Solution Providers: As Carriers Stop Being 'Dumb Pipe' Providers, The Smart Move For Partners Is To Add Value

AT&T’s potential acquisition of media behemoth Time Warner is just the latest sign that carriers are looking to offer more than just the pipes, solution providers say.

As service providers such as Google and Neflix disrupt the video business, carriers see an opportunity to branch out from their core connectivity offerings and deliver premium content.

"The future is wireless, and AT&T and Verizon are terrified of becoming 'dumb pipes,'" said Michael Bremmer, CEO of TelecomQuotes.com, a telecom consultancy based in Moreno Valley, Calif. "The [carriers] are seeing that the way we consume media is going to be through streaming [services]."

[Related: Partners: Monster AT&T-Time Warner Deal Could Add Value Beyond Connectivity… If It Wins Approval]

Dallas-based AT&T last week formally unveiled plans to acquire Time Warner for $85.4 billion in a stock-and-cash transaction that values Time Warner at $107.50 a share. The deal, which is still subject to regulatory approvals and approval by Time Warner shareholders, will give AT&T access to content assets such as HBO, CNN and Warner Bros. Studios.

If approved, the AT&T-Time Warner merger would create the nation’s largest entertainment company just ahead of cable giant Comcast, which struck a similar deal in 2009 by acquiring NBCUniversal.

Verizon, meanwhile, has had "false starts" in the content arena, with its 2015 mobile video service Go90 struggling to gain traction in the crowded over-the-top video market, Bremmer said. But in 2015, Verizon snapped up media provider AOL and now plans to acquire internet content provider Yahoo in hopes of growing its dominance in the media space. AT&T also reportedly bid on Yahoo before Verizon won the deal.

These types of acquisitions are becoming more frequent, but carriers are still struggling to make the pivot into providing meaningful content, said one solution provider executive who requested anonymity.

"These acquisitions tell us that the large carriers, more than anything, want to control content because at the end of the day, it’s the content that matters, not the underlying infrastructure," the executive said. "We've seen several attempts at it and, clearly, carriers aren't giving up on this strategy."

As telecom providers scramble to add more value to their offerings, so too should their partners, Bremmer said. The proposed AT&T-Time Warner mega-merger should point out to partners that selling basic connectivity is not a viable long-term strategy for the channel, he said.

"If you're a partner selling pipes, and you're not creating unique value, you're out of business in three years," he said.

Solution providers should instead be looking at delivering unique services over the pipes and focusing on strategic business outcomes for end customers, TelecomQuotes' Bremmer said.

"You need to sell something that has value and is sticky, not something [where] the price is going to continue to get cheaper," he added.

While carriers will require fewer partners to sell basic connectivity as their own portfolios evolve, they will still rely on them to sell business services, especially on the high end, according to the solution provider executive who requested anonymity.

"If you look at Comcast, for example, they are definitely relying on the partner community to drive sales of their business services," the executive said.

But partners still need to offer their own intellectual capital and services in order to be less "replaceable" to both their carrier partners and end customers, Bremmer said.

"If a partner has all its money coming from suppliers, you don't have a business, you have a job," he added. "Carriers will still need partners that think strategically for the more complex deals."

AT&T's competition applauded the carrier for the deal this week. Lowell McAdam, CEO of Basking Ridge, N.J.-based Verizon, said Monday that the proposed merger could shake up content companies' business models and "makes very good sense" for AT&T.

Marcelo Claure, CEO of Overland Park, Kan.-based Sprint also weighed in with positive feedback regarding the acquisition Tuesday.

"The way we look at it, it's a bold move by AT&T," Claure said. "I applaud them for taking that risk. It validates the point that content providers and wireless carriers can go hand in hand."