The telecommunications, or telco, industry has long since been an integral part of the way we communicate in the modern age. As our reliance on the internet increases, we are looking for more and more connectivity in our daily lives. Whether we are aware of it or not, we are dependent on telecommunications to provide us with strong and stable access to the applications we use to connect with each other both in our professional and our personal lives.
No one incident brought into focus the importance of telco in our lives more than the COVID-19 pandemic. During the numerous lockdowns, virtual communication replaced the physical across almost every aspect of daily life. Work went online, exercise classes were virtual and meet-ups with family and friends were done over online video platforms. Telecommunications brands thus played an indispensable role in keeping people together during an extremely difficult period.
Undoubtedly, the most important telecommunications tool in 2020 was that of video conferencing platforms. All across the globe, people signed up for and signed into Zoom, Skype, Google Meet and many other social networks to do everything from AGMs to cooking classes and online birthday parties to group workouts. What’s more, employers had no choice but to move their operations into the virtual sphere, which meant that, in the week of March 14 to March 21 2020, iOS and Google Play saw the highest ever number of downloads of business apps - a whopping 62 million -, according to a report from App Annie.
Yet, despite the apparent success of the industry and our ever-growing dependency on telecommunications, things are not as positive as they appear for the sector.
In fact, telecommunications has been flailing for the past decade. Faced with market disruption from digital natives companies and over-the-tops (OTTs) such as Google and Apple, telco has found itself to be part of a sector that is adapting too quickly to keep up with.
This decline combined with such pandemic consequences as the forced closure of retail stores, contact centres overflowing with requests and a sudden and pressing need to remodel all digital channels as the only face of the brand means that telco is in dire need of reinvention.
Although the pandemic reminded us of the importance of telcos, it also fast-tracked several fledgeling trends that were threatening to accelerate the industry at an incredible pace. As such, telcos were given centre stage in an arena for which they were not prepared and the need for reinvention became blindingly apparent. This year and beyond, telcos must make bold, rapid decisions in order to make the most out of an opportunity that could firmly cement them as utterly indispensable in our society.
In this article, we will take a look at the main challenges facing the industry and what trends are shaping this sector.
The challenges
The truth is that most of the biggest mobile operators in Europe are fairly indistinguishable from each other and are mostly plateauing or even stagnating in terms of revenue and market share. Even before the pandemic, telco was struggling against over a decade’s worth of market disruptions, coming from all sides. From digital natives setting new standards for UX to increased competition from both expected and unexpected sources challenging many telecommunications companies’ established revenue streams. Consequently, the old telco business models and revenue streams just aren’t enough in 2021.
Indeed, according to a survey by Kearney conducted back in 2013, over two thirds of executives at Europe’s leading telco companies said that their future success - and for some, their survival - was dependent on fundamental upheavals in both their business models and their operations.
The problem is that the competition in telco has crept in almost out of the blue. It seems odd that network providers should be threatened by digital services that are dependent on telco in order to function. And yet, third-party services, whether it be Zoom, WhatsApp or TikTok, have hundreds of millions of users who spend hours a day on their platforms and barely use their network’s branded add-ons.
It’s clear that we no longer use our phones simply for making calls - in fact, that function has slipped right on down the list of importance. The market now involves communication on a much bigger scale and encompasses a whole host of data services. It is in this sphere that the over the top (OTT) players like Google, Apple and Facebook are leading the competition. Having developed their own highly popular messaging services and video call features, these giants have been taking over one of telco’s biggest money makers: calls and texts.
The issue lies in a lack of relevance in the eyes of the user. Telco powers every picture posted on social media, every work video call and every Tweet, and yet it is losing market share to the very platforms its infrastructure sustains. The question has therefore arisen as to whether telecommunications companies will choose to remain merely as network providers, in a supporting role to the big actors, or whether they can become competitors in their own right. In this latter case, operators would need to provide a complete package of digital services, with their own messaging and video call services as well as perhaps other branded add-ons, from music and video streaming to email.
In order to become relevant in the new digital age, a full reinvention of the traditional telco is required and this is no mean feat. Some companies are already trying but are struggling to match the young, lean workforce and fast-paced, entrepreneurial culture of the competition. The biggest obstacle to telco’s revamp, however, lies in its outdated customer service practices.
A survey by Capgemini highlighted that a mere 37% of telco customers frequently accessed help and support via their providers’ digital channels before the pandemic. This, and the fact that the figure was predicted to remain the same throughout 2021, highlighted the need for telecommunications companies to improve their online customer experience. This is concerning when compared to other industries, in which engagement with digital channels has shown notable improvement since the beginning of the pandemic, and often started from a higher initial number. In banking and finance, for example, 47% of customers used their bank’s online app pre-pandemic, a number which went up to 55% in 2021, while 49% used their bank’s website, rising to 57% in 2021.
According to the same research by Capgemini, customers don’t use their network provider’s digital services because of several main reasons: they think there is a lack of personalised services (50%), they believe it’s easier to go in-store if they want to resolve issues quickly (41%) and they find making purchases via online channels too time-consuming (32%).
In a post-pandemic world in which people have become used to exceptional customer experiences, this is a primary concern for the telco industry. That being said, it is not altogether surprising that in an industry for which the call center has been a long-standing staple, the transition to a lean online customer experience platform is taking some time.
The new players in the digital service industry leap-frogged straight over the traditional call centre model, bypassing it for the lower cost, highly scalable option of digital customer support platforms. And it seems they made the right choice. Despite the “human” aspect of call centres, they have high workforce turnovers and low productivity rates: only 17% of those who participated in a survey by AGC Partners could identify friction points causing negative customer experiences.
Fundamentally, telco needs to focus on its customers across the board: improve the customer experience, yes, but also leverage data and analytics to make smarter business decisions and give the customer more of what they want and consequently increase retention. There is a prevalent need for telecom companies to become more ruthless in both cutting costs and investing in growth in order to move into the new digital age.
Reducing costs will come largely from automating the customer experience and bringing it up to the standard of the digital natives. Developments in AI and customer service bots have turned the need for human intervention into a failure of process design; customer requirements in telco are often simple and mostly require speed and precision, rather than a personal touch. Comparing old-school and new-school telco, the differences in workforce size are pertinent. When Facebook acquired Whatsapp in 2014 for $22 billion, the latter had half a million users and was run by 55 employees. For comparison, EE, the UK’s biggest network provider, was bought by BT a year later for the equivalent of $17 billion and had closer to 15,000 employees.
The trends shaping the future
Fortunately, when it comes to the future of telco, there is ample opportunity for change and growth. In fact, many telecommunications companies have already started modernising and prioritising their digital customer experience. Capgemini’s research found that telco’s main motivations post-COVID are: improving online and mobile experiences (41%) and optimising customers’ experiences with AI technologies, such as virtual assistants and chatbots (39%). Below are some of the trends that are influencing the future of telco.
5G
Capgemini found that in a post-pandemic world, 63% of people have come to regard mobile and broadband connectivity as essential and yet just under half feel their current service is satisfactory. Bottom line, after a year spent indoors and online, expectations for internet providers are through the roof.
Enter 5G. Promising to be more reliable, more available and faster than its predecessors, 5G will be the ultimate tool for telcos aiming to provide their customers with the best level of connectivity.
A study by Deloitte found that almost all networking executives had either already adopted 5G or WiFi 6 in 2020 or would have done so by early 2021. 5G is set to transform industries across the board and analysis from KPMG puts its estimated contribution to the UK GDP at £30 billion over the next decade.
More than 100 telecom companies and operators have already tested and, in some cases, launched 5G network capabilities and, in fact, some are already exploring the possibility of 6G in the near future. In fact, the European Commission is already working on Hexa-X, an initiative for research into the next generation of wireless connectivity.
AI
The widespread implementation of 5G opens the door for the next exciting trend ready to define the future of telco: AI. The high speeds and low latency of the next generation of connectivity allows third-party digital services to work in real-time, paving the way for hyper-intuitive virtual assistants, digital humans and chatbots.
When it comes to transforming the customer experience, AI is an invaluable tool for telco. It allows conversational robots to give customers personalised answers almost instantly and communicate seamlessly in real time, while taking the burden off call centres and reducing workforce costs. Vodafone has already launched its new customer service chatbot TOBi and has since seen a 68% improvement in customer satisfaction, according to the bot’s creator TechSee. Likewise, Deutsche Telekom has been making moves in AI, having introduced its own chatbot, Tinka, but is also going even further by incorporating other AI elements such as smart data analytics in order to increase efficiency and lower operational costs.
The IoT
Another trend reinforced by the pandemic was that of the already blooming Internet of Things (IoT). Demand for smart home and industrial devices is set to keep growing exponentially as individuals, families and businesses become accustomed to living and working in an ultra-connected environment. Indeed, Statista predicts the number of connected devices in the world to go from 20 billion in 2020 to 75 billion in 2025. Telcos have a great opportunity to invest in IoT at every level as the new connectivity provided by 5G means the sky’s the limit when it comes to the potential of smart devices.
In conclusion, the success of telco companies can be enormous if they successfully invest in and implement the latest technologies, namely 5G, AI and the IoT. The stage is set for immense growth if this established industry can bring about significant changes to business models and operations.
Fundamentally, telco has a hugely valuable asset: it connects us, and this is something that is always going to trigger innovation and growth. In order for telco companies to lead, it’s as simple as leveraging the power of connection and helping it both improve and develop into the future.