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Telcos Are Stepping Outside of Their Comfort Zone

Telcos Are Stepping Outside of Their Comfort Zone Image Credit: Wrightstudio/Bigstockphoto.com

This article is co-authored by Alix Burge.

For years now, telcos have had declining revenue - and 5G will not be their saving grace. Because they must replace around half of their revenue every ten years, telcos must change course and find new sources of income. However, across the western world, government regulations have limited telecommunications companies from increasing revenue by blocking mergers, decreasing wholesale prices and abolishing roaming charges.

Overcapacity and market disruption have also been barriers to the sustainable income of telcos. If communication service providers (CSPs) desire radical results, they must be willing to pursue radical change - and many are. Telcos realize that the future of data networking lies beyond the cloud. Below are five significant telcos-related predictions for the upcoming year.  

#1: Transition to Tech Companies

Already this year, observers noticed that telcos redefined themselves, pivoting from telecom companies to tech companies. Telcos are no longer just connectivity providers and have become more tech-co focused. Having put a large amount of their investment and budgets in maintaining and developing IT systems, they want to be major IT players and software developers.

Next year, this transition will continue to ramp up as telcos search for ways to leverage their experience and newly assembled expertise. Moreover, there will be a shift amongst CSPs to build their own in-house capabilities around software development.

#2: Creating In-House Marketplaces and Total Solution Packages

Perhaps the most groundbreaking development is that telcos are building total solution packages and creating in-house marketplaces to source their products. Rather than just being telecom providers, they are looking to become leaders in marketplace capability by aligning their connectivity products to more application-focused services. Likewise, there will be a push to become brokers of their new services and trusted partners for their B2B and B2C customers. Moving beyond selling only connectivity, CSPs will sell the complete needs of the enterprise, including cloud and data services along with specific things like desktop management, security and remote work offerings.   

As telcos build these IT systems and marketplaces that serve their customers and start in-sourcing or out-sourcing development to the appropriate partners, they will need to determine how to make money for themselves. Will they resell their platform capability elsewhere? Will they build a marketplace and then white label it for resell? Telcos are looking to productize for external market needs. Simultaneously, they want to transform how they manage and invest in their businesses. Telcos - incumbent ones especially - are becoming more proactive, choosing to act unilaterally and selling service offerings quickly and at scale instead of waiting for an RFP’s assistant.

#3: CSPs Potentially becoming ESPs

The future of data networking means that CSPs will want to start selling their data, just as they will sell their own capabilities. Due to new cloud competencies and responsibilities, telcos will try to broker the enormous amounts of data they collect. Namely, CSPs will evolve into ecosystem service providers (ESPs). While the concept of what an ESP truly encapsulates is still on the drawing boards, a working definition is a trusted partner that manages the data society generates on behalf of different actors by brokering connectivity-led data and licensing marketplace access. An example of an ESP functioning in society would be the rapid clearing of a traffic accident. Cameras and IoT sensors would collect data of the crash and store it in a secure ecosystem to later be sold by the ESP to subscribers, who, in this scenario, would be first responders or insurance companies.  

Currently, telcos tailor solutions for different industries, like healthcare and law enforcement. In the future, the next step will be to determine what data to sell back to actors in the ecosystem. For example, manufacturers would buy the data in a supply chain situation. In retail, consumer goods companies would buy the data from the cash registers to find out if they lost or gained market share. CSPs need to think about which sectors they will move into and examine how they can facilitate data distribution. Telcos should also consider how they can productize the insights they derive from the data. One option is to sell the data to a relevant industry. The other is to dive deep into the data to search for extractable insights. This second option will not work for all sectors because it will require substantial industry expertise.

#4: Telcos Concerned with Outwardly Image

Inevitably, telcos will begin investing in areas like health and education because they want to associate their image with efforts that serve a community purpose and have a positive impact. Their primary motivator for building a better outward-facing persona is to attract people (and skilled individuals) to work for their organizations by reinforcing their credentials as ethical guardians. To better draw in the best talent, telcos will need to define a new USP and continue to promote employee wellbeing and purpose programs; such initiatives will help acquire more people and procure government funding. 

#5: The Rise of Private Networks

Today, telcos face significant cost pressures and financial issues. Plagued by government regulations and declining topline revenue, there is a possibility that telcos will expand into private networks. The demand for private networks exists, especially in B2B and manufacturing operations. Moreover, if telcos don’t start investing in private networks now, others will eventually beat them to it. Companies will soon challenge national CSPs by creating private 5G networks. And these companies might leverage an established backbone for international connectivity. Once organizations start setting up local networks, telcos will be in even worse trouble. By that point, they won’t have the time or resources to build a solution as private and highly tailored as their competitors.

Private networks will vary sector by sector. Some industries and areas that might first witness these networks are manufacturing, closed ports and airports. Beyond 2022, specialist network companies may arise, essential telcos that have specifically tailored solutions for special environments. Such places would be spaces where connectivity is critical, such as hospitals or very remote operations. Likewise, there could emerge telcos that provide industry-specific solutions. Although most of this is speculation, there is a high probability that private networks will come to fruition. CSPs wrestle with commoditization to generate new revenue, which requires considerable customization. And they are attempting to move out of the highly custom world of industry verticals to serve more horizontally, which will leave a gap.

Conclusion

Telcos must establish new revenue streams regardless of what trends materialize in 2022. Should telcos become ESPs, focus on technology and connectivity solutions or build private networks for niche industries, there is one certainty: telcos are preparing themselves to step outside their comfort zone and become more than purely telecommunication providers.

Alix Burge is a Telecommunications Consultant at EPAM Systems, a leading digital transformation and product engineering company. A highly experienced information and communications technology consultant with a 20-year career at BT, Ericsson, Vodafone and more, her expertise includes digital and technological transformation; innovation through emerging technologies; and adoption of new delivery methodologies to create disruptive business solutions and market propositions. Alix is an advocate for women in technology and STEM and supports a number of diversity and inclusion initiatives.

Author

Wouter Goedkoop is Head of Digital at EPAM Systems, a leading digital transformation and product engineering company. Focused on EPAM’s Telecommunications, Retail & Distribution, Manufacturing and Medtech sectors in Europe, he has extensive digital expertise gained in senior roles at Liberty Global, UPS and KPN among others. At EPAM, his team helps customers utilize new technologies to personalize customer experiences, innovate their products and improve operations.

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