On Rad's Radar: The Decline of Revenue

By Peter Radizeski, RAD-INFO Inc.  |  May 07, 2015

An Infonetics (News - Alert) study shows that videoconferencing and telepresence equipment revenue was flat from 2013 to 2014. Some of that is due to less expensive systems on the market. Over time, the retail price of equipment (think DVD players and HDTVs) drops as more units are made.

We have seen the decline in sales of laptops and desktops. Apple (News - Alert) is selling fewer iPads. Indeed, Dell foresaw the need to transition from hardware to software a couple of years ago (and battled to go private to do that). You need only look at IBM (News - Alert) to see that moving to services and software over hardware was the model for the future. Even in book publishing, the hardware to the software is occurring.

At the same time, revenue is declining in all aspects of telecom – Internet access, voice, data, even cellular. Broadband and voice may not be dropping much because companies are increasing speed for the same rate – to retain customers and shore up average revenue per customer. Voice has declined steadily since the late ‘90s – with long distance, then VoIP. Over-the-top apps like WhatsApp and Skype (News - Alert) get some of the blame. Yet what I see is a steady decline in pricing in everything.

When 10GB point-to-point circuits go as low as $3,000, the industry has finally collapsed upon itself. The price of DS3’s is still a ridiculous amount, but its replacement – metro Ethernet – is dropping. With every renewal, the monthly recurring rate comes down. Or the speed doubles but the rate doesn’t. (Note that I am mainly referencing NFL cities.)

With cable capturing almost a third of the small business voice and Internet market, how does anyone eat selling $300 bundles? The share volume to sell to keep the lights on is astounding. And you can’t make it up with T1s or waves. The industry may blame the price erosion on agents (who sell on price), but it is the pricing we are given. AT&T (News - Alert) has more than 20 promotions to counter every regional competitor, which means that the pressure is on, but also that pricing is fluid.

With the mounting debt in this industry, how will this declining revenue make payback possible? How does the declining pricing affect the channel’s ability to make a living?

Peter Radizeski is president of RAD-INFO INC

Edited by Maurice Nagle