It’s been an interesting 12 months for the telecommunications industry. From the rise of generative artificial intelligence (AI) to ongoing macroeconomic instability, telcos have had to take a hard look at their business models and shift their strategies.
Traditionally, revenue growth has been the top priority, but we’re now seeing a focus on maximizing efficiencies in the face of more expensive access to financing. Only one in 10 telcos have reduced their operational expenditure (opex) over revenue in the last decade, according to Omdia. Worldwide spend on digital transformation is forecast to reach nearly $3.9 trillion in 2027, and there will be deep curves in the telco industry on how to use capital expenditure (capex).
Today’s networks are increasingly more expensive to build and run, which will drive changes in how telcos align spending with usage. Here are a few emerging trends they must navigate in 2024.
Adopting the next phases of generative AI
No other technology has driven as much buzz recently as generative AI. According to a survey by Altman Solon, generative AI spending could surge as much as six times the current amount for telcos, and use cases will reach an average of 34% adoption among communication service providers (CSP) within the next year, reaching 48% adoption within the next two years.
Telcos are in the first phase of generative AI usage, where solutions such as call summarizations or chatbots that augment existing systems allow for rapid implementation and adoption. Customer-facing chatbots are the most widely adopted use case for generative AI in the telco industry, with 92% of CSPs highly likely to implement chatbots, and 63% of those stating they already have one in production.
In 2024, we’ll see the next phase of adoption where telcos will mature and scale their generative AI-powered tools and experiences. We’ll see keen focus on infusing the customer experience with generative AI, which can come in the form of personalized product offers and marketing to create new value opportunities. One New Zealand has already introduced a generative AI solution that helps its contact center agents better understand why customers call and how to proactively support call resolution, leading to a 10% increase in customer trust. Early work by Amdocs with their launch of Stellar Elements to unify its eight specialized customer and user experience companies under one brand, have showcased how quickly some of these use cases can be built on top of enterprise ready generative AI tooling to drive business value. Cox Communications also uses generative AI to foster innovation and enhance customer service to reduce the time previously spent on manual documentation searches, slashing it from 2-3 hours to mere seconds.
Increasing Software as a Service (SaaS) utilization
Many larger telcos have traditionally been builders, assembling bits and pieces of various technologies to develop services. Telcos are leveraging SaaS solutions to solve problems such as legacy tech debt, leading to improvements in the overall customer experience. Operators like T-Mobile are leaning on SaaS solutions from Salesforce, Adobe, Amdocs, and others to rapidly transform their customer experience as part of their digital-first vision while they navigate complex system migration work.
In 2024, telcos will continue to focus on utilizing SaaS, as they strive to improve time to
market for new products, achieve better financial performance and business agility.
Unlocking new network capabilities through APIs
Telcos will focus on exposing network capabilities through Application Programming Interfaces (APIs) by unlocking information from 5G networks, giving more control over network programmability to manage areas such as quality of service and bandwidth.
As the industry has standardized APIs across operators, telcos will need to evaluate whether they will host their own API network or work with cloud providers. It’s important to consider the components needed for a network API, including computing power, storage, databases, and machine learning capabilities needed to give the developers an enhanced experience to support.
Enhancing operator value using the cloud to transform core network capabilitiesÂ
Many telcos are using the cloud to create more cost-efficient networks which can reduce operating expenses/revenue ratios by more than 10%.
The focus on cloud RAN will continue in 2024, and telcos will harness their full spectrum of benefits including higher efficiency, cost reduction, and reduced power consumption. CSPs like NTT DOCOMO and NEC Corp, for instance, have shown that they can reduce their power consumption by over 70% using cloud RAN.
Outside of cost optimization, the cloud also opens new revenue opportunities for CSPs, such as re-imagining product lines and capabilities. There’s also an opportunity to create a globally distributed enterprise network, such as what Deutsche Telekom did to combine their connectivity services with third party connectivity, computer and storage resources. TELUS released a smart home solution in 2023 that reduces the need for multiple smart home apps and simplifies the installation process for new devices.
To sum up, it’s important for telcos to evaluate and select the right cloud provider – their choice of partner will determine enterprise ready and safe generative AI capabilities, the breadth of cloud native SaaS providers, available developer communities for their APIs, and industry depth to build the next generation of execution capabilities. In order to stay ahead, telcos must remain nimble and evaluate how these emerging trends and technologies can accelerate their business goals and set them up for long-term success beyond 2024.
