Something is not right with the telecoms industry just now. Some of you would say it hasn’t been right for a long time but a number of things have happened of late that make me think many telcos may be reaching a crisis point that they may not recover from.
I attend an inordinate number of industry events in my job and I get to interview or moderate panels with many C-levels. Some are clearly focused on what the business needs to survive, many others less so and an inordinate number seem resigned to the fact that total digital transformation will never be achieved and settling for a partial journey may be the only option. I can count on one hand (yes, I can count) the number of tier one operators that have managed the transformation journey to a level that has either returned increased revenues or that they can openly boast about. Like a chameleon the outer skin may disguise what never changes on the inside.
The recent TM Forum Digital Transformation World event held in Nice attracted a withering number of CTIOs to a specialized track mainly to share experiences, hear from those that are managing the journey best and try to determine at what level of digital maturity they have reached. The TM Forum itself must take credit for managing its own transformation, under the leadership of its progressive and energetic CEO, Nik Willetts, from a guardian and purveyor of BSS and OSS processes into a body that is leading the way in understanding what is now required to make any digital business work.
However, the real issues hindering progress lie with the complexity, diversification and sheer volume of legacy that telcos carry on supporting despite the arguments in favor of taking a loss now for the sake of future prosperity. Telcos have an incredible history of paying big money for assets they then feel ‘required’ to ‘sweat’ – often way past their use-by-date.
Their boards, ever wary of upsetting stakeholders with grandiose plans of wholesale modernization, seem resigned to stick with the “tried and true” methodology of the last hundred years. Whilst the cash cow gives milk don’t do anything to upset it. They grudgingly agree to invest in networks to keep up with the latest ‘G’ and they bid for spectrum because they have to, but whilst the share prices wallow and revenues lag they hold back on wholesale transformation at a time when a piecemeal approach simply does not work. And it’s costing big money just to integrate to legacy systems and keep them running.
And that creates a whole new set of risks that are manifesting themselves somewhere in the world daily. As an example, and as reported in the Sydney Morning Herald: ”Telstra, Australia’s largest mobile telecommunications provider – suffered a widespread outage of its 4G network on Monday that crippled voice and data services provided by the carrier across much of the country. This outage came after another mass service disruption less than three weeks ago, and many other well-publicised recent outages for the company. And it goes without saying that this isn’t just an Australian problem – widespread cellular outages have been prevalent in the United States, the United Kingdom, and Europe.”
Maybe it’s time, and for mobile operators in particular, to concentrate on delivering a network that always works. We have all become dependent on communications so surely this must be the operator’s priority. Do customers really want be bombarded with daily marketing offers, subsidized handsets, and plans that need an actuary to work out? Today’s customers want connectivity, transparency and simplicity. They don’t want to buy digital services from their telco – they can probably get a better deal elsewhere from the myriad of digital service providers vying for their attention.
Don’t believe me? Take a look at Reliance Jio in India and Free in France, particularly the latter. Two flat rate tariffs, a set price (€19.99 pm) for unlimited data and calls in France and free international calls to over 100 countries. Something must be working because Free under its holding company Iliad has, just six years after it entered the mobile market, has become one of the leading electronic communications operators in France, with more than 20 million subscribers, of which 13.7 million are mobile subscribers and more than 6.5 million are Broadband and Ultra-Fast Broadband subscribers. At the end of 2017, it had market shares of 24% for Broadband and Ultra-Fast Broadband and 19% for mobile. During 2017, the Group continued its profitable growth trajectory, generating close to €5 billion in revenues – up 5.6% on 2016.
And this could well happen in other markets. Digital transformation will only work if the service being provided to customers is seamless, fault-free and continuous. Removing complex billing removes (the bulk of customer service calls) and concentrating on the business of providing good service and forgetting the ludicrous idea of selling everything that others sell better is surely the way forward.
Better still, why not unload the agonising and often unprofitable retail business and become a pure wholesaler to big customers that have money and want what you can offer. Concentrating digital or any other transformation on becoming an open platform seems so logical. Ah, there’s the catch – logic in the telco space seems to have been lost, if it ever existed, or maybe it has been genetically bred out. Logic and guts, now that I think of it, are such rare commodities in the telco space. Pretty soon investment – and customers – may become just as rare.
Good piece, Tony, with so much in it – much of which I feel I’ve been droning on about (less eloquently) for some years.
Telcos thinking they should be something else is one thing – and that’s perhaps fair enough at at time when so many businesses are transforming – but telcos have also, for many years, carried with them a dangerous sense of entitlement (to premium service revenue from their network investment) and resentment (of other businesses that exploit broadband more successfully – the OTTs against which they raged for so many years).
These twin (but related) positions rose from telco’s understandable hubris – mobile and broadband made the industry so immensely profitable through the 90s and 2000s that it has been very hard for it to accept that another great wave of success wasn’t inevitable. But mobile and broadband were both network services (with a few extra bells and whistles), variants on business as usual for the industry. The great waves since 2005 have been driven by digital/internet native startups, whose mindsets were very different, for whom the network was just an enabling factor to their core business rather than central to it (and something they probably thought about very little, if we’re honest). Competing with Google, Amazon et al wouldn’t just have required digital transformation – i.e. doing the same thing differently and more efficiently – it would have required massive diversification into completely different kinds of businesses – and how many organisations can we name that have ever managed that successfully?
So yes – continue the transformation of the network to make it cheaper to run, more flexible and agile, eliminate the more redundant elements of the BSS/OSS and move the rest online/ into the cloud, or to cheap third parties. Shifting the focus from retail to wholesale also makes sense as even consumers approach the telco with a cash-and-carry mindset (just give me the gigabytes and the line-speed and I’ll take care of the rest). Protect the bottom line not with ever-more extravagant flights of digital fancy, but by making network services ever more reliable, usable and cost-effective. Forget being an also-ran (digital service) provider – there’s no shame in being a lean, mean and excellent (digital) service provider.
Thanks Bob, but isn’t that what I said? 😉
I wouldn’t be at all surprised, Tony, but blame yourself for triggering my digital transformation rant…
We love your rants. Don’t stop!!
Tony, the need for focusing on digital innovation and partnerships has merits but telcos suffer from I’ll try it on my own. The innovation dilemma there is “how much more can be wasted on innovative digital business models?”.
Digital players are unlikely to help telcos distribute services because most CSP then turn to their tier 1 suppliers asking them to replicate and license the tech (if it touches me, I’ll have it all”.
On the other hand, I believe a new kind of MVNO may be emerging, one that doesn’t go for a licensed partnership but aggregate chains of services some of which come from a telecom.
Also, your advice to focus on one simple thing, the network and be it a wholesale approach is a wise advice ahead of its time. You think the boards will ever buy it…? there is no transactional income there!!!!