To the average person on the street, it may appear that mobile carriers are thriving. It’s hard to use the Web or flip on the TV without seeing flashy ads for the latest deal or the newest smartphone – all at lower and lower prices.
The reality, however, is a bit more complicated.
Those inside the industry have seen it coming for years: The threat that mobile carriers – even the largest ones like Sprint, AT&T Mobility and Verizon Wireless – are at risk of becoming “pipes.” What I mean by this is that basic communication infrastructure – calling, texting and data services – has matured and the competitive landscape has shifted to finding new sources of revenue through user services and experiences, leaving carriers at risk of being left behind.
During this year’s Mobile World Congress and in subsequent announcements, we learned that carriers are already seeing increased pressure from tech giants like Facebook, Amazon, Apple and Google that are making their marks on a crowded industry – a trend that will only increase. Additionally, the broad accessibility of free Wi-Fi is decreasing reliance on messaging while data plans and messenger apps – such as WhatsApp – are eating away at the number of standard texts we share, further eroding the traditional cornerstones of mobile carriers’ business models.
A tectonic shift
In reacting to this trend, mobile operators have a growing desire to shift their business strategies to become their own “digital service providers” and take advantage of the capabilities enabled by modern improvements to network technology. We saw it recently when Nokia acquired Alcatel-Lucent and Google announced its plans to provide mobile voice and data services. These were yet more signs of the telecom infrastructure market shifting to new avenues for revenue and relevance.
What these shifts mean is that mobile operators must now find new ways to engage with customers to boost monetization through value-added customer services and products. They must evolve to keep pace with today’s business environment and the rapidly shifting demands of a diverse consumer base. Without a dramatic change in their technology and approach, carriers will undoubtedly lose out to those that have consumers’ attention by way of apps and other content models.
What will it look like?
The future of the mobile operator industry is an architecture similar to Web and mobile applications, which will enable carriers to rapidly adjust their services and offers to capitalize on the quickly shifting desires of the market. I envision the future of this field supported by a simple yet powerful set of three pillars: 1) the device, 2) the cloud, and 3) a service and commerce design portal.
With this type of architecture, carriers can move from being hardware-based, communications providers toward the “digital service provider” model. This shift enables carriers to rapidly develop, “A/B” test and deploy compelling internal and partnered services in a matter of days or weeks instead of months or years, meeting the delivery expectations of today’s consumers. Also, an end-to-end framework can enable richer context awareness and functionality, and eliminates many legacy systems and subsequent costs.
While added flexibility for consumers is important, more critically this shift will open up an entire new realm of revenue possibilities for carriers. Instead of being fixed to set strategies, they’ll have the ability to test, optimize and roll out new services and pricing plans based on trends they see in the market, increasing customer satisfaction, retention and revenue. This model finally allows innovation to flourish in an industry that has been stifled by legacy software and multivendor, cross-functional processes.
The challenges ahead
The challenge here comes from the entrenched nature of the current market leaders. Larger, traditional carrier systems will take longer to respond, due to their dependence on multiple legacy IT vendors and their fear of changing their business approach to hold on to their positions. Over the years, the industry has built up vendor disincentives (e.g. professional services contracts, organization hierarchies) that have kept carriers from making the technology changes they need to stay ahead of the game.
Of course, this isn’t particularly different from other markets; this “innovators dilemma” has impacted multiple industries.
Where are we going?
The wireless service provider industry is just beginning a highly disruptive period. Consumers are seeking more choice and customization while carriers are looking for new ways to gain back customer excitement with loyalty. On top of all of that, the new wave of client-cloud technology is drastically shifting the basis of competition.
We’re still a long way from carriers completely becoming commoditized pipes, and this new technology disruption cycle provides an opportunity for visionary mobile operator executive teams to transform their businesses to regain a promising future.
Greg Raleigh, founder and CEO of ItsOn, has a 30-year track record of innovation and leadership that has shaped today’s wireless and networking industries. He founded four successful companies. He conceived and proved the groundbreaking theory for multiple-input/multiple-output wireless transmission, a contribution that completely changed 100 years of thinking and led to dramatic data speed increases and connection reliability improvements in the field of radio communication. He invented and commercialized the MIMO signal processing architectures and algorithm approaches used today in all 4G chipsets and most Wi-Fi chipsets – including LTE, HSPA+, WiMAX, Wi-Fi 802.11n and Wi-Fi 802.11ac. Most recently Raleigh co-invented and commercialized Smart Services, the world’s first highly customizable mobile network service technology. Raleigh holds a B.S. degree in electrical engineering from California Polytechnic University, an M.S. degree in electrical engineering from Stanford University, and a Ph.D. in electrical engineering from Stanford University.
Editor’s Note: The RCR Wireless News Reality Check section is where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
