Telcos struggling with new business models

Global telecommunications service providers recognize the need to adopt new business models that leverage the growing significance of converged services and advertising, but they still haven't yet fully figured out how to make the transition, according to a survey from IBM Corp. Bill Battino, managing partner, communications sector, global business services at IBM, explains that the telcos have finally realized they needed to change with the times after years of landline erosion, a maturing DSL service and even maturing wireless average revenue per-user rates. More than 250 global telecom service provider executives were polled and the results reveal the vast majority expect business model transformation to be the primary source of value. Advertising and convergent services are two of the key drivers in the new business model transformation. While advertising in the mobile space is advancing at break-neck speed, fixed operators with broadband operations will be able to benefit from advertising as well if they decide to offer Internet TV or IPTV. Just as wireless gives the mobile operator a tremendous amount of subscriber insight so too will IPTV. "If you're a provider of that service and the provider of the underlying network, you potentially have access to much more granular information on what people are actually doing when they watch video," explains Stuart McIntosh, partner in the strategy and change practice, communications sector, global business services at IBM. He adds this information is going to be a lot more specific than what is obtained through other ratings services. "This is an area where some of the changes which potentially might occur in the broadband environment, particularly around IPTV, will provide some new opportunities for the incumbent telecom companies to get back into advertising via broadband," McIntosh tells Network Letter. While the executives surveyed know where they want to take their business, they still want to focus to a large degree on traditional strengths such as network coverage and customer base as sources of competitive advantage. McIntosh concedes that some telcos are looking at things such as customer data, simplicity, ease of use of complex products and services - elements, according to IBM, that make up a winning strategy in today's competitive telecom environment. " as of today not all of the companies in the industry recognize quite how fundamental the challenge is in terms of developing and building the capabilities which will ultimately be required for success," says McIntosh. As to when telcos might commit to this business transformation, as opposed to just talking about it, McIntosh notes that some companies are already headed in this direction. He notes that France Telecom, Telecom Italia and Deutsche Telekom are reintegrating some businesses they had previously spun off in order to have an integrated platform. Results of the survey also reveal that Canadian telecommunications service providers are in somewhat of a unique position. They are already highly integrated, and have been for some time, meaning they are poised to take advantage of this business transformation. However, it remains to be seen whether they will lead the way with new business models or wait and see watch our neighbours south of the border do.

Telcos struggling with new business models

News | December 18, 2007

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