Omdia: Consumer Telco Opportunity Challenged by Global Tech Giants
Market research firm Omdia (owned by Informa) says all growth areas for telcos will experience significant competition from hyperscalers – specifically the global tech giants Google, Amazon, Meta/Facebook, and Apple.
Omdia’s Quantifying the Consumer Telco Opportunity – 2023 report is an in-depth report providing analysis and insights drawn from Omdia’s related data tools as well as individual operator case studies. The market research firm says that other than core fixed-line and mobile data services, almost all of the potential growth for telcos in the consumer sector over the next few years will come from ‘non-traditional categories. Those include video streaming, digital gaming, streaming music, and smart home (whatever that means).
“Service providers must look beyond data and diversify into adjacent digital markets to enable continued growth of their telco consumer businesses,” said Omdia’s Jonathan Doran. “Many have already invested in TV and online video entertainment, but there are other fast-growing markets telcos can also explore. Adopting the right go-to-market strategy and business model for each individual service area will be critical to striking the balance between achieving market success and mitigating financial risk. In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their own products and brands” observes Doran.
“Omdia’s Digital Consumer Operator Strategy Benchmark shows that the more service providers actively invest in a given service area – including through partnerships – the bigger market impact they have, which in turn better positions them to take a bigger slice of overall market revenue”
Big tech is already there and doing a decent job of selling all these digital goodies direct to consumers without the help of operators. Every time telcos have tried to compete directly in adjacent markets is has all gone horribly wrong so, as well as picking their fights more carefully, they are advised to consider an ‘if you can’t beat em, join em’ approach.
“In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their own products and brands,” said Doran. “Omdia’s Digital Consumer Operator Strategy Benchmark shows that the more service providers actively invest in a given service area – including through partnerships – the bigger market impact they have, which in turn better positions them to take a bigger slice of overall market revenue.”
The Omdia chart below illustrates product types by growth potential (horizontal axis), relevance to the Communications Service Provider (CSP) core proposition (vertical axis) and forecasted relative 2027 market size. As you can see, most consumer digital products are pretty far from the CSP core proposition, but Omdia forecasts they will collectively amount to a $500 billion market by 2027. How much of that will find its way into the pockets of telcos as a result of partnering with Big Tech remains to be seen, but even a small fraction is better than nothing.
Amazon, Microsoft and Google are not only three of the biggest players in the digital consumer space, they also dominate the public cloud market, which network operators are constantly urged to turn to for its efficiencies and flexibility. It’s possible to imagine a time most of what we get from and operator is actually supplied, and monetized, buy one of a small number of hyperscalers. It’s not clear whether that represents a positive development for the telecoms industry.
References:
https://telecoms.com/521154/study-highlights-increasing-dependence-of-operators-on-hyperscalers/