The telecom industry has been at the helm of growth and development on a global scale. In addition, this industry has experience substantial change concerning technology as well as business models.
The introduction of technologies like mobile phones and cellular communication in the 1990s, and the Internet revolution was well handled by the industry players – they were quick to adapt and maintain their revenue streams.
However, the Over-the-Top (OTT) service providers like WhatsApp, G-Pay and Amazon Prime have posed a considerable challenge to the revenues of service providers.
In response to growing competition, the telecom industry is looking at different avenues to reclaim the past glory that it enjoyed before the rise of the OTT platforms. In fact, recent Gartner reports have indicated that infrastructure investments in 5G are expected to generate immense revenues and resurrect the standing of the service providers.
Here, we will explore the current challenges and how creating new and improved revenue models help redefine service providers' business models.
One major threat to telecom service provider revenues stems from the fact that the existing OTT apps do not contribute directly to the revenues of these operators. On the other hand, these OTT applications depend considerably on the telecom infrastructure to deliver their services to end customers.
In addition, many OTT services are capable of replacing the services offered by telecom service providers, such as messaging applications that have largely replaced traditional SMS services. As most of these services use the Internet to communicate, the service providers continue to enjoy revenues from the use of Internet services and data packets transfer. However, this is severely impacting their revenues that were earlier generated heavily from their core services like international calling and text messaging.
Three reasons why OTT continues to be popular
Cost: The OTT services are delivered at bare minimum costs. In fact, some do not attract any direct costs at all. These applications perform just as well as the core services offered by service providers but without additional costs such as connectivity.
Abilities: Standard services like texting or SMS have certain limitations in comparison to feature-rich messaging apps like WhatsApp. Combined with the low cost, this is a major advantage that OTT platforms have over the telecom service providers.
Ease of use and convenience: Users are communicating and sharing more than ever before. And this is mainly due to the above two features of OTT applications. They are easy to use and can be adopted irrespective of the service provider you are with.
The way forward
Considering the nature of the OTT platforms and applications, there is little surprise that the revenues of service providers have been severely impacted in the last five years. The only way forward is for these entities to modify the way they function and adapt to the changing times in order to reclaim their past glory. In other words, it is time to become proactive and take the bull by its horns.
Popularly addressed as the '4th revival' the 5G is expected to launch the 4th industrial revolution. 5G networks have finally been launched by most countries and service providers are looking at harnessing this next-gen technology for increasing their revenues.
The global 5G equipment market alone has grown tremendously in the last 5 years. However, service providers cannot expect customers to pay significantly more for faster connectivity. Therefore, this is not a viable model to improve bottom line revenues.
What can 5G do differently than 4G?
Service providers must look beyond the current applications and business models of 4G and take more innovative approaches to use 5G for their business benefits. Let us take a look at how 5G can enable service providers to offer better services than their customer's expectations.
Augmented reality and virtual reality
High-latency services can undermine the entire gaming experience, especially for VR headset users. In fact, continuous latencies between action and response time can result in severe motion sickness. 5G's marginal latencies can help overcome this critical problem in the gaming industry making it an ideal platform for the industry. The service providers must not miss out on this crucial revenue sharing opportunity with OTT platforms hoping to deliver AR/VR experiences on the 5G backbone.
Carrier-grade connectivity delivered via bespoke model
Unlike its predecessors, 5G brings much more to the table than just network performance improvements. As a platform that is highly 'connected,' 5G is capable of enabling service providers to offer well-defined SLAs and QoS for enhanced performance.
Efficient network slicing is an excellent benefit of the new 5G technology. Each virtual slice is an isolated instance and is programmed to work on a separate architecture with networking provisioning requirements.
This will enable service providers to offer virtual networks that are customized to fulfill the enterprise's requirements. But, most importantly, slicing and creating visual networks also translates into reduced investments in the physical infrastructure. All of this, while tremendously increasing the variety of services that can be extended to the end customers.
It is time for enterprises to shift the focus on the customers and users rather than the features of the product. Unless you are offering an exclusive product, it is more important to place the interest of the customer before the attributes of your offering.
Cloud-computing entities and global e-commerce players have transitioned into industries other than their core businesses. Therefore, service providers must listen to the needs of their enterprise customers to remain in the game. 5G is proving to be an excellent platform for translating the requirements of large customers into deliverable products and services.
New and evolving technologies
Carriers and service providers certainly stand to benefit from newer technologies and services models emanating from 5G technology. And to reap these benefits, businesses must look at creating user-friendly platforms that can compete with providers of public as well as private clouds.
Secondly, service providers must look at offering turn-key solutions, including professional services. The services and platforms must be efficient, easy to install, setup and operate, and must be capable of scaling up as business requirements increase. Service providers can also incorporate monitoring and provisioning tools that promote self-service.
Addressing customer requirements
The easiest way to address customer requirements is by adapting to their respective industry. In other words, to understand and discern customer requirements apart from network connectivity. These could include security services, customized latency requirements, global or local spread of the network, monitoring or management tools, speedier issue responseand resolutions, etc.
Faster speeds are not an assured indicator of a simultaneous increase in revenues for service providers. However, 5G is highly capable of creating newer growth opportunities for all businesses across industries. This is also true for telecom service providers that have been facing immense competition from the increasing popularity of OTT platforms and services over the last five years. While blocking these services is not a wise strategy, it is high time that service providers innovate and adopt technologies like small cells and provide competitive platforms catering to legacy, as well as future, systems.
— Piyush Jain, Global Services Architect, Ciena
Photo by Austin Distel on Unsplash