Industry reacts to new value chain

It’s no revelation that the Asia-Pacific region - and the rest of the world, really - is experiencing tremendous growth in terms of bandwidth demand, number of mobile devices, end-to-end digital services, and accelerating consolidation of infrastructure-based providers and a lot of niche players joining the scene. But there has also been a distinct shift of the global economic center of gravity towards China, India, Indonesia, Brazil and Mexico.
One of the reasons for this shift towards Asia is that much of the innovation in communications over the past couple of decades has been originating right here. A lot of this has been driven out of sheer necessity. ARPU is very low in many countries in the region, so operators have to be more efficient and look to innovative new services such as m-payments and mobile banking to fill in the gaps.
In addition, Asia also has closer relationships between operators and government than perhaps other parts of the world. Whereas in North America and Western Europe, deregulation and liberalization happened in the early 1980s, it’s only touched many Asian countries in the last decade. As a result, Asian governments are more likely to be able to use the telecom companies as an instrument of national strategy than their western counterparts.
But wherever, operators as a whole have to change to adapt to the new world order of communications. From today’s new value chain for digital services, it’s clear the industry is stratifying into three distinct layers, each occupied by different types of players.
First are the infrastructure providers that create and maintain the vast and complex computing and communications infrastructure needed to deliver services. This is a commodity business that will require a small number of global players able to deploy massive economies of scale.
Second are the service providers that are creating, enabling, aggregating, delivering and tracking the services the industry needs. There will be many thousands (if not millions) of these players creating and delivering services to multiple vertical industries.
Third will be the customer-facing retailers that are offering services. But whether this group will be dominated by a small number of “supermarket” type retailers, or by a large number of specialist retailers is an open question.
Undoubtedly, there will be multiple further sub-categories within each of these industry layers. And it’s safe to assume that the larger players will want to play in all layers of the industry, but a smaller operator could easily decide to focus on becoming an expert retailer, sitting on top of infrastructure and services provided by others.
Of course, once an operator has decided where they want to play in this new industry structure, they need to transform their business to maximize their potential. And that transformation has to be multi-faceted, embracing everything from their network, systems, process, portfolio and business model.
In addition, industry players will need to be able to demonstrate their expertise in the following core competencies: security (protecting services, privacy, data and transactions); customer experience (knitting together multiple players across complex value chains); big data (managing and understanding data); revenue management (designing services with low revenue leakage, and fraud resiliency); and product lifecycle management (using automated mechanisms to create and launch services from well-structured catalogues of products and services).
I spoke about all of these transformation essentials during a presentation in June at CommunicAsia, because it’s important for our industry to carefully examine the rapidly changing market and discover how we will collectively address these challenges.
Martin Creaner is president and CEO of TM Forum