Operators are finally getting the message about 5G monetization

Conversations at Digital Transformation World 2019 indicate operators may finally be getting the memo about monetizing 5G.

The long and short of it is that revenue per bit of data is going down the toilet and we’re rapidly approaching the point when connectivity alone becomes a loss-making exercise. This is obviously a bit of a problem if your main business model depends on making a profit from providing connectivity and brings fresh urgency to the somewhat tired buzzword that is digital transformation.

TM Forum deciding to rebrand its event last year was a reflection of how central to telcos’ considerations this is stuff is. For years is has been repeated to the point of cliché that operators need to adapt the way they do business, become more ‘agile’, fail fast, act more like a Silicon Valley startup, etc. Everyone always agrees, but then we end up having the same chat year after year.

Blame for this can be apportioned to two main issues: technological and cultural. At the event to a company called Apigate, which reckons it’s got a major piece of the technological puzzle nailed. Essentially is offers a platform that cuts out all the middle-men and layers of technology involved in enabling operators to sell digital products and services.

Apigate started life as an in-house project at Malaysian telco group Axiata to resolve its own challenges in this area, but was spun off to become an autonomous commercial operation a year or two ago. IT’s still owned by Axiata but is now seeking additional investment from VC types. Platforms like that, if they deliver as promised, seem to facilitate the process of offering new digital products to operator customers significantly.

Bearingpoint Beyond also offers a digital platform designed to offer a path of least resistance between operators and various other commercial partners, but more from an OSS perspective. Our conversation with them at the show focused as much on the cultural side of things and their impression is that the extent to which operators are acting on all this noble digital transformation sentiment has increased significantly in the past year.

Operators are usually large, listed companies that are used to acting more like utilities than Silicon Valley startups. The strategic emphasis is traditionally more about efficiency and scale than innovation and risk-taking, but the looming ARPU crisis means that’s not sustainable even in the mid-term. Operators all know this but need to find more executive will and nerve than they’re used to showing, to make it happen.

Most of TM Forum’s work is geared towards removing technological hurdles to successful digital transformation, but events like this one are in many ways more about the cultural side. There is definite optimism from them that we’re reaching some kind of cultural inflection point at which operators start taking more risks and vendors get better at helping them do so. The advent of the 5G era, with all the new commercial opportunities it promises, seems to have hastened this process.

For years we’ve been hearing about OTTs making all the money over the top of commoditised connectivity services, so it’s not like this is news. But cultural inertia has meant the eureka moment of fully understanding that connectivity is now just the means of delivering digital products rather than a profitable business by itself. If that arrived then it’s not a moment too soon.

Telecoms vendors need to raise their game – DTW 2019

There was a familiar feel to the latest instalment of TM Forum’s Digital Transformation World event, with operators once more urging vendors to get their act together.

In a keynote session focusing on network transformation for the 5G era Elisabetta Romano, CTIO of TIM, Nikos Katinakis, Head of Networks & IT of Telstra and Luc Noiseux Chief Technology and Strategy Officer at Cogeco talked about how their companies’ own IT systems are adapting to the 5G era.

Romano reiterated a point she had made in an earlier keynote in which she expressed frustration at the speed with which vendors deliver solutions to emerging needs. Having been at Ericsson for years before moving to TIM last year, Romano is in a great position to comment on that dynamic, but doing something about it is another matter.

Her view was echoed by the other speakers and have been a consistent theme of the show for years. As ever the sheer complexity of all the clever stuff that needs to be done to make 5G work is at the root of it, but this is hardly a new thing and, if anything, should present a great opportunity for vendors to increase their value to their operator customers. Opensource was also mentioned as a bottleneck when it comes to the development process.

TM Forum also used the first day of the event to publish some research claiming the telecoms industry costs itself a billion dollars a year by using 30-year-old procurement practices. The research specifically identified the RFP (request for proposal) process as a bit of a liability, with two thirds of CSPs and three quarters of vendors surveyed agreeing that it’s no longer fit for purpose.

“There has always been criticism of the use of the RFP for IT procurement because it glorifies the process rather than the outcome,” said TM Forum’s Chief Analyst, Mark Newman. “But what has now changed is the desire to transition to agile IT development and the need for a more flexible, iterative procurement process.

“This poses real challenges for the procurement function. First, it’s likely to shift the balance between capex and opex budgets. Second, CSPs expect to get more bang for their buck if vendors partner with them on agile development. However, CSPs don’t necessarily know how much a project or solution created with a vendor partner will actually cost in a year’s time.”

TM Forum reckons the agile IT approach could cut the procurement process down from the current average of 12-18 months to just 2-3 months. Just as with the perennial call for vendors to raise their game, however, this would require the kind of cultural shift that is so often the biggest obstacle to successful digital transformation. So we wouldn’t be surprised to see this issue crop up at future events too.