Why CSPs are losing the customer relationship betting on half the experience and where they can grab the other half.
Just three weeks ago, Verizon CEO Dan Schulman said the quiet part out loud at a Semafor fireside chat: network is no longer enough to compete for the customer. He wasn’t wrong about network quality, as 5G investment transformed what’s possible. But he was right that it’s no longer sufficient on its own.
CSPs spent years investing billions to claim “fastest network”, citing Ookla scores as proof. But today network speed is table stakes. Most consumers expect connectivity the way they expect electricity: reliably, invisibly and not costly. If the network becomes less of a differentiator to the consumer, price differentiation fills the vacuum – a race to the bottom, void of brand loyalty until the CSP is hardly distinguishable from a utility.
Deloitte found this year that 77 percent of telecom customers feel no loyalty to their provider, but 86 percent would pay more for a better experience. This is not to suggest that CSPs don’t offer any experience worth paying for. Connectivity experience remains important to consumers, but CSPs are missing out on the holistic experience they could offer that would give customers a stronger reason to stay loyal.
Unbalanced benefits from network capex
While CSPs invested in network infrastructure, other ecosystem brands focused on customer experience. Apple is the starkest example, setting the new customer experience bar that others should aspire to, captivating consumers for two decades. Visit anyone’s home and you’d be hard-pressed to not find at least one or two Apple products or services. Would you walk into an Apple Store on a Saturday stroll? Yes. A CSP store? Unlikely.
That investment wasn’t wasted, because it built the foundation every MVNO and OTT player now runs on. However, the returns accrued disproportionately to the ecosystem players who focused on experience while CSPs focused on the pipe. The device loyalty fell to Apple and Samsung’s ownership, who took over repair, payments and technical support from CSPs, and the experience fell to the OTT players like Meta, Google, and Netflix, who took the experience on the device from CSPs – like messaging, voice, and fintech.
MVNOs, who’ve shed the network capex, have the luxury to focus their energy on appeal aside from the network. Global brands like Revolut, Lidl Connect, and Wal-Mart can now focus on customer experience and can win loyalty on value. Connectivity for them became an additional service that brought more value and not the core offering, positioning them firmly against being squeezed on price. And now, 90 percent of Americans would consider alternatives to traditional legacy CSPs for a primary experience driver like personalization.
CSPs would be wise to take pages out of these organizations’ strategy books, but that’s not where the investment went, especially with AI.
AI can’t play savior with current strategy
Nvidia’s annual telecommunications survey showed North American telecom organizations are investing heavily in AI for network optimization and customer service. The former shows promising results, but upon closer inspection of the latter, it’s clear the investment was defensive. It focused predominantly on the backend – the likes of call center chat shedding and service automation – but not the frontend where customer communication and experience happens.
These AI investments serve the CSP’s bottom line mostly, not the customer. A customer whose inquiry was managed by a virtual agent didn’t have a better experience than before; they just had a less expensive one for the CSP, so the difference is a net zero for the customer.
The fiscal and ROI logic is there, but investing in those areas lacks the offensive punch that brings additional value. Instead, it doubles down on the same kind of logic that positioned CSPs as they are today. What’s left for CSPs is going on the offensive and focusing more on other kinds of experiences where AI can drive value for customers, not just cost savings.
Value is right where CSPs always were
Giving customers value starts with CSPs recognizing the fundamental shift that’s required. Customers stick around not just for the core product, but also the experience thereafter – the likes of personalization, proactivity and predictiveness. The Netflixes, Nikes, Amazons, Googles, and Apples mastered this, winning because they understood that experience and service are a product, too.
CSPs can change this by building off of the excellent network experiences they carved out that no one else in the ecosystem can match: going right on the very devices that CSPs give their customers, where the source of truth is.
There are only three things a person doesn’t change frequently: house, car, phone. The latter is the key to building a relationship not centered on price, where experience matters. And it’s the window into the customer’s daily experience. CSPs can ascertain hundreds of data points, including frequented location, app usage and interests, device performance and more, creating a unique composite of each customer.
This opens the door for opportunistic problem solving and tailoring product offers when the customer actually wants them. CSPs are already offering a number of products and services to create stickiness, but what actually creates the stickiness is feeling value first from the provider. “Your iPhone has connectivity issues – optimize by doing a, b, c on your device or upgrading to x model since this is a 22-month-old device.” Or, “you’re entering a rural, satellite zone, which drains your battery. You can conserve battery by adjusting these settings.”
These kinds of experiences turn a utility relationship into a brand relationship through valuable engagement. It’s how the aforementioned players in the technology sector, who CSPs are often compared to, succeed in what they do. And it’s also what feeds AI that’s worth deploying.
So while Dan Schulman has a valid point, acknowledging this problem is easier than the change itself.
The challenge is accepting that the path forward doesn’t run through just the network. A dual approach also gives CSPs the edge over MVNOs and OEMs, who can’t access or own both. Having that composite on them opens the door for many differentiated experiences that have customers saying “I’ll pay the extra for this service.” It starts on the device, the one thing the customer never puts down, and the one thing CSPs have been standing next to without ever really looking at.
The shift Schulman called for is real. The question is whether CSPs move toward it deliberately, or risk falling further behind, stuck with the network bill.
Alan Minney is a veteran of AT&T, IBM, and Ericsson, with over two decades of blue-chip technology and telecommunications experience. He leads MCE’s partner ecosystem strategy to create sustainable growth. He has also previously built and scaled global strategic partnerships across Microsoft, Apple, Samsung, Qualcomm and beyond. At Ericsson, Alan oversaw key partnerships for private 5G networks, including marquee customers such as Hitachi Rail, and supported the development of the Slalom Element lab212 innovation center at One World Trade Center. A thought leader in private 5G, robotics, mobility, and smart manufacturing, Alan has previously spoken numerous times on online platforms, conferences and podcasts.
