The telco industry is at a critical juncture where growth opportunities based on current network and device offerings are rapidly diminishing. For instance, the ITU reported that in 2022, there were 87 active mobile broadband subscriptions per 100 inhabitants worldwide. In Europe and the Americas, saturation has already been reached with 110 and 113 mobile broadband users per 100 inhabitants respectively. While simultaneously, fixed-telephone subscriptions continue their slow but steady decline, losing an average of 4.2 percent each year over the last 10 years.
Despite the prospect of limited subscriber growth, communication service providers (CSPs) are making significant investments to expand the coverage of 5G and full fiber access. According to the Global Mobile Suppliers Association (GSA), by the end of March 2023, 249 CSPs in 97 countries had launched 5G mobile services. The reason is that the high speed and immense capacity of 5G and full fiber networks - which accounted for 65.7 of the world’s 1.362 billion broadband connections at the end of 2022 according to research house Point Topic - have the potential to support emerging immersive services, facilitate new ways of working, and improve the efficiency of many industrial processes.
It’s becoming essential for CSPs, especially in mature mobile markets, to capitalize on these new opportunities to diversify and grow their revenues beyond competing at the margins for churning subscribers. With the emergence of 5G core, edge compute, and network slicing, CSPs have an opportunity to monetize their networks in innovative ways and engage more deeply in B2B and vertical industry sectors.
What does this mean for CSPs? Growth, sustainability, and differentiation requires innovative new offerings, and this requires them to transform into a technology-driven company (techco).
The techco journey: What it is and what it entails
Although digital transformations are complex, it’s the critical foundation for telcos to become techcos. Business and network operations is the new battleground where agility and scalability need to be prioritized. To remain relevant in this new environment, CSPs need to make their networks future ready. They need to transition to being data-centric and cloud-enabled businesses. Legacy IT systems need to be migrated to an open, modular cloud-native IT stack. Customer-facing and B2B services need to be digitized. And omnichannel systems need to be AI-driven to deliver seamless, consistent, and personalized experiences that not only meet but exceed customer expectations.
Historically, CSPs either went it alone or relied on just a handful of technology partners for new feature and service development. This has not only hindered them from realizing the full benefits and potential of their efforts but slowed the process of creating differentiating services. As techcos, CSPs need to provide more comprehensive end-to-end solutions – and this means being more partner centric. This includes offering consumers and businesses value added services bundled with connectivity and offering their network as a service to partners through plug and play APIs.
However, becoming a techco requires more than just changes to technology and systems. Success will require organizational and cultural change as well. CSPs need to develop and embed specialist knowledge and skills in technologies such as cloud, predictive AI, generative AI and software development. Modern operational concepts such as Agile development and DevOps should be used across the business.
Given that co-creation is a fundamental requirement for modern IT environments, the techco culture encourages and supports customer-led joint development projects and embraces collaboration inside new ecosystems. During the transition to becoming a techco, CSPs need to identify partners who will support their immersion into IT and cloud solutions, enrich their joint development setup, and work with them in finding a balance between outsourcing and self-sufficiency.
The business value and growth opportunities of becoming a techco
Becoming a techco opens the door to previously unattainable growth opportunities. Some CSPs will focus on creating new value from the core business and exposing network services in easy to consume APIs to developers, significantly expanding their business reach. Others will adopt a partner-based strategy that creates the right mix of services to delight customers and businesses alike. And in some cases, the techco will diversify into new business areas, leveraging their existing assets in finance, industry 4.0, healthcare, or other sectors.
Co-creation platforms will be significant in contributing towards creating new business value from 5G and fiber network investments, cloud, and edge technologies. Through the use of open APIs, innovation, streamlining automated operations, and collaborating with partners, these co-created platforms will create new growth opportunities, while driving significant cost efficiency and agility across businesses.
Fundamental to the platforms is their ability to enable CSPs to reduce IT spend through BSS/OSS consolidation, modernized IT software, and automated operations on any telco or hyperscaler platform. Co-creation platforms also need to provide support for real-time charging across different services, partners, or business models. The ability to offer new and diverse monetization models will help CSPs create profitable value chains and position themselves as B2B2X enablers.
Although some CSPs have already begun to offer financial services through device financing schemes, as a techco these capabilities could be offered alongside IT and network services – providing customers a one-stop-shop offering to third-party online retailers for home entertainment systems, consumer electronics, or other goods for example. Many large techcos, notably in Asia, are moving into the mobile space and are actively looking for synergies which will allow them to leverage their online services with their mobile subscribers. Large CSPs in other parts of the world should equally be looking for opportunities to monetize capabilities and expertise held within their own subsidiaries, or associated investments, across their large multinational subscriber bases. These moves represent changes to traditional business models and an increase in return on investment.
In the early years of the 5G era, digital transformation gives CSPs the opportunity to reset their businesses to become more like technology companies. However, the transition is not only challenging but is an ongoing process: moving from being network-based to software driven; migrating legacy infrastructure to the cloud; adopting digital value chains; learning how to innovate and launch new products quickly; embracing a new culture; and recruiting, developing, and retaining new skills; never-the-less, the rewards can be substantial.
The increased business agility that is inherent as a techco will empower CSPs to adapt faster to market needs, stimulate innovation, and add value on top of their current network investments. By equipping themselves to serve a greater diversity of customers – both human and non-human – CSPs can reap the monetary rewards from 5G, cloud, and edge technologies. Even amid the challenges, transformation from a telco to a techco affords CSPs with the best chance of succeeding in the digital future and beyond, and testament to this are the many CSPs that are at varying stages of their journey.
