Time to get out of consumer market for MNOs?

I was delivering a workshop on SDN / NFV in wireless, last week, at a major pan-european tier one operator group and the questions of encryption and net neutrality were put again on the table.

How much clever, elastic, agile software-defined traffic management can we really expect when "best effort" dictates the extent of traffic management and encryption renders many efforts to just understand traffic composition and velocity difficult?

There is no easy answer. I have spoken at length on both subjects (here and here, for instance) and the challenges have not changed much. Encryption is still a large part of traffic and although it is not growing as fast as initially planned after Google, Netflix, Snapchat or Facebook's announcements it is still a dominant part of data traffic. Many start to think that HTTPS / SSL is a first world solution, as many small and medium scale content or service providers that live on a freemium or ad-sponsored models can't afford the additional cost and latency unless they are forced to. Some think that encryption levels will hover around 50-60% of the total until mass adoption of HTTP/2 which could take 5+ years. We have seen, with T-Mobile's binge on  a first service launch that actively manages traffic, even encrypted to an agreed upon quality level. The net neutrality activists cried fool at the launch of the service, but quickly retreated when they saw the popularity and the first tangible signs of collaboration between content providers, aggregators and operators for customers' benefit.

As mentioned in the past, the problem is not technical, moral or academic. Encryption and net neutrality are just symptoms of an evolving value chain where the players are attempting to position themselves for dominance. The solution with be commercial and will involve collaboration in the form of content metadata exchange, to monitor, control and manage traffic. Mobile Edge Computing can be a good enabler in this. Mobile advertising, which is still missing over 20b$ in investment in the US alone when compared to other media and time spent / eyeball engagement will likely be part of the equation as well.

...but what happens in the meantime, until the value chain realigns? We have seen consumer postpaid ARPU declining in most mature markets for the last few years, while we seen engagement and usage of so-called OTT services explode. Many operators continue to keep their head in the sand and thinking of "business as usual" while timidly investigating new potential "revenue streams".

I think that the time has come for many to wake up and take hard decisions. In many cases, operators are not equipped organizationally or culturally for the transition that is necessary to flourish in a fluid environment where consumer flock to services that are free, freemium, or ad sponsored. What operators know best, subscription services see their price under intense pressure because OTTs are looking at usage and penetration at global levels, rather than per country. For these operators who understand the situation and are changing their ways, the road is still long and with many obstacles, particularly on the regulatory front, where they are not playing by the same rules as their OTT competition.

I suggest here that for many operators, it is time to get out. You had a good run, made lots of money on consumer services through 2G, 3G and early 4G, the next dollars or euros are going to be tremendously more expensive to get than the earlier.
At this point, I think there are emerging and underdeveloped verticals (such as enterprise and IoT) that are easier to penetrate (less regulatory barriers, more need for managed network capabilities and at least in the case of enterprise, more investment possibilities).
I think that at this stage, any operator who derives most of its revenue from consumer services should assume that these will likely dwindle to nothing unless drastic operational, organizational and cultural changes occur.
Some operator see the writing on the wall and have started the effort. There is no guarantee that it will work, but certainly having a software defined, virtualized elastic network will help if they are betting the farm on service agility. Others are looking at new technologies, open source and standards as they have done in the past. Aligning little boxes from industry vendors in neat powerpoint roadmap presentations, hiring a head of network transformation or virtualization... for them, the reality, I am afraid will come hard and fast. You don't invest in technologies to build services. You build services first and then look at whether you need more or new technologies to enable them.