Wireless carriers have certainly grown accustomed to their perch from above, controlling so much of the industry and their relationships with customers. Only recently have they begun singing a different tune, as was evident here at Mobile World Congress this week.
The astronomical growth rates of mobile broadband might appear to present a great future ahead for carriers, but with data usage exploding and traditional telecommunications services being disrupted by nimble startups with no legacy costs, more growth in mobile will mean more problems and tighter margins for many network operators.
Mobile broadband is projected to grow from 1.6 billion connections in 2012 to 5.1 billion connections in 2017, representing a compound annual growth rate of 26 percent, says GSMA chief marketing officer, Michael O’Hara, citing the organization’s latest data.
“Networks are vital resources for the future,” says Rene Obermann, chairman and chief executive of Deutsche Telekom, but as traffic across the carrier’s networks increases 70 percent year-over-year, he adds that carriers also need to do more with less. Managing all that traffic will be a growing challenge, but Obermann says he is equally troubled by what he calls the “over-the-top paradigm.” Apps like Skype and WhatsApp are cutting away at the revenue carriers have enjoyed for many years from services like text messaging.
“I’m not moaning, I’m just describing the reality and we need to deal with it… It means you invest, we take the profit, from there side,” he says. “As a result, you see the stock market responding to all the telcos.”
“It’s not sustainable that networks make all the investments,” adds Obermann. “The good news — we are changing, we are becoming more efficient, we understand how to innovate, at least better than in the past.”
“Telcos have to be smarter than they are today… They have to embrace innovation,” he continues. “We have to view ourselves as enablers” and make cooperation part of carriers’ DNA.”
Hans Vestberg, chief executive of the infrastructure giant Ericsson, carried Obermann’s theme into his follow-up keynote as well. By 2018, 92 percent of the earth’s population will have access to mobile broadband, he says.
“The pace of change we’re seeing so far in our industry is the slowest so far — it’s only going to increase from here,” adds Vestberg. “It’s going to transform us, you and me using the network, it’s going to change businesses and it’s going to change our society.”
Although Ericsson is one of the direct beneficiaries of carriers’ massive capital investments in network buildouts and technology upgrades, Vestberg says infrastructure vendors also need to innovate to create more value and efficiencies for their carrier partners.
While carriers have long bemoaned the notion of being nothing more than “dumb pipes,” they desperately need to rethink their future roles to avoid such widespread commoditization. The ideas are finally bubbling to the surface, but as Obermann says, “it does require a big cultural shift in traditional telecommunications companies.”