It is one of the most obvious observations that I have deliberated on in this column. 

Many of you know it. Many more among you have guessed it at some point of time, thought about it. Some of you have discussed it. Some of you probably have tried wishing away such thoughts.

As a journalist, I am just putting it straight.

That the days of mobile and fixed lines business being treated as two synergetic businesses are numbered. In short, these two will be two completely different businesses.

And yes—I know what you are thinking—not many companies will be able to run both the businesses successfully. The rest of this write-up will try to provoke your thoughts on who could get out of what. Happy musing !

Let us start with the way things have developed in the last few years. Fixed telecom business is more than 100 years old. Mobile business is at best two decades old. Many countries opened their mobile business to competition right from day one. Local fixed line business was opened a little late in most countries. Proactive regulators tried their best to create level-playing fields in both. But look at what has happened in the ground. The competition in mobile has been a real success story, with list of successful companies containing a good dose of both incumbents and competitive service providers. Local fixed line business, on the other hand, has by and large stayed with the incumbents in major countries. You may blame it on slow decision making and faulty licensing regime in Indian context. What about the US, where the business is again back with ILECs? Most CLECs have just vanished from the scene. What about Europe?

You know the real reason. It is the local loop. Despite all attempts by regulators to unbundle it, the incumbents have managed to turn it into a strategic advantage.

And this is where the big difference begins in fixed and mobile businesses, that has an impact on the economics of these two businesses. They are different. The local loop in the fixed business has been built by the incumbent. He owns it. Mobile is more of a level playing field. The local loop—or its counterpart—is the airwave. That is scarce but free. The moment the governments have tried to put a big price on it, the troubles have begun. Like in 3G. But that is a different story...The point is the economics of the local loop, cost of which is 60-70 percent of the total cost in a traditional telecom business, are entirely different in both these businesses. The business models and strategies have to be different.

n With low entry barriers, the new operators have found it easier to enter a newly opened market in mobile. Some of them are global players. This has made the mobile business more global. After the initial threshold is crossed, you can expect large-scale consolidation with five six players dominating the global market. Fixed business will continue to remain a more localized business, because of the major dominance by incumbents.

n With more competition and less capex, marketing has become key in mobile, with both new connections and new services getting marketed much the way FMCG and consumer service marketing is done. Fixed telephony is still a utility kind of business, with more of business development than big budget campaigns.

n As business priorities change, the way companies look at their infrastructure will also change. And something resulting out of that may be the most disturbing (interesting, did you say?) thing I am writing in the whole piece. That the strategic infrastructure for mobile service providers will be their IT infrastructure, not the network infrastructure. Though they will continue to upgrade networks, soon networks will be the backend, and billing, CRM, provisioning, and service creation platforms will be the front-end.

In summary, there will be two set of rules for two businesses. Whether companies will be able to run both the businesses, my guess is as good as yours. The synergies will be little. They can succeed in both, as long as they understand these are two separate businesses.

The strong comeback of the incumbents in many markets is now apparent. It looks likely that they will salvage some of their lost pride and will again dominate the business that they understand most—fixed line business in their own countries. The mobile market will be a truly global business with a few players distributing it among themselves, after a big consolidation. And yes, don’t forget the potential aggregators. Despite the near total failure in Singapore, you cannot yet write off people like Richard Branson! 

Shyamanuja Das