The telecommunications industry is being heavily disrupted by technology startups. 5G has arrived and the COVID-19 pandemic has changed the way we work and consume media. So industry needs to innovate and transform to expand its activities back into the services market. The way I see it, integrating competing startups into a new ecosystem might be the way to make that happen.
For quite a long time, the telecommunications industry provided the foundations of communications and all the services built on top of those foundations: from voice telephony and texting to mobile internet connectivity. But the world has changed dramatically. Startups have thoroughly disrupted the services market. A McKinsey report I read recently showed how the internet companies’ market share of the telecom industry grew from 46 to 78% over a period of 10 years. Not a big surprise, quite honestly, even phone calls are made over the internet these days. This situation leaves the telecom business no choice but to retreat to its core activity. As a result, the telecom providers are back at square one: first and foremost, they are network providers, not service providers.
Based on that model alone, however, the future of telecom providers doesn’t look very bright. The number of mobile connections they serve keeps growing, while the average revenue per user (ARPU) declines year after year. As the consumer’s expectations grow — faster connectivity, better support, more convenience — the operator must invest more in infrastructure and IT to meet those expectations. In a highly competitive market, this means delivering more value to the customer, even when prices go down.
Rethinking the service model
To get out of this difficult position, several telecom providers merged with cable networks and TV broadcasters. However, there are other domains where providers can flourish again. Offering better service is a potential answer. I was only 19 years old when I worked as a technical support agent at the call center of a leading internet service provider. Whenever a server went down, I remember the huge number of customers calling us for support, desperate to connect to the internet.
We’ve crossed many bridges since then, and happily I’ve had the opportunity to work in this industry for the last 20 years and see the steep growth curve with every technological advance and innovation, meeting consumers’ needs along every step of the way. Now a further leap is coming with the huge investment in 5G. Telecom providers are in a unique position where they can help shape a new future for businesses and consumers, purely based on their investment in new technology, especially 5G. In fact, moving to this next-generation network has the potential to completely transform the way industries operate. In this way, 5G opens the door to gaining a competitive advantage and new opportunities for innovation.
The power of the ecosystem
But rather than just offering new communication technology, the telecom operators also need to reinvent themselves. First of all, they have to find new service areas to monetize the huge investment that comes with 5G. Based on those services, they can start building ecosystems around consumers’ and businesses’ needs. Last but not least, the use of new technology, such as data analytics, allows for solutions that win consumers’ loyalty through personalized experiences.
Obviously, the telecom providers aren’t the only ones to see the potential of 5G. In fact, 5G-enabled services from startups may further disrupt the telecom industry. The availability of new technology alone can’t save the industry. It needs to rethink its focus and innovate. Technical capabilities can’t be the focus of that exercise; instead the benefits of the use cases that become possible thanks to 5G should take center stage. The best way to do that is to bring capabilities and partners together in an ecosystem. When startups that are currently the telecom providers’ competitors join that ecosystem, everybody wins.