Betting on Telco Resilience
If there’s one thing I’ve learned in my 20+ years in the telecommunications industry, it’s never to bet against it. Few companies have shown the resilience and ability to reinvent themselves as telcos.
Never has this resilience been more needed as wireless carriers fight over an increasingly saturated subscriber market. According to a Pew Research Center study, 92 percent of adults in America own mobile phones, while only 40 percent still use landlines. Stealing share becomes one of the few ways to maintain traditional subscriber count and related revenues.
It’s no surprise then, that a new price war was touched off by T-Mobile’s CEO, John Legere, who took to Twitter recently to announce a new unlimited pricing model that doesn’t put caps on phone, texting or data usage. This direct challenge to his competitors was taken up by Sprint in a matter of minutes. So, as the fight for subscribers continues, the pressure on revenues will continue to grow.
The fact is, younger subscribers have cut the cord, getting their entertainment via the OTT market through HBO Go, Hulu and other services. Even baby boomers are leaving landlines behind as they downsize their homes. The value chain is shifting, with revenues moving away from traditional infrastructure-based services towards media, content and new adjacent services.
Seeing this “writing on the screen” early, Verizon has taken a number of important steps. First they partnered with Comcast in their joint Xfinity service offering, and then acquired AOL in 2015. Adding Yahoo has been another sound move in an effort to participate in more of the value chain — via both content and the means to deliver it. After Google, Verizon now owns the next-most-visited combination of online properties, according to The Economist.
And that’s just one example. Telcos are competing rigorously and vigorously with social and media platforms for broader presence and new sources of revenue. One such stream is advertising which is wholly dependent on content. In 2013, Rogers Communication in Canada secured national media rights to all NHL games on all of its platforms in all languages. This deal was touted by NHL Commissioner Gary Bettman as “transformational,” embracing digital technology and bringing hockey to viewers when, how and where they wanted it.
Yet, in the U.S., the National Football League chose Twitter over Verizon. While the deal might help Twitter boost its market penetration, it seems a short-sighted move for the NFL. They should have partnered with a telco and played the long game.
After all, telcos have our number(s), with mobility an indispensable part of our lives. Our devices, and by extension telcos and the services they enable, keep track of our contacts and connections, help us get from place to place, let us create, capture and store our personal history in words and images, allow us to buy, sell and transact, entertain us and more. Telcos have a phenomenal amount of accumulated information, know-how and an amazing set of enabling assets that make all these services and many new ones possible. Yet sometimes this is undervalued and underutilized by the marketplace.
One underexploited enabler is direct carrier billing. Consumers watching a football game could, courtesy of their telco, pause their live-stream, click on their favorite player and get an option to immediately purchase a licensed jersey, or click-to-buy exclusive digital content from their devices and have these purchases added to their monthly telco bill, just like downloading an app.
Telcos in Europe and Asia are already moving in this direction. Singapore telco Singtel created Singtel Online Gifts that allows customers to buy or send gift cards that are charged to their accounts. Additionally, Swiss operator Swisscom partnered with NTT DOCOMO to offer its customers carrier billing for goods purchased from MediaShop Group, a TV and online merchant based in Austria.
Mobile transactions offer significant revenue potential in the American market for telecom players and an easy way for third parties to tap into a new source of value. Every post-paid phone plan is a line of credit that could be used for goods and services, making telecom the biggest provider of credit to the consumer marketplace. We’re already being exposed to the practice through telcos’ partnerships with nonprofits and their text-to-donate fundraising appeals.
Emerging Telco Services
Using their full book of assets—not just pipes and wires, but now big data, content and ecommerce—telcos have the ability to offer a much wider play in the marketplace. No social media outlet comes close to having the connectivity, infrastructure, broad services reach and market data of the telecoms.
In addition to OTT services and mobile transactions, the Internet of Things is another area of opportunity for telecom players. These three areas are discussed in more detail in the Capgemini white paper, “Digital Services: An Opportunity for Telcos to Reinvent.”
For truly visionary brands that want to do more than reach eyeballs, partnering with telcos makes sense. And visionary telcos are investing to extend their own reach, repositioning themselves up and down the value chain, expanding their service offerings. Increasingly, like Verizon and others, they will be not only delivering but also developing content, and getting paid for both.
It would be shortsighted to overlook the resilience of the telecom industry. I, for one, am excited to see the transformation as it continues to reinvent itself.