What is telecom operator’s role in digital economy?

Tom Loozen, global managing director at Accenture Communications Industry group, says Wireline and wireless service providers who have staked their business on voice and messaging revenue must now grapple with the harsh realities of a different market with different demands.

Digital growth has opened the floodgates to a number of companies adopting the same role as telecom providers by offering similar packages of broadband, voice and messaging services. From Internet search providers to computer manufacturers, there are now more competitors with which to contend, and each is on an equal footing with the established names that preceded them. Digital has disrupted the market to the point where customers are no longer “owned” by a single provider but shared across multiple providers. With more competitors attempting to claim their share, the revenue such customers can generate for service providers is limited.

The challenges don’t end there. Digital enables enhanced services. Short-range alternative public hotspots, as well as white label networks, are emerging technologies that appeal to customers. Digital “pure plays” who started from a digital foundation are better equipped to provide such services than incumbents who still rely on slow and inflexible IT architectures ingrained in their operations.

So what can telecom incumbents do to get back in the race? Going head-to-head with their digital competitors is a losing battle. Doing nothing is the surest way to defeat. To thrive in this digital economy, operators must re-imagine their core businesses and find ways to turn this disruption to their advantage. They need to take on a new market role.  Instead of vying with competitors head on, they need to help them succeed.

Historically, incumbents have provided communications services outright. But now the better opportunity is enabling others to provide those same services.  Incumbents should reside in the middle of the digital economy providing the network that powers the digital services of device manufacturers, over-the-top providers, media companies, developers, solution vendors, and numerous vertical industries.

In the digital economy, the role of the incumbent has evolved into an Integrated Digital Service Provider (IDSP), operating as a platform for all things digital for their own services and third-party companies.  IDSPs feed into the “Platform Revolution” trend in which companies use digital technologies — social, mobile, analytics, and cloud — to build a specific set of services that help other businesses develop and deploy their digital offerings.

There is tremendous growth potential for incumbents that embrace the IDSP role and move into digitally contestable markets. Take, for example, the Internet of Things (IoT) opportunity in which devices are interconnected in a network that collects and exchanges data. IDSPs should provide the bandwidth for that network and be the integrator that ties disparate IoT devices over a home WiFi or broadband network. Integrating these devices makes it possible for manufacturers to create their own branded services on top of the platform from the IDSP.

Potential audiences in IoT include home healthcare integrators, customized cloud providers, virtual interaction facilitators, and smart city providers. Estimates show that the number of connected devices in five years will range from 50-to-75 billion, far more than the 8-to-10 billion devices currently on the market. For an IDSP, each device is a revenue opportunity.

But becoming an IDSP will not happen overnight.  Telecom incumbents have the disadvantage of working from the legacy architecture cited before.  There is also the challenge of re-imagining their core business. This entails a 180-degree proposition that will cause growing pains and natural resistance from invested participants.

Telecom incumbents can start by evaluating their core assets and strengthening internal capabilities for digital business. After establishing their core business, they can look externally and plant their flags in those digitally contestable markets.

In a point-of-view paper on IDSP, Accenture explores use of digital disruption for competitive advantage. The paper outlines rational moves telecom incumbents can make to get on the right side of the digital economy. Our research identifies six steps to become a high-performing IDSP:

Deliver seamless customer experiences – Create larger, omni-channels that marry web, mobile, social, retail, in-store, call center and other touchpoints for a consistent, shared experience customers can enjoy. Telecom incumbents can sell more efficiently in an omni-channel while increasing customer loyalty through added convenience.

Specialize the network – Instead of striving for commoditization, operators should differentiate their network capabilities, capacities and solutions for premium revenue. The more unique a service the better.

Create a multi-speed IT architecture – Create multiple tiers in IT architecture that can accommodate digital services while also simplifying legacy systems for greater agility. Invest in new digital technologies, and build an application programming interface layer, to expose core data to faster-moving digital channels and ecosystem partners.

Leverage partnerships – Form business relationships across multiple industries that will be the basis for building a digital platform and winning more business.

Invest in security- According to Accenture’s Digital Consumer Survey from 2014, nearly a third of consumers trusted service providers the most with their personal data. IDSPs can capitalize on this trust by building separate security and privacy services. Security will continue to be a pervasive IoT concern.

Monetize data – Data is the lifeblood of digital services. To become an effective IDSP, data analytics should be leveraged to appeal to new business interests and partners. Businesses crave insights on location, personal interests, and data usage.

Final thoughts

Customers have already made digital services central to their lives. Now it is time for telecom incumbents to move to the epicenter of the economy supporting those services. By operating with a fully transformed digital core as an IDSP, they can capitalize on the disruption to win big.

Tom Loozen is the global managing director for Accenture’s Communications Industry group. He can be reached at [email protected], and you can follow him on Twitter @tomloozen.