Not all CSPs share the same ambitions when it comes to digital transformation, and they won’t all embrace the same business models.This article is from our new research report, Digital Transformation Tracker 1: The race is on. The Forum surveyed 185 executives from 93 unique CSPs operating in 64 countries, and 175 executives from 75 unique supplier companies and conducted dozens of follow-up interviews.
Some companies will become visionary platform providers; others will be content to operate as utility connectivity providers. Some will offer connectivity while aspiring to become digital service providers (DSPs). TM Forum’s first Digital Transformation Tracker found overall, that:
- Mobile operators are developing or acquiring fixed and broadband businesses, while fixed operators are launching mobile businesses.
- Fixed and broadband operators are developing or acquiring pay-TV businesses (in most cases IPTV).
- Fixed and mobile operators are expanding B2B services (connectivity and ICT).
- Many operators are looking to branch out into the Internet of Things (IoT), mobile financial services and/or digital advertising.
The platform push
We asked respondents what CSPs should aspire to become as part of their digital transformation programs. They could choose more than one of the four options we provided, two of which are existing business models – best-in-class connectivity and multi-play – and two that are more aspirational – full DSPs and platform providers.
Interestingly, suppliers are more bullish about CSPs’ prospects as platform providers and DSPs than the CSPs themselves.
The move to embrace technology is clear in this push towards platform, although platforms can be much more than just technology. A platform strategy can have two key elements:
- A platform-based IT architecture, which supports electronic marketplaces and facilitates a digital business model (such as, Amazon Web Services or Microsoft Azure).
- A platform business model, where rather than playing a direct role in the supply chain, companies build digital ecosystems or marketplaces connecting consumers with producers of goods and/or services, making it easy for them to do business (such as, Airbnb, Amazon Marketplace, eBay and Uber).
While CSPs have attempted to address all market segments and verticals in business-to-consumer and business-to-business markets for their core communications and connectivity services, they won’t be able to take the same approach with platforms. Most successful platform businesses target a specific niche (mobility services, hotels, social media, etc.).
CSPs expect Internet of Things and vertical (ICT) markets to be good platform opportunities. Indeed, these are the main drivers for investment in 5G and cloud-based networks. It is interesting to compare CSPs’ greater enthusiasm for smart cities compared with vendors, below, as well as to note that the suppliers are far more attracted to connected car opportunities than the CSPs.
There is a tendency for CSPs to equate innovation with new services. Yet it is possible for a CSP to be innovative – in its marketing or distribution strategy or use of technology, for example – and with a traditional telco business model.
Xavier Niel is a French entrepreneur and the main shareholder in Iliad, the French group that owns triple-play and mobile operator Free. He also has a majority stake in Monaco Telecom and is poised to enter the Italian market as a fourth operator.
Despite Niel being a major player in the French technology start-up scene, he appears to have few aspirations to move beyond fixed, broadband, TV and mobile in his telco businesses. Free does not even offer quad-play bundles. Nevertheless, the company has been extremely innovative and ‘digital’ in many respects:
- In 2002 it was a triple-play pioneer and built its own set-top box because it could not find ready-mades that met its requirements.
- In 2014 it introduced its own SIM-card dispenser kiosks, which are sited within other stores.
- Operators controlled by Niel have embraced open-source technology in their IT departments and are developing their own platforms and technologies to reduce software licensing costs.
- Niel embraces simplicity. His operating companies only offer three to four pricing plans at most, and he is prepared to shut down 95 percent of plans when he acquires a business to reduce costs and complexity.
Overall progress toward becoming a DSP has been painfully slow for most operatorsm, whether seeking to embrace new or digitize the delivery of current services. In fact, many of the world’s largest CSPs no longer embrace the term DSP and have reverted to calling themselves telcos or telecoms providers. This is a reflection of how difficult it is for network operators to compete with digital native service providers, and recognition that connectivity always will be a fundamental part of CSPs’ value proposition.
Nevertheless, in the face of stagnating revenues, CSPs must pursue multiple strategies to capture a larger share of the total pie in individual markets and develop new revenue streams.