An Economist’s perspective on the future of telecoms

Getting external perspectives always adds to the richness of the Great Telco Debate.  Mark Gregory, Chief Economist at EY in London and I discussed the economic realities of telecoms and the digital economy going forward. Here are the key themes that emerged:

  • Measuring productivity in traditional economic terms has been challenged by the Gig economy and its processes: ubiquitous connectivity is destroying traditional value such as in the taxi, hotel or retail markets but is creating new value as different parties are brought together on the exploding number of platforms for consumer and business use
  • ‘Digital’ was formerly about hidden components such as semi-conductors, servers and 3D printing. It’s now all pervasive and, from an economist’s perspective, it’s about how all industries work, the potential impact of technology and where value is created
  • The potential ubiquity of ultra broadband diminishes the relative value of connectivity since scarcity tends to create value
  • Telecoms is in the group of General Purpose Technologies (GPT) as described by Robert Gordon in his assessment of the impact of IT on productivity. It may be a disproportionately important enabler in a more digital world, but it is nonetheless an enabler
  • Telecoms (broadband) should have a relatively bigger role going forward but that depends on how it evolves and how it allows other industries to evolve
  • Telecoms first of all has to deliver its role into the digital economy as an enabler. Moves into content delivery and other services have been only variously successful
  • Telecoms must think about how it can enable other value chains rather than dominate them by underpinning new processes and allowing new apps to flourish.
  • Politics is becoming extremely important for the future of telecoms. Regulators have to get out of the mindset of capping prices if they are going to allow the telecoms industry to evolve into its new digital economy support role. The telcos have to be able to benefit in terms of value capture if they are going to be incentivised to invest for the future.
  • 5G is what some of the financial community are most worried about in terms of another big chunk of investment being required.
  • Digital skills are important as automation shifts the focus for human roles in the digital economy
  • As we look at Brexit some sectors are clearly going to be impacted:
    • Financial services and Life Sciences because of the regulatory environment.
    • Automotive could be impacted but this is still not clear
    • Telecoms does not appear to be in the high impact category.
    • Data protection will be a major focus given European regulation.
    • The labour force is the one to keep an eye on – digital skills and a more flexible work force capable of coping with the the dynamics of a digital market will be vital.

Here is the full interview:

Keep November 29th 2018 free for the next Great Telco Debate. If you have topics you think are shaping the future of the industry and would like to contribute as an ‘expert witness’ please drop me a line.

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