The telecom industry landscape will be transformed in a number of ways, from the way service providers used to position their offerings, and its new features and applications, to the types of providers and end-users, according to a new report from Researchica.
In its report titled “Telco Business Future Proofing Framework 2018-2025”, the UK based digital market research and consultancy company warns that 30-50% of Telcos would go out of business by 2020. And, claims that the trend has already started.
Growing influence of connectivity across almost every industry, things, and services is greatly disrupting the telecom industry value chain. Although connectivity is playing a crucial role in today’s hyper-connected world, the more valuable roles are being played by players like cloud, analytics, and security providers. The scenario is changing at a rapid pace and Telcos face many challenges in monetization despite the emergence of enormous opportunities.
David Brown, Senior analyst at Researchica said, “Telecom is the only industry where volumes (connected human, animals, machines, and things) are growing at 30–50% a year, but revenues are continuously shrinking.”
He further added, “The situation is going to be even worse in the coming years. While there will be more than US$ 2,000 billion investment by Telcos in the coming years, the RoI is highly questionable the way Telcos are currently planning to monetise. Telcos need to realise that investments alone do not lead to increased profitability.”
David suggested, “The fate of Telcos will totally depend upon the choices they make today, and the tough decisions they take today. And, I mean ‘really tough’ decisions because their existence is in danger for sure.”
Researchica advises telcos to reinvent much more rapidly if they want to grab the upcoming opportunities, overturn declining revenue trends, and offer new services profitably. Researchica claims that current business model of telcos is not at all relevant now, they need a framework to future proof their business and RoI – a complete overhaul of operational procedures, network planning, business strategy, target markets/ customers, and portfolios.
“Operators must visualise their future revenue sources and related applications now before making any new investment,” suggested David Brown.
More importantly, the report emphasises on the importance of creating future proof networks that would be scalable, completely automated, with drastically reduced OpEx. Network optimisation would be highly crucial to offer next gen services across consumer, enterprise, and industries – profitably. The report says that zero-touch automation is the future, and the importance of NFV/ SDN would considerably increase in the coming years. However, there are technical challenges in NFV development and deployment due to unavailability of any suitable NFV/ SDN solution – both cost-wise and application-wise. So, what should be the priorities for telcos from network evolution perspective? This report analyses different approaches of Telcos in this area. AT&T, Vodafone, NTT Docomo, Telefonica, and China Mobile are pioneers in the field. These operators are taking different approaches in adopting NFV and SDN technologies.
In 2016, NTT Docomo developed and rolled out the world’s first NFV technology that can run EPC software from multiple vendors to enhance connectivity in high-volume areas. The NFV solution of Docomo runs on Ericsson’s OpenStack-based virtualised infrastructure managers (VIMs), and its implementation includes virtual network functions (VNFs) from multiple vendors such as NEC, Nokia, and Fujitsu.
NTT Docomo is now scaling up its NFV implementation after reporting increased efficiency and lower costs. The NFV deployment now enables NTT Docomo in achieving a shorter time to market, with service releases now available in a day, rather than in a few months. Meanwhile, NFV has enabled increased automation in service delivery, also saving time. Docomo is expanding its NFV deployment and plans to have 75% of its mobile core network assets running on NFV based virtualised system by 2020.
Another leading NFV/ SDN adopter, AT&T aims to virtualise and control over 75% of its network using its SDN/ NFV architecture to meet the growing demands of data and video-hungry users by 2020. AT&T launched an initiative called Domain 2.0 in 2013 to make its network automated and software based. The investments in such efforts are already bringing cost out of the organisation. For example, AT&T has been able to flip the ratio of billing inquiries through increased use of automation. It used to do 20% automated and 80% manual, and now it’s flipped. ONAP, DANOS, and Acumos are some of the key projects of AT&T that is helping it achieve efficiency and retain margins.
The report covers a more detailed analysis of different approaches of telcos for achieving network virtualisation and optimisation.
Following are the other key finding from the report:-
- The real disruption is going to happen after 2020-21; once IoT gets more prevalence than today; automated systems starts transforming businesses, societies, and governments at least 20 to 30 times more than today; nontraditional businesses with totally new offerings (across consumer, enterprise, industrial, and other segments) with highly appealing value proposition starts coming at a rapid pace from nowhere.
- With the current business model, Telcos will not be able to monetise their investments anymore.
- Highly profitable Telcos would be offering both voice and data “almost free” across the consumer segment by 2025.
- Smaller players would not be able to create the balance between long-term and short-term financial goals. Consequently, 30-50% of Telcos would go out of business by 2020.
- IoT will create huge revenue opportunity by 2025, but more than 90% Telcos are not prepared to monetise.
- NFV/ SDN will be crucial for telcos for cutting costs, increasing efficiency, offering services quickly, and retaining margins.
- 75% of the CEOs are extremely worried about strong competitors coming out of nowhere.
- Strong culture resistance will limit many big players to change.
- Telcos with a startup like approach will be able to capture high growth opportunities in the beginning.
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