Many communications service providers (CSPs) depend largely on revenues from traditional services such as voice traffic, last-mile access carriage, and long-distance capacity. However, these are all rapidly commoditizing services, with revenues and margins in long-term decline. At the same time, the new generation of internet content providers (ICPs – companies whose primary business is the creation, storage, and dissemination of digital information, such as Alibaba, Apple, Facebook, and Google) are attracting consumer, enterprise, and wholesale customers away from their usual CSP suppliers with cheaper and richer-functioned communications services.
If they are to survive in the face of these pressures, and build their businesses in this time of profound change, CSPs must anticipate and respond to their customers' demands and expectations. CSPs must innovate to attract, retain, and grow customers, to increase revenue, profitability, and market perception. In the wholesale market, we have seen significant growth of partnering with suppliers, customers, competitors, and players from adjacent markets to develop new offers in response to changing customer demands. In addition to reducing risks and time to market, partnering can bring together the skills, capabilities, and reach of complementary players to achieve more than either party could on its own.
A number of new technologies, such as 5G, the Internet of Things, and artificial intelligence, coupled with market concerns over security and privacy, have stimulated innovation among CSPs in developed and developing markets. Although many innovations in the wholesale market are more evolutionary than revolutionary, Ovum's latest Telco Services Innovation Radar demonstrates the variety of retail innovations launched in 2017 and shows how the rate of innovation grew when compared with 2016.
The Middle East is a region where CSP customer numbers – and expectations – are increasing rapidly. This is pushing CSPs to adapt beyond the provision of traditional telco services into wider portfolios of digital services, including media, financial services, and smart cities. Companies are following a variety of paths to achieve this diversification, including partnerships, acquisitions, and investments in third-party developers. By taking a more flexible approach to meet customer needs, CSPs are reaping the benefits of additional revenue streams, at the same time boosting traffic over their networks, which improves their return on investment.
CSPs cannot afford to relax. Instead they must evaluate every opportunity to improve the service they provide to their existing customers, while attracting customers from new markets with innovative new services and strategies.
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