The combination of the commoditization of traditional wholesale services, intense pressure from customers to improve operational agility and flexibility, and the demanding requirements of new wholesale customer segments is putting pressure on established wholesalers to collaborate and partner with competitors and companies from adjacent markets. Collaboration enables wholesalers to shorten development timescales, share the risks and costs of rolling out new services, and to reach markets that were hitherto unreachable alone.
Ten years ago, wholesale market revenues were dominated by earnings from long distance capacity and the carriage of voice traffic. When fixed and access markets were opened to competition wholesalers found new sources of revenue from retail service providers, aggregators and virtual network operators. However, over the years competition and regulation have combined to inexorably force down prices and margins from these ‘traditional’ services.
In response, wholesalers are under pressure to find ways to differentiate their offers to win business from new customer segments, such as the owners and distributors of content, and new services, including cloud services and cybersecurity. However, it requires too much scarce resource (time, capital, and skills) to develop these capabilities in-house. Instead, forward-looking wholesalers are developing networks of partners with established capabilities in adjacent markets and fields with whom they can quickly and efficiently roll out innovative service offerings.
For example, fixed network operators are working with satellite operators to provide access and backhaul services to remote locations round the world. By combining their capabilities these partnerships are planning to get new broadband services up and running faster than either type of company could alone. Similarly, collaboration between submarine cable network operators enables them to provide content owners and other OTTs with the diverse, low latency and resilient international connectivity they demand.
Very few wholesalers have the resources in-house necessary to develop their own expertise in emerging technologies, such as cybersecurity, blockchain, analytics, Artificial Intelligence (AI), and machine learning. While some companies are attempting to gain these skills through acquisition, a less risky and expensive option is to establish partnerships with companies that have established proficiency in these fields. In cases such as cybersecurity and blockchain, where efficient and effective interworking and interconnection is key, wholesalers have launched alliances of like-minded competitors to trial the new technologies.
Wholesalers that are reluctant to partner with competitors and companies with complementary abilities risk painting themselves into the corner of falling revenues and margins. Only through collaboration can wholesalers reverse the decline of traditional service by differentiating their offers to established markets and opening new markets for their capabilities.
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