Telcos Will be Banks

Thoughts on Carrier Evolution (Sep 11 2011) Marketing

1. Earlier this year, in the context of an address to an audience composed mostly of small telcos and cooperatives, I made one prediction, that telcos were going to become banks. I’m sure the prediction made very little sense at the time, and I was not able to elaborate in much detail at the time.
   
   The logic is pretty simple. If I am running a tier-one service provider, and I annually book $20 billion to $40 billion of revenue, I have a big problem if revenue sources representing billions of dollars of that revenue start to dwindle, as is the case for voice revenue, and likely text messaging revenue next.
   
   To replace lost revenues on that order of magnitude, I’d have to find other new businesses representing billions of annual revenue. And there really are very-few such opportunities available to tier-one providers.
   
   So why does that matter for small service providers? Basically, the context within which all telco and cable companies operate is set by the tier ones in each market.

   That doesn’t mean all firms can have the same strategy, but that customers will come to expect a “logical” set of services from a telco or cable company. Those expectations then become market realities.
   
   So the most-significant action by a tier-one provider in the past several weeks has been the application by Rogers Communications to become a bank under the Canadian federal Bank Act.
   
   If approved, the proposed "Rogers Bank" will focus mainly on credit, payment and charge card services, at least for the moment.
   
   Some of you should have the logical reaction of “I thought telecom companies were in the communications business?” It might now be more accurate to say that telecom companies are in a growing variety of businesses that use networks.

   Rogers to become a bank

   Does that mean every co-op or small telco or cable company will become a bank in its own right? No, any more than every small co-op or telco becoming a provider of mobile wireless service on its own network. Will every co-op or service provider actually offer banking services? Probably not. But will "telcos as banks" change user expectations? Yes. 

   And the same sort of argument will hold for machine-to-machine services, enterprise services and mobile advertising. Ultimately, many tier-one providers are going to be in those businesses, and that will condition the market to expect such services as part of a logical bundle of services provided by a large telco or cable company. Over time, that reshapes user expectations about all telcos and cable companies.. 

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