By Martin Creaner, president and CEO of TM Forum

Two years ago, everyone was talking about cloud computing or cloud services. Last year it was smart grid and e-health.

This year I think the emergence of the so-called digital economy—or services connecting traditionally offline devices and services with the online world—has become mainstream.

Key issues such as cloud-based services, including the growing area of cloud brokerage, machine-to-machine (M2M) and mobile payments are likely to make their mark in 2012, but they are part of a much bigger picture of a rapidly changing communications world.

The reality for 2012 and well beyond is that every player in the value chain is looking at a world that’s hungry for connected services and everyone in that value chain is going to try to meet the needs of the consumers.

CSPs can meet many of these needs, but there are hundreds of thousands of small innovators that are eager to try as well. As a result, the only real prediction we can make with any kind of certainty is that traditional communications services revenues will continue to fall inexorably over many years and will eventually bottom out.

We’ve known that voice revenues have been falling for years, but an interesting recent twist is that for the first time, revenue for texting and messaging—SMS and MMS—is falling.

This is largely due to the emergence of mobile social networking and cloud-based integrated alternatives such as Apple’s iMessage which bypasses the traditional phone network and allows two devices running Apple’s iOS 5 to have unlimited messaging with no incremental revenue or even involvement by the operator.

While we have a way to go before smart phones and the connectivity that supports them is ubiquitous, we can’t ignore the signs that traditional and albeit more reliable services will progressively lose out to more integrated and frankly innovative over-the-top (OTT) services.

Traditional services won’t disappear completely. Instead, we are going to see a dramatic contraction of revenues from these services, alongside the rapid growth of new services.

But the kicker is that the new growth won’t necessarily happen within the same companies that are experiencing declines, so this shouldn’t be seen as a panacea for the large CSPs of the world. Rather, the new service revenue may well appear in much smaller, nimbler firms.

We’ve all heard about OTT services that have the potential to bypass the service provider entirely, and OTT will continue to be a hot topic for the remainder of the year. But now there’s another fly in the ointment in the form of “under the floor” services where CSPs are outsourcing their IT and network operations to vendors.

So we have CSPs being squeezed from the top through constant competition in a saturated market and from OTT services, and then at the bottom they are outsourcing their core competencies.

In essence, they are driving themselves into a position where they don’t know as much about their network and back-office as they should. They are feeling the heat from all sides.

On the bright side they do own massive swaths of spectrum and bandwidth, but will that make up for losing customers at the top and surrendering their competencies at the bottom with their network and IT operations?

With the barrier to entry now so low for anyone wishing to get into the communications space, and with customers viewing whoever supplies their smartphones and tablets as their service providers, the market has definitely been turned on its head.

While CSPs themselves are undergoing a huge transformation to focus on the parts of the value chain that will deliver most benefit to them, they will still have to keep up with the hot topics for this year, including big data management, security, customer experience management, location-based services, e-payment and more.

If we all come together as an industry, rather than reinventing the wheel, we can focus on the vehicles of communications services and help all the players in the value chain find success.

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