☎️ Intro
Los Angeles, CA 3-16-2023: As the telecom industry and CSPs (communication service providers) have evolved over the last few decades, they have shifted from offering traditional data and telephony services and ISPs providing network solutions to offering a wide range of products to keep up with competition, especially against technology companies, who have been steadily taking market share from legacy teleco’s since sometime in 2010.
Recently, several mergers and acquisitions have taken place between the telecom and entertainment industries, indicating that companies are seeking to diversify their product offerings beyond the traditional services. To maintain competitiveness, and to address some of the key pain points the industry has been facing, such as customer churn and negative customer sentiment, this business trend is viewed by some as mission critical to the overall health of the indutry long-term.
☑️ Post Objectives: This post focuses on 5 telecom industry trends for 2023. We’ll begin by taking a brief look at the industry and its sub-industries. As our second order of business, we will review market research to support the trends being discussed in succession, and then break down each trend in detail.
🧩 Table of Content
In the telecom industry, there are four distinct sub-industries: wireless, wireline, satellite, and fiber-optic. The wireless industry includes cellular (CSP), Wi-Fi (ISP), and satellite communications, while the wireline industry includes telecommunications/telephony, cable, and fiber-optic services. Inmarsat and Intelsat provide satellite services to consumers, businesses, and government agencies - Customers can access high-speed internet through fiber-optic services provided by companies such as AT&T and Verizon.
The telecom industry is expected to reach $4.4 trillion USD in market size by 2023, representing a compound annual growth rate of 4.6%. This growth is attributed to the increasing demand for wireless broadband technologies and the widespread adoption of 5G networks. Additionally, the telecom industry is expected to witness an annual growth rate of 7.9% in mobile data traffic and 9.2% in fixed data traffic.
Research indicates that the telecom sector is highly competitive and dominated by a few large companies. The top 10 firms control more than half of the industry’s profits and revenues. The telecom industry is also expected to grow its cumulative customer base by 6.7% by 2023.
Capital expenditures as well as its operating expenses as a result of the increased demand and subsequent development of telecom infrastructure, such as fiber-optic cables, optimized mobile towers, and 5G networks – Capital expenditure is projected to grow at a CAGR of 6.4% while operating expenses are forecasted to increase at a CAGR of 8.6%.
1. 🌐 5G Network & Technology
In addition to delivering faster speeds, lower latency, and higher data capacity than 4G, 5G promises to revolutionize a variety of sectors beyond telecom as a direct result of the capabilities of 5G networks, such as healthcare (remote surgery and services), transportation (autonomous vehicles), and entertainment (deliver high res content to customers). In order to meet the growing demand for high-speed wireless networks, major telecom companies are heavily investing in the development of 5G infrastructure, which has been a multi-billion dollar initiative to both upgrade or replace legacy infrastructure. Further fueling the expansion of 5G technology within the telecom industry is the increased adoption of IoT devices and smart cities.
Mobile networks will be up to 100 times faster than 4G and have 1,000 times the capacity than we experience today. Not only will 5G networks allow for faster speeds, but it’s also more reliable with lower energy consumption overall. All value adds to both the end users and the service providers.
As 5G networks are deployed over the next few years, they are expected to drive growth and innovation within the telecom industry, supporting many of the trends and developments we will be reviewing in succession to this section.
2. 💻 Edge Computing and CDNs
Users are expecting high bandwidth network connections that allow multiple devices to stream high-resolution content concurrently from a single home network. Edge computing and content delivery networks (CDN) are being used to serve content from a point of presence (POS), closer to the end users requesting access to content. By decreasing the physical distance between the host server and the end user, customers are able to access higher-resolution content more quickly and with a more stable connection.
In engineering-driven companies like Netflix, strategic partnerships have been established between tech companies and ISPs to co-develop infrastructure that will ultimately improve the overall network experience. Netflix, for example, has a vested interest in ensuring that ISPs (internet service providers) networks can deliver high-resolution content in an efficient manner to their customers.
As companies increasingly choose to use edge computing and content delivery networks to deliver the best customer experience (CX), optimizing for speed has become critical across the entire technical stack, a trend likely to continue in 2023, with an increased focus on strategic partnerships and co-developed infrastructure to support new use cases and content types.
3. 🤖 Artificial Intelligence (AI), Machine Learning (ML), and Automation
Artificial intelligence (AI) and machine learning (ML) are becoming increasingly important in the telecommunications industry, including both ISPs and CSPs, because they can automate manual processes, reduce security risks, and optimize network performance via AI-driven load balancing and optimizations, among many other use cases and benefits to both the end users, and the providers.
One of the other buckets where AI and ML are uniquely positioned to support the telecom industry is within the customer service segment, where AI and ML will help automate processes across the entire customer service lifecycle, and includes marketing outreach and analysis. Beyond automation, AI will be increasingly used to offer more personalized feedback to customers in real-time, thereby improving sentiment and helping customers to solve their problems as hastily and efficiently as possible.
AI and ML are also expected to be used to improve network performance and reduce costs. For example, telecom companies are expected to use AI and ML to monitor network performance and quickly detect and diagnose network problems independently of any manual input by a network engineer or IT technician. Furthermore, AI and ML are expected to be used to develop more efficient network routing algorithms, which can help reduce network congestion and improve network performance.
Overall, AI and ML are expected to play a major role in the telecom industry in the coming years
4. 🎥 High-resolution Content and AR/VR
The demand for high-resolution content is expected to remain strong in 2023, driven by the increasing popularity of streaming services and the rise of 4K and 8K video content. In order to meet this demand, telecom companies are investing heavily in infrastructure development and co-developments as we have already reviewed in the edge computing/ CDN section of this post.
For example, telecom companies are developing new technologies, such as 5G networks, which will provide users with faster speeds and lower latencies than existing networks, allowing them to watch videos and play video games that require lots of data. Some telecom companies are investing in edge computing and content delivery networks (CDN) to offer their customers faster and more reliable streaming services, in addition to optimizing the delivery of high-resolution content. As we discussed in this post’s edge computing/ CDN section.
In a world that is increasingly reliant on video conferencing from home networks, telecom companies are investing in new video and audio technologies such as voice-over-IP (VoIP) and improved video conferencing standards.
Additionally, telecom companies are investing in new technologies, to support virtual reality (VR) and augmented reality (AR), which points to each of the innovations we have discussed thus far such as 5G, AI/ML, and CDNs. Each provides customers with even more immersive experiences and delivers high-quality, high-fidelity audio and video content and services to millions of geographically dispersed customers simultaneously.
5. 📡 Internet of Things (IoT)
According to estimates, there will be roughly 25 billion IoT-enabled devices by 2030, up from 10 billion in 2021. From smart thermostats to home security, IoT enabled devices have a wide range of applications. Today, the average household in the United States has upwards of 20 devices connected to a home network, all of which require a near-constant state of connectivity. This trend has moved well beyond the consumer use case for IoT, and includes most modern businesses and industries. As telecommunication companies manage our home network infrastructure, they’re positioned to benefit from an increasingly networked world.
In 2026, IoT is projected to generate roughly $1.8 trillion USD in revenue for mobile network providers. IoT revenue would be a massive value add for the industry as a whole, considering that customer churn has been one of its greatest challenges in recent years, as more and more people have been pivoting away from traditional network and telephony services.
Due to the overall size of the business opportunity, optimizing for IoT presents a huge opportunity for innovation and improvement. Through network improvements, telcos and ISPs can offer a better more optimized service while retaining more customers.
To understand how telecom companies can increase revenue through IoT, we need to consider the value of data. Essentially, data can be considered as a stream of value between two points. As a result, those who manage the rails in which these values are transferred will be able to maximize revenue and use data to develop new products and services. It’s highly likely we will see this trends continue in the coming years, as telcos and ISPs evaluate new sources of revenue, and design entirely new business models and service types, as a direct result of the intrinsic value of date.
Our physical products are becoming increasingly networked, requiring high bandwidth and high-efficiency connections. Smart cities, autonomous cars, healthcare, location services, equipment monitoring, wearable devices, and many more are some of the IoT applications worth calling out beyond the use cases we have reviewed thus far.
🌐 🎖️ Final Thoughts
The looming economic slowdown is expected to significantly impact the telecom industry, but some of the longer-term effects will elucidate over time. It’s safe to make some assumptions based on prior market contractions and recessions in order to provide a thorough and honest viewpoint on the industry for the years to come.
We can assume that investments to support the transition from 4G to 5G, for example, will be marginally slowed by the recession, but only marginally. Resources and capital will be continuously deployed since the quality of our networks is viewed as a critical infrastructure. Even though innovation may slow during this period, it will not stop, so it is safe to assume that major new innovations will be throttled back intentionally. Some of the greatest business opportunities and innovations have emerged during recessions in each of the prior market contractions.
Looking back to each of the themes that we have reviewed in this post, it will be quite interesting to see how each bucket emerges from the coming recession, and which market forces will affect the greatest amount of change.
This article reviews five telecommunication industry trends in 2023, including ISPs and CSPs as sub-industries. Firstly, we reviewed each of the distinct sub-industries and then reviewed market research to provide some measurable figures to guide our analysis of each trend. The final section discusses each business trend, starting with 5G. The second topic was edge computing and CDNs (content delivery networks), followed by artificial intelligence (AI), machine learning (ML), and automation. In conclusion, we discussed high-resolution content, VR/AR, and IoT (Internet of Things).
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