|Content talks – but what’s the message?
George Nikoloudis is OTEGLOBE’s Chief Operating Officer; he was previously OTEGLOBE’s Director of Voice Sales Services. Prior to OTEGLOBE, Mr Nikoloudis held a number of high-level positions at MCI Inc, later acquired by Verizon Business. As a Country Manager, Mr. Nikoloudis was responsible for the launch and operation of the regional office in Athens, which covered the markets of Greece, Cyprus, Bulgaria, Romania and FYROM.
George Nikoloudis holds a University Degree in Electrical Engineering from the UNSW University of Sidney and a specialization in Informatics.
Although most of their market will still come from data and voice services, the telecom industry needs to reinvent itself in the next 10 years. The rise of non-traditional services, explosive Internet demand, shifts in customer behaviour, an always connected digital world and innovations brought by OTT will force today’s telcos to choose between traditional revenue streams or look to higher growth services at a higher risk. Telcos need to climb the value chain of applications, content and media to grow.
Content booms in a connected world
Remember when the Internet was known as the “information super highway”? Back in these days, users connected to the Internet primarily through dial-up networking to look for information and email messages and then disconnect once their job was complete, freeing the phone line for traditional phone calls. Nowadays things are a little bit different but the context is the same: Spread the knowledge around the world and stay tuned in a global village called the World Wide Web.
Today, the Internet isn’t just a side activity, it’s the main dish. It is a social medium where people are engaged. We shop online, do business online, we play games online, we read the news online, we listen to music on line, we watch TV and movies online, we connect on-line with social media, it’s a never-ending list. Our kids expect to find nearly all types of content available online and on all kind of different devices. Mobile devices, such as smartphones and tablets, as well as connected internet TV are likewise becoming the most popular and enjoyable medium for entertainment services.
And what have we done as an industry to feed this content hungry, always connected Homo Sapiens? We built high-speed, broadband connections to replace the old dial-up lines, we run thousand of kilometers of optical fibres around the globe, added mobility and layer-upon-layer of complexity on our network infrastructure to make sure that our services would always be there when people needed them.
Oh, and by the way, somewhere along the line we made money, we increased our revenues and the size of our business, we transformed ourselves from simple voice carriers to fixed, mobile, internet, etc. service providers.
So since our industry, the telecom industry, has benefited so much by this content boom during these last 30 years why’s everyone complaining?
Stop shouting! Listen to what the content has to say…..
When it comes to our industry today’s customers have one thing in common: they are ignorant about the players in the content delivery chain. They don’t know – and couldn’t care less – who owns the content when they watch a movie on their iPad or who is responsible for their call when they use Skype.
People in our industry say that this rapidly changing customer behaviour is reshaping the competitive landscape of Traditional Telecom Operators. Why? Because on the one hand new entrants, also known as ‘over-the –top’ or OTT players are offering free services via Internet directly to the end-customers, our eye-balls, eliminating voice and data revenue streams and on the other hand heavy network and IT investments are still required just to keep up with the traffic explosion coming from these same OTT sources, that generate little, if any, incremental revenues. It seems like moving in circles, but wasn’t it always like that? More content needed bigger networks that connected more people asking for more content, it’s a never ending story. So what’s the difference today?
Become a utility or be like Google? What are the options?
Sustaining new revenues is as important today for traditional telecom operators as it was when voice became the cash cow for potential revenue streams. International pressure on roaming and terminating tariffs diminishes high margin products like voice and text messages, paving the way for the rise of new, non-traditional services i.e. social media, M2M, etc. with tighter and riskier margins.
This fundamental shift towards a different revenue mix and eroding margins is shaking up the industry and is introducing new metrics of service performance as well, like accelerating content delivery and overcoming problems of bandwidth bottlenecks and latency over long distances. Moreover with medium and large businesses and corporations moving much of their IT infrastructure to the cloud, the speed, quality and assured delivery of corporate content and applications over the cloud, as well as the increasingly vital e-commerce content, is also sensitive to the inherent delays – path congestion along the way – and vulnerabilities of public Internet.
So it does not come as a surprise that trying to remain competitive more telcos are focusing on content delivery networks (CDN), that promise to increase and, most importantly, assure the speed and quality of content to the end user as if the origin – content server is located right down the corner. Some telcos are investing in CDN technologies to shape up their own networks for the growing content opportunity. Others are integrating CDN solutions of third parties in their network and service offering, either by acquiring or by partnering with pure-play CDN providers. Lately, there has also been a lot of debate in the CDN industry as to whether or not a federated CDN model will take place amongst independent operators taking on bilateral agreements or exchange based models and the establishment of CDN exchanges.
But is this the magic solution for our industry’s growth? Will another technological advance help our business to transform into highly efficient and innovative media entities, the Google, Apple and Amazon of the future? Although moving higher up the value chain is raising the bar again for our industry, setting new and higher delivery standards, it is also sending another message: that all the key players in the value chain will need to co-operate in the immediate future to deliver content over managed networks instead of public Internet to improve performance and uptime, lower overall costs, improve quality of service and in the end improve the end user experience.
Global experienced leading operators with extensive network infrastructure and presence in multiple markets, smart content distributors with efficient delivery platforms and creative OTT players with their innovative solutions should work together to build new business models, form alliances and commercial agreements and pave the way for the digital world of the future.
But what about the smaller regional players or specialized wholesale providers? What should a regional service provider do in the meantime to address the content explosion and the fundamental shifts towards new services in this new and unpredictable digital landscape?
I’m a regional player. What can I do now?
Every player in our industry should need to be prepared for the fundamental shift in the market by deciding which markets to address and which business models – tools to use in the short/mid -term.
What the content tells us is that no matter our size and geographic reach, sitting on the fence is no longer an option as network costs are increasing and the revenues coming from traditional ‘cash cow’ services are starting to stagnate.
A good short term plan to compete in the different parts of the value chain is to adopt a “reliable & smart pipe’ model focused on efficient connectivity selling, targeting CAPEX optimization and flexible cost structures that are the key success factors in securing customer loyalty and long term contracts. A short/mid-term approach is to address specific carriers, content providers and OTT players alike and co-operate to create better value for them and their customers by developing innovative, reliable and highly adaptable tailor-made solutions.
Expansion into new products and adjacent markets along the value chain will also be necessary, but for a regional operator a high risk, high investment approach towards new products and services could only form part of a transformation process in the mid/long-term. We have to keep in mind that although new services such as cloud computing, will experience high revenue growth, they have significantly lower margins (less that 15 per cent on an average) when compared to traditional voice and data services.
The approach to evolve into a smart, next generation operator targeting specific markets might look conservative or even out fashioned to some, but at the end of the day there is no standard ‘one size fits all’ model, every operator will have to take their own decisions on how far they want to go and which path best suits their strategic model, capabilities and heritage.
So what will it look like in ten years from now?
Few industries will have to re-invent themselves as the telecom industry will have to in the next 10 years. The rise of non-traditional services associated with the explosive internet demand, shifts in customer behaviour in an always connected digital world and the innovations brought in the supply of services by OTT players create strategic challenges for the telecom operators of today putting them at the crossroads between sticking to the traditional revenue streams or building new partnerships and tapping into higher growth services but at a higher risk.
Although more than 65 per cent of the market is still expected to come from core telecom services (data and voice) in the next decade, the operators will need to move along the value chain to more applications, content and media-based solutions to preserve their growth potential.
In a few words our industry will need to transform not only to address new customer demands but also to adapt to the challenges of the new digital world.
The content speaks now and we have to listen: Human evolution has always been about adaptability and co-operation, not survival of the fittest!