How Telcos Can Contend With Cloud-Based Computing

“We’re going to move the center of our digital life to the cloud,” Apple CEO Steve Jobs said recently when launching iCloud and joining the mushroom of cloud services driving the next big step in the growth of the digital economy.

It’s become clear that cloud services will have a profound impact on every business. All of the ingredients for rapid take-off are now in place as smart phones and tablets rapidly proliferate, networks expand and services go virtual. You’d think that would make telecom operators smile – but actually, many are crying in their beer over the investment needed to cope with the massive growth of information coming just when their traditional high-margin voice and messaging services are declining. With five out of every six people on the planet having a phone, subscriber growth is slowing – while competition is rising and new services are going ‘over the top,’ delivering cost, not revenue.

Communications services are now following Moore’s Law, which originally described the doubling of computer power and halving of its price every two years. But just as Intel made a fortune out of that law through innovation and economies of scale, so can communications companies if they get smart.

There are more than 1,000 telecom operators worldwide, each with their own geographic footprint. After years of regulators pushing network competition, basic economics is now making market consolidation inevitable.  As we’ve seen in the U.S., telcos everywhere are merging, sharing infrastructure and joining forces to leverage buyer power. Those who don’t get it will be left in the digital slow lane.