The telecoms sector is in a state of flux and confusion.
Many of the world’s largest telecoms companies are grappling with operating in an increasingly complex market place where access to services such as fixed line and/or wireless broadband internet is the norm, and the expectation is free or very low cost.
This is the case in most Western markets such as North America, the European Union, Scandinavia, and increasingly in faster growing markets of South Asia, Sub Saharan Africa, Middle East, Turkey, Central Asian Republics and South America. For example, one can even get Wi-Fi services at the base camps of Mount Everest.
The sector is now a centre for innovation, growth and disruption in most industries. Mobile devices including smart phones, tablets and activity trackers are being embedded more extensively in today’s society and are driving key trends including Streaming, Mobile Payments, Internet of Things (IoT) and Mobile Health.
This has resulted in a new wave of companies formed to take advantage of the opportunities, including new mobile banks, E.g. Atom, Rise. Existing incumbents are also moving aggressively into digital mobile payments, such as Yorkshire Building Society.
Why is this happening? We are all to blame and can take credit for it as we are becoming more interconnected and dependent on various technologies and platforms e.g. Public Cloud Services, Video, Over the top (OTT) Messaging Services (Viber, What’s App, We Chat,) and Social Networks (e.g. Facebook, Google+, Twitter etc.) to access and consume various forms of content.
In late 2007, Apple disrupted the telecoms industry when it launched the iPhone, which combined music and video content with mobile telephony on a single device. This is generally regarded as the world’s first mainstream smart phone. This was closely followed by Google with its Android mobile operating system. This resulted in the rate of smartphone adoption increasing exponentially, in line with the explosive growth in mobile data usage, mainly driven by video.
4G generates up to six times more traffic than a non 4G connection (see Figure 1) due to two key reasons:
- 4G connections are for higher end devices that have an above average usage.
- The higher speeds encourage the adoption of high bandwidth applications such as audio and video streaming, e.g. Spotify, Netflix, YouTube etc.
According to some industry estimates, (Cisco, Ericsson, Vodafone, BT etc.), this trend is unlikely to reduce anytime in the next few years as even more of the global population gets online, some for the very first time.
Asia Pacific leads the way in data traffic consumption rates, followed by Central & Eastern Europe and Middle East & Africa (see figure 2).
In addition, many local, regional and global operators are experiencing fierce competition, revenue shortfalls, further deregulation, network upgrades, e.g. from 4G to 5G and fixed line fibre, technology advancements for Machine to Machine communications (M2M), Internet of Things, (IoT), Mobile Payments, Smart Cities, Home Automation, and Connected Vehicles etc.
As the number of connected devices over fixed line and wireless grows, telecoms companies are looking for new opportunities to increase their revenues from their core businesses in a number of ways, including the sale of network equipment and branded devices, new products and services, and additional licensing agreements. For example, Vodafone and Huawei market joint network hardware as part of a revenue share deal and to help reduce costs.
This wave has led to more complexity and confusion, but also presents opportunities for forward-thinking operators to create and deliver innovative services at competitive prices for an improved customer experience. It is essential that telco operators become digital to put customers and the digital products and services they demand at the heart of their thinking and operations. The risk otherwise is too great. The sector is highly competitive with existing operators and new entrants looking to take out large pieces of business from traditional players. Operators must find new and profitable routes to increased growth and the answer lies in digitisation. The transformation will be difficult as many operators are large and move slowly. This has to change if they want a seat in the digital ecosystem and take advantage of the opportunities presented.