The mobile industry has been the driving force around the globe behind the technology evolution over the last decade. The direct and indirect impact of the industry is calculated in trillions of dollars. There are over 3 billion mobile Internet users, 5 billion unique mobile subscribers and over 8.5 billion mobile connections. The number of companies generating more than a billion dollars from digital services ballooned from just 4 in 2010 to over 100 in 2017. The ecosystem continues to expand, and innovation is thriving. And yet again, we are the cusp of dramatic change as the wireless industry embarks on the 5G evolution cycle. There are several other trends that are also shaping the ecosystem. The cable companies, wireline players, Internet giants, and upstarts all see wireless as a key part of the industry stack and as such they are making their moves to be a significant player in shaping the next decade.
Competitiveness is at the core of how markets evolve. Mobile operators have played a central role in bringing the networks online and providing reliability of a platform over which new services and applications can continue to germinate and thrive. Competition at access layer ensures that consumers benefit, entrepreneurs can play fairly in the marketplace, and the overall economy benefits from such a framework.
In 2011, in the paper, “Competition and The Evolution of Mobile Markets: A Study of Competition In Global Mobile Markets,” we explored how mobile operators segment has evolved over the last few decades and studied the dynamics through the lens of “Rule of Three.” The theory states that in any mature industry, 3 top players dominate the market. Said another way, market typically settles down to three major players after the market has worked out its inefficiencies. The paper became a reference for many telecom regulators and agencies around the world who were looking to understand relative competitive dynamics of their mobile market.
Mobile operator segment is heavily regulated, so regulators have a significant say in the number of operators in a given country. Sometimes they try to insert competition where it is lacking while it might require M&As in other cases. Mobile operators are too important to fail as they support the critical national infrastructure, “market failure” is not an option. But as the market forces consolidation, as the tectonic plates of the very foundation of the industry shift dramatically, the regulators have to often grapple with the key questions, how many is too many, and how many is too less? Is there a perfect number for the market? Given the convergence of fixed and mobile, given the influx of Internet player in the segment, how should regulators think about the definition of the “market” because if the market is defined incorrectly, bad policies and damaging regulations are likely to follow.
We return to our 2011 analysis and update it with the current perspectives and understanding to ask the question again, what’s the optimum number of mobile operators in a given country and is the question best answered by the regulators or by the market? Given the convergence and shift in the revenue stack, the mobile market has changed drastically as predicted initially by our 4th wave thesis paper in 2012. This paper tackles these questions by taking a look at the historical trends and how markets have evolved to address the basic questions – What is competition in the mobile market and What’s the ideal mobile operator market structure for any given country?
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Disclaimer: Some of the companies mentioned in this paper are our clients.