September 24, 2023

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Online Services Revenue Increases, Network Providers Receive Less


CEM REPORT | The demand for quality access to the internet is constantly on the rise. Telecommunications companies are working continuously to improve the quality of access to the internet.

The amount we pay for data has created a belief that our network providers make so much in revenue, but a recent report says otherwise.

According to a study by GSM Association (GSMA), revenues across the internet value chain nearly doubled in five years, from $3.3 trillion in 2015 to $6.7 trillion in 2020. Much of this growth comes from online services; they saw a 19% increase in revenue per annum in 2020.

According to the global body of mobile network operators, GSMA in its 2022 Internet Value Chain Report, the number of users being connected to the internet globally stands at an annual growth rate of 7.5%.

The study further reveals that this will be a major contributor to paid-for online services exceeding $1trillion in revenues in the nearest future, consequently driving huge capacity demand on global networks.

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Traffic per user grew at 27% per year, with almost 80%

The report states that the internet value chain is growing strongly, however the infrastructure providers (network providers) are not receiving revenue as expected and believed by many.

The report added that the benefits and returns are flowing principally to players in the online services business.

Although network providers invest and provide the necessary infrastructure, online services especially social media and video streaming and hosting  providers rake in more revenue at the expense of telecommunications operators.

The body in the report states that the situation has created imbalances between network operators and online services providers.

The body stressed that this may consequently put global growth prospects at risk across multiple sectors of the internet-based economy, if not addressed.

GSMA in the report urges business leaders and policymakers to fully appreciate the critical role of the internet infrastructure and work to ensure that market distortions, regulatory requirements, or other factors are not limiting the ability of participants to make sufficient returns in all segments of the ecosystem and that all segments can make a fair return.

“This would sustain long-term investment and not just those businesses with the biggest platforms and scale. The telecom operators have an important role to play and need the right incentives to keep investing in networks, both in core network capacity and increase in edge functionality,”

José María Álvarez-Pallete, Chairman GSMA’s according to Nairametrics  said, although the internet is doing so much across the world, certain sectors are squeezing network operators who provide the infrastructure they need to operate.

“The internet connects 4.6 billion people and drives the global economy. It is transforming business models, unlocking new opportunities, and uplifting communities across the world.

“But as some sectors in the internet value chain thrive, the demands of investing in the infrastructure those sectors rely on for growth are squeezing network operators. We welcome the growing recognition of this issue by policymakers, and as the internet-based economy expands across all sectors over the next decade,”

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