Four key challenges for the Telecom Industry

Nitin’s introduction:

The telecommunications Industry has evolved around technology advancements in the communications space. The industry has developed from being a provider of landline services to delivering high-speed broadband services with ubiquitous mobility.

The telco industry today is certainly at a point of inflexion, and in order to remain relevant in the rapidly changing marketplace, its long-standing aspiration of evolving from the legacy of providing connectivity services to a more value-added provider of content, applications and data services has to be accomplished. In fact, the rapid adoption of digital transformation by enterprises is a great opportunity for telcos globally. For telcos, it’s not just about the digital transformation that they are themselves undergoing, it is also about their being the digital enablers for other enterprises and sectors. GSMA has projected that the number of connected devices will grow from 7 billion in 2018 to 25 billion in 2025;13 and telecom operators are in a unique position to capitalize on this by providing innovative digital connectivity solutions that will form the backbone of the globally connected digital world in the near future.

1. Despite growing data consumption, telcos have been losing the content and application battle to OTT (over-the-top) players, leading to flat-line/shrinking revenues.
   In general business terms, increasing customer demand leads to an increase in revenues, but for telecom operators, data usage has increased exponentially while revenues at best have remained flatlined. Capex investments made by telcos in 3G and 4G in the last decade have led to a major technological shift in the form of high-speed global mobile networks. Most of these investments have enabled entry to OTT players who offer consumers innovative services. While OTT players who fully leverage the connectivity infrastructure provided by telecom operators have grown their revenues exponentially over the past decade, the telecom operators haven’t been able to monetize this phenomenon and bite into any incremental revenues for themselves.
2. Massive investments are being made in 5G infrastructure; however, monetization through IOT solutions and the ability of telcos to create new revenue streams is unclear.
   When it comes to new revenues streams for telecom operators, IOT is high on the list. After all, IOT is the big phenomenon which is likely to create billions of connected devices across the world powered by these telecom operators. While there is no doubt about the potential of the 5G + IOT combination, the big question is, how are the telcos going to capitalize on this and generate revenues for themselves. Despite a number of trials and pilot implementations, it is not clear what role the telco can play or what business model it can have beyond that of a connectivity provider.
3. Digital channels have not yielded the desired results; digital contributes less than 15 per cent of total sales and services for many leading telcos.
   Telcos have made very significant investments in digital transformation over the last five to seven years. However, these investments have not yielded the desired outcomes, and customers continue to rely heavily on stores and call centres for their needs. The main reason for this is that telcos have not adapted their products and services for digital channels. In this industry, policies, the fine print and pricing continue to be complex, necessitating the need for assisted sales. Moreover, the telcos’ digital journeys have mirrored physical journeys, making them long and cumbersome.
   Another challenge the telcos face is that while they generate huge amounts of data on customer usage, the systems of insights to convert this data to create personalized experiences for the consumer have not evolved at the required pace.
4. Keeping up with cybersecurity, regulatory and government policy changes
   The focus of regulators is increasingly turning towards areas such as general data protection regulation (GDPR), while legacy issues such as wholesale pricing and VoIP interconnection regulations are easing. But other areas of regulation are changing very fast, and we have spectrum release road maps, data protection frameworks and accounting rules, all in ever-evolving states.

Monitoring call and communication quality is crucial for ensuring that customers get the kind of telecom experience they deserve. Tracking and understanding their communication life cycle will be essential for telecom companies for another reason too – which is to do with data and privacy. Customers are terrified at the possibility of identity theft and financial loss. As a result, customers are demanding the same level of control over their personal data as they have over passwords to their bank accounts and email addresses. Telcos will need to work harder to create environments where people can feel safe.

Telco operators are working towards providing personalized experiences leveraging AI/ML and digital analytics capabilities, which, from a customer-centric point of view, is the right thing to do. However, customers don’t want to compromise on how their data is protected and stored. Telcos will need to ensure that their networks can protect consumer data in line with industry standards and to the satisfaction of their customers.

Nitin’s conclusion:

While there are headwinds, and given that the telecom industry is at a point of inflection, telcos have inherent strengths that they can use to turn the tables to their advantage. Telecom players have huge physical assets that act as an entry barrier; they generate massive amounts of customer data, given the ‘always on’ nature of customer usage, and provide a service that has become essential in many aspects of life. These advantages, coupled with what is perhaps the most significant technology change for the industry – 5G – can prove to be a force multiplier. While the telecom industry has undergone many technology upgrades, each more significant than the previous, 5G has everyone in the industry excited like never before. And there is a good reason for it.