Developing a blueprint for a future-proof operating model
RCR Wireless reports on how limited infrastructure (base stations) and spectrum in Europe will require spectrum sharing and other tech options in order to support growth as 5G private networks and 6G on the horizon change the telco technological landscape. Panelist Alexander Kuhn, deputy head of German Federal Network Agency’s (BNetzA) Section of International and National Spectrum Management stated, “What we need to take into account for spectrum regulation and spectrum management is always the creation of usage opportunities for those who would like to use the spectrum.”
MNOs have been moving in the “asset-light” direction for a while as they sell off tower infrastructure to tower aggregators in sale-leaseback arrangements, cutting spectrum deals with MVNOs to monetise their infrastructure investments, and also moving towards AI/BI and implementing virtualised and software-defined network architectures. EY makes the claim that telcos need to focus not just on “asset-light” but “asset-right”. Having the right core infrastructure retained and/or augmented while continuing to offload/outsource assets that don’t help them differentiate their value proposition on the market – but preserving core elements that are critical to their brand.
Digital Telco: AI & Chatbots, fewer shops and customer service staff
The COVID-19 pandemic created a seismic shift in consumer buying patterns and impacted how business gets done. Big city central business districts have been decimated by remote/work-from-home arrangements started during the pandemic and continues today. That, coupled with digital-native generations that are now becoming the major consumer demographic, meaning that physical “in-store” buying patterns have been permanently disrupted. Apps are the norm. AI-powered chatbots have been increasingly taking over customer service and tech support roles and transforming call centers. All this means there is a larger appetite by consumers for digital-only interactions, including telco. It also means that operations innovations that leverage the latest digital technologies, will continue to drive business operational evolution, even in legacy businesses with largely fixed infrastructure and entrenched bureaucracies.
Growth into Utilities, not Media
In the recent years we witnessed how media as a growth strategy for telcos has been proven a bust. After a series of mergers and attempt by big telcos to expand their service offerings into the media space, AT&T is dumping its Time Warner acquisition after scuttling Direct TV. Verizon also rethought its media strategy and sold off Verizon Media. As 2024 is likely to bring more uncertainty on three key fronts: interest rates, regulatory policy and overall growth prospects there still isn’t a unifying growth narrative for media and entertainment companies in sight. With the telco business operating model so different from the media model, and a media model that is undergoing a significant transformation itself (as streaming struggles from content creation challenges, too many competitors, and legacy TV properties like news channels struggling to compete in the cable-cord-cutting era), future vertical expansions for telcos must ensure an alignment with their core business. Focus on “scope extension” such as telco and utility businesses, that have a similar corporate culture, regulatory and operational alignment, can leverage similar digital transformation synergies.
What will it take for Telcos to succeed in their transition to Techco?
Telcos and power-providing utilities may see some opportunities in bundling their combined services. Much of that will depend on how well they can navigate their respective governmental regulatory environments. If they can solve that challenge, their operating models have many similarities.
For example, PG&E in California has “direct access” options where customers can buy their electricity from a third party “Electric Service Provider”. This is similar to the MVNA model in the telco space.
In Europe, number of telecom companies initiated projects to resell energy services. An example is Orange in Poland that teamed up with a private utility Polenergia to offer electricity to households and small businesses across the country, aiming to leverage its existing assets to diversity their offerings. Since the initial launch, it has been extending its partnership and diversifying further its offer.
As such, if one or the other can develop a customer-focused operating model, a B2C bundle built around NPS is possible. McKinsey shares the next generation operating model and how it focuses on the customer experience. While both telco and power utilities have some regulatory insulation from competition, customer pressure on regulators will drive more competition. Implementing digital technologies into core operations and freeing up limited staff resources to improve the customer experience, may be the path to company competitiveness.
Embracing Change, Adapting Organisation Structures
The biggest challenge for legacy telcos and as well as the utilities is the staffing and physical infrastructure that has been built up over decades. These businesses have become bureaucracies that have evolved around rather rigid business operations, regulatory requirements, and the industry as a whole. When an operational shift is required, operational friction is often the result.
People who are trained to do things a certain way to make the operation run as it has done historically, is often at odds with required strategic change.
Companies often get around this by acquiring an entity to initiate a shift into a new market or mode of operation. Or they can launch a new initiative and then integrate it into the whole as it proves itself out.
As the telecom industry continues its significant transformation, the path forward involves embracing a digital-first, customer-centric approach while navigating regulatory landscapes. By adopting flexible, innovative operating models and focusing on strategic asset management, telecoms can effectively transition into the future. The successful integration of technology, like AI and digital platforms, combined with a focus on synergistic expansions, with particularly in utilities, will be crucial. Ultimately, this evolution will not only ensure survival but also drive growth in the ever-evolving digital era.
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