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Moving telcos forward in the digital age

The business models on which telcos grew fat and happy over the years are coming to a natural end. Building out network infrastructure as quickly as possible, and then selling access to it at a profit in an engineering and finance-driven model is no longer viable in mature or saturated markets. With estimates of over 300bn US dollars coming out of the mobile sector globally in the course of the next 6 years, it’s more than time to make a change – and to adapt to the digital world.

This is neither news, nor a shocking revelation. For years, analysts and industry-watchers have been urging a dramatic rethink of business models and priorities. So why have telcos not yet done so? And what options might be open to them?

Complacency amongst key decision-makers within many telcos is certainly a part of the picture, combined with a reluctance to rock the established and profitable boat, and a lack of understanding or awareness amongst governments, regulators and investors of the need to change, let alone of the potential alternatives. Increasingly irrelevant data metrics still used to measure success frustrate would-be agents of change; out-dated regulatory regimes threaten to throttle innovation at the outset.

Much time and momentum has been lost playing around with digital units, either externally or within companies, exploring digital services, products and opportunities as a side-line or start-up rather than as a fundamental component and driver of business in the new economy. Innovation is too often siloed rather than integrated across a company. And the arrival of OTTs, the internet companies making money over the top of the telcos’ networks, has famously provoked outrage, hostility, and energetic defence of a model that is no longer defensible, rather than any attempt at engagement, cooperation or constructive dialogue.

Cross-sector partnerships are, however, vital to the future success of telcos. ICTs are the backbone infrastructure and enabler of developments in fields as diverse as healthcare, education, energy distribution, transport, agriculture and civic engagement – bringing tremendous opportunity and the need for new approaches to commerce and public sector delivery. Telcos are sitting right in the middle of this explosion of potential new markets, between the organizations, enterprises and individuals that want to use the power of digital services and the service, content and application providers with the digital products, solutions and innovations to sell. By partnering with new stakeholders, or renegotiating existing relationships with government, for example, telcos can be the critical facilitators of growth, enabling interactions that are both more efficient and more effective in a win-win-win scenario.

It does mean moving beyond the traditional embedded models of connecting people via voice and internet in a quasi-monopoly set up. It means leveraging the latent power of the networks, playing to the telco strengths of subscriber base, billing and customer services as a platform for new partners from vertical sectors as diverse as finance, medicine and logistics. And it means moving away from competitive tension towards mutually-beneficial cooperation. All of which calls for open dialogue, new ways of thinking and new skill-sets, in particular in data science.

The other major area where telcos hold the cards, even if they may not yet be fully aware of it, is in the enormously important field of big data. The analogy between data and oil is familiar but, like all good clichés, extremely valid: data is an immensely powerful resource that must be extracted and made useable to release its value. Telcos, of course, have privileged access to the immense volumes of personal data generated each day by each and every customer – and telcos are implicitly trusted with that data.

This role as trusted custodian represents a huge opportunity. Personal data on who I am, where I was, what I like, what I do, who I know or speak to and so on is a rich stream of real-time information that can be analysed, utilized and monetized, from targeted advertising to personalized services and products to efficient energy use and smart cities. As consumers become aware of the value of their data and their role as data generators, they will become increasingly empowered, seeking to control what happens to this information, which third parties have access to it and to what extent, how they can directly benefit from or monetize these interactions – with telcos as the trusted intermediaries.

The key to all this is trust. Without guarantees on privacy and security, without transparency, understanding of the use of personalized services, exchange values and regulatory safeguards, this new opportunity for both telcos and the wider economy will fail before it has properly begun. Recent EU regulation on data, coming into force next year, is an important first step in protecting the consumer, obliging the business community to consider how to add value to data users rather than merely extracting it.

But we need to move forward faster, to understand more clearly, to work together. This is why I see the Leadership Summit on the Future at ITU Telecom World 2014 in Doha this December as the ideal wake up call to the global ICT community. Governments need to re-evaluate what telcos can do for social and economic growth beyond simple connectivity, understanding the latent capabilities and potential of the industry to drive digital development, social inclusion, economic growth. Regulators need to balance data security and privacy with an openness to new ways of thinking, new organizational cultures and collaborations. Telcos need to work to their strengths, refine their offerings in the digital world, engage in dialogue with government as regulator and major customer. It’s time to move away from the frustration of government and industry running in parallel rather than together, moving in a spirit of creative co-innovation.

Simon Torrance, CEO, Metaflight