With low profitability looming large in the minds of telco executives, Mari Nilsson Björkman, Telecom Industry Lead at SAS, discusses the role AIoT can play in improving business value.
News that several telcos were struggling to pay out dividends [1] to shareholders due to cash flow issues at the end of last year was another blow to the industry. Compared to the tech giants [2], telcos have fallen behind when it comes to market value and investor confidence over the past few years.
A combination [3] of debts, high interest, and rising costs – including funding 5G infrastructure – come on top of years of lost revenue from the B2C market due to calls and texts being ‘free’ via options like WhatsApp. However, some telcos have been successful as they transformed themselves into technology companies – ‘techcos’ - and started taking market share because their agility [4] has allowed them to adapt quickly to changes in the market, and innovate at speed.
Many other telcos have, in contrast, been encumbered with legacy systems, manual processes, and siloed ways of working. They’ve also been largely footing the bill for 5G, so much so that in Europe there have been calls for the tech companies to help fund it [5], since they not only have the means but will also reap the rewards from it.
If you can’t beat ‘em...
Given the scale of the challenges they face, it’s no surprise that telcos are taking lessons from the tech world to help them transform their strategies and operations to become digital-first agile enterprises. A number of them, including Vodafone [6], have already announced plans to move from telco to techco – acknowledging that until now ‘value [has] flowed to tech companies building on [its] infrastructure’.
As is the case with any digital transformation project, becoming a techco represents a major change in the telco business model. It means rethinking existing processes, and changing mindsets across the organisation. The goal is to use technology to promote collaborative and agile ways of working that ultimately create value for both customers and the business.
According to a KPMG report [7], the transition to techcos encompasses three elements: vision, ecosystem and culture.
On the vision side, it means having a clear idea of what the company should be (e.g. a focus on customer service or prioritising network access for the developer community).
It involves a shift in organisational culture where customers come first, teams are agile, risk appetite is higher, and innovation comes faster. How technology is implemented is the third critical element, or as KPMG puts it the ‘dynamic ecosystem of technology, services and solutions providers that can work collaboratively with you to deliver the capabilities and resources you require.’
What does transformation look like for telcos?
Cloud computing, Internet of Things (IoT), artificial intelligence (AI) and machine learning (ML) are among the defining technologies of digital transformation. When these technologies form part of the ‘dynamic ecosystem’ described above, telcos are finally able to unlock the value of their data, using analytics to support more sophisticated forms of automation, make accurate forecasts, improve customer experience, innovate, and grow and diversify their range of products.
One particular technology that lends itself to telco transformation is the Artificial Intelligence of Things (AIoT), which as its name suggests, is a hybrid of AI and IoT.
It is used by telcos in an eco-system to create add-on B2B (Enterprise) services on top of the connectivity/communication services they are selling. For example, they might be a communication operator for a manufacturer - linking offices and production plants together with broadband and phones. With AIoT they can, in addition, sell a service monitoring their production plant and connect the whole production line with sensors – thereby achieving surveillance of the entire production process. By adding more intelligence on the provided connectivity layer, they expand their service offering portfolio to the B2B customer segment. This delivers value beyond the traditional communication services, driving revenue growth.
As the networks become increasingly complex, it’s no longer possible to manage the colossal amounts of data flowing through them manually. Telcos need to be able to intelligently organise and prioritise data to support a growing number of applications, including streaming and VOiP calls to the standard that customers expect, particularly when it comes to 5G.
In a survey of Millennials, Ericsson [8] found that while speed was the priority for more than a quarter of respondents, others named factors like price, enhanced security and quality of experience.
AI is needed to manage the complex 5G infrastructure, enabling operators to ensure low latency, increased network capability and higher capacity.
Underpinning AIoT is the capability to pull in data from a growing number of sources, including physical assets and hybrid and multi-cloud environments, and make it available through a single secure environment. Automated and semi-automated processes allow decision-makers to surface the insights they need at the right time to proactively identify – and act on – challenges and opportunities.
From provider to partner
We’ve noted that digital transformation paves the way for companies to change their business model, but what does this look like in practice?
For a telco, it could mean using AIoT to realise the potential of the B2B market as margins for consumer services become tighter due to lower demand for voice calls/SMS and competitive pricing.
However, as enterprise customers in every sector, from banking to manufacturing, press on with their own digital transformation journeys, there are more opportunities to partner with them to deliver the 5G capabilities to support AI, IoT and AIoT.
This could include building private 5G networks [9] for sectors like defence but more generally helping to build a network that allows them to deliver more services to enterprise customers. Together, the telcos can grow their reputation as true partners by delivering reliable, secure and resilient connectivity.
References
[1] www.cityam.com/why-are-these-telecom-giants-struggling-to-maintain-dividends/
[2] stlpartners.com/articles/strategy/from-telco-to-techco/
[3] www.cityam.com/why-are-these-telecom-giants-struggling-to-maintain-dividends/
[4] stlpartners.com/articles/strategy/from-telco-to-techco/
[5] www.reuters.com/business/media-telecom/faced-with-slow-5g-rollout-eu-telcos-single-out-big-tech-again-2024-01-29/
[6] www.vodafone.com/news/technology-news/vodafone-innovation-on-launchpad
[7] kpmg.com/xx/en/home/insights/2024/01/telco-to-techco-beyond-connectivity.html#:~:text=You%20can't%20move%20from,capabilities%20and%20resources%20you%20require.
[8] www.ericsson.com/en/reports-and-papers/mobility-report/articles/millennials-expectations-5g#:~:text=High%20expectations%20for%205G,-The%20potential%20benefits&text=In%20addition%2C%20when%20asked%20to,network%20reliability%20and%20guaranteed%20quality.
[9] www.euronews.com/next/2022/05/31/bt-and-ericsson-partner-to-build-5g-private-networks-for-companies-in-the-uk
