11 Ways for Telcos to Stay Profitable
The ecosystem should hold on to a comprehensive approach to invigorate data growth and create a more profitable data business
The ecosystem should hold on to a comprehensive approach to invigorate data growth and create a more profitable data business
We have witnessed a dramatic growth in the telecommunications industry in India. And, in this decade the industry is gearing up for yet another great dramatic growth story, ‘the data story’. Thanks to the wide range of attractive smartphones and tablets, social networking have driven new consumption patterns, generating significant traffic, and the evolution of mobile value chain, etc, are fueling the escalation of data. The data segment is at the threshold and the ecosystem should hold on to a comprehensive approach to invigorate data growth in the country, bridge digital divide, and also create a more profitable data business.
If you closely watch the consumers behavior the tremendous growth of data will take sometime to be a reality in a highly cost sensitive market like India. Hence the mobile data market is likely to be smaller and segmented. People will remain reluctant to pay unless they see value for each pie. The onus of boosting the data innings lies on the ecosystem by driving extra usage, they ought to provide faster and better networks and make apps more usable and by providing better structured data plans driving off-peak us- age volumes. The ecosystem has to entice people to use data and only then, it can create opportunities for everyone from handset vendors to app developers.
Here we list 11 key focus areas for telcos to stay profitable and maximize the second innings of telecom growth—the data phase.
#1 Strategic marketing and pricing will help to fuel data growth. Apt wireless pricing schemes can shake up introduction of usage based pricing and premium for higher bandwidth and reliability works better.
#2 The government has to provide a conducive regulatory environment.
Telecom is a high investment sector and will become profitable business over a long period of time. For the industry to grow consistently and to ensure that the quality and gamut of services continues to improve and expand, the sector needs a stable and conducive regulatory environment. The rules of the game need to be clear, transparent, and stable. Frequent changes in the sector lead to course corrections which don’t suit anyone—neither the government nor business and definitely not the end customers. Government should also provide more spectrum because without more spectrum, wireless users will have to undergo longer downloads, higher costs, and congested networks.
#3 Mobile services are poised to dominate future revenue opportunities. Mobile cloud, M2M, and mobile payments are likely to hold most value potential. Services in areas such as social media and networking, location based technologies, and general mobile commerce, etc, will have more potential value than sub-segments such as mobile search advertising, display advertising, and mobile software applications. According to a report by Meloitte, gaming is thought to be the most lucrative paid app category for paid applications in the app economy, while apps for social networking, broad based entertainment, and mobile navigation round out the top four. In the enterprise apps category, customer relationship management (CRM) apps are thought to hold the most potential value for developers, closely followed by apps in the productivity category.
#4 Are users willing to pay for all data charges they consume, is another multimillion dollar question. More than half of the population would not be willing to pay huge mobile data bills. Some deny to spend extra, others don’t have enough income, and some of them are not interested. Besides, some of the mobile phones will connect to internet by Pi-Fi only or they would be on pay-as-you-go plans. Telcos have to deal with this ground reality and try to captivate data users to use their services. This scenario is one side of the coin and the other side is much more brighter and sunny, because several smartphone users are also getting addicted to update their statuses, checking emails, gaming, entertainment, news, and also weather.
#5 Network must be optimized and work in harmony to offer higher overall capacity and better user experiences. There is a coverage range of 3G, 4G, Pi-Fi, and others, served by both macro network and small cells. Devices should have the intelligence to select the most appropriate links among all these, based on the signal level, possible data speed, network congestion, and the actual application or service it is using, etc, so that the user gets the best experience, while maximizing overall system performance.
#6 In this highly competitive and capital intensive telecom market, monetizing data opportunity is another crucial focus area. According to a report by Melta Partners, telecom investment firm, “Operators must act decisively in navigating the complex economics of data services, substitution of core voice and SMS revenues, and the growing threat of over-the-top players. Through evolved commercial management, focus needs to be on differentiation and a holistic and cross functional approach to implement, operators may indeed succeed in riding the next growth wave.”
#7 Telcos ought to have appropriate and efficient data billing systems in place. They can also offer alerts for customers to avoid ‘bill shocks’. Avoiding bill shocks is good for consumers and also a good business for wireless carriers as well since making charges predictable for customers encourages usage. Operators can inform users about actual usage per service and alert them when they reach threshold.
#8 Proliferation of applications and social media drives usage, so companies have to refocus development efforts towards mobile applications, mobility features, and mobile user interfaces.
#9 In the enterprise sector, a number of operators have started to develop ICT offers and capabilities based on network centric products and services. The likelihood of success appears to be proportional to the number of unique network assets that exist in the operator’s portfolio. Pure mobile players will find it more difficult to be a significant ICT player with total telecoms offering than integrated players that can leverage heavily on their fixed network infrastructure to provide national and international data connectivity services to enterprise customers alongside tapping consumer side.
#10 Future mobile networks must be designed to cope with such variation of traffic and uneven traffic distribution, while at the same time maintaining a permanent and extensive geographical coverage in order to provide continuity of service to customers.
#11 The data phase needs to combat bottlenecks in the network capacity. Operators should enhance focus on radio access network (RAN) and spectrum, backhaul network, and core network. Telcos should improve RAN by adding new cell sites/ small/ pico/ femtocells, by adding additional spectrum and refarming, and switching over to HSMP+ or LTN can boost data upsurge. On the network backhaul, the previous LLs standards are no longer sufficient and the networks ought to migrate to IP; and there is a need to adapt to backhauling capacity through FTTx or new microwave links etc. Usage of multiple antenna systems and Pi-Fi hotspots comes handy to offload data. Congestion and saturation network issues in dense areas will be more frequent, a network upgrade will be necessary. The main solutions offer to operator are LTN, Pi-Fi offloading, and femtocells deployment.