Telecoms industry set to reveal its hopes and fears

It’s that time of the year when Telecoms.com once again conducts the signature Annual Industry Survey. Answering it will not only let us know what you think, but will benefit the telecoms industry as a whole, and in turn, yourselves too.

The 2019 Annual Industry Survey (AIS) has just gone live. True to its mission, this survey is designed to take the pulse of the telecoms industry, in particular of those topics most pertinent to operators, suppliers, technology vendors, analysts, consultants, and everyone else with a stake in the telecoms ecosystem. It’s my job to write collate the responses and present them to you.

This year’s survey covers many of the core technology topics the telecoms decision-makers are most interested in reading about, including Industry Landscape, 5G, Digital Transformation, IoT, and BSS/OSS. Undoubtedly the readers of this story, you, are in the best position to tell us, and the industry, how you see the current status of the industry and where you see it heading for. So, please, click here to answer it.

I was thinking about giving this story a title like “Your Industry Needs You”, but that would be too Kitchener-esque, plus I don’t have the beard to go with it. Instead, I’ll go full Churchillian: I have nothing to offer but a high-quality survey report for free, a sense of contribution, and the chance to win a new Apple Watch.

If this is your first experience with our AIS, or if you’re simply interested in finding out how correct (or incorrect) we have been with our understanding and predictions, feel free to check out last year’s results.

Ericsson promises enormous rewards for the right enterprise investments

With consumer revenues in the mobile world flat-lining, many telcos are exploring the world of enterprise services to recoup 5G investments, and Ericsson thinks it’s a pretty large pot of gold.

According to Ericsson’s ‘5G for business: a 2030 market compass’ report the question isn’t whether or not telcos are exploring how to work with enterprise customers in new and interesting ways, but more which are the ones to prioritise.

“The combination of 5G and digitalization creates new opportunities for service providers to build and extend their businesses beyond connectivity and presents a way to break the trend of a stagnant market,” Jan Karlsson, Head of Business Area Digital Services at Ericsson, said in the report.

“However, even if the rapidly changing 5G-IoT landscape offers enormous potential, it is complex and not without its challenges. Deciding on the best way forward requires a comprehensive understanding of issues surrounding the addressable markets, the driving forces and barriers for different industries to adopt 5G-enabled use cases.”

This is the challenge which many telcos will face. Enterprise services are not simply about bundling together several buzzwords, each vertical demands its own niche solution. For example, the fast-growing gaming industry is demanding low-latency driven services, while smart manufacturing depends on reliability and resilience and broadcasters are searching for the high-speeds and coverage.

With limited resources available in-house, some telcos might have to elect which niche to target. This creates the potential for a very interesting industry moving forward. Perhaps the telcos will compete for post-paid contracts in the consumer world, but the creation of niche solutions for enterprise services might force telcos down more specialist routes.

But each of the verticals are not created equal, and the nuance in opportunity in the short- to mid-term is worth bearing in mind.

According to Ericsson, while healthcare might have notable challenges, there are also some significant rewards. mHealth, eHealth and hospitals are all areas where connectivity can offer benefits and profits. In Industry 4.0, a favourite segment for 5G justification, the team suggests smart factories might gain traction sooner rather than later, though mining and utilities usecases are not gaining as much traction.

The automotive arena is an interesting area, with opportunities obvious in both the connected/autonomous vehicles segment as well as for in-car entertainment. Unfortunately for the telcos this is an area where other challengers are trying to own the ecosystem. If the telco industry is not careful, it might be relegated to nothing more than a commoditised connectivity partner.

Interestingly enough, in the retail segment, Ericsson is downplaying the opportunity for 5G in the physical stores though eCommerce certainly presents greater prospects. There could be profits for those who create the solutions and own the space, though as there are a limited number of larger retailers who would have the CAPEX to invest in such propositions as in-store mixed-reality experiences or drone delivery, it might be a tricky segment to justify.

Perhaps the most interesting takeaway from this report is the opportunity for diversification and specialisation in the enterprise services market. Some telcos might opt to chase after the same pot of gold, but strategic investments could see the right telco enter a niche will little or no competition.

Verizon buys into alternative realities

Verizon has announced the acquisition of Jaunt XR, adding augmented and virtual reality smarts to its media division.

While few details about the deal have been unveiled, the deal will add an extra element to a division which has been under considerable pressure in recent months. The Verizon diversification efforts have proven to be less than fruitful to date, though this appears to be another example of throwing money at a disastrous situation.

“We are thrilled with Verizon’s acquisition of Jaunt’s technology,” said Mitzi Reaugh, CEO of Jaunt XR. “The Jaunt team has built leading-edge software and we are excited for its next chapter with Verizon.”

Jaunt XR will join the troubled media division of Verizon which has been under strain in recent months. The ambition was to create a competitor to Google and Facebook to secure a slice of the billions of dollars spent on digital advertising. On the surface it is a reasonable strategy, but like so many good ideas, the execution was somewhat wanting.

Since the acquisition of Yahoo, Verizon has had to deal with the after-effects of a monumental data breach, write off $4.6 billion of the money it spent on the transaction, spend big to secure a distribution deal with the NFL and cut 7% of its staff. The first few years of living the digital advertising dream has been nothing short of a nightmare.

Looking at the financials, during the last quarter the media division reported $1.8 billion in revenues. This was down 2.9% from the previous year and accounted for only 2% of the total revenues brought in across the group.

With Jaunt XR brought into the media family, new elements could be introduced to the portfolio. Details have not been offered just yet, though with VR, and more recently, AR expertise, there is an opportunity to create immersive, engaging content for the mobile-orientated aspects of the business.

This transaction will certainly add variety and depth to the services and products in the media portfolio, but soon enough you have to question whether Verizon is throwing good money after bad. This has not been a fruitful venture for the team thus far.

Politics is starting to turn in favour of telco – ETNO

Despite the promises made by politicians, few in the telco, technology or media industry would believe politics is designed to help, but ETNO think the tides are turning.

At the 5G Core conference in Madrid this week, much of the attention has been directed towards the technological side of the business. Few would complain about this bias, it is a technology conference after all, however there has been a reminder of the challenging element of politics.

“We can all agree that 5G is a strategic challenge for Europe,” said Lise Fuhr, Director General of ETNO. “But there is another part and that is what is role of politics, policy and society? What are the obstacles and enablers of 5G? How do we partner with the different stakeholders to make 5G happen in a fast way?”

As mentioned above, almost every politician who is worth his or her salt has been breaching the benefits of a more favourable regulatory and policy environment to facilitate investment in the TMT segments, but there seem to be few real-world benefits. This however might well change in the near future.

A good sign of this optimistic future are the new appointments at the European Commission.

On November 1, Ursula von der Leyen will assume office as the new President of the European Commission. Although von der Leyen is a career politician, she first assumed political office in 2001, she has at least made the advancement of the digital economy in Europe a priority.

In her ‘manifesto’, future-proofing the European economy for the digital age was listed as the third priority. 5G is a key component of this message from von der Leyen, as is artificial intelligence and high-performance computing. von der Leyen might not have experience in the technology industry, but at least she realises the importance and is prioritising advancement in the field.

The second appointment is Sylvie Goulard as Commissioner for the Internal Market. In this role, Goulard has been tasked with overseeing the progression towards a digital economy, with one component to ‘enhancing Europe’s technological sovereignty’ and another to define ‘standards for 5G networks and new-generation technologies’.

From Fuhr’s perspective, this is a sign of positive intent. From the outset of her tenure, von der Leyen has set digital as a top priority. It is an add-on as it might have been considered for other politicians, it isn’t necessarily a plug for headlines, it is a proactive progression towards the digital economy.

Looking at the policy side, the European Electronic Communications code is ‘a compromise’ according to Fuhr. The policy could have been more ambitious to help the industry, but at least it isn’t doing any harm. New spectrum will be released, ownership of licences has been extended for telcos and there is positive work in the small cells area as well.

While these are not definite signs politics and policies are going to be enablers of digital progress, there is plenty of opportunity for something to go wrong, all the right noises are being made by the European Commission. There is still plenty of risk, but it looks promising.

Huawei pledges $1.5 billion to its new developer program

Huawei has announced that it will invest $1.5 billion in the next five years to boost its developer ecosystem for the Kunpeng and Ascend computing platforms.

SDKs were also released at the same event when its Developer Program 2.0 was unveiled.The announcement was made at the 2019 version of the Chinese vendor’s annual Huawei Connect event in Shanghai. According to Patrick Zhang, CTO of Cloud & AI Products & Services at Huawei, the new program will cover five key areas:

  • Building an open computing industry ecosystem based on Kunpeng + Ascend computing processors
  • Establishing an all-round enablement system
  • Promoting the development of industry standards, specifications, demonstration sites, and technical certification system
  • Building industry-specific application ecosystems and region-specific industry ecosystems
  • Sharing Kunpeng and Ascend computing power, making it available to every developer

The focus areas are related to cloud computing and artificial intelligence. The applications and services the ecosystem aims to support are for server level, either in the centralized cloud or on the edge. To enable the ecosystem development, Huawei also published Kunpeng Developer Kit and ModelArts 2.0 AI development platform.

Despite that x86 architecture is still dominating the server market, ARM has worked to break the monopoly, and Huawei is one of ARM’s leading licensees. Earlier this year Huawei released Kunpeng 920, its CPU based on ARMv8 design. Huawei aims to expand its share in the server market with Kunpeng’s superior computing power claimed by Huawei, most likely starting from the market in China.

But Huawei’s ambitions go way beyond moving more boxes. Its cloud service has been promoted for its strong AI capability, supported by the Ascend AI chips. The Ascend 910, the latest version, was released in August, which the company claimed is the world’s most powerful AI processor.

By enriching its ecosystems, Huawei hopes it will be able to deliver a full suite of solutions, including supporting digital transformation undertake by increasing numbers of telecom operators.

This is the second iteration of Huawei’s Developer Program. The Developer Program 1.0 was launched in 2015.

The winners and losers of telecoms will be decided by convergence

There are still naysayers about the benefits of convergence, but those who ignore this trend will fast find themselves sleep-walking the path to utilitisation and irrelevance.

First and foremost, let’s have a look at what convergence actually is. This strategy is not the silver bullet which some telcos are seeking. A convergence strategy which not recapture the lost fortunes of yesteryear overnight, and it will not turn the traditional telco into the sleek shape of an internet giant. However, it does future-proof the business against the rising tides of utilitisation.

For those companies who are happy to be utilities, fair enough. There are profits to be made through the commoditisation of data services, though it is a very different type of business. But those who think they can be a value-add business, simply focusing on a single revenue stream are fooling themselves. Those companies shall remain nameless here, but it is pretty obvious who they are.

Convergence is about layering the business through multiple service offerings and diversifying the way in which telcos can engage consumers. It could be through multiple connectivity opportunities, and increasingly content has become a common theme, but there are numerous options open to the telco which demonstrates a bit of bravery.

According to recent research from OSS/BBS firm Openet, 73% of consumers are open to purchasing more digital services from telcos. The result of the introduction of these services is not only more revenue, but increased loyalty. 65% said the presence of more digital services would make them feel more engaged with their telco, while 79% said it would increase their loyalty.

Firstly, this is an opportunity to avoid the dreaded race to the bottom. If a telco can offer a positive network experience (not a given in today’s world however) and a reasonable price, as well as digital services, churn will also theoretically decrease. But what do digital services actually mean?

Content is the most obvious one to start with. If a telco is flush enough, this can mean owning a content segment, such as football rights in Spain for example, though partnerships with OTTs is an increasingly popular option. The telcos can be very valuable partners to the OTTs, either through their billing relationship with the customer or a trusted link in regions were direct customer acquisition is more difficult.

Numerous telcos are taking this approach, and it is proving popular with customers. Using the Openet research once again, 38% of respondents would switch their provider for better content options, while another 38% would be interested in changing should there be a zero-rating offer attached also.

But content is only the start, and this is an area which could become increasingly commoditised if/when these partnerships become commonplace. Looking beyond these content bundles, offering a broad range of niche features could be the next battle ground. Think of the Vodafone partnership with Hatch for gaming. This will not appeal to everyone, but it will attract interest from a niche. O2’s Priority loyalty programme offers early access to music venues and festivals. Again, a niche, but it will appeal strongly to some.

Looking further afield once again is where you start to see the real leaders in the digital world. Orange is a perfect example, with its security products. This is where the world of connectivity and digital services can be blended to attract completely new revenues. And of course, as more of the world become digitised, there are more opportunities to add value on top of connectivity offerings.

The smart home presents opportunities, as does the connected car. The telcos have a unique opportunity to capitalise on the digital world as few consumers today would leave their home without their smartphone. This is a direct, and constant, link to the consumer. There are not many other industries which can boast this advantage.

Interestingly enough, the telcos will not even be cannibalising their own revenues with these new products. For most consumers, the money spent on connectivity is different from that which is spent on entertainment or security. If you can help them spend less through bundled services, this is a bonus, but asking the consumer to spend money on entertainment as well as connectivity is not going to decrease ARPU. Quite the opposite.

The consumer wants to spend money on entertainment and digital services, but the question is who they are going to spend it with.

Ideally, we would like to see more telcos take the Google approach to business. In 2015, Google undertook a business restructure, separating the two functions into very distinct business units. On one side, you have the core search business. Google knows it can make money from this without really trying. On the other side, you have ring-fenced funds which are used to fuel the ideas which drive diversification on the spreadsheets.

Through this structure, one side of the business is not influenced by the other until the right time. Ideas are given the opportunity to flourish and be what they are intended to be, without the limitations of the traditional business. Fi is an MVNO which has emerged from the research side, as is Sidewalk Labs and balloon connectivity firm Loon. Without the separation, would these ideas have evolved to their full potential which is currently being realised?

This is the challenge which the telcos are facing. Convergence and the evolution into a digital services provider requires an internal disruption. It demands executives think about priorities different and invest in areas which are alien to the organization. It means being forward thinking and preparing to fuel ideas with long-term ambitions. And it needs to be done quickly.

You don’t necessarily have to be first to market, but you need to be a fast-follower at the very least. A convergence strategy encourages loyalty from subscribers after all, and once the dust has settled, it will become increasingly difficult to lure valuable postpaid customers away from rivals.

Not every telco will get it right. Not every telco will believe in the convergence buzz. And not every telco will evolve fast enough. However, there could be the creation of a tiered industry for too long. The winners at the top who nail convergence and become a valuable part of the digital economy, and the losers who continue to trudge the path to commoditisation.

Research indicates strong demand for digital services delivered by telcos

BSS vendor Openet has published some new research that suggests consumers have a better perception of operators as digital brands than had been feared.

While it should be stressed that Openet, as a digital transformation vendor, has a vested interest in encouraging operators to invest in their digital offering, the research was conducted independently and the results are deserving of consideration on their own merits.

Presenting the findings Openet expressed pleasant surprise at how many positive responses the survey got on the matter of operators as digital brands. Respondents from five countries around the world placed their operator above even Spotfy and eBay when asked to rank bands according to ‘digital leadership’. Meanwhile, as an industry, telecoms was relatively well regarded in that respect too.

Openet survey slide 1

Openet survey slide 2

The moral of the story, as far as Openet is concerned, is two-fold. Firstly operators should have the confidence to offer a nice lot of digital stuff to their customers, be that through partnerships with the dreaded OTTs or their own innovation. Secondly they should be further encouraged to do so by the latent demand for such products and services, as implied in the slide below, which shows that even respondents to view operators mainly as utility companies are receptive to being offered more.

Openet survey slide 3

“To achieve digital parity with many of the world’s most recognisable technology brands underlines the significant progress mobile operators have made,” said Niall Norton, Openet CEO. “The global operator community most certainly had some catching up to do in driving digital awareness and engagement in the face of new competition and approaches.

“Most operators launched strategic digital transformation projects to not only revolutionise how they create, offer and monetise new digital services, but also re-architect their networks. Our study reveals the significant value of these projects, and the exciting commercial opportunities that await them.”

“The global operator community should be congratulated for these survey findings. Many of them have had their world’s turned upside down over the past few years and entered a period of re-education and re-invention. Our survey clearly shows that most have successfully completed a period of digital re-invention to forge new customer relationships according to the same values, albeit across new channels and through new services.

“What is most exciting is that global operators have only scratched the surface in terms of unlocking the full potential of the digital technology that enables these new working practices. Lucrative new revenues await all operators that have completed or are completing their digital transformations – and seeing their CAPEX costs for enabling technology infrastructure slashed at the same time. The game has changed forever.”

Openet has gone all-in on this stuff and seems to be reaping the rewards after a couple of years of difficult adjustment. A focus on both offering operators bespoke BSS offerings and enabling them to offer more relevant stuff to their customers seems to be a t the core of this. Operators constantly fret about the dangers of commoditisation and it looks like there is market demand for them to add value to their core offering. Now they just need find the courage and determination to chase that business.

How can operators avoid becoming a dumb pipe?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Francesca Greane, Content Lead for Broadband World Forum, explores how increased connectivity is changing the role of operators, and how telcos can stake their claim in order to avoid becoming a mere dumb pipe.

In the era of hyper-connectivity, society stands on the cusp of change. We have evolved from the basic internet connections introduced two decades ago and are now edging towards real-time mobile connectivity with 4G and the convergence of the physical and digital that is being driven by the fifth-generation mobile network and the rise of the Internet of Things (IoT).

However, with increasing complexity comes an increasing demand for bandwidth, speed and efficiency.

Network operators and the ecosystem partners that supply and work with them are the epicentre of these evolutions. They are uniquely placed to serve almost every industry and every vertical as everyone looks to innovate how they connect and how they communicate.

But the telco reality is that they are tasked with simply providing an ever-increasing bandwidth capacity simply to support these advancements – rather than being pivotal in helping to drive them forward. Thus, the question remains, how can operators leverage the emerging opportunities that increased connectivity providers in order to avoid becoming a mere ‘dumb pipe’.

The answer is different in each industry, as we briefly examine below:

Automotive

According to Ericsson’s VP of Global Sales Connected Vehicles, Jueraen Daunis, “Only 5G has the necessary capacity to make truly self-driving cars a reality from a connectivity standpoint.” It’s a pretty bold statement; one that solidifies quite how dependent the automotive industry is on operators and the wider telco ecosystem.

It is the fusion of IoT, 5G and AI that will transform the auto industry into a digital services business and thus, to stake their claim in this space, telcos are advised to partner with established digital players such as Microsoft and Google as they build their operating systems into the 250 million connected cars due on the road by next year (Gartner), as well as start-ups in the automotive space.

Malaysian operator Altel Communications, for example, allied with Chinese firm ECarX to develop car connectivity tech services for Malay car brand Proton. Industry leaders Uber and Renault will be further examining the role of connectivity and telecommunications in the automotive industry at Broadband World Forum 2019.

Cloud Gaming

Intel predicts that AR and VR entertainment will deliver cumulative revenues of $140bn between 2021

and 2028. Immersive applications that don’t even exist today could generate $67bn a year by 2028 –and the key technology underpinning this trajectory is 5G. Synched with this is the need for

edge computing; both of which will provide the speeds necessary for these next-generation gaming experiences.

Matthieu Duperre, Founder of Edgegap, summarised the position of telcos in this industry pretty succinctly when he said: “In the early 2000s, operators lost the battle against the OTT. They kind of stopped bringing value, or lost track of where they were bringing value. So, then they became the dump pipe that we’ve all heard of. What’s happening now is a unique opportunity for them to regain value and that control over the pipe and to move away from the dump pipe mentality; they own the network and the last critical mile. Betting on that last mile, and on creating an infrastructure that can’t be done by the likes of Google or Amazon, is going to be key to their success”

Smart Home

With OTT streamed content eating into their traditional pay TV subscriber revenues, and competition in broadband access intensifying, service providers need to tap new revenue streams. With established and credible consumer relationships on their side and a router into the heart of the home, network operators are well placed to exploit the opportunities related to broader management of home connectivity.

Whilst wary of being the fall guy for everything from streaming video glitches to cybersecurity, operators can leverage their position as the first point of call and take ownership of the whole home network.

“The solution is to have very effective and robust guidelines,” explains Bruno Tomas, Director of Programme Management at the Wireless Broadband Alliance. “These guidelines will effectively ask customers to commit to only using equipment provided by their telco –or their recognised partners”

Telefónica, for instance, has integrated its AI-powered digital assistant Aura with Facebook Messenger, Google Assistant, and Microsoft Cortana. In Spain, Aura is built into Movistar Home, which Telefónica aims to become home hub for user management of all connected devices.

 

Broadband World Forum’s latest report – Staking Telco’s Place in a Connected World – dives deeper into the role of operators in each of the above industries as well as numerous others. To download this report for free, simply click here. Want to stay ahead in the broadband industry? Discover the latest technology trends and solutions from leaders in the broadband universe with a free visitor ticket to Broadband World Forum (October 15-17, Amsterdam, The Netherlands). Your ticket gives you access to 25+ hours of content delivered by leading speakers, 150+ technology providers from Tier 1’s to startups in our expo hall and endless networking opportunities with the 4,100+ leaders in attendance. Click here to claim your free ticket.

Veon raises outlook as it unveils diversification strategy

Telecoms group Veon has increased its EBITDA guidance for FY 2019 and is looking beyond connectivity for future growth.

Veon serves over 200 million subscribers, mainly in central Asia, and things seems ticking along nicely. “Veon is performing well in the current financial year against our 2019 targets and today we are increasing our EBITDA guidance for FY 2019 from low to mid-single digit growth to at least mid-single-digit growth,” said Ursula Burns, Group Chairman and CEO. “Previous guidance of Revenue growth and Equity Free Cash Flow remain unchanged.”

Despite that, Burns reckons Veon needs to diversify beyond mere connectivity in the pursuit of future growth. A new strategy framework is built around three pillars: connectivity, new digital services and future assets that open up adjacent growth opportunities. This essentially seems to be a version of the kind of 5G strategy most telecoms groups are advocating.

“Our new strategy framework underscores the growth opportunities we see beyond our connectivity business and aligns Veon’s ambitions with our industry’s future development,” said Burns. “I am confident that the greater flexibility in how we allocate capital will allow us to execute on these opportunities, reinforcing our market-leading positions and maximizing shareholder returns over the longer term.”

“Over the next 18 months, there are opportunities that we believe will best serve investor interests over the medium-term,” said Alex Kazbegi, Group Chief Strategy Officer. “We are excited about the opportunity in our core Russian market, which we believe can be best accessed through a short-term increase in network capex to allow us to drive medium-term service revenue growth.

“In Pakistan, there may be the opportunity to increase our stake in the business through the existing put option with Warid. We also believe stepping up our investment in Digital Financial Services in Pakistan is an exciting first step in Future Assets.”