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September 14, 2012

Should Wholesale Carriers Get into Retail?

By Gary Kim, Contributing Editor

According to a report from TelecomAsia, at least some speakers at the Asian Carrier Conference, a major wholesale carrier trade show, suggested that precipitous declines in voice revenue now require that global wholesale providers think seriously about “going retail.”

That should immediately raise questions, if the statement correctly is interpreted as a call for wholesalers to enter the retail business, as it means wholesalers have to compete with their own customers, at least to some extent.

Doy Vea, chief wireless advisor at Smart Communications, stated that "It's the end of the world for old business models," noted properly that voice profit margins continue to be squeezed. Up to this point, the universal wholesale voice carrier strategy has been to strive for higher volumes to offset declining per-minute prices.But there obviously is only so much any carrier can do in that realm. So Vea reportedly argued that the future is to “go retail.” Granted, the distinction between wholesale and retail operations tends always to blur over time, even for carriers that originally claimed they were “exclusively” in the wholesale business, therefore not competing with their customers.

Over time, even a wholesale-only carrier often finds it must, or wants to, also get into some retail lines of business. In the U.S. market, virtually all “wholesale only” carriers eventually have wound up offering at least some specialized retail services as well as wholesale capacity services.

Telstra (News - Alert) Global's Jim Clarke reportedly also noted that the line between wholesale and retail increasing is becoming blurred.

Without question, wholesale and retail carriers have talked for at least a decade about “moving up the value chain and avoiding becoming a bit pipe or dumb pipe. But that is arguably something quite a bit less threatening to a retail service provider than the possible emergence of a former wholesale supplier as a retail competitor.

Wholesale executives understand the dangers quite well, so the call for more retail operations is probably better positioned as a suggestion that there are some network features including signaling or feature transparency that should be looked at in new ways in the interconnection part of the wholesale business. 

The cloud computing Infrastructure- as- a- Service business also provides another example of a quasi-retail or fully retail business that many wholesale providers also are exploring. As always, though, it also is important to avoid major channel conflict.  

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Edited by Brooke Neuman
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