Telcos face balancing act in turbulent times

Telcos face balancing act in turbulent times

Need to shift to new business models highlighted at Tel.Con12.

As Communications and IT minister Amy Adams opened the annual telecommunication conference Tel.Con12 in Auckland she acknowledged the challenge telcos face in a time of rapid change, what she called an “evolve or perish environment” that requires a shift from legacy thinking. She says the challenges include how to ensure businesses understand the importance of various IT products and services for growth and how government can encourage innovative IT services over fibre networks. She also says there is a need to keep an eye on what IT skills and training are required as a result of the UFB project and the rise of cloud computing.

We have to encourage greater numbers to look at ICT as a career, she says. This requires changing the perceptions of an IT career as not just being on the help desk. We should tell stories on how to inspire New Zealanders to innovate, citing the creation of the photo sharing company Instagram which was bought by Facebook for US$1 billion last week.

A company like Instagram, “could have easily been developed in New Zealand”, she says.

Dr Alan Freeth, TelstraClear CEO, said the telco sector continues to operate in an “inherently unstable” environment.

“We are playing a high tech game, playing bets on technology” in an environment of uncertainty, he says.

He says he does not have the answers to the long-term viability of the telco model. The traditional revenue streams have disappeared or shifted.

However despite these challenges, he says the telecommunications industry continues to create wealth, helps change people’s lives, as he cites how social media has helped support democratic processes.

Russell Stanners, Vodafone CEO, said the focus is now on innovation and the creation of new business models.

The expectations of customers are rising, including what they can do with communications, he says. Whereas in the past it was straightforward voice and text, now customers are expecting services and experiences that are significantly better.

Telcos face new competition from the likes of Apple, Google, Faceook and Twitter. For New Zealand, the biggest change is the concept of super fast broadband into the home. “As an industry it is transformational, beyond imagination. There is no blueprint for us to follow. It is something that is changing our business model."

The marketplace is huge and there is competition at every level, he says. Before, it was a contained value chain and customers bought everything from their favourite telco.

Now it is about changing the business model, says Stanners. “There is huge competition right across the value chain, we need to figure out where do you partner to allow the industry to do deals right across the value chain."

People should figure out who to partner with, compete with, do the deals and make it happen, or as Stanners puts it, “collaboration at base level, competition at services level”.

“We have to reinvent ourself in a big way so we can move to figure out where the value is, speed up cycle time,” he says as the 15-year cycle of previous technology investments do not cut it anymore. “We have to simplify everything we do.”

Jason Beaumount, director data experience solutions at Amdocs, continued on the theme of the need for new business models for today’s telcos.

“It's not sustainable to be keeping pushing bits and bytes to the end user,” he says. “You have to start to differentiate your services, [with] customers accesing what they want.”

For instance there will be customers who are big users of Facebook or YouTube, or they could be “light browsers” who do not bother downloading media with high definition, and could be offered different packages, says Beaumont.

“You have to go on a journey to the subscriber base, you can’t go from offering access today to huge innovation tomorrow for the entire market. You have to let some people adopt very innovative plans and services,” he says.

Service providers have an opportunity to do this and they have been given this on a silver platter by the likes of Apple and Google by showing innovation in the way their products go to market, says Beaumont.

“They don’t have to reinvent it. They just have to use the same methodology and bring their customers along some data packs to offer very specific offerings tailored to them.”

He says this will also promote “stickiness” as the customers can not just move to another provider because they might not have the same services that are tailored to their needs.

Eric Hertz, CEO of 2Degrees, discussed how social media has impacted his company's operations. He says the company is active in the space and gets customer feedback from social media that is influencing its pricing and introduction of products.

“People will tweet a complaint and expect a response via Twitter,” he says.

Hertz says Twitter is as important, or more important than email because customers expect immediate response.

“We have to treat it that way,” says Hertz.

He adds that 2Degrees also offers specific products through social media, for example customers can buy products through Facebook. These types of activities will be more critical as people spend more time in social media, he says.

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