Carriers need new game plan to survive in digital age

James Middleton

August 13, 2008

3 Min Read
Carriers need new game plan to survive in digital age

Fixed and mobile carriers in mature markets must transform themselves into “IT and network factories” and support new services all but unrelated to telecoms in order to survive in the digital age.

The warning comes from industry analyst Gartner, which said this week that by 2012, it expects around half of the 20 largest carriers worldwide to be offering new services only minimally related to telecommunications.

Furthermore, leading carriers in developed markets are forecast to be deriving at least 15 per cent of their revenue from non traditional sources as they seek to combat declining voice revenues.

In order to find new growth, carriers will need to develop a wide range of new digital services and will increasingly find themselves competing on a broader playing field and going up against internet companies, such as Google, as well as equipment providers, such as Nokia.

But of greatest concern to the carriers, is Gartner’s expectation that they will have to rescind exclusive control of the customer data used to support new personalised digital services.

To their advantage however, Gartner’s believes carriers will benefit in three main business aspects: strong market intelligence; deep integration of systems and data; and synergies between services.

“The evolution of networking and IT technologies toward online IT and the digital age creates significant opportunities for communications service providers (CSPs) but also poses huge challenges,” said Jean-Claude Delcroix, research vice president at Gartner. “Opportunities for new digital services range from extended transmission services to content services and IT services. The main challenges will be a much more competitive environment and a much more intense use of IT in the delivery of services by CSPs.”

Delcroix warned that fixed operators will need to move fast to offer new content, video and advertising services and application services in order to offset the decline in their voice revenues. He estimates fixed ops have less than five years to come up with a new plan or face being relegated to utility bandwidth providers.

Mobile operators have a little more time, with next generation mobile technologies such as LTE and 4G in general affecting the market progressively from 2010 to 2015. With prices of mobile data services and devices too high for mass usage today, carriers will need to deliver new mobile digital services that require less bandwidth but offer good value for money, such as download and streaming services for music, micro payments and ticket ordering, Delcroix said.

Gartner’s research echoes a report released by analyst house and parent Informa Telecoms & Media in May, which added that even operators in emerging markets will have to embrace new ways of running their businesses when growth inevitably slows.

“For the last ten years mobile operators have been building strategies, platforms and services for the delivery of new non-voice services which, they hope will compensate for the inevitable decline in voice revenues,” said Mark Newman, chief research officer at Informa. “But it’s been tough going and non-SMS data revenues have been disappointing,” he said.

In its report, ‘Future Mobile Operator Business Models: Broadband, Partnerships, Wholesale and Mobile 2.0’, Informa notes that the focus is moving away from a limited number of services provided by the operator to internet access and operators’ non-SMS data revenue base is in the process of shifting from services to basic access. The services users are beginning to use on their mobiles are provided by internet players rather than mobile operators.

As such, the analyst expects that mobile operators can look forward to a period of growth in mobile broadband connectivity. But to capitalise on this opportunity, operators need to invest heavily in new high-capacity networks, effectively marking a transition to becoming ISPs. To avoid the fate of fixed-network ISPs, mobile operators will then either need to partner with internet firms and share revenues and/or develop a smart-pipe strategy. This involves ‘exposing’ different parts of their networks to third party service providers and monetising access to them.

About the Author(s)

James Middleton

James Middleton is managing editor of | Follow him @telecomsjames

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