06
03
DIGITALIZATION:
FROM EXPECTATION
TO IMPLEMENTATION
3.1. FORCED TO INNOVATE
Whatever the sector and industry, all companies around
the world know that digitalization will define how the future
unfolds. What this means especially and particularly for
the telecommunications industry is that it must adapt and
reinvent its business models:
81% of the study participants
believe that digitalization
threatens their traditional
business models and
established revenue streams.
The relevant players in the telecommunications industry
are being squeezed from two sides. On the demand side
the telcos are faced with increasing market saturation, low
willingness to pay and commoditization trends. On the supply
side there is a growing convergence in which traditional
(industry) boundaries between telco and content providers as
well as those between fixed and mobile operators are being
torn down. This is calling established approaches into question.
Moreover, telcos are increasingly having to deal with regulatory
interventions such as the recent statutory tightening
of identification requirements for prepaid users as well as
the new range of requirements that the German Federal
Network Agency (Bundesnetzagentur) has imposed in
connection with data retention.
Some of these interventions also pose a threat to longestablished
revenue streams. The most recent examples:
At the end of 2016, the German Federal Network Agency
decided to incrementally lower the termination fees
applicable in Germany, the fees that the network operators
charge each other when transferring phone conversations
from one network to another. Since mid-June of this year,
the elimination of roaming fees in the EU has stripped telcos
of a lucrative source of revenue – people’s cell phone conversations
and data usage when traveling within Europe 1) .
In addition, telcos are being challenged by the attacks on
their traditional business models from OTT services such as
WhatsApp, Netflix, or Skype. OTTs are making it harder for
telco companies to generate value, not to mention that they
are considered responsive, eager to experiment and highly
oriented toward end customers. These days, traditional
revenue streams such as voice transmission have become
either dramatically less important or have become almost
completely irrelevant, as is the case with text messaging, and
have been replaced by OTT services.
PERCEIVED IMPACT OF DIGITALIZATION
“Overall, how much do you think digitalization
is affecting the telecommunications industry?”
Voice transmission is no
longer a money-making
business; it is a commodity
and now happens via
bandwidth.
Top executive, HR, Veon, Germany
In the future digitalization
will be the intrinsic core
of how the industry supplys
services and processes.
Top executive, COAI, India
In the end, digitalization
is the oil field that will
keep the entire telco
industry alive.
Top executive,
Technology & Innovation,
Deutsche Telekom, Germany
1) Heitmann, G. (2017). 2017 – An outlook: This is what the telecommunications industry faces.
Retrieved from https://blog.telefonica.de/2017/01/2017-ein-ausblick-das-erwartet-die-telekommunikationsbranche/