Operators need new ventures to maintain dominance

The news that Nokia and AWS have agreed to collaborate on a series of initiatives may have been just a small item this week. But the partnership between the two companies to accelerate the migration of service provider applications to the cloud and deliver a range of new 5G services is a harbinger of what’s to come. 

It’s not a partnership that has emerged out of nowhere. Traditional telcos, mobile operators and internet service providers are having to look carefully at the future: their sales may not be declining, (and for many may even be increasing) but the long term picture isn’t a rosy one.

Two surveys published this week illustrate the scale of the problem. The GfK report on global mobile sales in the last quarter looks, at first glance, to be relatively optimistic. There’s a rise in smartphone global sales of three percent, with some particularly dizzying rises in Latin America and Eastern Europe. But the story in Western Europe and North America is very different – a flat market there will surely be matched by other markets once they play catch-up: there’s little sign, yet, that the mobile operators can change their approach.

Gloomy

And Analysys Mason’s report makes for gloomy reading for the operators. The analyst firm forecasts that the worldwide market for telecoms business services will grow from $411 billion (USD) in 2017 to $415 billion in 2022 – in other words, under 1 per cent growth over the next five years. And again, the emerging markets are the ones where all the action is. “If you look over the last year, the operators in the high income countries have been seeing declining sales, it’s the middling economies like Malaysia, the Philippines and Turkey that have been growing,” said Tom Rebbeck, head of the Enterprise and IoT Research team at Analysys Mason.

The research predicts that operator revenue in these high-income markets has reached saturation point and will continue to decline: the question is, what will the operators do? 

There are several answers to this. One is to attack the enterprise ICT market, an extremely lucrative one. There’s also the possibility of providing more to the microbusiness space – businesses with fewer than 10 employees.  “One of the opportunities that the operators really haven’t tapped into,” says Rebbeck, “Sales in this sector have been disproportionately low.”

But, while mobile operators can certainly aiming at this market, there are two other areas. The first one is the growth in the IoT, According to the Analysys Mason report, revenue from Internet of Things (IoT) connectivity will increase sharply at over 10 per cent per year to fill some of the void left by voice and data revenues. IoT connectivity is set to account  for 7 per cent of operator enterprise revenue by 2022. 

IoT options

This is not a high-margin market, warns Rebbeck, “With IoT, it’s mostly about the volume of devices, it’s not moving existing devices to faster networks.”  He says that there may be some exceptions, for example, in some connected cars there could a 4G connection for entertainment services, but they won’t be the norm. 

“No, IoT will be about low bandwidth, low data rate and low revenue. Take something like electricity smart meters, that send a message once every 15 minutes; revenue from them is going to be less than £2 a year. However, we are talking about a lot of devices and, even if the return on each device is only a couple of pounds a year, with 3 billion devices, we’re talking a lot of revenue.”

The other option that telcos can do (mobile operators and fixed line carriers can do is to diversify into other markets.  The Nokia/AWS tie-up, while not a carrier-backed ventures is an example of the sort of the benefits that a partnership could produce.

There’s one big stumbling block in operators exploring new revenue opportunities, says James Collier, “they’d like to do more but they’re tied by regulation.”

Collier is an advisor to Hutch and is a co-founder of Prism, a software company working with carriers and consumers. He sees at first hand, the problems that operators are having exploring new markets, as their existing ones are dying.

“All carriers are in decline,” he says, “their saving grace is that they have big chests of money but they’re eyeing up new markets and working out ways to develop content.”

But here they’re up against the growing upstarts like Amazon, Google, Facebook and Apple, he says, companies who don’t have the regulatory issues that the operators have. “Amazon is the elephant in the room,” he says, pointing that Amazon in the future could offer mobile services – and probably will when they work out how to monetise a mobile offering effectively.

There’s one shining light for the operators and that’s the arrival of GDPR. Collier sees this as creating a more level playing field as operators are much more geared up to working with customers who can be marketed to, this is in sharp contrast to the likes of Facebook and Google, who are already running into privacy issues.

The regulatory environment is changing too, he says. Five years ago, it was much more restrictive than it is now. 

One thing is clear: the days when voice services could be expanded almost indefinitely are long gone but that doesn’t mean that mobile operators are set to decline.  As we’ve seen, there are a whole load of areas to explore: the nascent IoT world, leveraging 4G (and the emerging 5G) for a range of new offerings, partnerships with cloud providers and exploring ways to deliver content. 

Contributer : Techradar - All the latest technology news http://ift.tt/2yPpHN3