Is the Shift from Supply to Demand Driven Industry Pushing out Smaller Players?

June 19th, 2015 by · Leave a Comment

This Industry Viewpoint was authored by Patrick Lincoln, Director and Founder of SolutionIP

With the spread of fast mobile and superfast fibre broadband, increased online streaming and mounting dependence on cloud and VoIP, demand for telecoms is growing at a startling rate. Yet some have argued that the telecommunications network is arguably not keeping pace with rising demand and that a supply imbalance has occurred that favours the larger telecom providers and ISPs.

There is an argument that there is money to be made by keeping supply low, prices high, and profiting off of consumers who purchase more minutes and data than they actually use. Demand will continue to escalate, and by limiting their infrastructural development telecom industries are able to keep their expenses to a minimum while maximizing profits.

Of course this defies conventional economic thought, as in a properly functioning freemarket economic system, supply would always rise to meet demand. If the existing networks were unable to increase their supplies, new companies would arise from an ether of eager startups to meet consumer needs. The premise that we are witnessing market dominance, as a few major telecommunication giants continue to enjoy their top positions by ensuring that the telecom infrastructure remains beyond the scale and resources of most new competitors, is actually false and doesn’t chime with what I’ve personally witnessed in the UK.

Telecommunications strategies and services for businesses are now more available due to the large number of entrants into the market and the increased competition. This has a tendency to actually push prices lower. At Solution IP, we’ve found the UK telecommunications marketplace to be very healthy, especially when it comes to VoIP and if anything it is oversaturated with new entrants to the market reselling the services of other larger companies. What companies need to do therefore is differentiate to survive.

It’s true that enforced regulation and anti-competitive practices from some of the big telecom providers has had an impact on some smaller companies, but for resellers the outlook is actually good, as we have an increasing number of suppliers to choose from. There are indeed a few giants, but what we see is that the larger companies - like TalkTalk, who have just bought Tipicall in order to start offering SIP - don’t come across as industry experts as much as a lot of smaller more specialised companies do. Businesses in the SME and midmarket range much prefer to deal with the smaller companies than the giants as the customer service is better and the solutions more robust and tailored. Far from curtailing the ability to expand, this has actually empowered many small companies to grow into huge ones, like SIP Trunk specialists Gamma or ISP Enta.

The burgeoning disparity between supply and demand is causing a restructuring of telecom based businesses as consumers vie to get as much as they can from networks increasingly regarded as limited and finite. To reflect this consumer trend, market value has lifted away from the entrenched network and infrastructure providers themselves and been placed on the shoulders of increasingly competitive telecoms based service providers that deliver the most effective use of available internet resources. More than ever, survival depends on the ability to service customers, reputation, quality of service and solutions, fault resolution services, and the knowledgeability and expertise of providers, not to mention reputation and word of mouth.

Profits are no longer being derived from the internet itself but from the products and amenities gleaned from it. This shift has translated into a rise in the number of new companies entering the telecom trade.Competition in VoIP, SIP Trunking and cloud based services has skyrocketed, spurred on in no small part by a growing need for adaptive and flexible business models that can compete globally as well as locally or nationally.

With the growth of competition, quality of service will save or doom telecom businesses as customers drift towards the companies they can trust to provide them with expert service and dependable IT support. To remain competitive, companies must maintain focus on what they do best and not sacrifice quality of service for the sake of diversification.

The draw towards greater efficiency will signify a jump in interconnectivity. As web based products propagate and products improve, so too will the need for professional consultancies in a host of IT areas, such as VoIP networking and cloud support for large businesses. The companies that are positioned to offer these services and meet new standards for excellence are not only going to survive the changing world of telecommunications, but thrive.

About the Author: Patrick Lincoln is founder of British Unified Communications Company Solution IP, which he set up in 2006. An authority in the industry, Patrick spent many of his formative years building relationships within the telecoms community in the South West of England. You can connect with Solution IP on Twitter or Facebook.

http://www.interbrand.com/es/views/229/telecom-a-sector-on-the-edge-of-revolution

http://www.budde.com.au/Research/Global-Telecoms-Industry-Key-Trends-OTT-M2M-Big-Data-and-the-Cloud.html

http://www.circleid.com/posts/20140523_the_demand_and_supply_imbalance_in_telecoms/

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