Despite all the recent advances in technology, the actual business of telecoms has been slow to move with the times.
Take dynamic pricing as an example, a practice common across many industries. Using dynamic pricing, businesses can set flexible tariffs based on current market activity.  They change prices based on algorithms that consider competitor pricing, availability, demand and other factors that, ironically, they can monitor because of the connected world the telcos have enabled. Dynamic consumer pricing is the norm in a host of industries such as hospitality, travel, entertainment, and energy – but not in telecoms.
In consumer telecoms, the bundle (call, text, and data) or flat rate tariff options are the norm. A limited choice of best effort broadband packages, most, if not all, with fixed rates, no real allowance for different patterns of usage, and no guarantee of service delivery. Â No real flexibility today and very little sign of change tomorrow.
What’s more, ask MNO executives what services they expect to drive 5G revenues and you will likely hear about the industrial IoT, connected or autonomous cars, and other business services long before you hear any reference to consumers, let alone any differentiated services for the consumer. In fact, in last year’s telecoms.com industry survey, 84 per cent of respondents prioritised B2B over B2C for 5G investment.
Where dynamic pricing is concerned, it’s also a similar story in the business market where high speed, high capacity leased lines attract a fixed fee that doesn’t change with usage. While that gives businesses certainty on costs and guaranteed availability – it lacks any flexibility and limits the potential target market for such services. The company might only use the 100 per cent capacity once a day when a network-wide full server back-up is carried out – quite often overnight when the network is quiet. But the pricing does not reflect that, it is just the 100 per cent charge all day, every day.
For some reason, telcos have been reluctant to explore the dynamic pricing model. As a result, they continue to risk conceding the business opportunity to the over-the- top (OTT) innovators who are not only using the power and ubiquity of the internet to offer their services, they are also starting to look at differentiated connectivity.
AWS (Direct Connect) and Azure (ExpressRoute) already offer direct connectivity to their sites, bypassing public internet access. In addition, AWS is offering a new platform and service called Wavelength aimed at delivering ultra-low latency applications from AWS network edge servers to mobile devices and end-users, positioning themselves as 5G communications suppliers.
This is truly an absurd situation. To deliver Wavelength, AWS is creating a network-edge computing overlay on top of existing telco networks, something the operators should be in a much better position to deliver themselves directly.
Perhaps what is even more surprising is that in some cases, the web giants like Amazon are being welcomed with open arms and operators have opened their doors to AWS inviting them to camp on the network edge. They presumably regard AWS as a potentially helpful, profitable tenant, but surely the likelihood is that the revenue AWS soaks up is on another level completely to the rent that it pays for its presence.
AWS, and others like it, already offer businesses dynamic pricing for server level usage. It offers an on-demand pay by the hour service with no long-term fee commitment; or the option to pay a low, one-time fee and get a reserved discount on the hourly rate. Alternatively, in a truly dynamic offering, businesses can bid for unused capacity using a spot price that changes as demand fluctuates.
Telcos are currently a long way from being able to offer this level of pricing flexibility to businesses or consumers – and in order to get there, a few things need to change.
- Mindset change. In the days before the always-on connectivity that the mobile market explosion delivered, fixed line national operators offered peak and off-peak calling charges. Although that concept has fallen out of favour, it retains some merits. For example, in today’s CoronaVirus infested world, I have no doubt that consumers will be willing to pay a premium for assured quality of video calls with family and friends, and even telemedicine calls with doctors via video. Today we all understand exactly what ‘best effort broadband’ means in terms of connectivity, latency and jitter. Dynamic pricing could also incentivise businesses to use bandwidth hungry applications or move large scale workloads to off-peak hours.
- The network itself needs to change. Service providers are not only limited by mindset, they are also restricted by the way networks are traditionally built and configured. Too often networks are built as simple, large but expensive pipes, where the availability of the pipe is always charged at 100 per cent occupation regardless of traffic. Operators need to increase their investment in more flexible infrastructure, including greater use of SDN and NFV architectures.
- The systems need to change. Talk to any service provider and they will tell you that they have hundreds, if not 1000s of tariff packages running on their systems – but that’s largely because legacy tariffs are kept live for existing customers. The billing systems are complex, and a change in one element can often have unforeseen repercussions across other tariffs. In the 2019 Telecoms.com survey, 70 per cent of respondents believed BSS systems needed to undergo major changes to enable customized network services.
It could be that 5G is the last realistic opportunity for telcos to change their business model; to stop being a supplier of raw bandwidth, and start being a supplier of dynamic, assured and differentiated connectivity services. To do so they need to deliver private line like services to both businesses and consumers, priced dynamically on a pay-per-use basis, and make better use of their bandwidth to deliver cost savings to customers.
Of course, it requires investment, but it is completely within their capability to start working towards this now. Working towards using a combination of soft and hard network slicing to deliver a much more flexible infrastructure – a true, stand-alone 5G network providing different levels of guaranteed service availability, at different tariffs, to different customers all at the same time.
Telcos need to understand that they have overlooked the full potential of dynamic pricing in both the business and the consumer market. In fact, they have almost missed the consumer market altogether and allowed the Internet giants and OTT companies to take the lion’s share of the revenue.
They need to recognise that, like businesses, consumers would pay a reasonable premium to get on-demand, assured and differentiated service for a specific reason – from cloud gaming and entertainment to remote medical support. These are services consumers would pay for and consume on an as-needed basis with guaranteed levels of connectivity.
To do all this, telcos need to invest in a service-oriented infrastructure. The 5G radio is already being upgraded and is fit for purpose. To drive new revenue streams, they now also need to invest in a dynamic and sliceable transport network so that they can bring their outdated business model up to date in a dynamic business world.
