In this interview Vikram Chadha, VP Marketing for du gives his passionate views on the ways that operators can look forward to a rosy future where they can use their smart pipe know-how to monetize new services. Catch Vikram in person speaking on the topic of “Moving to a data centric world”, on Day Two of the 10th annual LTE World Summit, the premier 4G event for the telecoms industry, taking place on the 23rd-26th June 2014, at the Amsterdam RAI, Netherlands.
In your view what are the best ways the operators can market themselves as more than just a “pipe”?
The value-add that telecom service providers are capable of goes well beyond the realm of services they currently offer – it wouldn’t be too far-fetched to say that the potential is virtually limitless. The telecommunications industry is currently at a crossroads, and as a result it is undergoing an upheaval as more and more people access the Internet across multiple devices and platforms, driving up data traffic growth. The race to connect the ‘next billion’ has never been so intense, and therein lies the opportunity. As per industry research figures, we will have soon have 20 billion connected devices and as if that’s not enough, the prediction is that there will be 50 billion connected devices by 2020!
The laws of economics kick in as more and more people adopt the smartphone/devices wave – enabled by telecom service providers. In a nutshell, the key factors enabling this growth are:
1) Better affordability of increasingly-fast mobile broadband;
2) The battle of the screens: Availability of intensely feature-rich smartphones with super high resolution screens puts the power of high-end computing power in the palms of users. This battle of one-upmanship among the device manufacturers is driving down prices leading to increased adoption of smart devices and bandwidth consumption.
3) As more and more people go online to access their banking services and conduct e-commerce transactions – fuelled by the easy availability of plastic money, there is a tectonic shift in banking and the way people conduct monetary transactions. This in turn further leads to growth of the Internet and related ecosystems.
4) Shift in mindset of an average user and the need to be ‘always connected’ has led to a proliferation of smart apps, data and video.
Going back to our point of ‘smart pipe’, the above-mentioned factors provide new opportunities to telecom operator to position themselves as “smart pipe” providers. Why? Because telcos are the key enablers – they not only have the technology knowhow, but also have proven expertise in identifying and managing the needs of customers. This is a key competitive advantage that needs to be harnessed well. I see a future where in the coming years, besides revenues from connectivity, a significant part of operators’ revenues streams will coming from the following which are today considered nascent:
- Managed ICT services: The opportunities exist for operators to provide managed connectivity services, IT system, and cloud services into the local markets they serve. The operators can be a key player in e-government and provide managed security on both mobile and fixed networks. Using a data-centre to provide infrastructure as a service bundled with managed connectivity is a value add. This opportunity is amplified for operators in the emerging markets as major IT players have a weaker presence in these markets.
- Internet of Things, M2M-based services and cloud-based services: If telcos are to stay relevant in future, they need to change, and change fast, if they want to get incremental revenues from this space. However difficult to fathom, revenue opportunities exist significantly in smart city projects that some local governments are undertaking – smart campus or education, smart office, smart home and smart vehicles.
The operators cannot do this alone, they need to tie-up with technology firms in these spaces – other leaders and start-ups with innovative solutions offering cloud services. One way of gaining traction in this space is for operators to buy early stage companies who show promise, and use their marketing engine to achieve scalability. Importantly, to get this right the operators need to change their working culture, become more agile and give precedence to innovation.
- Video and Digital services: It is no secret that the maximum bandwidth consumption and data usage happening today is because of video. Video spurs consumption and video consumption is growing at 66% CAGR. If the operators want to become smart pipes they need to treat video and data as separate elements. There is an opportunity to monetize video in many ways – video services can have a premium offering where the consumer gets assured bandwidth, or operators could provide premium or exclusive content at special rates.
- Financial services: Today, mobile in a central aspect of the life of a consumer and therefore financial services can become a key revenue stream.I see a big transformation happening in the financial and payment space over the next five to ten years. The operator’s revenue streams in many countries will include M-Payments, M-Banking, and mobile money transfer. The opportunities exist for operators to be a key player to facilitate e-commerce, especially in emerging markets. We have seen some early success in this space in Africa. The other thing in the operators favour is that they have prepaid and postpaid billing, which might enable consumer transactions to happen through this medium. Partnerships with OTT players, ecosystems like Android Play and Apple App store can be enabled for the consumers through the carrier billing.
To sum up, vision, leadership, getting people to work on these transformational projects along with resourcing of new skills will lead the operators to become a “smart pipe” and have multiple revenue streams.
Partnerships or opposition? How should operators approach the OTT issue?
My view on this is that telecom operators need to collaborate and compete at the same time. You have to collaborate and partner with the big OTT players. It does not make economic sense to compete with the likes of Facebook, Google, Apple etc. However, it is important that we collaborate with them quickly and offer their services or applications as a part of the operator ecosystem. The opportunity in the emerging market for this collaboration is even bigger. The percentage and adoption of credit cards in this market is at a nascent stage. However the consumers using applications like Facebook, applications from Apple store or Google Play from the emerging markets is growing at a fast pace. To accelerate this growth further the consumers will be more than happy to subscribe to these applications through the billing system of the operators.
The big opportunity for operators today is in monetizing data. The consumer of today is app centric. On the data front the next wave of growth will come from application-based data services. If we need to increase penetration and monetizing data we will need to offer application-based services. Recently, Facebook bought a startup Finish company called Pryte which would provide data access to users without wireless data plans by selling short term passes. This is an indication that this trend is likely to become bigger in the coming years, therefore a buy-in for application based data services will continue to grow.
On the other hand, telecom operators need to compete with local smaller OTT players. The operators should be able to provide their storefront, build their own ecosystem, make the network and its assets as components available as an API which can be used by local technology companies to build applications and offered through an operator storefront. This strategy will enable the operators to position themselves as key players in the digital space and economy enabling them to serve the local needs of content, applications, B2B as well as B2C ecosystem. This will provide the growth of revenues that an operator is looking for from the digital services paradigm.
Is there much scope for pricing innovation on LTE and LTE Advanced?
LTE with its speed has already won the heart of millions of consumers and customers. It is the key driver today enabling the mobile revolution to be 5x times faster than the internet revolution. LTE Advanced will take it to the next level. LTE Advanced brings in three key dimensions of improvements
a) Carrier aggregation to leverage more spectrum and increase data rates (bps)
b) Increase in spectrum efficiency through advanced antenna techniques
c) Increase in capacity on a per coverage area basis from benefits derived out of small cells (HetNets)
If I take a leaf out of Everything Everywhere’s data package pricing on LTE and the kind of traction that they have received, I clearly see that the operators have an opportunity to offer pricing based on increased speeds. The value proposition of EE is very simple but the superior data experience has an instant appeal with the customers. With LTE Advanced, one is able to offer the customers the increased capacity, increased coverage in areas and the superfast speeds. This will provide a superior customer experience to the customer for which the customer might be ready to pay a small monthly premium for this service.
Why is the LTE World Summit such an important date in the diary?
The LTE World Summit is the best platform for connects the complete eco-system of players in the LTE/4G space. Monetization of data is a key KPI for all the operators today and this place is a good place to learn, network, share and exchange ideas. I expect that the summit will provide opportunities for me to:
– Learn from the industry’s leading LTE thought leaders
– Access case studies and best practices shared by different operators/vendors
– Network, share and exchange ideas with people involved in the eco-system
– Evolve and discuss future business models
– View technological innovations
– Explore partnership opportunities
The 10th annual LTE World Summit, the premier 4G event for the telecoms industry, is taking place on the 23rd-26th June 2014, at the Amsterdam RAI, Netherlands. Click here to download a brochure for the event.