Telecom operators use fat pipes or networks to connect millions of mobile Internet users to ensure that they can access services of digital giants such as Google, Facebook or Amazon.
Now these telecom operators are facing the risk of losing business revenue to these digital giants – mainly because mobile operators’ services are becoming a commodity. Commodity business does not generate premium value in the market place.
Primary reason for telecom operators’ struggle is lack of innovation and slowness in bringing out new business models for earning more revenue.
Interestingly, some of the telecom operators do not even own their networks. Some networks are owned or funded by telecom equipment makers such as Ericsson or Nokia.
44 percent mobile users will leave their telecom service provider if a digital giant such as Google or Amazon launched an offer comparable to their mobile operator, according to a survey by technology outsourcing company Accenture.
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According to Frost & Sullivan, Stratecast’s Consumer Communication Services Tracker shows that the multichannel video market has been losing subscribers over the last several years. Service providers have been scrambling to find new promotions and marketing solutions to retain customers. Mobile service providers expect to offer OTT video in bundled services package in 2017.
Accenture says the launch of eSIM brings new challenges for CSPs as switching between providers becomes easier. 68 percent of online consumers would be interested in using a device with an eSIM with 50 percent because of the ability to switch from one provider to another easily.
Competition among telecom operators will increase as new players enter the market by embedding eSIMs into the devices at the point of manufacturing, bypassing the network connectivity provider and going direct to the customer.
The traditional CSP business is becoming commoditized and as a result they must accelerate their shift into new markets or the window of opportunity will close,” said Francesco Venturini, global industry managing director for Media and Communications, Accenture.
The above chart from Vodafone indicates that the global telecom operator is planning to create revenue streams from IoT, data analytics, digital, 4G, fiber-driven broadband and IT transformation.
Accenture suggests that telecom operators need to innovate.
Innovation is not a major focus area for Indian telecom operators. For instance, Indian operators such as Bharti Airtel, Idea Cellular, BSNL and Reliance Communications are not showcasing any innovation at the forthcoming Mobile World Congress (MWC 2017).
“There are opportunities ripe for the taking if CSPs invest in their core business so it remains healthy, while at the same time pivot to accelerate innovation and expand their reach to provide new digital services, offering real value to their customers,” said Francesco Venturini, global industry managing director for Media and Communications, Accenture.
Accenture suggests that telecom operators must change their operating models to succeed.
Opportunities for telecoms
There are several opportunities for telecom operators globally. Telecoms can use data available to them because they control the delivery platform right through from back office functions to the devices, and from the applications to the network.
“If telecom operators apply analytics and use this data to their advantage, it allows them to unlock a broader range of innovative new monetization opportunities and to further optimize the customer experience,” Accenture said.
Frost & Sullivan says the total capital expenditure (Capex) of big data telecom services in the Latin American market reached $633.3 million in 2016. The investment is expected to reach $1.77 million in 2022, led by Brazil and Mexico.
“Big data could offer vast business and revenue-generating opportunities. Data from users, services, networks, locations, and management sources could be monetized through product promotion, targeted advertisement, up-sales, quality of experience (QoE) and network optimization,” said Frost & Sullivan Digital Transformation Industry Analyst Carina Gonçalves.
Digital video provides huge opportunity to drive new revenue through the content and from digital advertising. 37 percent of respondents say they would turn to CSPs for Pay TV channels and 34 percent for Video on Demand (VOD) services.
Frost & Sullivan says video service providers — from OTT video providers to MSOs and telecom providers — will make investment in original video content. Verizon’s investment in Yahoo may be a prime example for the video push.
Internet of Things (IoT)
IoT is also creating growth opportunities for CSPs to offer new services. The connected home, which revolves around machine-to-machine communication offering cost and time savings to consumers, is quickly becoming a reality.
Frost Sullivan earlier said Augmented reality (AR) will enter the consumer space in 2017. Microsoft’s HoloLens, and Facebook’s integration of Facebook Now with its Oculus Rift technology are the main examples for the AR adoption.
OTT providers such as Google and Amazon are trying to dominate the home intelligent agent space. AI functionality may be integrated into Alexa and Now. Technology giant Apple may push its home automation solution with Siri built in.