The systemic telecoms crisis and the importance of fresh new services

Profitable telecoms businesses are starting to cringe, as traditional services are being replaced by other online – conditionally free – communication services. Now, network operators are forced to look for answers to difficult questions. How do we create new revenue streams? How do we work with clients, interact with partners, and develop business?

In the communications industry, things are changing rapidly. Telecommunications are being transformed into ‘infocommunication’ – a new branch of the economy, combining information and telecommunication technologies. As I said before, profitable businesses began to ‘cringe’, and now there is something new, demanded by users and dragging down the revenue of communication operators. As a result of competition between operators and substitution of traditional services, the profitability of the most mass communication services falls on conditionally free.

However, this does not eliminate the need for serious investment in the development of telecommunications infrastructure. The volume of IP traffic is growing rapidly, and modern services, for which, in fact, the consumer is ready to pay, require broadband access to IP networks – and this is an additional infrastructure development cost.

The future of telecommunications is inextricably linked with the development of services, and operators of fixed and mobile communication networks are guided by solutions through which they can quickly expand the range of services and increase profits. However, the telecommunications industry may face serious challenges in the next few years.

Growth limits

The telecommunications industry is on the verge of a systemic crisis that has never existed before. The revolution is coming to an end – and further development of the market poses a number of serious obstacles.

The saturation of the market is down to the first of these obstacles. In developed countries, the subscriber base of cellular communication networks has practically become equal to the country’s population – therefore the rapid growth of the industry has exhausted itself. Indeed, in many countries, the number of active SIM cards has already exceeded the population.

In developed regions, the needs of business users and those of individual consumers in fixed telephony are completely satisfied, therefore, the operators can only compete amongst themselves for existing subscribers, increasing the cost of advertising for the whole industry. The remaining untapped reserves in other regions will not last long.

Another factor is the exhaustion of traditional drivers of growth in the telecommunications market, including fixed, mobile telephony and broadband Internet access. Equivalent replacement for them is not yet foreseen. The possibilities of increasing the speed of channels are also maximised by technological efficiencies.

There is also a functional crisis of the modern telecoms network. Already, the options provided to users meet almost all of their needs. All the fundamental needs of consumers – the desire to earn or save money, save time, provide security – are generally satisfied. To attract subscribers with new services, operators are now focusing on entertainment options.

Finally, operators are being plunged deeper and deeper into becoming dumb pipes. The main task of the operator is not to become such a ‘pipe’ for the delivery of third-party services. Additional value added services have undergone a noticeable change. If earlier, the basis of everything was a ‘voice’, and the rest of the services complemented it, now the primary facility required by users is Internet access. VAS has become a secondary product, created not by the operator themselves, but by other market players.

Now the prosperity of the IT industry is limited in expectations of subsequent growth as the ‘untapped’ market has been fully signed up. And what is happening now can be compared to a soap bubble. If the trend continues, telecommunications companies will evolve from technology leaders with ever-increasing capitalisation, to gradually turning into enterprises that are barely able to maintain the ageing infrastructure in a working condition. Without new services aimed at new segments, we are doomed to bleak vegetation.

What to do?

Ultimately, the success of confronting the systemic crisis will depend on the ability of the industry enterprises to find both unoccupied prospective market niches and unmet customer needs.

What new requirements should the new services meet? First of all, we are talking about carrier services and the business model and technology of provision that will reliably protect them from hijacking by third-party companies. It is desirable that these are not entertainment-only services, but something that meets more pressing needs for the consumer – as previously mentioned, saving time, making money, ensuring security, optimising business processes – which guarantee a broader potential audience and resilience in demand even during periods of crisis. 

It is preferable to offer completely new, independent services using specialised subscriber equipment, rather than paid additions to services already available. It would also be desirable that they are put into operation on the back of the existing network infrastructure of operators and do not require significant upgrades, which would allow for higher profit margins, limited additional investment and quick payback on existing capital expenditure.

Operators need to create dynamic new business models. These could implement the technologies of deep traffic analysis (DPI), service virtualisation that cloud models increasingly use. An important trend is the consolidation of the larger industry players and the saturation of the market.

In the corporate segment, there is a drop in margins, while tariffs for legal entities are approaching tariffs for individuals. However, telecom has a lot to develop. Free services stimulate the use of more complex tools and such services become sponsored. A good prospect, for example, is M2M services, because inter-machine communication can generate huge amounts of traffic.

In the entertainment business, Internet companies are much more successful; analogous carrier services are usually not popular. VoIP ‘kills’ voice traffic, and voice – this is 80% of the revenues of companies engaged in providing communication services, including all those based on mobile networks. Voice communications become free – even in a 3G network thanks to applications such as Viper. These are preferred by end users, but they take business from operators.

Operators will be forced to include additional services in their product portfolio, such as video conference facilities, the demand for which is growing every year. Otherwise, they can lose subscribers who have a wide choice of third party services.

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AjeetKumarSingh
24 Sep 2017, 3:52 a.m.

good

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