Telecommunications Industry STEEP Analysis
Some internal factors that will impact the future of the telecommunication industry in the US are the 5G wireless technologies, the working relationships that youth-adult demographics tend to have with the Internet, the fact that investments in telecommunications are considered to be risky, the use of renewable energy sources, and the implementation of data sigils. Some external factors are global aging and the growing elderly public, the advancement of IoT, Donald Trump's pro-growth agenda that will stimulate the industry, the global need to adopt a policy of minimizing environmental damage, and the privatization and deregulation of the sector.
- In the last decade, life expectancy has increased significantly. At the same time, the aging American public is increasing its use of the internet, especially in the use of home-based and health-monitoring systems. This has had a positive impact on the American telecommunication industry.
- There are 2.5 billion digital customers globally who are under 25 years of age. What characterizes this group is the fact that they are “always on” and that they show a different usage behavior compared to that of the traditional “analog” consumer. On average, these young digital users spend 315 minutes online each day.
- The digital environment is an instrument that helps this young-adult demographic “take care of business,” with 45 percent using social media as their primary platform for customer service. In addition to that, younger generations have started using the mobile Internet access considerably more in the past few years.
- This new social reality is a trend that has been growing and is one that directly impacts the American telecommunications market and must be taken into account for decision-making.
- IoT is emancipating communication customers. However, it can also create a lot of new business opportunities.
- Technology investments using telecommunication automation to communicate with smart cars, HD aero imaging, remote surgery, and adaptive traffic control have also recently increased. Connecting telecommunication to these external factors of technological development is vitally important to the growth of the US industry.
- 5G wireless technologies will be gaining ground quickly, unleashing the full potential of augmented and virtual reality, smart cities, and IoT.
- The demand for an increase in the capacity and the speed of data transmission would allow larger contracts with streaming companies to be closed, a tendency that has only seen an increase in the US.
- President Donald Trump's proposed policy changes have made the overall economic outlook fairly bullish. The two pro-growth agendas, namely, the significant cut in corporate taxes and the deregulation of different industries are major catalysts to the US economy. It is believed that the U.S. telecommunications industry is going to be a major beneficiary.
- The proposal to reduce the corporate tax rate from 35 percent to 20 percent faced by telecom operators would immediately add to the cash flow. Trump's tax proposal will result in big gains for telecom operators. Operators can use this money for research and development of the 5G network and its deployment, a very strong trend in the future of the telecommunication industries.
- The pricing competition resulting in lower ARPU (average revenue per user) and margins, the massive investment for upcoming 5G wireless network and fiber optic build-out resulting in low free cash flow, and the intense competitive pressure shifted investors' focus toward other growth-oriented industries.
- This directly influences the future of the telecommunication industries in the US because all the three major telecom sectors present a greater risk to investors, with stocks registering anywhere from 7% (for services) to 24% (equipment) more volatility than the broader market. Investors with heavy exposure to telecom can expect stronger-than-average gains during bull markets. During a more bearish period, however, losses from this sector can be severe.
- Smart phones make up a large part of the e-waste products. Due to the electronic waste generated by service and equipment providers, the industry's focus has been on managing its waste and minimizing its environmental impact. More and more suppliers are investing in reducing their carbon imprint.
- Globally, telecommunication companies that have been dedicated to the collection of smartphones used for recycling have had a good return from consumers from developed countries.
- This demonstrates that in the future of the telecommunication industry, companies that do not focus on minimizing their environmental impact will not be competitive on the world stage.
- The EPA (Environmental Protection Agency — US) offers benefits to industries that are pro-active in increasing the use of renewable energy sources. Among the American telecommunication industries that have adopted this position, the combined use of green energy from these organizations reaches almost 26 billion of KW/h per year, which is equivalent to the use of electricity of nearly 2.4 million average American households per year.
- In addition to the enormous financial savings, due to the substitution of the energy source, experts predict an increase in the collection of environmental attitudes on the part of the end users, which means that the US telecom industry needs to set sustainable targets to keep growing.
#5) Political drivers
- One factor that worked in favor of the US telecommunications industry was privatization and deregulation. For some time, the telecommunication industry has enjoyed relative freedom based on its importance in the process of globalization. However, several threats have emerged in recent years, which may mean that political risks are rising again. The biggest focus is on growing markets such as China and India. However, the level of government control in these markets is high.
- Political risks rooted in national security and human rights issues are another important source of political pressure for the telecommunications sector. Because of this, governments around the world have launched measures to monitor and control communications. These measures have become tighter after the terrorist attacks and the hacking threats against the US government.
- These factors show that political risks will put the future of the US telecommunication industry at risk, especially in regard to the export of products.
- On December 14, 2017, in a landmark ruling, the US telecommunications regulator, the Federal Communications Commission (FCC), repealed the net neutrality laws imposed by the Obama presidency. The ISP (Internet Service Provider) industry will be the primary beneficiary after the dismantling of net neutrality by the FCC.
- The FCC's current restrictive regulatory stance may also pave the way for new mergers and acquisitions between ISPs and online digital media companies.
- This subject, which is still under discussion, will directly affect the growth of the telecommunication industry in the US because it is a major concern for the online service users.