The global pandemic highlighted just how critical communications is to modern life. However, communication service providers (CSPs) continue to live through challenging times. The ITU reported that in 2022, there were 87 active mobile broadband subscriptions per 100 inhabitants worldwide. And in Europe and the Americas, saturation has already been reached with 110 and 113 mobile broadband users per 100 inhabitants respectively, says Ari Banerjee, SVP strategy, Netcracker Technology.
Today, more than 93% of people over ten years of age own a mobile. The headroom for any further significant growth in traditional subscriber numbers is limited. As the continuing increase in usage per subscriber isn’t generally being matched by corresponding revenue growth, the focus needs to change to how to serve these consumer and business customers better.
The telco business is at a crossroads as significant investments are being made to roll out 5G, fibre and cloud-based networks across the world. According to the Global Mobile Suppliers Association (GSA), by end of March 2023, 249 operators in 97 countries had launched 5G mobile services. The high speed and immense capacity of 5G and full fibre networks which accounted for 65.7 of the world’s 1.362 billion broadband connections at the end of 2022 according to research house Point Topic have the potential to support new consumer habits, facilitate new ways of working and improve the efficiency of many industrial processes.
But how can CSPs turn this into a profitable business opportunity?
With the prospect of limited growth in human subscribers, it’s becoming essential for CSPs in the mature mobile markets of advanced economies to capitalise on these new opportunities to diversify and grow their revenues beyond competing at the margins for churning subscribers. With the emergence of 5G core, MEC applications and network slicing, CSPs have an opportunity to monetise their networks in new ways and engage more deeply in B2B and vertical industry sectors, connecting ‘things’ as well as people.
For many CSPs this requires a new business approach that transforms them into technology companies – techcos.
What does it mean to be a techco?
To compete in this new environment, CSPs need to make their organisation future-ready. They need to transition to being software-centric and cloud-enabled businesses. Legacy IT systems need to be migrated to an open, modular cloud-native IT stack. Customer-facing and B2B services need to be digitised. Omnichannel systems need to be AI and data-driven to deliver a seamless, consistent and personalised customer experience.
Becoming a techco requires more than just changes to technology and systems. Success will require organisational and cultural change as well. CSPs need to develop and embed specialist knowledge and skills in technologies such as cloud, artificial intelligence and machine learning and adopt new operational concepts such as Agile development and DevOps.
Historically, telcos have relied heavily on a handful of technology partners for new feature and service development. This has restricted them from realising the full benefits of their own efforts to create differentiating services in-house. As techcos, CSPs need to become proficient in developing or co-developing their own code and inserting it into partner solutions.
Co-creation is a fundamental requirement for modern IT environments. Techco culture encourages and supports customer-led joint development projects and embraces collaboration inside new ecosystems. In their transition to techco, CSPs need to identify partners who will support their immersion into IT and cloud solutions, enrich their joint development setup and help them find a new balance between outsourcing and self-sufficiency.
Techcos will need co-creation platforms…
Co-creation platforms will make a big contribution towards creating new business value from 5G and fibre network investments, cloud and edge technologies by streamlining automated operations and enabling collaboration with partners at scale through the use of open APIs. Such platforms can leverage investments and create new growth opportunities while driving significant cost efficiency and agility across businesses. Telcos need solutions that accelerate business efficiency through intelligent automation, IT consolidation and extensive digitalisation of internal CSP processes. Good platforms should allow CSPs to reduce IT spend through BSS / OSS consolidation, modern IT software, operations automation and SaaS delivery models on any telco or hyperscaler platform.
Co-creation platforms also need to provide support for real-time charging across different services, partners or business models. The ability to offer new and diverse monetisation models will help CSPs create profitable value chains and position themselves as B2B2X enablers.
Becoming a techco opens the door to many exciting growth opportunities. Some CSPs will focus on creating new value from the core business and exposing network services in easy to consume APIs to developers, significantly expanding the business reach. Others will adopt a partner-based strategy that creates the right mix of services to delight customers and businesses alike. And in some cases the technco will diversify into new business areas, leveraging their existing strong technology assets in finance, industry 4.0, healthcare or other sectors.
Many CSPs have already dipped a toe into financial services through device financing schemes. By adopting the techco mentality, these capabilities could be offered alongside IT and network services as a one-stop-shop offering to third-party online retailers for home entertainment systems, consumer electronics or other goods for example.
Many large techcos, notably in Asia, are moving into the mobile space and are actively looking for synergies which will allow them to leverage their online services with their mobile subscribers. Large operator groups in Europe or the Middle East should equally be looking for opportunities to monetise capabilities and expertise held within their own subsidiaries, or associated investments, across their large multinational subscriber bases. These moves represent changes to traditional business models and return on investment.
As the backbone of the online world, telecommunications will remain critical. In the early years of the 5G era, digital transformation gives CSPs the opportunity to reset their businesses to become more like technology companies. The transition will be challenging: moving from being network-based to software driven; migrating legacy infrastructure to the cloud; adopting digital value chains in place of a small coterie of large suppliers; learning how to launch new products quickly; embracing a new culture; recruiting, developing and retaining new skills.
But the rewards could be substantial. Increased business agility will empower CSPs to adapt faster to market needs, stimulate improvement and add value on top of their network investments. By equipping themselves to serve a greater diversity of customers both human and inanimate CSPs can generate revenues and profit from 5G, cloud and edge technologies and achieve more proportionate rewards for the essential services they provide to society.
The author is Ari Banerjee, SVP strategy, Netcracker Technology.
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