10 Telecom Predictions For 2017

The Forecast Is In

The telecommunications market was jam-packed in 2016 with a flurry of mergers and acquisitions, data center sales, and a bevy of new service offerings. Carriers busied themselves by adding new, strategic services to their legacy connectivity portfolios in an effort to stay fresh, while other providers scooped up fellow carriers to better compete in the crowded market.

Telecom carriers are working hard to shake off their 'plain old telephone company' reputations, and this year is already shaping up to match the intensity of 2016. Here are our 10 telco predictions for 2017.

Consolidation Will Continue

Between CenturyLink announcing plans to acquire Level 3, Windstream and EarthLink set to merge, Verizon's acquisition of XO communications, and Charter's Time Warner Cable deal being cleared by the FCC, consolidation was running rampant in the telecom industry in 2016.

The trend will continue into 2017, industry pundits say. Rumors are already swirling this month that Verizon is in the market for a cable company, such as Comcast or Charter Communications. But 2017 could also see some of the smaller Tier 2 and Tier 3 carriers and Competitive Local Exchange Carriers (CLECs) come together to increase their footprints and better compete with the larger players.

Telecoms Will Stay In Cloud Market, Sans Data Centers

In 2016, many of the incumbent telecoms succumbed to the pressure of cloud industry heavyweights such as Amazon Web Services and Microsoft and ditched their once sought-after data center assets in an effort to stay profitable while also staying in the cloud market.

Carrier giants Verizon and CenturyLink sold off data center facilities at the end of 2016. Windstream also sold its physical assets at the end of 2015. But even as more carriers offload their data centers, these providers have no intention of leaving the cloud space.

In 2017, Verizon and Equinix, which picked up Verizon's North and Latin American data center business for $3.6 billion, will offer services for business customers based on the newly-combined product portfolios. CenturyLink also will stay in the cloud in 2017. The provider will continue to offer co-location services through a commercial relationship it will enter into with the consortium that bought its 57 data center facilities for $2.15 billion.

Carriers Concentrate On Content

In an effort to compete with the likes of Google and Netflix and add more value, many of the large, incumbent carriers have been on a mission to acquire content instead of simply offering connectivity.

AT&T announced its plans to acquire media and entertainment conglomerate Time Warner for a whopping $85.4 billion. Verizon in July announced its intent to acquire Internet giant Yahoo's media, search and communications assets in a $4.83 billion deal, which the provider hopes to integrate with the AOL assets it acquired in 2015. Verizon was also rumored to be sniffing around CBS, a company that was set to merge with Viacom before the deal fell through in December.

With the consolidation trend only picking up steam, telecom providers will be most likely continuing to compete by way of acquiring premium content.

Carriers To Continue To Invest In the Internet Of Things

Service providers jumped into the Internet of Things (IoT) space in 2016 as a way to offer more strategic services and offset the declining demand for legacy connectivity and voice services. Carriers will continue to build out their IoT strategies into the next year as they look to grow this revenue stream.

2016 saw carriers such as AT&T and Verizon make aggressive telematics and smart city-related technology acquisitions. In 2017, industry analysts believe that more carriers will follow suit and make acquisitions that target the IoT space. At the same time, Verizon and AT&T are showing no signs of stopping their IoT technology buying sprees.

Wireless To Win Over Wired

With more users relying on cellular connections as their primary means of connectivity, the legacy telecom providers are realizing that wireless, as opposed to their legacy wired infrastructure, is the future, according to industry pundits.

In fact, cable giant Comcast even announced in September that it would be launching its own wireless service by mid-2017. Verizon in January sold off its wireline asserts in three states to competitor Frontier Communications at the end of 2015, a move some industry analysts attributed to the provider shifting its focus to wireless.

With IoT picking up steam, the major carriers are building out their wireless and mobility practices, and even are starting to make mobile data plans easier for channel partners to sell. This strategy should continue into 2017, as wireless traffic outpaces hardline traffic.

5G Technology To Evolve

5G is still in development, and standards aren't expected until 2019 followed by commercial deployments in 2020, but that doesn't mean carriers aren't going to be pushing the envelope next year.

AT&T already kicked off a month-long business trial using an early version of 5G millimeter wave technology in December. Verizon also said that it had been doing field trials of 5G in the U.S. earlier this year. In fact, the Basking Ridge, N.J.-based provider said in March that it was planning a commercial launch of 5G as early as 2017. However, 5G technology will still be in its infancy in 2017, despite carriers trying to move the ball forward.

Net Neutrality Potentially Under Fire

While Net Neutrality, an Internet fairness doctrine, won't be overturned overnight, the incoming Republican administration could ease Net Neutrality rules.

President-Elect Donald Trump appointed a Federal Communications Commission (FCC) transition team led by Jeffrey Eisenach (pictured), a telecom consultant and well-known critic of current FCC Chairman Tom Wheeler's policies, including Net Neutrality. Wheeler in December announced that he will step down on Jan. 20, Inauguration Day.

As a result of the new administration and Wheeler resigning, many industry analysts believe the stage is being set for Wheeler's policies -- namely, Net Neutrality -- to be dialed down or repealed completely.

Carriers to Prioritize Software-Defined Technologies

Many service providers this year leveraged software-defined networking to inject agility into their networks. By extension, software-defined wide area networking (SD-WAN) is allowing these carriers to offer in-demanded hybrid networking offerings to their business customers.

Several carriers, including AT&T and EarthLink, introduced SD-WAN services for businesses looking to intelligently prioritize traffic across their networks. SD-WAN services will continue to be a popular solution for end customers in 2017, and carriers will be diving deeper into SDN and Network Functions virtualization (NFV) technologies in order to evolve their own legacy networks.

IT Distribution Providers To Add Telecom Practices

The August merger between IT distributor ScanSource and master agent Intelisys made big waves in the telecom channel. The deal highlighted a valuable opportunity that many IT distributors are leaving on the table: lucrative recurring revenue that comes from selling telecom services.

With business models shifting away from large, upfront IT spending in favor of monthly subscription-based pricing, IT distributors are looking at ways to include recurring networking, cloud, and voice services within their businesses.

Following the ScanSource-Intelisys deal, many industry pundits predicted that 2017 would see more consolidation in the distribution space as these companies look to acquire master agents. Some master agents could also join forces by way of mergers next year.

Security To Stay In The Forefront

With large-scale security breaches staying front and center in the news, carriers -- the keepers of Internet infrastructure -- will continue to regard security as a high-stakes issue in 2017.

In 2016, security vendors, including Palo Alto Networks and Fortinet, rolled out offerings specifically for telecom service providers. Many of the large security vendors are starting to focus on carriers as a customer segment, but it's been slow-going. In recent years, telecom providers have become a popular target for hackers. As these providers continue to keep security front of mind and bake it into their cloud-based offerings and data centers, carriers could be looking to security vendors for high-end network security firewalls.