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Telecommunications: Recovery Driver or Luxury Expense?

Originally published May 5, 2009

The current economic conditions have all sorts of analysts looking for reasons, reactions and repercussions. Some like to point fingers. Others are looking for the leading indicator industries and products to show that the United States and global economies have hit bottom and are moving toward positive growth. The telecommunications industry is not immune to this analysis.

In fact in the United States, the telecommunications industry has been “outperforming” the overall economy since October 2008. Figure 1 is an example of two “randomly” selected telecommunications service providers and their performance vs. the Dow Jones Industrial Average.

(mouse over image to enlarge)

(Source: http://finance.yahoo.com)

One might think that telecom service providers might be viewed as one of the leaders in the economic recovery. However, the verdict is not in on where telecommunications falls on the “hierarchy” of needs in this economy.

Recently, I have seen two different opinions for telecommunications. One claims that telecommunications is an “untouchable” that provides an economic enabler for socioeconomic growth. There is another opinion that says that many view expensive telecommunications plans as luxury expense and consumers are looking for ways to lower expenditures.

Which one is correct?

Driver of Economic Recovery and Growth

There are many who view access to telecommunications, specifically broadband or higher Internet access, as the major component to the “digital divide” between those who are enabled for the Internet economy(s) and those who are not. A recent study, commenting on the impact of the socioeconomic aspects of telecommunications, made the following assertion:

While it might be a stretch to say that telecommunications is as important as water and energy, I do believe that telecommunications is a vital component to allowing individuals and organizations to participate in the global economy and provide the ability to reduce greenhouse emissions related with daily commuting and transportation (… we’ll ignore the emissions of green house gases related to electrical consumption… ).

These impacts on both economy and environment are probably the drivers behind the current “broadband stimulus package” currently being haggled over at national and local levels within governments in the United States.

Cutting Back…

Another analyst group’s survey finds that, despite the analysis above, a significant number of consumers are moving from “defined payment” post-paid, subscription services to “pay as you go” pre-paid usage services for their wireless telecommunications packages. One of the more interesting concepts listed in the survey is the concept that “premium packages,” like mobile Internet, will probably decline for particular socioeconomic groups

This type of response indicates that despite the fact that overall telecommunications may be part of the engine that drives socioeconomic growth, often paying for the above-mentioned “food and water” can come ahead of telecommunications “extras” above voice “dial tone” and home-based Internet “pulse.”

On the One Hand; On the Other Hand

Harry Truman probably said it best when he asked for economists who would give him a single opinion rather than two, or more, equally weighted options. In my opinion, business intelligence teams that provide enterprise-wide information on overall network usage linked to the performance of subscriber order usage will have the best ability to provide the internal information about where the telecom service provider falls on the continuum of enabler vs. luxury cost.

However, this type of analysis will not be limited to a single aggregated view of the enterprise. This view will be split in both terms of consumer and business customers, and this analysis will NOT be limited to demographic divisions. Individual consumption and geographic divisions will be more important than credit score when looking for the product, services and geographies that will lead the economic recovery both in the United States and internationally. Business intelligence organizations should avoid the “easy” answers of demographic segmentation and aggregation to look “deeper” for product and customer “portfolio” segments/aggregates that show where a telecom is performing well and ready to lead the rebound and where the organization is performing poorly and should apply additional scrutiny and risk analysis.


In the current economic situation, telecommunications executives are going to look to their business intelligence organizations for information on whether or not their organizations are part of the socioeconomic lift or part of the products/services that consumers are cutting back on to make ends meet. And those executives are going to be looking for “answers” rather than “two-handed economists.”

SOURCE: Telecommunications: Recovery Driver or Luxury Expense?

  • John MyersJohn Myers

    John Myers, a senior analyst in the business intelligence (BI) practice at  Enterprise Management Associates (EMA). In this role, John delivers comprehensive coverage of the business intelligence and data warehouse industry with a focus on database management, data integration, data visualization, and process management solutions. Prior to joining EMA, John spent over ten years working with business analytics implementations associated with the telecommunications industry.

    John may be contacted by email at JMyers@enterprisemanagement.com.

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