The telecom industry has changed dramatically since the 1980s waves of privatization and competition remade the former monopoly industry structures. More change is likely in the future, as tier one suppliers adjust to a market where profitable operations are difficult to impossible in rural areas. But new providers, of many types, are likely to emerge in the wake of the tier one retreat.
Historically, large integrated telcos and cable TV companies have been most efficient, and most profitable, serving relatively small areas such as urban cores. A rule of thumb in North America is that telcos make money in the urban core, break even in suburban areas and lose money in fringe and rural areas.
In other areas of the business, one sees the same trend: suppliers sell directly to businesses and consumers (using dedicated sales forces for the former, mass media for the latter), but rely on channel partners to sell to specialized audiences (system integrators, interconnects, resellers and agents for small business information technology and communication services).
In the U.S. market, the tier one carriers slowly have been selling off rural assets. Paradoxically, the other trend also has happened: rural carriers have transformed themselves largely into business customer specialists (Windstream and Frontier Communications being the best examples).
And the same time, many independent Internet service providers are springing up to serve small communities and rural areas, as traditionally many cooperatives and small telcos have served rural areas.
Over time, there is little reason to believe the fundamental dynamics will change. Large, well-capitalized firms will continue to do best in dense areas, as competition continues to emerge.
That will lead any number of rational actors to conclude that they really cannot effectively serve rural customers, as costs are high and average revenue per account low.
Under such conditions, whether by plan or circumstance, many tier one providers will exit rural markets, as they will not be able to compete. In their place, providers with much-lower cost structures could emerge to serve such markets.
New technology might well help create a bigger market opportunity for new cooperatives, municipal ISPs and other new actors whose goal is to provide high quality Internet access for a single community.
And that might be true not only in North America, but globally. As core access platform costs continue to fall (new open source access platforms, new fixed wireless technologies, millimeter wave platforms that provide very high capacity, 5G, cable TV access, low earth orbit satellite constellations and so forth), it increasingly will be possible–where lawful, and where backhaul can be secured–for third parties to create their own local ISP operations.
Over time, that will accelerate the trend towards tier one providers operating in dense urban areas while rural areas see a proliferation of new business models and actors.