Extreme telco challenges demand a radical response | NTT DATA

Mon, 17 August 2020

Extreme telco challenges demand a radical response

 

European telcos have long become accustomed to disruption and with a rapidly changing market and evolving regulatory, technological and social landscape, the challenges can only grow.

The outlook over the next five years is complex, with aggressive markets, falling revenue and growing costs. When we look at the market situation, we can see regulations changing, but in different ways in different countries. To this we can add growing competition from challengers, as well as consumer expectations on telcos to provide the level of service offered by the likes of Facebook and Google.

Added to this is the pressure on revenue. Income from the three ‘Ms’ – minutes, messages and megabytes – continues to fall, while the industry still needs to find effective ways to generate income from IoT and 5G. Telco customers also seem to want even better services from 5G than they get with 4G – but without paying more for it.

Despite reduced income, telcos must continue to invest heavily in next generation network technology like fibre to the premises and 5G, while also maintaining their legacy networks.

These are pressing problems and when looking for ways to solve them, telcos can find lots of good advice. Typical strategies include simplifying digital architectures, placing networks in the Cloud and using Artificial Intelligence (AI) to squeeze out more performance. Upgrading operations and business support systems and becoming more agile also have their advocates.

The human factor

Strategies such as these will bring some returns, but many telcos may find it hard to execute them fast enough to keep pace with a changing market and rapidly changing technologies. To find a better way, telcos could shift their gaze from the headline trends and technologies of 5G, agility and big data and take a more human scale view of what customers will expect over the next few years.

Just as with 4G, customers will continue to want more content, from more sources, when they want it and at higher definition. Accustomed to the fixed, low price subscriptions of content providers like Amazon and Netflix, they will demand the same from their telcos, who will be left with little wriggle room to monetise content.

Customers are also set to demand services that support their lifestyles, such as paying by phone for charging their electric car. These types of services go beyond what telcos typically see as their core offering and will demand partnerships across industry to make them work.

In an age of increasing cyber-attacks, trust will be even more important and become a commodity. Telcos can play a major role here, with their ability to protect customers’ home networks.

We can also expect a rise in the number of company startups, especially in the SME sector. These new entrepreneurs will want their telcos to provide new offerings to support their business, such as connectivity, data, payment and financial management services.

Retreat, expand or regroup – radical strategies for a new world

To flourish over the next few years, telcos are advised to reappraise their role in the ecosystem – what type of company do they want to be, what services do they want to provide, and which markets will they serve?

Although it may sound strange, one of the most effective strategies could be to retreat from serving customers. Instead, telcos could shift their emphasis to connectivity. This is set to show increasing demand, with a consequent rise in the need for infrastructure to meet it. Tower providers enjoy big margins already, while there will also be a need for more data centres.

Moving away from providing direct services avoids the need to monetize consumers and shifts the emphasis to offering better digital services, charging running and maintenance costs to other providers. The result can be streamlined business, reduced operating costs and avoiding cutthroat competition for consumers’ cash.

Get closer to customers

The opposite strategy is to get closer to customers, with the telco becoming a more intimate part of their homes, work and lives. The rise of small business and the growth in cross industry service offers means that telcos can become the major player in domains like the home and autonomous cars. This demands a rethink of telco core services – they can put more emphasis on home IoT support, business service and breakdown support, rather than their traditional consumer services.

There are also opportunities to get closer to customers by being part of the trusted value chain. Telcos can now take a bigger slice of the online payment cake, so it’s worthwhile looking at providing secure payment services for IoT and utility providers.

Join forces with others

If telcos don’t like these options, there is a third way – regrouping. With connectivity set to increase and the lines between industries becoming indistinct, it makes sense for telcos to hook up with all sorts of players in the ecosystem – small, emerging and established - to offer new, combined services.

NTT DATA’s sister company NTT Docomo has already gone down this road, transforming from a traditional telco to a tech comms company. In fact, it currently gets 20% of its revenue from non-telecoms services.

With this experience, NTT DATA can help telcos to explore the opportunities of the next few years, helping them adopt the right strategy for continued success – however radical, or traditional, it turns out to be.

 

 Read our latest whitepaper to discover more detail on how telcos can thrive in uncompromising conditions over the next five years.


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