By Keith Willetts, chairman of the TM Forum
We can all be pretty sure that there won’t be any turning back of the clock when it comes to the decline of voice and messaging revenues.
But I also think it would be wrong to underestimate the ability of the communications industry to reinvent itself for the digital world.
People change most when they in danger and, let’s be honest, the years of mobile and broadband growth created pressure to keep up with demand, not the pressure to survive.
The paradox of increasingly better, faster and cheaper IP networks is that it gets ever easier and cheaper to launch services that compete with traditional voice and messaging services.
Being the enabler of the digital world is also to be the enabler of new competition. Services like Apple’s iMessage or Microsoft’s Skype can be given away for free because the barriers to entry are low and the provider is using them to bolster other revenue streams, not necessarily to make a profit in their own right.
Revenue and, more importantly, margin decline is a new form of pressure that few communications companies have ever had to deal with.
When it does happen, the first step any company takes is to reduce operating costs to maintain profitability through network sharing and outsourcing deals, business process optimization, moving to commercial off-the shelf systems, and so on.
But that approach has limits and as a result, we are now seeing a new wave of creativity aimed at growing the top line as well as keeping costs in check.
Rather than just piling in a load of new cash to make that happen, one of the best places to increase revenue is to make your existing assets work harder.
One of the most under-exploited of those is data which can be turned into valuable information.
At TM Forum’s Big Data Analytics Summit in Amsterdam last week, speaker after speaker talked about mining the gold in that data – from a better understanding of customers’ needs to help improve marketing, to improving customer loyalty by improving their experience, to directly monetizing information useful to third parties.
Rather than thinking of companies that provide digital services over the network as competitors, increasingly providers are seeing them as customers.
Any service needs a set of enabling services like authentication, security, problem resolution and billing.
Communications companies running systems for their own services can also be a provider to third-party service providers and even provide complete platforms to support innovative services, particularly in the rapidly growing M2M space.
At the network level, sweating the assets can provide some of the clearest opportunities.
Networks are capital intensive and run on economies of scale, yet regulators throughout the world have driven network level competition, not service level competition. So most countries have multiple parallel networks.
Because you can suspend the laws of economics, but you can’t ultimately defeat them, the inevitable consequence is an increasing consolidation of networking through network outsourcing, network sharing and mergers and acquisitions.
The weak will be picked off by the strong which will get stronger because they will increase their economies of scale.
While networking services and equipment production will consolidate, the rate of new service innovation will mushroom.
Relieved of the massive barriers to entry that used to accompany the voice and messaging market, digital service providers can concentrate their efforts on innovation.
It’s true, the digital world offers huge prizes for innovative players and just about every industry sector is open to that – healthcare, energy, automotive and so on.
But enterprise digital services on which corporations depend to run their business still can’t be provided on a “best effort” basis.
That creates a big advantage for companies that know how to engineer and operate such services provided that they match their strengths with agility and innovation.
There is also a huge opportunity for companies that can provide the underpinning systems and technologies to feed that market – and while consolidation is taking place in traditional areas, we’re seeing a lot of new players popping up in critical niche areas like data analytics, policy management, product lifecycle management and security.
One of the most important nuts to crack in in opening up that market will be overcoming the challenges in delivering enterprise-grade services over multiple clouds, especially in the areas of security, quality of service and operational integrity.
To help solve this challenge, industry leaders like FT-Orange, Microsoft and others are coming together at the TM Forum to solve these problems through building multi-cloud management tools made up of blueprints, step-by-step guides and APIs based on industry standards and best practices that let both cloud providers and enterprises manage their networking environments, prioritize traffic and pinpoint where their services are not working.
For sure, this is a very interesting and dynamic time from a market perspective of continued pressure on operators and mushrooming opportunities for cloud-based enterprise applications.
TM Forum’s role is to bring together the entire ecosystem to solve intractable problems that no one company can solve by itself. If we grow the size of the pie, everyone is better off provided that grasp the opportunities.