Selling to Telcos in the Age of Digital Transformation

A playbook for vendors in a changing sales and marketing environment

Vendors must help operators navigate uncharted waters

Telecom operators of all stripes are driving mass-scale digital transformation initiatives – 86% in this survey are either underway or planning their journeys. These are uncharted waters, with the ‘hoped for’ destination, a leaner, more agile and customer-centric organization, better able to profit from digital services. The clear majority (84%) are adamant that in five years’ time, they will have evolved into completely different type of businesses.

Telcos are leaning on the vendor community to help them transform. 78% say they are more demanding of vendors as the landscape becomes more complex. In many respects, that’s good news for suppliers, as a staggering 98% of telcos are looking to vendors to play a bigger role in driving innovation to support digital transformation. However, engaging with telcos is becoming increasingly difficult and complex. Operator organizations are in near-constant flux, their purchasing processes are changing, and many telcos are frustrated by the failure of vendors to demonstrate they can meet their evolving needs.

Operators are in a state of flux:

In the last three years:

  • 52% of telcos surveyed have changed leadership, and 72% have introduced new Board or senior management roles
  • 77% have restructured at least once, while almost half have restructured at least twice in the same timeframe
  • Almost two thirds (61%) have rebranded or changed market positioning

This points to a continually changing set of senior decision makers and purchasing influencers working in organizations whose ‘final destination’ is subject to sporadic reorientation.

The telco purchasing process is increasingly convoluted and complex:

  • 74% of operators see ‘consensus buying’ as the new normal in telco businesses
  • Purchasing decisions now involve more people (the mean is 38, but can be more than 100 in some cases) and take longer (up to 45 weeks) to complete
  • 40% admit that purchases can often be abandoned completely if consensus isn’t reached
  • 70% of operators believe the number of people involved in decision making will increase over the next two years

Vendors face a difficult sales and marketing journey, having to meet the needs of dozens of influencers over increasingly long purchasing cycles. If they fail to do this, they are likely to end up with nothing in return for their investment. And with the number of decision makers expected to rise in seven out of ten operators, this is a challenge that must be met head on.

Vendor positioning and messaging important, alongside marketing channel selection:

  • Vendor reputation and standing in the industry is the most important selection criterion for telcos; demonstrating understanding of operator challenges and patience with processes is next, and strong differentiation from other suppliers is the third-ranked trait that drives selection
  • However, the biggest frustrations with vendors are a lack of subject matter expertise, over persistence, lack of flexibility, failing to acknowledge consensus buying behavior by engaging with multiple stakeholders, and a lack of understanding of the complexity of contemporary operator businesses
  • 73% believe that the IT or trade media is the most helpful source of information when shortlisting vendors, 56% favour industry analysts

Successful vendors must evolve their sales and marketing strategies to capitalize on the opportunity presented by telco digital transformation. Deep understanding of the audience must come to the fore to help drive the tailoring of messaging to numerous decision-makers. It is vital that vendors demonstrate subject matter expertise and an understanding of the operator’s plight through their sales discussions and marketing communications in order to drive selection. And the key to reach telcos and compete for their attention – and wallets – is through industry media and the analyst community, viewed by telcos as the most important sources of information.

CC Group Whitepaper Feb 2018

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Could the future be one without mobile and broadband bills?

Seeing money leave your bank account is not something anyone likes, but how about a future in which mobile and broadband bills are a thing of the past?

Now before the telcos take to the streets in protest, hear us out because we’re not suggesting the internet becomes free. The idea here is connectivity is purchased by device manufacturers at wholesale prices, ‘embedded’ into said devices and used by the consumer in exactly the same way. The telcos will still get paid for their efforts, but the money will come from elsewhere.

Let’s talk about the positives of such an idea starting with the consumer. Right now for the consumer connectivity is one of the most important aspects of everyday life. It runs our social lives, banking, entertainment and work lives, as well as pretty much everything else. But the consumer does not care where connectivity comes from, just that it works.

But, when there are connectivity problems for the consumer, the world is going end. And with the mass market penetration of social media networks such as Twitter, don’t they let you know about it. Social media has given the masses a voice, and it can be deafening at times. By moving to the wholesale model, telcos would no longer have to deal with the demanding consumer, but instead single points of contacts at companies, who are likely to be a bit more rational.

Trading millions of customers for hundreds, while still delivering the same levels of connectivity is surely a benefit. The expense of customer services could surely be decreased, and the PR team would spend less time fire-fighting the divas on social media. Doesn’t sound too bad.

The second positive would be predictability. The consumer is unpredictable when it comes to demand on the network. Companies are more predictable and better at forecasting trends than Joe Bloggs. In such a wholesale model, of course there would be dynamic purchasing of capacity, but surely there could be a model where ‘connectivity contracts’ could be drawn out, allowing both sides to have a better view on how much ‘connectivity’ will be bought and sold.

This sounds very simple, but by having these contracts in place and managed properly, telcos should be better able to predicts spikes on the networks, better understand the flows of demand, and in a better position to manage such strain on the network. Such a set up could improve visibility, allowing the telco to improve overall performance and ultimately experience.

A final point for consideration is the financial side of things. Delivering the internet to the masses is expensive, that is probably not going to change, and the profit margins in the consumer world are only going to get smaller. The continued race to the bottom is ensuring profits are going to continue to erode. That said, moving across to a wholesale type model could offer financial gains.

Firstly, signing a contract with a device manufacturer could certainly be done on a longer term basis than with the consumer. Secondly, it could be done in a more consultative approach, where the telco is in on product development discussions to more readily hone the delivery of connectivity. And finally, it would remove the monstrous expense of trying to buy the loyalty of the consumer.

The advertising budget of the telcos must be substantial. The brands have to be everywhere online, in print, on radio and on primetime TV. Sponsorship of sports teams is also common, and experiential marketing initiatives will not come cheap either. Fighting for the consumers attention and preference is an expensive game.

The amount of cash generated through a wholesale business model would certainly be less be MB than selling directly to the consumer, but some might argue that due to the number exploding number of connected devices, the increased consumption might compensate for the decline in price. When you also remove the expensive consumer advertising budgets as well, the business case becomes clearer. The telcos might even become more profitable.

This is obviously a massive change. Not only in the operating business models of the telcos, but also in the way devices are manufactured, sold and delivered. Whether the device manufacturers (we’re also including products like TVs here as well) are happy to absorb the cost of connectivity is also unknown, but it could also create a new service business model for the manufacturers; a basic sell to the consumer could offer 10GB of data per month, but a premium model for £5 a month could offer unlimited.

Some devices manufacturers will be reluctant here, but the ambitious ones who can see the opportunity of moving into a services model could make cash. It would extend the relationship with the consumer and open up the idea of recurring revenue.

It would also mean the telcos would have to redefine themselves as an organization. This new wholesale model would commoditize data, it would move the telcos to another area of the value chain. Some telcos might be reluctant to move towards a commoditized business model, but we’re not too sure what the issue is there; if run properly, you can make a significant amount of cash out, just ask the oil companies.

Of course there will also be casualties. How will Kevin earn his bacon after EE tears up his contract?

Everyone thinks telcos are utilities except the telcos

It’s a trend which the telcos have been fighting hard to resist, but the growing wave of commoditization is seemingly starting to swallow them up.

The telcos continually deny they are utilities, but the fact they seem unable to branch off into value added services with any notable success is a damning trend. New research from The BIO Agency is just another stick to beat them with.

Let’s start with the most painful statistic; nine out of ten correspondents, all of which were UK consumers not necessarily industry figures, perceive their telco provider as a utility. According to this research, it’s not just journalists, the tech industry, regulators, enterprise organizations and vendors who view the telcos as utilities, it is Joe and Jane Blogg on the high street as well.

To support this claim, 64% of the respondents also consider there to be little or no difference between the telco. And to be completely honest, when it comes to selecting a new provider, your correspondent will tend to agree with the 64%; decisions are based on price alone. Sure, there might be the added bonus of content thrown in, but experience to date says this content isn’t very good. Excluding sport of course, but this isn’t something produced by the provider, just relayed to the consumer. And it generally costs extra as well.

Should the telcos want to continue this battle against commoditization, the perception of the brand and the business certainly needs addressing. Content is an area they thought this could be done, and quite frankly it hasn’t worked, perhaps the smart home is an area where this could be done, facilitating the relationship between the customer and the range of new services which will be prominent before too long.

Whatever it is, some value added service needs to be created, as you can guarantee the race to the bottom (in terms of data pricing) is certainly not going to change. Data is no different whether it comes from O2, EE or Three, the only thing which might differ is the quality of accessing it, which varies depending on where you are. Certainly sounds like a utility.

The final area we would like to draw attention to is the following:

  • 76% of people would not switch their telco provider if they had the opportunity
  • Though only 27% are likely to recommend their current telco provider

What this says to us is that customers can’t be bothered about going through the painful process of changing provider, but they certainly don’t give a monkeys about where their data is coming from. In this sentence, ‘data’ might as well say water or electricity or gas, the same attitudes are seemingly present.

The telcos are losing the battle of perceptions, but we’re not 100% sure this is one which they will be able to win.

Spectrum spat surrounding satellites sizzles softly

FCC Commissioner Ajit Pai has let us know what he’s going to be doing throughout November, and there is a risk of a bit of bickering appearing.

Just as public sector employees around the world start winding down for Christmas, Pai is packing his November with a broad range of activities. From tackling Robocallers, Next Generation TV, retraction of pointless regulation to media ownership, possibly the most interesting area is surrounding the availability of spectrum.

“Another top Commission priority is unleashing more spectrum to spur the rollout of next-generation 5G wireless networks,” said Pai in a blog post. “To that end, the Commission will vote on an order that would make available another 1,700 megahertz of high-frequency spectrum for flexible terrestrial wireless use while providing 4 gigahertz for core satellite use.

“This decision would build on the 11 gigahertz of spectrum that we made available for flexible terrestrial wireless use last year and would be a major marker in the United States’ efforts to lead the world in 5G innovation.”

The vote is set to take place at the next open meeting scheduled for 16 November, but there might be a few people who find issue with the starring role satellite is being given in the 5G world. There are of course two sides to the argument here, and the decision to more readily assist the satellite companies (at the possible detriment of the telcos) will almost certainly polarise opinion.

The satellite sub-sector will be delighted by such positive messages slipping out of Pai’s office. The FCC has been the recipient of several letters from heavy hitters in the satellite space in recent months, each requesting additional spectrum resources to make a more substantial contribution to the communications segment in the US.

The telco industry naturally is against any such move. They of course have to fight and bicker to get their hands on such valuable resource, and of course it does not come cheaply either. T-Mobile US has blasted the satellite industry for seeking additional spectrum, and has also found issue with the satellite providers proposing limitations for mobile broadband. To make things worse, the satellite providers might not even have to pay for it either…

You can start to see why the telcos are finding grievance. And before you pin the moaning down to T-Mobile US being T-Mobile US, the magenta army are not alone. Verizon has called on the FCC to reject any new proposals, arguing the commission has already offered enough protections to the satellite industry. Any more would not be deemed fair or justified.

“The Commission should not now disturb that generous compromise by going even further in response to the reconsideration petitions filed by the never-satisfied satellite industry,” said Gregory Romano, Verizon’s Associate General Counsel.

Looking specifically at the numbers, there is a solid argument for the telcos, who will be pushing the FCC to clip the wings of the space cadets. According to 5G Americas, 325 million mobile subscriptions in the US, this compares to 2 million satellite customers globally. When you look at these numbers and these numbers alone, you have to question why the FCC is considering such favourable conditions for the satellite space when all the demand is being managed by the telcos in the mobile space.

Of course, there is a counter argument. Another one of the main initiatives which is faced by the FCC is bridging the digital divide. This is an issue when you look at poorer communities in the cities, but it is a much larger problem out in the rural communities, where connectivity is tricky (putting it politely).

This has been on the agenda for almost as long as the internet has existed, and the telcos have always made promises about addressing it. While we are sure there are a few individuals who are fighting for the digital rights of the rural communities, the challenge has seemingly been ignored by the telcos. The divide has not gotten smaller, and some may argue is it only getting larger.

Satellite is a very real option to address this challenge, as it removes the need to sort out the physical infrastructure to fuel connectivity. Telcos have argued this is a very time consuming and expensive activity, which is perhaps one of the reasons why we haven’t seen progress. Why should you prioritize a few farmers in Idaho, when you can boost profits by a little bit more each year? Don’t forget, this is an industry which has seen profits erode over the last couple of years, non-critical projects will get kicked back a bit every now and then.

The challenge has been there and not addressed so far, so why shouldn’t the satellite companies be given the chance to contribute to the 5G revolution in their own way? In this light, although we do accept this is only one area, the telcos have had their chance and done nothing.

This is certainly an area which has the potential to develop into quite a bickering mess, and who knows, maybe we have another couple of lawsuits to look forward to.

Could the super-aggregator be the salvation of telco content ambitions? got its first experience of IBC this year and while it was a very interesting experience, it raised more questions than answers around what role telcos have in the world of content.

First of all, let’s have a look at the basics. The telcos want to be involved in content because it is a value add, and the only way the telcos are going to avoid commoditization of their services is by finding value in what they add to the consumers life. Right now data is not a value add, it’s a basic need. What this says about the consumers of today is beside the point, but the experience of data consumption is a secondary concern; quantity is king.

This means a race to the bottom and a direct line to commoditization. It is unavoidable unless trends are broken. So content seems to be the answer. But how?

One option which is yet to really appear is becoming a super-aggregator of content. A couple of telcos seem to be trying out the idea, and Facebook is also making a stab at it with its Watch proposition, but there does seem to be a whole in the market for someone to collect all this content into one place.

During the conference, one point was made very clear; there is so much content out there. There are so many channels, so many OTT services and so many new content studios appearing all over the place. The gluttony of channels is offering so much choice to the consumer, which could be a good thing, but also could be a negative. It’s confusing and fragmented. Finding this fantastic content can be a complicated and frustrating job.

Fox Networks’ COO Brian Sullivan raised one idea during his keynote; super-aggregators. As an industry we are offering too many windows for the consumer to navigate. We’re also duplicating content too much as well. Maybe the next super-power of the content world won’t be the one who creates the next blockbuster, but the one who controls access to the consumer. Now this could be a new player, or an established player in the content arena, or how about this for an idea, a telco.

Think about it this way, what is the one thing which (almost) every single millennial has in common? They have a smartphone. It doesn’t matter which device, or through which operator, but they have a device and a single relationship with an operator. This is a unique relationship and one which could be very powerful.

In other areas of the world, your average consumer has several relationships with providers. Whether it is several social media accounts (Facebook, Twitter, Instagram etc.) or content provider subscriptions (Netflix, Spotify etc.), there is no central point of access. To access content it means going on Netflix, or turning on the TV, or going to BBC iPlayer. The relationship with the operator is singular and definite. It only changes with a new contract and it is rare two overlap (excluding those who have work and personal contracts).

Surely there is an opportunity for operators, or device manufacturers perhaps, to create a super-aggregator window, where the consumer accesses content. Customers could purchase and manage subscriptions through the application, while also consuming the content at the same time. Imagine an Expedia for content, but consumption not comparison.

Admittedly relationships would need to be developed, but the telcos need to do something differently. Taking on established players in the content world, whether it would be distribution or creation, is likely only to end in tears, but adding value on top works. The consumer could find value in a single super-aggregator and the players in the content world could benefit from simpler access to the consumer.

If there is a need and a benefit, there is usually someone who will gain. Operators have a good relationship with the consumer, which goes everywhere and anywhere – when was the last time you left your phone at home?

Facebook is already trying to muscle in on this area, but there have been questions on how suitable long-form video is for social media. But it does offer an interesting idea for the telcos. Why compete with the established content players when you can offer them a service and add worth to the value chain?