The writing is on the telecoms wall: live together…or die alone.

Telecoms operators have been a successful business for quite some time, making a lot of money out of voice, and then out of fixed and mobile data.

Yet the dawn of a new era, the internet era has pitted web players against telecoms operators, stealing value from them, and pushing them to the background. Telecoms operators tried to counter this threat, yet were not very successful, due to structural and cultural constraints.

The only way forward for telecoms operators is to rethink their single-sided business model, ditching their go-it-alone approach in order to provide services to third parties, which will in turn provide services to their own end clients.

Telecoms operators had quite a ride for a while…

If one pans back to the pre-internet era, telecommunications operators (Telcos) used to sell, well… phone calls. Their business was two-fold: maintaining a complex nationwide phone network; and selling voice communications priced on duration and distance. Because of high costs (Both CAPEX and OPEX) of such a network, telcos did expect to monetize its use as much as possible. This led to a “walled garden” mentality where they would attract customers with initial offerings then focus on retention tactics and maximizing revenue per user.

In this profitable business, the irruption of data was first seen as a growth opportunity. When the internet began its commercial career in the early 90’s, data communication relied on analog modems, using existing telco's infrastructure and providing additional revenue "easily". Internet services providers business, led to even more minutes sold by telcos, which still retained the lion’s share of the overall value chain. Everyone was still primarily a telephony user.

A few years later, xDSL changed this dramatically. All of a sudden data was available in relative abundance, and did not rely on switched communication. ISPs became competitors, and telcos had to start their own ISP divisions. Web services took off and online revenue started to grow, mostly out of reach of unhappy telcos. They responded by mimicking successful internet services with a “me too” approach (Mail, homepage, storage, cloud…), hoping to regain control of most of their customers’ communications, and incidentally to justify high access price points.

However, they were never fully committed to these services, for several reasons. First of all, they often were not sold as a standalone product, but rather bundled with a subscription; they were mostly designed to attract or retain customers, and therefore were only required to be “good enough” at best, not best-in-class. Secondly, telcos could not bring themselves to outsource these projects, even if those relied on new technologies they did not fully master. Thirdly, telcos did not want to share revenue, and therefore kept away from useful partnerships that might have brought necessary expertise. This was a losing proposition from the start, as they could hardly compete alone with the innovation speed of the entire web economy.

Fortunately, voice communications were still going strong due to the mobile boom, and telcos shrugged off the internet phenomenon, secure in the knowledge they still controlled access to their customers on mobile networks.

Early mobile services were a much watered-down version of the internet, only accessible through operator-controlled gateways, portals, and operator-bound handsets. 3G brought better bandwidth, but did not change much because, once again, of this very “walled garden” approach to mobile services. Telcos still closely guarded access to their mobile customer base.

…but the music is about to stop

Enter the iPhone. All of a sudden, walls came tumbling down. One got access to the actual, full-flavored internet from one's iPhone, and was no longer required to go through the operator’s portal, or restricted to his approved mobile services. Telcos lost their main historic asset, which was control over their customers. Worse for them yet, a new and much improved way to interact with customers through applications made their brand completely invisible in day-to-day interactions.

Telecoms operators’ reaction was more of the same: copying these new mobile services in the hopes of keeping their customer’s revenue all to themselves. They rolled out numerous apps, set numerous joint ventures with digital startups, even tried to unite and create their own store through the “Wholesale Application Community” (WAC). But they did not gain much from this approach.

The reasons for this lack of success are both structural and cultural.

• Structurally, no single operator had the reach of an internet player; mostly, operators design services for their mobile and internet clients, and not as a standalone product. This also makes them complacent on design or user experience, since the service will be bundled with the access fees.
• Culturally, they are still anchored in an industry mentality that pushes technology rather than use-cases (2G, 3G, 4G, and soon 5G), and products (Derived from former phone plans) rather than services. They are neither agile nor customer-centric.

We are now 10 years into the iPhone era, and little has changed. But telcos are under heavy pressure: on one hand, customers demand ever-cheaper data, fueled by internet usage, which requires constant network investment; on the other, they are losing most service revenue, even voice revenue, to better and more agile internet players. Gradually, connectivity is becoming a commodity, which was the nightmare scenario telcos fought tooth and nail to avoid.

Telcos still have some room to buy time. The comfortable margins they enjoyed for years mostly shielded them from the need to optimize their cost structure. Also, new technologies such as 5G or FTTH can justify higher prices for a while. But this is a stopgap; if they want to preserve their margins in this new digital economy, telcos must find a new business model.

Yet so far, telcos' digital strategies seem to be focused on enhancing user experience through multi-channel processes and digital tools; this, however, does not address the major issues mentioned above. Nor is it easy to implement: telcos tend to be organized in product silos (Voice, data, content…) that limit internal cooperation and customer focus, and are often quite large organizations ill-suited for agility. Digital transformation remains a daunting prospect.

So, what should we do now?

Telecoms operators are network and technically focused organisations, which have only an average scorecard in terms of client relation and user experience (UX).

As a result, they should not aim for over personalised services and best in class UX, but rather focus on

- Leveraging their network and adding value to its connectivity business

- Pushing services to third parties that would in turn sell services to end clients

Telcos should capitalize on their strengths, not on their weaknesses

• First and foremost, telcos are businesses "engineered to deploy and operate" a voice and data transport network.
• Stemming from their primary asset (The network), there is a flow of information generated around the end-user (Whether companies or individuals or both).
• Last but not least telecoms operators have reach, as they can push product and services to their customer base.

The network is my ally… and a powerful ally it is.

Building up on those aforementioned elements, telcos should focus on their core business: operating a network, and add value to their current offerings.

In a "not so distant future" telecoms operators will have a mix of macro mobile networks, complemented by tens of millions of small cells and publicly available/shareable Wi-Fi hotspots.

Over time, they will provide an increasing number of consumers with a single "connectivity" service (To rule them all), incorporating fixed and mobile broadband, in an "always best connected" mode, leading to an Ultraband connectivity service. This connectivity will be built on a more dynamic relationship between the macro mobile network and the “smaller cell” network.

This would allow telcos to provide customers with an "always on" connectivity depending on where they are located and on network congestion, as connectivity would be dynamically routed in order to provide the best network experience.

This "always best connected" service would be "charged" as premium to the end client, providing a relief (If not more) for telecoms operators marching towards a commodity prices situation.

This will be based on a convergence between IT systems and telecoms networks (Self-Organising Networks as well as Software Defined Networks). This very convergence would also be an opportunity for telcos to unclutter their legacy systems and improve their operations, allowing them to get free of their internal constraints improving the overall UX.

Positioning telecoms operators as "platform" operators

There are different types of telecoms customers:

• Consumer, professionals, companies…
• Enterprise clients
• Third party partners providing content, applications ... and services

Telecoms operators' role should not only to push products to the first type of customers but also:

• To "connect" (!) them to enterprise customers and third-party service providers and advertisers
• Additionally instead of being the point of creation / manufacture of every service, telcos could create value by pushing products created by third parties to end customers, the network becoming a go-to-market vehicle.

As a result, revenues would not be limited to a left-to-right stream (From end clients to the operator), and the market in which telcos operate would be "double-sided" as they would cover all "sides" of the value chain with downstream as well as upstream customers.

This double-sided market has been operated for quite some time in different industries:

• Payment / credit card companies such as Visa or Mastercard (Connecting merchants, banks and end clients),
• Software companies such as Microsoft providing operating systems (Connecting PC users to publishers),
• Internet search companies such as Google (Connecting search engine users to advertisers).

Yet this would be a Copernican move for telecoms operators as it would mean switching from a Closed Network Model or NetCo, to an open platform model - WebCo or Telco 2.0. This model already exists in a static and relatively closed form, under the name ' Third Party Access ': SMS + and long-term third-party billing for large content providers and aggregators. But Telco 2.0 brings so much more.

The novelty lies in the way in which enablers are made available, in a more open and dynamic way, as well as the extension of the concept to more and deeper internal functions and components emanating from the network or telecoms IT systems.

This new telecoms approach involves unbundling the telecoms business / network into three layers:

Yet telecoms operators have already led multiple mostly unsuccessful APIs programs trying to entice developers to build software on top on those, leveraging telecoms information from the network.

To bring this to fruition, telcos should not limit themselves to APIs, but must provide access to their own IT and telecoms resources (Much like the Amazon Web Services approach) whether computing, storage or dedicated services that developers could tap into, in order to provide better end customer services. Telcos should even help developers with user targeting built on their own internal data.

Mutual benefit

This would enable telcos to tackle one of their major weaknesses: indeed, until now telcos have been talking at length about the Holy Grail, namely the best user experience for their clients. But let's face it, as telcos are "infrastructure minded/led", rather than "customer focused", results have been murky at best:

• Not only does telecoms operators' DNA prevent them from having a genuine customer led approach,
• But also, being a telecoms operator, companies in the industry have legacy (Layered) IT systems, and complex telecoms equipment that represent a very difficult "beast" to master.

From a marketing perspective, there are too many segments, being redefined on a regularly basis, that lead to a conundrum, as it is nearly impossible to have a matching product line/organisation.

That is the very reason why MVNOs and third/fourth entrants have most of the time a better UX and a better client and segment approach: although they are late to the telecoms party, they do not face the aforementioned constraints.

Telecoms operators should not give up on improving their user experience, yet having and keeping the best and ultra-personalised UX, is not feasible on the mid-term (Some might even say on the long term…), as a result telcos should allocate their resources and focus accordingly.

Working hand in hand with a developers' community could help telcos tap into their expertise, mindset and agility to improve its user experience and even pave the way for new IT architecture.

Being your business partner

Last but not least, telecoms operators should embrace a "consulting" approach in order to target enterprise customers.

Those customers would benefit from and end-to-end service tapping into telecoms service and data, as telcos could approach MNCs or national large enterprise with a service aiming at improving their business or reducing their costs, wrapping telecoms, IT and consulting into a single project.

One of the use cases would be a Voice 2.0 one, for example, targeting delivery companies such as UPS with a service aiming at ensuring the delivery of a product at home, without long interaction with a call centre reducing the cost of operating the delivery business:

• " Hello, your order, has arrived, press 1 to get it from our shop, 2 for a delivery, 3 if you wish to cancel the order "
• Whenever one calls the call centre, his information is shared with UPS so that one does not need to provide scads of information on the phone
• If one can see the delivery man leaving one could ask for him to come back via interactive SMS and the received message, could be cancelled or modified.

This would result in multiple business benefits:

• The customer would be satisfied, because it would not have to place a call to the call centre and provide an "odd" order number;
• The call centre would have a better RoI (Return on Investment), with less calls, that would be shorter and it could focus on complex interactions;
• The delivery company most importantly would be willing to pay to get its business process running more smoothly while lowering its costs.

Go-to-market channel

As mentioned earlier telecoms operators should position themselves as a "digital facilitator" for their clients, being a "go-to market" channel and curator as they could provide best in class services/market, partnering with third party companies.

Telcos would offer practicality: become a service facilitator with, for example, a portal aggregating services such as music streaming services, ride hailing (Quite similar to Starbucks portal on its Wi-Fi network); or possibly share value with its customers under a promotion form, providing access to its client base to the aforementioned third parties.

• In developed countries as telecoms operators are facing internet companies providing best in class, well established products, (Spotify, Youtube…) they should partner with them and push those services to their clients, as there is no point for end clients to choose a me-too product from telecoms operators
• Whereas in emerging countries they could push with their own /telecoms operator-backed services, as they would have less competition, and get market share leveraging network effect, before the arrival of industry juggernauts

Differentiated approach

Depending on their position in the market, telecoms operators should have a differentiated Telco 2.0 approach:

When discussing with telecoms operators' senior management, one can easily see how obsessed they are with the “bit pipes” fate, as they struggle to avoid becoming dumb pipes operators.

Telecoms operators have done a lot in terms of projects, products, initiatives in order to avoid such an outcome, most of the time on their own, with little to no result at all. And that's the reason why they failed so far.

This situation is very similar to a person who is caught in moving sands, sinking inexorably... who could reach out to someone's hand in order to get out, but rather keeps on struggling on his own, only sinking faster.

We have to stop waiting.

Every man for himself is not going to work.

We just cannot do this.

It is time to start organizing.

We need to start figuring things out.

We need to figure out how we are going to survive here.

There is no doubt that this is the only way to make a difference.

Last week most of us were strangers.

But we are all here now.

But if we cannot live together, we are going to die alone.

Tariq Ashraf

Vincent Bouder