The Indian telecom sector is going through a stress period with growing losses, price wars, reduced revenue and extremely high spectrum costs. Low-cost data services have disrupted the market and the revenue of incumbent players. The crisis has also severely impacted investors, lenders, and vendors of these telecom companies. The telecom industry has been one that has had to deal with a continuously changing business, regulatory and technology environment over the past half century. Traditionally the principal revenue streams for telecom operators have been voice and messaging (SMS) with data coming in at a far third. But while telcos had been quick to react to previous game changing developments such as the internet explosion and the emergence of cellular mobile communications in the early 2000s, they have not responded as quickly or effectively to recent challenge to their revenues, over-the-top (OTT) service providers. The growing impact of OTT services on telcos’ voice and messaging revenue is a widely accepted phenomenon. Their impact on mobile data traffic and telco data revenue are also areas that have been acknowledged as critical points for consideration.
Given these challenges, the telecom service providers need to embark on a transformation journey from being communication service providers to digital service providers. The digital transformation focus should address the important areas around enhancing the customer experience, increasing revenues, reducing operational cost, and launch digital services with an accelerated time to market.
Digital transformation has to be addressed across four dimensions:
Network transformation. Service providers need to deploy SDN and NFV to create new services and business models, to increase service agility and flexibility and to increase network efficiency and to reduce CapEx. The network is breaking free from hardware. The new software based network will give customers access to faster more, flexible products, and services.
Data traffic on AT&T’s wireless network has grown more than 360,000 since 2007 driven primarily by video. Service providers have traditionally kept up with growing demand by using more and more sophisticated, complex routers, switches, and other gear. But this just is not feasible for much longer. It is too slow, too inefficient and too expensive. AT&T has found a better way. It’s a model developed in the IT world, where you emulate the functions of those complex pieces of hardware with software, and run that software on standard, off-the-shelf hardware. You can add capacity faster and push out upgrades at the speed of the internet. That’s the model for AT&T’s next-generation network, powered by technologies including software-defined networking (SDN) and network function virtualization (NFV). By 2020, AT&T plans to virtualize and control over 75 percent of their network using this new software-defined architecture to meet the growing demands of data and video-hungry users. In 2017, AT&T hit 55percent.
The turf war among Indian existing and new telecom players has ensured a digital revolution. Not surprisingly, data prices have fallen by more than 90 percent in the past year and a half, while bandwidth consumption has grown over 4X. In order for the Indian telecom players to cope with this data explosion, they have no choice but to SDN enable their core and virtualize the edge by providing the flexibility to deploy virtual network functions at network or customer edge implementation.
Business transformation. Using digital technology enables businesses to transform via servitisation as well as harnessing increasing automation. Internet of Things (IoT) is an important constituent of business transformation as it opens up new revenue streams for telecom providers. IoT is gathering momentum in advance of digital transformation and is a part of business transformation initiatives.
Indian IoT market holds tremendous potential for telecommunications (telecom) operators, as connectivity is the backbone of IoT deployment. With the country moving towards a digital economy, the growing adoption of cloud in IoT services, shifting of focus to industrial IoT (IIoT), rising market of M2M communication, and increasing trend of wearable technology applications are among the major factors driving the IoT market in India. As a critical player in this value chain, telecom companies can build new revenue streams. Telecom participants will need to step up and move beyond connectivity to play a larger role in this IoT wave to capture the growing market and bring in a transformation in their traditional business model. Forming strong partnerships, developing platforms, providing innovative services and adopting a consultative approach toward enterprises for embracing IoT should be the main focus areas for communication service providers to cash in on the IoT opportunity effectively.
Operation transformation. They must transform their operations and shift the skills into newer areas and altering the company culture even further away from the recent heritage of being network operators.
Skills transformation of existing employees is an important element here. The telecom industry, like many in the technology sector, faces a future in which its legacy businesses are quickly becoming obsolete. With its industry moving from cables and hardware to the internet and the cloud, the telcos have to be in a sprint to reinvent themselves. The overhaul presents an enormous HR challenge. There are 225,000 people employed in the telecom industry in India most of whom got their education and foundational job training in a different era. But rather than hiring new talent wholesale, the industry has to rapidly retrain its current employees while striving to engender a culture of perpetual learning. The new landscape requires skills in cloud-based computing, coding, data science, and other technical capabilities. Many of these fields are advancing so quickly that traditional methods of training and development cannot keep up. Given that the supply of technical talent is limited, and everybody is going after it, the best option is to reskill the existing workforce to fill the gap.
Experience transformation. Aside from increased flexibility and productivity, one of the main goals of digital transformation is to provide enhanced experiences for users – consumers or professional. 2018 will see a coming together of several different technologies and concepts that enable and support digital transformation and ultimately newer and rich customer experiences. These extend from new technologies such as 5G, NFV, IOT, servitisation to AR/VR, AI, machine learning and deep learning. These technologies are innovative and transformative and will play a significant role in providing superior customer experience which will be the key differentiator for telecom providers.
Secondly, one of the biggest steps that the telecom providers in India can contribute to customer experience is through the move to subscription based revenue models. Various try-and-buy and freemium business models are now widely available. Telcos have been forced to respond, both in terms of their end-user offerings, as well as packaging traffic and other services to their OTT collaborators. With traditional metered subscriptions still largely being the backbone of the telecom service provider business model, some creative thinking will be required for them to adopt new strategies to improve customer experience.
Lastly, in order to enhance every element of the experience and ensure the customer remains at the center of all business decisions, telcos will need to foster customer experience as a culture. It will be extremely important that the C-level leadership within the business provide the right direction and vision for the company. Leading by example, this influence filters down through the rest of the company so that the importance of customer experience management embodies everyone within the organization. To achieve this, telco will need to re-position their systems and processes to support more integrated product management strategies. It is also important that businesses take the opportunity to learn from their customers through their smart devices and ensure they have efficient business processes and infrastructure in place to make use of real-time customer feedback.
Telecom service providers are acutely aware of their need to enhance their business models in the new digital economy. The massive catalysts for transformation will be driven by 5G rollouts in 2 years from now. 5G networks will serve as a backbone for a new generation of services that require the higher bandwidth, lower latency and greater agility these networks have to offer. The new wave of advanced digital experiences and services will have the power to transform our day to day lives in ways that are even more impactful than the digital transformation that we are seeing today.