Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
Telecommunication operators are faced with a daunting revenue challenge that seems to get worse with each passing day. Even the recent uplift fueled by the launch of smartphones is coming to a close. Riches can no longer be made by chasing new customers who are buying smartphone-linked accounts. In developed economies, the market is becoming saturated.
With this as a backdrop, telcos are also facing the ongoing threat from over-the-top providers delivering services to subscribers that leverage the operators’ broadband networks. OTT suppliers continue to seize increasingly more content market share. And it is not just companies like Netflix that telcos have to worry about. Facebook’s recent purchase of WhatsApp is another visible threat. In markets outside the U.S., WhatsApp generates almost as much messaging traffic as all traditional carriers combined. Instead of using carrier text and voice messaging at cents per minute, WhatsApp users consume a few bytes of their data plan for close to zero cost, sending WhatsApp just $1 per year. That’s not much to a phone company, but it’s a nice payoff for an app company with more than a half-billion users. Most recently, WhatsApp added a voice calling service to its offering that enables Facebook to challenge telcos not only for mobile messaging, but for their bread-and-butter phone calls.
Instead of offering new services, telcos have been reduced to competing with each other on price – otherwise known as the danger zone. Given this reality, telcos need to adapt by taking advantage of the “as-a-service” revolution and becoming service companies. They also must find upselling opportunities instead of just chasing after new subscribers.
Digitization
The telecommunications industry has been slow in its uptake of digital technologies, yet across industries companies depend on telecom networks to provide customers with compelling online and mobile experiences designed to retain users and capture their interest. The telco industry’s own efforts to transform the way companies interact with customers, however, has lagged. Telco subscribers are learning the value of digital through experiences in other industries and is coming to expect the same from telecom operators.
The digital everything-as-a service movement has already transformed many other industries, including media, financial services, retail, health care, transportation and utilities. In these industries, digitization is not just about lowering costs and achieving operational efficiency, but is used to provide compelling customer experiences that drive new top-line growth.
Operators must be able to offer an integrated and original user experience across all platforms ranging from mobile devices, desktops, phones and the online store. If kept in place, there will be a foundation to build out a portfolio of new products and services designed to meet the unique requirements of each customer – from consumers to enterprises. To do this, operators also need an agile operating model and services infrastructure to support their digital transformations. Success will be defined by the ability to provide services not just today, but for years to come. And in order to create unique customer experiences, collaboration with customers and partners, experimentation and taking down the classic telco silos is a must.
While the telecom industry provides the backbone for digitization, it has not been able to digitize its own internal operations to benefit from the opportunity. The telcos invest billions of dollars to keep up with the exploding demand for data services while at the same time other industries have been able to seize the opportunity this robust infrastructure provides for their benefit.
Telcos of all sizes need to rethink how they capitalize on new service opportunities. Business teams must be able to develop new products, services and customer experiences across verticals and not be encumbered by the limitations of existing technologies.
Consumers across all industries are demanding more powerful devices, ubiquitous connectivity, more and better infotainment, and deeper interactions at work, at home, in the car and on the go. Telcos need to reimagine how they go to market and rethink how they transform the entire customer experience to provide a compelling portfolio of new digital services. Successful operators have already digitized their relations with customers, developing Internet-based ordering, online customer care and improved social media presences. Understanding what motivates customers and how they are consuming and using services is the best way to uncover upselling opportunities. But launching and monetizing these new services cannot take months or years to accomplish.
Business to business
There is a race going on with data center and network operators both expanding their facilities. In an increasingly networked society, the requirement for data center capacity will continue to grow as almost every operator is intent on buying or building out footprint in the age of the cloud. Gartner forecasts that the cloud services market will be worth $20.6 billion in two years, with infrastructure-as-a-service, cloud management and security services all growing. Telcos want to move up the IT value chain and transition to providing enterprise hosting and managed services.
While the ambition is there, telcos must be able to convince enterprises that they have the required skill sets and knowledge to deliver enterprise-class ICT. One of the challenges of selling to enterprises is that a business must be able to provide an individual solution to that enterprise. This runs counter to the telco business model of standardized offerings with rate plans. They must move beyond providing infrastructure to providing expertise.
But the cloud is a business model with which telcos are comfortable. After all, a cloud service has a rate plan; it is pay as you go and utility-based – all features of a business model that is easily relatable to network providers. While everyone believes telcos should be able to do cloud, and there are a handful that have proven to be successful, most are just scratching the surface. The business case to a customer is evident as a telco can provide a single service-level agreement that includes cloud services and network, as well as geographical coverage. There is tremendous opportunity to expand into the enterprise market as few companies beyond the likes of Amazon.com, Facebook or Google are building their own networks. The same is happening with computing technologies.
But the competition is coming from companies that know how to run lean, automated operations for cloud services. That same kind of agility and automation needs to be part of the telco vernacular. Spinning up machines and connecting them across a VPN outside a data center cannot take months. Enterprises are sensitive about how quickly they get service and how flexible the virtual machines can be. This is one reason software-defined networking and network function virtualization are requirements for making carriers’ operations more efficient along with enabling the service agility required for rapid introduction of new services to both consumers and enterprises.
Big Data: the new currency
Another untapped opportunity is big data. In today’s climate of shrinking revenue, saturated markets and varying forms of regulation, data provides hope. With all of the information available to telcos, there is a great opportunity to monetize data for the benefit of the operator, the business and society overall. Consider the smart city as a service – an operator has the ability to integrate technology into the heart of a city’s own strategy. The build-out of infrastructure and machine-to-machine technologies delivered over ubiquitous communication platforms provides an unparalleled opportunity for a service renaissance. The data generated by smart meters, smart urban lighting, smart water, traffic surveillance, smart transport, smart waste management and other smart things creates an unparalleled opportunity across verticals to create tailored applications. Across almost every vertical, there are untapped service opportunities.
Data is the new currency that can turn customers into products. After all, retailers, credit card companies and online search engines harness considerable value from data to create more viable products for customers. The opportunity and potential for a telco to use its data to both serve itself and help other companies better serve their own customers is unlimited.
Telcos that incorporate all these available resources and technology to move from talking the talk to walking the walk can transform to become the service companies they can be. But they need to hurry – this is an industry that’s declining in its traditional capacity and utility with each passing year, and the telcos that don’t adapt will soon be the ones to die.
Esmeralda Swartz has spent 15 years as a marketing, product management and business development technology executive bringing disruptive technologies and companies to market. Swartz is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs. Prior to MetraTech, Swartz was co-founder, VP of marketing and business development at Lightwolf Technologies, a big data management startup. Swartz holds a Bachelor of Science with a concentration in marketing and international business from Northeastern University.
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