How Platforms Will Help Telcos Overcome the Cannibalization of Voice and Text Services
Right now, telcos are looking for effective ways to use digital transformation and ensure relevance in long-term digital business.
What’s happening is that once dominant text and voice revenues have given way to cheaper data revenues, without which it’s becoming increasingly difficult to operate.
In today’s blog post, we’ll explore how this change in the telecoms landscape affects telcos, and why a platform strategy might prove to be the only sustainable path.
Data is Cannibalizing Text & Voice
Before we look at the benefits of a platform strategy, let’s examine the current dynamics in the telecommunications marketplace.
For a couple of years now, OTT providers have been expanding into a sizeable chunk of what was traditionally a telco market.
OTT vendors are able to do so by offering a more convenient way for end-users to communicate and consume high-quality content on demand.
For example, messaging apps such as WhatsApp, Viber, and Telegram don’t charge end-users to share news, talk to their friends, and call their business partners. They offer easy to use solutions that work from any place, at any time.
But it’s not about offering free services. It’s about offering convenience.
Take a look at Netflix and Spotify. Both charge a fee to consume their on-demand, high quality, original content. But customers continue to love it.
So how does this affect telcos from a business perspective? And what can telcos model in their own operation?
Telcos Still Hold the Reigns But...
Without telcos to provide network infrastructure, end-users wouldn’t be able to consume third-party content, nor use the convenient messaging tools.
And despite the increasing threat from OTTs, telcos still hold the reign. Telco data packages are what allows OTTs to deliver their content to consumers in the first place.
One could argue that since telcos still control network assets, they can choose to block users from accessing OTT services. This would be a short-term blow, but still a setback for OTTs’ business operation.
So where is the catch?
...They Need to Act Now
In simple terms, telco products have started to cannibalize each other.
Although OTTs make use of the telco infrastructure to deliver services, their innovative business models take away telco profits.
The problem is that data is cheaper than voice, and can offer a lot more than just voice or SMS. This means telcos need to reinvent their pricing/products, or even overhaul their business models.
For quite some time, telcos have been focusing on subscription and connectivity. The issue is that these make just one segment of the value chain and an increasingly crowded one. If telcos don’t change the focus, they will be forced to drop their prices even more.
The way both telcos and OTT providers can thrive is to focus on exploring joint ventures to create more value for customers through high-quality services, rather than to compete by lowering prices.
Going forward, telcos need to consolidate their ecosystem components such as OTTs to accelerate innovation in digital services.
They need to move past voice and text and realize that data is the new revenue engine.
The way for both sides to benefit is to band together.
And this starts with a platform business model based on APIs, as a way for both telcos and OTTs to offer their best to the end-user.
Monetize underutilized assets
Telcos already possess the main game changer—network assets.
But the catch is to monetize the underutilized ones.
At the moment, telcos are the sole bearers of maintenance costs for network assets. Some of these assets (such as cables, routers, and towers) are at idle capacity.
What telcos instead could opt for is to share their network assets, thus reducing the costs or tapping into new revenue streams.
And that’s where a platform fits in perfectly. A platform would allow telcos to pair their existing network assets with services, through an open API gateway, to deliver a full customer experience to consumers.
By offering an ecosystem where dozens of apps and devices communicate, telcos will actually be delivering a highly customized experience to end-users.
The customized experience is currently OTTs main advantage. It’s also one of the areas where telcos need to step up their game fast! Offering a reliable environment, a platform, is the way to do it.
The bottom line is that through a platform, telcos would once again be at the center of communications.
And the best part is that telcos have the technical expertise to do it.
Where telcos have the edge
With their brick and mortar presence, telcos are a trusted brand with high network coverage and availability.
Telcos also have access to verified customer data which is routinely used by banks and governments and a massive dataset generated by service consumption with real-time insight on customer behavior that provides immense monetization potential.
Crucially, MNOs have an existing billing relationship with every one of their customers which internet-based companies cannot claim.
A simple “add to bill” mechanism will allow telcos to monetize their underutilized network assets and traditional telco services in internet space.
What this means is that telcos have credibility and history, they possess piles of data, and a platform would allow them to channel these assets to bring together other stakeholders. This synergy would give customers the convenience they want when they want it.
A platform supports telcos expansion
Another advantage of a platform business model is that it transpires industries. Telcos can build platforms that tie together various aspects of everyday life, be it retail industry, finance, healthcare, or heavy industry.
For instance, during this year’s TM Forum in Nice, we have seen a couple of great examples of how telcos move into areas such as telehealth, combining network assets with health institutions, and thus allowing for integrated customer experience.
The reason we champion a platform business model is that it is focused on delivering an outcome, not a product. It’s about giving customers the experience, the convenience. The way to do it is to bring together parts that are apart. And who better than telcos?
Platform strategy use cases
Today, when customer satisfaction is the main currency, whoever brings on-demand, high-quality content to consumers wins. OTTs have been proving this for some time now.
So what can a platform do for telcos here?
Let’s start with the point of having a platform strategy in the first place.
The goal of a platform is to support collaboration and thus drive innovation.
And the key to a lasting telco platform is to be transparent and open to other market participants, which telcos can ensure through API ecosystems.
Telcos have a lot of data piled up and could gather user behavior data by using APIs, for instance on spending habits or preferences, across multiple services.
Telcos can then use this data to deliver better quality targeted content to platform subscribers.
For example, telcos could build a shopping platform that allows disabled customers to purchase and order groceries, clothes, medical services, or other essentials right through their phones.
Telcos would provide their network assets, open their APIs so that content providers could adjust their own services to the platform and become available to a new consumer base.
This would not just encourage innovation in terms of personalized services for the disabled, it would bring new business to services providers, unlock a new revenue stream for telcos, and ultimately, deliver fully customized experience for the customer.
This way, telcos move from being a telco to being a digitelco.
They overcome the traditional, increasingly negative publicity of being “just a pipe”, and become co-creators, enablers, providers.
These digitelcos will be wider ecosystems where developers, companies, and operators come together to collaborate.