Will telcos be frozen out of the internet bonanza they built?

There is much to do but no operator is embracing the opportunity

Mohammad Chowdhury
Updated: Feb 10, 2016 08:58:29 AM UTC
smartphone

Image: Shutterstock

According to GSMA analysis conducted by PricewaterhouseCoopers (PwC), the Internet of Things (IoT) is forecast to create an economic impact to the 100 tune of $4.5 trillion by 2020 . That’s a mindboggling number, but thinking about how pervasive the IoT will be, it shouldn’t be surprising.  We already order taxis using apps which use our and the driver’s location, wear devices which track our healthiness and drive cars that have SIM cards embedded to help us avoid road accidents.

The IoT is reshaping how the world produces goods and services, trades and consumes them. New sub-industries are being invented (cash-on-delivery ecommerce didn’t exist five years ago, and neither did pay as you drive insurance) while others are being torn as IoT-enabled innovation enables disruption as we have never seen before.
smartphone
Telecom operators regularly remind us that they built and manage the vast communications infrastructure upon which the internet operates. A task that began a century ago, without the world’s dispersed communications infrastructure miraculously connecting billions of people and machines from anywhere to anywhere with wonderful reliability (a few black spots in Mumbai, Yangon and other places excluded), billed and charged, the internet simply wouldn’t work. But one of the results of what was first called “packet” communications is that customers can access services “over the top” of a network and pay for them separately.

Hence a lot of the revenue of Google, Twitter, YouTube or Facebook is out of reach for the telcos who carry traffic to and from their sites.

Ever since data services started taking off in Europe in the early 2000s, and now in countries such as India, Indonesia and China as affordable smartphones come flooding into the market, telcos have been challenged. But despite this, telcos’ revenues continued to grow as hundreds of millions of new paying users took to mobile annually.

With IoT, the context and extent of challenge, and the scale of opportunity couldn’t be more different. Firstly, mobile operators no longer have subscriber-driven growth to rely on.  And while data services challenged telcos to manage OTT services from a few companies, the internet of things challenges them from any number of industries who can now access their customer base. Scale is manifold bigger than before: Gartner predicts there will be over 20 billion connected devices by 2020. Mobile data was about transforming communications; IoT is about transforming the economy.

Ill-equipped to deal with data, telcos cleverly maneuvered into making more money from data through network offload strategies, new marketing paradigms and tiered pricing. For IoT, telcos are again short of skills and face new types of challenges:
•    Too little fresh talent coming in from outside the telecom industry – In India, the best telco talent has been moving into the internet sector, for example high profile executive moves into Snapdeal and Flipkart
•    Leaders too telco-focussed – Finding it hard to understand the lenses of the different industries where IoT takes them, as diverse as retail to automotive. Telco executives used to managing billion dollar revenue streams can also lack the patience to let new revenues grow. Telcos in Singapore and Indonesia are beginning to think harder about patiently growing new revenues
•    Difficulty in finding common ground with partners – Telcos are used to working with network and handset players, but unused to figuring out how to work with shops, banks and taxi firms – in India, the major telcos have been absent in roles to work with fast-scaling new internet players. The intent is there, but business development meetings don’t result in solid outcomes often enough because the folks across the table don’t understand each other’s businesses.
•    Lack of IT and solution development skills – Which are critical to developing real, IoT solutions as this requires setting up solutions into an enterprise’s operating environment, implementing with delivery excellence the feed of information, background analytics and all within a secure environment.
•    Piecemeal business case approach rather than a “no regrets” view – CFOs are used to evaluating telco market propositions on the basis of a business case. The challenge is that in the nascent IoT world, some ideas will thrive but most will fail – so a portfolio view is more appropriate than a case-by-case ROI evaluation.
•    Marketing and sales too much an extrapolation of voice and data – Telcos’ sales and marketing teams are institutionalised around selling minutes and megabytes but the same brands, teams and sales channels struggle when it comes to selling services across other industries (such as health, air travel or logistics).

There are three areas that telcos need to be proactive in to build up in-house skills or find partners who can deploy the capabilities needed:
1.    Partner management – This telcos must learn to do better themselves
2.    Sales and marketing – The new skills required could be developed in-house as well as accessed through channel partners
3.    Solution development, integration and maintenance - Only a handful of telcos, such as BT, Orange or NTT have the skills to build and deliver solutions, whereas most have to work harder at creating go-to-market alliances with SI companies and hardware players.

smartphone

Right now some of the world's telcos are dabbling in IoT "adjacencies" in pursuit of new revenue growth - some are building and others are buying into new internet of things businesses, such as eHealth solutions or payments platforms.  Most of the activity is being undertaken by the largest, most advanced market players who face revenue stagnation in their established markets. But no operator is embracing the opportunity in a way that addresses the skills challenges above, for the long term. There is much to do, and given that most of the scale opportunity sits in emerging markets, it is time more of the telcos of India, China and other South East Asian countries got started.

The thoughts and opinions shared here are of the author.

Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.

Post Your Comment
Required
Required, will not be published
All comments are moderated