The telecom industry has held its own for over 100 years through several disruptions. Today, the next level of development revolves around the promises of the internet of things, 5G, and their potential to generate new revenue streams. Embracing these new technologies can allow telecom operators to remain profitable in a world that has left behind old revenue streams around long-distance calling and text message charges, to become an exclusive world of unlimited data.
Everyone is racing to have the most robust 5G network, but much of the ROI remains wrapped up in potential rather than solid business cases. Compared to places like China and South Korea, it is considerably more time consuming and costly to rollout 5G small cell infrastructure in the US. One research firm projects that mobile service providers will collectively spend nearly US $57 billion on the rollout of 5G through 2022.
There are plenty of challenges that come with the costly rollout and implementation of 5G networks. First, there is the need to identify millions of locations for infrastructure. Next, companies must work with city officials to acquire permits for every one of the millions of identified locations. Even after installation, a number of operational costs remain to lease, deploy and maintain sites containing the small cell technology. With all these challenges, there is growing concern around the small profit margins that will come with these new ultra-fast networks.
The Road to ROI
To recover a significant return on investment, network operators need to develop new revenue streams beyond just access charges for internet services. There is an increasingly pressing need for network operators to create new products and more monetization models to stay profitable.
Will users be willing to pay more for 5G services? Even though the ability to download an HD move in 5 seconds or enjoy a smooth AR/VR gaming experience is beneficial, it is not an immediate need for consumers. When thinking about the technology adoption curve, most consumers usually wait for word of mouth recommendations from their family, friends, and colleagues.
Beyond movies and gaming, everyday consumers will need a lot more products that utilize 5G speeds to make their usage a profitable revenue stream. Therefore, the best business case lies with enterprise 5G solutions rather than purely consumer use.
The Cloud Forward Strategy
In the business world, 5G can help proliferate the ubiquity of automation and intelligent environments. This advancement is possible through a combination of benefits around speed, reliability, low latency, and massive connectivity. 5G networks will change how businesses capture, transmit, and use data, while also managing the potential growth in demand and opening up opportunities to supply even more data. Therefore, to maximize all of the potential and profitability that 5G can provide, telecom operators must be innovative and strategic.
For telecom, the real value lies in cloud-native applications. In order to accommodate flexibility and innovation, many network operators have recognized the strategic imperative of moving to the cloud. When done in parallel with the transformation of operations support systems (OSS) and business support systems (BSS), the benefits come in the form of operational savings from automation. This ultimately affects total cost of ownership, which is important for telecom operators who are already stretched thin from initiatives around 5G and IoT, as well as other mergers and acquisitions.
When it comes to differentiation from competitors, the quality of the network, coverage and price are no longer the go-to USP. Now, by leveraging technology enabled by moving to the cloud, they can differentiate through customer experience by providing access to new and innovative services. Through incorporating the use of artificial intelligence and machine learning, operators can get even closer to the customer to understand their experience and improve upon it. This is an essential tactic when calculating the fact that the cost of acquiring a new customer is 5x more expensive than keeping them.
The Rise of B2B2X Business Model
While 5G is an important element, it is not the holy grail of IoT. Telcom operators must work on creating and controlling an end-to-end application infrastructure that will reduce churn and increase customer stickiness.
To do this, operators will have to move away from direct B2B and B2C models and begin selling 5G services to other businesses, who will then package and resell service as part of a bundled offer to their own customers. This model has come to be known as business-to-business-to-X (B2B2X), where X can represent a public agency, another business, or a consumer. Within this model, networks operators must innovate and collaborate in order to share profitability with enterprise partners.
These enterprise partner collaborations are limitless and can range anywhere from automotive, to eHealth, VR, factory automation, and gaming services.
Managing the B2B2X Customer Journey
In order to transition from connectivity providers to business service enablers, telecom must utilize microservices based applications with complete end-to end-governance that includes planning and execution, along with the ability to measure and improve processes. In an effort to bring this model to a reality, several companies are already creating platforms that allow the onboarding of multiple enterprise partners with only one integration in addition to managing services through only one interface. This will allow telecom companies to significantly expand their portfolio with a lower onboarding cost and shorter time-to-market.
Within this new model of digital marketplace solutions, there are several services that need to be brought together. In addition to easily accessible product catalogs, there must also be the inclusion of processes to execute partner, customer, and revenue management.Many digital players are partnering to expand their global footprint because at the end of the day, people want to pay one provider to bundle their digital services. Even though each new combination of service integrations presents its own unique set of challenges, it is a golden opportunity to boost customer stickiness through new services and a frictionless end-user experience.