For some global telecom giants, simply existing in competitive landscape has become hard

New business models need to be found that enable network operators and OTT players to co-exist and collaborate

Competition and the rise of over the top (OTT) services have been exerting pressures on operators’ revenues for several years now. In fact, for some global telecommunications giants, simply existing today in this competitive landscape has become hard.

For the sole purpose of surviving and possibly outbidding its competitors in acquiring customers, carriers have been reducing the costs of their services. At the same time, expectations among users are rising rapidly fuelled by demands for ever faster connections and coloured by the experience they currently receive from internet services where new services are made available on-demand and in real-time through online self-service.

All of these things are creating an unhealthy situation for carriers to protect their long term investments and manage industrial-scale national infrastructure – responsibilities that software-centric internet businesses don’t have, allowing them to develop and deliver new services in days, not years.

Establishing a telecom business and eventually scaling it is severely tough for a novice (regardless of the size of his capital) due to several daunting assets that an established telecom operator possesses like scale, process, skills and experience.

Ironically, it is these very assets — the traits that made them strong in the past – which could become their future weakness.

By 2020, 75 per cent of the traffic on an operator’s network will be video and much of it will be interactive. Today’s telecoms infrastructure and business models will increasingly become unsuitable for tomorrow’s world. Therefore, operators need to make the most of this situation and find ways to monetise video traffic particularly as ultra-high definition or 4K video becomes the new norm with completely unfettered online access and connectivity.

Over-the-top players continue to take a large slice of operators’ traditional revenue, as per Ovum the compound revenue losses is expected to reach almost $386 billion by 2018. These losses will widen as operators shift their base from traditional voice services to new VoIP services.

There is a serious requirement for transformation in the telecom network. Whether this transition would mean cloud-based data centres replacing telephone exchanges or services and core infrastructure being virtualised, a huge investment for telecoms transformation is required.

Having said this, economic pressures have revealed the weaknesses of these types of business models: low margins, large inventories, higher time to market and dependence on technology refresh cycles to please customers.

Telecom technology vendors have also had to transform.

Today, we’re focused on developing a workforce with deep IT skills and a CT background. We’ve had to eliminate legacy infrastructure thinking from our business by readjusting our focus.

Today, around 40 per cent of our R&D headcount are software development and IT specialists and are as important to the company’s future as electronic hardware engineers were 15 years ago.

We also employ teams of mathematicians to develop algorithms and data scientists to find value in customer and service information. These skills were not a priority for any vendor in our industry just a decade ago.

Most operators conduct analytics programmes that enable them to use their internal data to boost the efficiency of their networks, segment customers, and drive profitability with some success.

But the potential of big data poses a different challenge: how to combine much larger amounts of information to increase revenues and profits across the entire telecom value chain, from network operations to product development to marketing, sales, and customer service and even to monetise the data itself.

The applications of this are immense, including creating enhanced recommendation engines to generate more accurate and personalised offer recommendations for existing individual subscribers or even improved fraud management by correlating internal location, usage, and account data with external sources such as credit reports.

Telecom operators have also realised multiple threats revolving around them and hence have ventured into payments banks to redefine banking in India.

This new venture has a potential to boost their revenue since the penetration of telecom is much higher than banks and therefore provides them a huge advantage over the other new players. This new venture will not only provide a new revenue stream to their existing business but will also help them to reduce the churn rate.

Internet of Things (IoT) has huge market opportunities for the operators in India.

As per Huawei’s latest research, India will have at least 3 billion connected devices by 2020 with ‘smart city’ and smart building leading the way. All these connections would be dominated by cellular connectivity and hence would help the operators to enhance their revenue by using their existing network.

Finally, the internet is here to stay. New business models need to be found that enable network operators and OTT players to co-exist and collaborate.

Internet businesses typically depend on network operators to connect people with their new internet services. Collaboration is required to deliver win-win opportunities so that both parties can succeed. Without new models for operator and OTT collaboration, we face the prospect of decelerating innovation in the future as carriers see their ability to invest curtailed.

If the telecoms industry under-commits to transformation today, it could impair the ability of the ICT industry to continue to change the world for the better. That uncertainty would be most unwelcome news for everyone.

(Chandan Kumar is director-marketing & integrated solutions at Huawei)

Source: techgig.com