Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
“I have been up against tough competition all my life. I wouldn’t know how to get along without it,” said American film producer and director Walt Disney, who found innovative ways to serve his customers by differentiating his company in the fast-moving world of entertainment.
Today’s mobile network operators inhabit a similar atmosphere, faced with daily competition and a scramble to succeed. Theirs is a world of mobile networks, devices and services all evolving at an extremely fast rate, driven by technology innovation, strong competitive forces and boundless consumer demand. There’s an added strain on communications networks, particularly in data applications, such as video. In fact, some mobile network operators have seen an 8,000% increase in usage on their networks over the last three years, and network investments required just to keep up with this demand may be up to $1 trillion over the next decade, according to Accenture research.
Also, Accenture research indicates that from 2002 to 2010, return on invested capital for mobile operators declined by 32%, compared with content owners, device manufacturers and over-the-top service companies whose ROIC rose during the same period by as much as 50%.
In this market environment what can mobile network operators do? They must focus on the “high C’s” – cost control, collaboration, customer care and creation of value – to address today’s industry challenges, develop competitive differentiation and survive.
Cost control imperatives
Mobile traffic demand will continue to rise, with an estimated two billion new mobile connections over the next five years and a tremendous increase in customers’ thirst for data. Simultaneously, advanced technologies such as LTE will drive the need for continued investments in radio access backhaul networks. As a result, operators who develop innovative services must also dedicate a good portion of their revenue to building out networks to support them.
Achieving network buildout efficiently and cost effectively is an enormous challenge. First, in today’s environment, investments are typically justified only by new revenue growth; you can’t have one without the other. Second, although new network technologies such as LTE may simplify architectures and reduce operating costs, operators must find a way for next-generation and legacy platforms that support current services and customers to co-exist – a complicated and expensive task.
To reduce costs in the network, OSS, BSS and overall service operations, operators should work diligently to migrate and decommission legacy platforms across these systems. To do so successfully requires product simplification, and convincing and incenting customers to move to a new platform.
Network outsourcing is another way to reduce network costs. In fact, Accenture research and experience shows that operators who outsource functions such as provisioning, network engineering, applications management, inventory data management and end-to-end testing can reduce network operational costs by 20% to 50%.
Collaborate to compete
Today, collaboration is a necessity. The network – the physical part of the communications ecosystem – is less of a competitive differentiator as it’s expensive to maintain and upgrade. Plus, the proliferation of new, fiber and IP-based network architectures required for upgrades to LTE and the associated investments needed to do so are increasing network operation costs.
Some operators share their networks to help reduce costs. Estimates suggest that a well-executed network-sharing venture can reduce network run rate costs by 20% to 40%. Network sharing can also help operators accelerate deployment speed, overcome capital shortages, quickly close coverage gaps and drive new revenues. Collaboration between mobile operators and fixed-line operators is also likely to increase as mobile players grasp level of backhaul fiber investments required.
Customer value, creating through innovation are complementary
Operators must also develop more customer-centric mindsets and capabilities by offering a diverse portfolio of products and services driven by the types of experiences their customers want. As they do so, operators should employ analytics so they can sift through network performance metrics, define and measure network quality and the associated customer experience, gain a better view of customer activity and tailor services and offerings to customers based on their use of products and services.
Creating these new services through innovation – with value propositions that transcend simple voice and data plans – may be the most important of the “four C’s.” Areas for innovation opportunity include:
–The enterprise and cloud computing: More operators should consider vertical solutions tailored to the needs of a specific industry or marketplace, using the cloud to improve traffic volumes and drive higher average revenue per user by selling integrated packages of connectivity, infrastructure and software-as-a-service.
–Machine-to-machine: M2M solutions – especially industrial applications, telematics and energy and utilities – are becoming mainstream. To successfully capture this opportunity, operators should identify where they add value, beyond “just” selling or white-labeling an established product and identify their collaboration partners who can help drive the biggest market impact.
–Network innovation: Operators should continue speeding the development and deployment of creative network solutions. Mobile operators are pursuing Wi-Fi solutions to offload traffic and lessen network congestion. Operators should also conduct test deployments of content delivery networks, to see if this strategy can help them manage the mobile network traffic deluge.
Some final thoughts
Managing through a sea change is difficult. The migration of value across the mobile industry and the current economic climate is reconfiguring the entire telecommunications ecosystem. Only those operators who respond to the challenges of competitive differentiation will be better positioned to transform themselves from being “mere” providers of network capacity into providers that can serve their clients with excellence.
Monte Hong leads Accenture’s global Communications industry practice within Accenture’s Communications, Media & Technology operating group. In this role, Hong oversees the development of Accenture’s strategies and capabilities for serving the wireline, wireless and cable segments, including most of the world’s largest service providers. Additionally, Hong serves as the CMT Asia Pacific Communications Industry lead, driving the industry agenda across a dynamic and hyper growth market.