Telecom Industry: Supply & Value Chain
The telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure, and service providers. Many service providers own their own transmission networks and infrastructure but there are many who might lease from other players. What is the revenue metric for telecom and who are the major stakeholders in this industry? Read to find out!
Telecom Industry - Supply Chain:
The telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure, and service providers. Many service providers own their own transmission networks and infrastructure but there are many who might lease from other players. Business and household telecommunication services make up the largest source of revenue for the industry, followed by sales of products, equipment, and infrastructure services.
Telecom Industry - Revenue Metric:
The telecommunications industry uses a key revenue metric, average revenue per user, or average revenue per unit (also known as ARPU) to keep track of the revenue generated by a typical subscriber or device in a given time frame. To calculate the ARPU, a standard time period must be defined. Most telecommunications carriers operate by the month. The total revenue generated by all units (paying subscribers or communications devices) during that period is determined. Then that figure is divided by the number of units. Because the number of units can vary from day to day, the average number of units must be calculated or estimated for a given month to obtain the most accurate possible ARPU figure for that month.
Also related is ARPPU (Average Revenue Per Paying User) which is calculated by dividing up the revenue amongst the users who paid anything at all. This yields a figure that is significantly larger than ARPU. For example in the case of a subscription game (that has a free play version), the ARPPU, measured by accounts, is the subscription price, diluted slightly by free trials. ARPU is widely used by Internet Protocol television (IPTV) service providers.
ARPU can be a good indicator of how effectively the network is exploiting its revenue-generating potential but a high ARPU does not guarantee high profitability. ARPU does not take the cost of providing the services into account. Because of this, some service providers are relying more on key revenue metric, the average (profit) margin per user or AMPU, which does take the cost of providing services to a user or device into account.
Telecom Industry - Cost Model:
The telecommunications industry requires heavy capital investments to create wired, wireless, or broadband infrastructure and networks. It is a capital-intensive business with high fixed costs and lower variable or incremental costs. Customers pay for a share of the fixed costs apart from the variable costs in their fees. Companies in the industry are continuously looking for new customers so they can distribute these fixed costs among many payers. This helps companies remain competitive under price pressures and profitable in a fiercely competitive market.
Telecommunications Industry Value Chain:
The telecommunications industry is made up of a complex set of suppliers, service providers, regulators, and customers. The key stakeholders in the telecommunication value chain include
- Telecommunication product and equipment manufacturers
- Telecommunication service providers
- Customers
- Regulators
Related Links
You May Also Like
-
Imperatives of Telecommunication Industry
The telecommunications industry continues to grow steadily on a global scale. The most important imperatives shaping the modern telecommunications industry are globalization (worldwide scale), technology (latest advancements), and deregulation. The first factor shaping the telecommunication industry to what it is today is globalization. The second factor influencing the telecommunication industry greatly is technological advances. This article briefly discusses these three imperatives.
-
Telecommunications Industry Profile
Broadly telecom industry can be divided into two sectors, Equipment Sector and Services Sector. Equipment sector players manufacture telecom products whereas the services sector comprises operators and other service providers. The telecommunications industry equipment sector is comprised of companies that manufacture products that are used by both end-users and input to other telecommunications companies. Customers use these products to access telecommunications services. In this article, we will discuss the industry profile of telecommunications.
-
Overview of the Telecommunications Industry
Modern telecommunications industry players produce communication equipment and deliver a set of voice, data, and broadband services using wireline or wired infrastructure of cables, networks, servers, computers, and satellites. In this article, we will define the telecom industry and discuss some of the key business drivers. Understand the various constituents of the telecommunication services sector followed by a small discussion on current industry trends.
-
Telecommunications Industry – Business Drivers
To provide solutions to clients in the Telecom industry, it is critical to have a comprehensive understanding of their business, their objectives, and their challenges – those business challenges unique to their organization as well as those triggered by the industry and marketplace. The following article provides an overview of the key business drivers that are impacting telecom carriers and hardware providers.
-
Telecommunications Industry & Deregulation
The Telecommunications Act removed regulatory barriers to entry, opening up the market to new competitors. Deregulation led to a large number of new players. The third factor having a great influence on the modern telecommunication industry is deregulation. This article will discuss some thoughts on the impact of deregulation and unfettered competition on industry and a brief debate on deregulation versus some new form of regulatory intervention.
-
History of Telecommunications Industry
The history of telecommunication began with the use of smoke signals and drums in Africa, the Americas, and parts of Asia. In the 1790s, the first fixed semaphore systems emerged in Europe; however, it was not until the 1830s that electrical telecommunication systems started to appear. Follow this advancement from smoke signals to modern-day internet and mobile technology, understanding the events that have shaped the world of telecommunications.
-
Telecom Industry & Globalization
The telecommunications sector is an important strategic segment of the modern economy. As globalization set the stage, the telecommunications industry became gradually a more global industry with increasing competition. The first factor shaping the telecommunication industry to what it is today is globalization. The telecommunications industry transports information at such incredible speeds that the concept of the virtual world has become true. This article will discuss the impact of globalization and the risks and opportunities it present to the industry.
-
Telecom Industry: Supply & Value Chain
The telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure, and service providers. Many service providers own their own transmission networks and infrastructure but there are many who might lease from other players. What is the revenue metric for telecom and who are the major stakeholders in this industry? Read to find out!
-
International Telecommunications
The telecommunications industry has been among the best performing industries in the world in recent years. Until the 1980s, the governance and regulation of international telecommunications regulation were relatively straightforward where state-owned telecom companies provided services within discrete national boundaries. International traffic was carried at rates mutually agreed upon by governments and their respective national carriers. A brief discussion of how the industry is shifting to a multilateral trade framework.
-
Debate on Need for Deregulation
There are many arguments in favor of deregulation. Advocates argue that continued regulation can only support the development of static markets whereas deregulation is necessary for the development of dynamic markets. Market convergence and related infrastructure competition are more likely to take place in dynamic markets. In many telecom markets, deregulation is currently being discussed, in this article, we will examine the impact of deregulation on the overall economy and study arguments that are placed in favor and against deregulation.
