This Industry Spotlight was authored by SAP’s Sandeep Chowdhury
As behemoths like Google, Meta and Netflix continue to devour bandwidth across the network value chain, the common refrain among network providers who are investing so much to build the infrastructure on which platforms like these rely has been, “What about us?”
“Over the past six years, average total shareholder returns have been almost flat across the internet access connectivity segment, while other segments have at least doubled investors’ stakes and some user interface players have delivered almost six-fold returns over the same period,” the network trade organization GSMA states in its Internet Value Chain 2022 report. “At a time when a greater load is being placed on internet connectivity infrastructure, requiring network operators to increase speed, capacity and coverage, their business model is being squeezed.”
Telecom network providers are “in a bit of a margin squeeze,” Accenture analyst Andrew Walker acknowledged in a recent Q&A here in these pages. “So the natural question becomes: what are the new sources of revenue? How can they expand? Where can they bring different products to offer sources of value to customers and move out of the utility game?”
One viable way forward to value-creation for telcos is via the direct-to-consumer market. Because they own the access point into the consumer’s home and mobile devices, they’re in an especially strong position to explore direct-to-consumer (D2C) services, from home security to streaming and beyond.
India’s Reliance Jio is doing much more than test the D2C waters. One of the world’s fastest-growing 5G providers, the company offers a broad and expanding portfolio of D2C apps, including JioPlay for live TV, JioOnDemand for streaming movies, Jio Business for voice and data services and digital solutions aimed at small and midsized businesses, and Jio Financial Services (JFS) to bring investing services to consumers and merchants.
“JFS will use technology as a key enabler to reach customers directly,” the company said.
Reliance Jio’s D2C commitment appears to be paying off, as the company reported record revenues and EBITDA in 2022. It’s not the only network provider getting serious about D2C. Canada’s TELUS, for example, offers a television streaming service along with a healthcare app and a home security service, and other providers around the globe are rolling out similar offerings.
Their challenge is ensuring these D2C services resonate with consumers, who expect rich, value-driven experiences and an effortless, highly personalized and curated content journey. As companies like Jio are demonstrating, network providers can diversify their revenue streams and their customer bases with business models that position them as value-added enablers of digital transformation (for business customers) and a digital life (for consumers) with services that sit on top of, or around, the network. The World Economic Forum and Accenture estimate there’s $32 billion in value for telecom companies to unlock through 2025 by redefining customer engagement, and another $940 billion to unlock by extending revenue streams beyond connectivity.
Based on my work with telcos as they explore new business development frontiers, here are four keys to unlocking that value with D2C:
- Focus on building cloud-based network and edge computing capabilities by leveraging 5G and web3. Customers have a massive and growing appetite for low-latency experiences with gaming and media content such as live sporting events. In a recent sport fan survey by CapGemini, for example, 70% of fans picked smartphone screens as a preferred device to watch games, including 78% of Gen Z and 74% of Millennials. Meanwhile, 75% of fans mentioned streaming platforms as a preferred option for watching sports, double what it was in 2019.
Companies like Jio are demonstrating how telcos can leverage their positioning on consumer devices, plus brand loyalty and 5G capabilities, to attract more customers to these kinds of rich experiences with over-the-top streaming services.
And that’s not the only D2C opportunity looming for telcos. With web3, they can develop differentiated solutions for the metaverse, where they curate and personalize commerce, multifaceted bundles of services and journeys into the virtual world.
- Cultivate business networks and ecosystems built on partnerships. This summer Jio announced a joint venture with the financial services company BlackRock to provide consumers with tech-enabled access to investment solutions, the kind of partnership telcos will need to forge to develop the multi-industry business ecosystems that are necessary to building the service bundles that appeal to consumers.
By aligning interests and combining strengths, the various participants in these ecosystems — hardware, content and app providers, etc. — can create experiential, context-based edge services that add value for customers and provide inroads into markets other than connectivity. To do so, they’ll need a digital platform to connect the ecosystem and provide a single environment for configuring, pricing, quoting and settling complex offerings where connectivity, infrastructure and services are combined.
Here a telco can serve as the trusted entity that operates the essential services that support and enable the broader ecosystem.
- Deliver a consistently superior customer experience. In a commoditized marketplace, CX has become the great competitive differentiator. So to stand out in the D2C world, network providers should take a cue from the Apples and Amazons of the world by providing simple, intuitive and highly personalized interactions and experiences.
Here’s where artificial intelligence and advanced predictive analytics tools can help. These tools have the ability to rapidly synthesize and draw insight from the customer, operational and network data that network providers are uniquely positioned to gather, and use it to shape highly personalized, relevant consumer experiences in real time.
To support a superior CX, they’ll need to develop robust capabilities for managing customer IDs and credentials, along with integrated digital wallet systems to make it as easy as possible for consumers to transact. They’ll also need sophisticated billing capabilities to support their service bundles, which in turn will be instrumental in recouping their infrastructure investments.
- Prioritize a high-quality partner experience, too. Telcos have to compete for partners just as they do for customers. So to truly realize the promise of ecosystem-based D2C services, they must have the back office capabilities to onboard and serve large numbers of partners, and to manage the myriad revenue inputs and outputs involved in offering bundled D2C services. They’re more likely to draw top-notch partners if they can offer streamlined pricing, usage-tracking, billing, settlement, reconciliation, receivables processing and other financial and accounting functions.
Based in Frankfurt, Germany, Sandeep Chowdhury is a senior director in the SAP Telecommunications Business Unit, focusing on customer experience and business support systems. He previously worked at Schlumberger, Ericsson and IBM before joining SAP.
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