Technological evolution is moving at a very rapid pace: how does it impact the business models of telcos? And what are the most impactful technologies? Second Claudio Campanini, Managing Partner Kearney Italia“today we are already seeing a first impact: the segmentation of business models, with the creation of TowerCos, FiberCos and networks within a model that is moving further and further away from the vertically integrated one of the classic telecommunications operator” .
This is, however, only a first step. “The development of 5G, fiber and infrastructure technologies is important but not sufficient to change the dynamics of the sector’s return on investment – he clarifies Bells -. We know in fact that the return on capital investment in the telecommunications world is decreasing and no longer remunerates capital, so we need to find different solutions. And here technology plays an important role, but while on the infrastructure side there is a deployment phase that lasts over time, in the world of networks we are at a key turning point in the hands of traditional operators destined to become platform operators”.
The cruciality of the cloud in networks
Over all this there is an evolution that is more important than the others: the inclusion of the cloud in networks. “To date – he points out Bells – the technology is quite developed, so the issue is fundamentally one of implementation, under the constraint of investments”. In practice, in a model that must fuel the monetization of services, the implementation of the cloud in networks becomes crucial to monetize connectivity. “Today virtualization is already an ongoing process, but based on our analysis carried out in Europe only 23% of network functions have already migrated to the cloud – he continues Bells -. The native cloud must therefore be the final mantra: a cloud that must be inserted at all network levels, starting from the core network, because its importance is decisive for implementing innovative 5G services, solutions such as network slicing or low latency services . Likewise, without virtualization in access networks, investments which are crucial to maximizing the return on invested capital will not be optimized.”
The evolution of the infrastructure towards the cloud – he points out Bells – “it feeds the platform operator model, because it gives substance to an entire API ecosystem that is in progress, in which the operator can be central but must still develop a series of partnerships. The development of network APIs and service platforms will in fact be the fundamental enabler of the scenario”. “The final objective – he clarifies – is to have more scalable service platform models than today. Remembering that we cannot think of the same time to market that we had in the past for services, if we want to be successful operators in the world of 5G and innovation”.
From traditional operator to platform operator
But how do we ultimately move to facilitate the transformation into a platform operator? Bells explains that the actions to be taken fall into two areas: the commercial one and the technological one.
On the first front, technology today “allows the development of a true ecosystem of partnerships for the development of services, in which connectivity remains central from a commercial point of view. Telecommunications operators – he points out – in the past have not been so proactive in managing an ecosystem model and therefore today they must take a very important step”.
The platform operator model comes from Asian markets, where it had already been developed for 4G, so today the success factors and winning partnership models are already known: “These must be replicated – he points out Bells -, considering that they are different between B2C and B2B and also include B2B2C models, in which the distribution channel may not necessarily be the TLC operator, but someone else”.
From the point of view of pricing models, “5G today provides opportunities to escape from the classic connectivity pricing lever and therefore segment a little more – he continues the managing partner of Kearney Italia -. It’s about moving away from the idea of aiming only at the mass market, because if we don’t want to focus solely on price, it is necessary to look for niches and segments, “dressing up” connectivity with something different from the point of view of services.
And as regards the operational and technological model, finally, the focus must be placed on the implementation of cloud models that allow you to overcome time to marketwhile on the infrastructure front there are in the center virtualization and cloudbut also the maximum exploitation of economies of scale and the benefits deriving from the fact that there are infrastructure operators capable of optimizing operators’ investments. The return on invested capitalall things considered, must be the mantra that must guide all strategic choices.”
