This article is co-authored by Wouter Goedkoop, Head of Digital at EPAM Systems and Alix Burge, Telecommunications Consultant at EPAM Systems.
When people typically think of telecommunications companies or telcos, most would assume that these entities will stand the test of time. After all, communication has become an indispensable part of our society, with western markets experiencing more than a hundred fold increase in data traffic. However, the reality is that telcos are about to come to a significant crossroads in their history. For context, 2019 marked the third consecutive year that telecom companies had declining revenue. Gray Kim, a renowned telecom analyst, noted that telco firms need to replace about half of their revenue every ten years, and 5G will not be the solution to their dipping net revenue. Income will need to come from elsewhere.
Regulatory measures including the blocking of mergers, mandatory decreases in wholesale prices and the elimination of roaming charges have had a negative impact on revenue growth. Similarly, overcapacity, in the form of supply growing faster than demand, played a role in stymieing the revenue gains of telcos. Likewise, market disruption from challenger operators and over-the-top (OTT) services drove prices down. Telcos feel these factors across the western world, Europe in particular.
Faced with perpetually declining topline revenue, industry experts posit that telcos must find a way to innovate and develop new revenue streams. Namely, telcos' Rubicon will be the evolution from communication service providers (CSPs) to ecosystem service providers (ESPs). Many believe that this evolution is the natural next step for telcos to take worldwide – particularly as countries and governments begin to look at pressing societal issues, such as safety, traffic, and energy efficiency, through a more systems-thinking mindset.
What is an ecosystem service provider?
While ESPs do not exist yet, a working definition is a broker of all connectivity-led data and services that licenses access to a secure and standardized marketplace for partners and customers. Essentially, an ESP would be a trusted partner that manages the data society generates on behalf of different actors.
Nevertheless, it is necessary to point out that CSPs cannot evolve into their new role without the assistance of governments. Several industry observers and experts believe that there must be a push in society for governments to help the Telecom industry rather than hinder it as they have done for the past decades. Western governments have built out and bailed out almost every sector except Telecom, from airlines and retail to entertainment and banking. The regulations placed on CSPs by governments were always beneficial for the consumer, like the European legislation that eliminated roaming charges but restricted CSPs’ ability to generate revenue.
Conversely, should governments support CSPs in their metamorphosis into ESPs, telcos would not only benefit themselves but society as well. By enabling CSPs to be more than just a dumb pipe, they can become a secure and trustworthy manager of civilian data on behalf of governments. Addressing big societal issues requires data, and though that data is fragmented now, ESPs could unify it – but they will need the necessary legislative support.
How would an ecosystem service provider function?
Although the concept of an ESPs is still in the realm of possibilities, it is essential to ask: who should we trust to manage data? Tech giants like Google and Facebook? Or the CSPs who are already quite accustomed to following government regulations. Likewise, would people prefer their data spread out between multiple entities or handled by one? An ESP has the power to bring various parties together and become the sole trusted, neutral custodian of data and services. Eventually, decision-makers must define what architectures will support the providers, including the guidelines for how the onboarding and sharing of data will operate. Also, rules for revoking data and outlying who has the right to access data must be determined.
Various examples of CSPs experimenting
CSPs have attempted data management pilot efforts, including Verizon’s partnership with a world leader in custom software manufacturing and consulting to create smart city prototypes in the US and UK focused on energy and mobility optimization. Nevertheless, these efforts were merely experiments. CSPs cannot realize such models at a large scale because they don’t have the funding, resources or clearance. The current plan for ‘Build Back Better’ focuses on investment in infrastructure, while parallel investment in ESPs would create greater efficiencies.
Should a society permit CSPs to manage centralized data, small businesses would be able to see all their bills in the same place, enabling them to streamline decision-making. Corporations could also monitor the bandwidth of employees for efficient allocation of workloads. Another capability of ESPs could manifest in the rapid clearing of traffic accidents. Cameras on the road, in cars and other IoT sensors, would capture the car crash. The gathered data would be shared and viewed in a secure and controlled ecosystem. Plus, whatever car company happens to film the accident would not own the data. Instead, the data would be the possession of the ESP, who would then make it accessible to the subscribers, which, in this case, would be first responders or insurance companies.
In the west, the discussion of ESPs is purely hypothetical. However, in China, their government structure could allow for fast and efficient deployment of a data management system. The European Commission wanted to create a pan-European CSPs system but failed. Various factors hold CSPs back from evolving, such as more national and language barriers in Europe. Likewise, people in general, value private and high-performance networks.
Out with the old, in with the new
Even though CSPs, with the help of governments, could tackle some of our society’s biggest challenges, at the end of the day, their primary concern is revenue. As stated initially, CSPs must move beyond their traditional revenue streams and transition to connectivity solutions and offerings. Getting governments to invest in CSPs will require the Telecom industry to demonstrate readiness and the ability to address these big societal problems – otherwise, their revenue will continue to decline.
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.
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.
