many years but it has never come."
Much of the current interest surrounds 5G, a next-generation network technology promising faster connections, reduced latency (the delay that occurs during data downloads) and more efficient, software-based networks. Yet 5G seems likely to follow the precedent set by previous generations of network technology, which in saturated markets have largely failed to spur revenue growth despite the initial hopes. "Unfortunately, consumers have been shown to be the only real beneficiaries so far of different tech generations," says Robert Grindle, a Deutsche Bank AG analyst. (See 5G: Another Next-Generation Disappointment?.)
Besides sprucing up their networks, operators have tried expanding into different parts of the value chain, and even entering entirely new industry sectors. Yet these efforts are not bearing much fruit. While a number of Internet giants have marched successfully into communications markets, telcos have struggled to move the opposite way into web territory. From a pure connectivity standpoint, the Internet of Things (IoT) could see 5G and more advanced 4G networks used to support billions of new devices over the next decade. But analysts doubt that connectivity revenues from IoT services will be substantial. (See 5G Guru Predicts Rollout Disparity and Is Sigfox on the Run?.)
In fairness, telcos can hardly be accused of peddling 5G as a future engine of sales growth. Several years ahead of its commercial deployment, most operators have been circumspect in their statements on the technology. A few have even expressed misgivings. (See Russia's MTS Knocks 5G as 'Vendor Game'.)
Nevertheless, it would take a brave operator to admit that 5G is not a growth opportunity. The UK's EE has perhaps come closest, publicly acknowledging that network upgrades merely slow the ongoing sales decline. As for the financial community, it continues to expect "very little" from 5G, says Deutsche Bank's Grindle, given the well-remembered disappointment of 3G. (See EE: New Tech Is Mobile Revenue Savior.)
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