Services telco future: Cap Gemini

Voice calls, be they fixed line or mobile, have become a commodity and if they're not free add-ons to a telco's data service, they soon will be.

Voice calls, be they fixed line or mobile, have become a commodity and if they’re not free add-ons to a telco’s data service, they soon will be.

Data is also becoming a commodity service and, unless telcos can rise above the label, they will find themselves in a marginal business with little hope of growth. That’s the view of Cap Gemini Ernst and Young’s (CGEY) Asia-Pacific telecomms media networks division, John Edwards.

“We said this to them two or three years ago and now we have the numbers to prove it; voice is where most telcos make 60% or 70% of their revenue and unless they find a new market, they’re in big trouble.”

Edwards is in New Zealand for the launch of CGEY’s follow-up to its 1999 Connected Society report, “Business Redefined”. CGEY interviews chief executives from around the world about the telecommunications industry. This year 128 chiefs were surveyed and second of 50 bosses is being interviewed at the moment.

A key trend the report highlights is the imminent explosion of broadband access.

“Voice over IP networks is happening, albeit slower than we anticipated, and telecommunication providers need to take it into account.” Incumbents are particularly at risk, says Edwards, because they often have entrenched beliefs about the speed of these new technologies.

“We’re going to see some telcos with PSTN networks rolling out IP networks as well and trying to maintain both long after it’s become clear that IP networks are vastly more efficient.” Edwards says the packetisation of voice is imminent for both fixed line and mobile networks.

“Mobile is only a few years behind fixed in this regard but it’s following the same trend.” That trend sees revenue from voice calls completely flat if not declining slightly over the next five years. Interestingly, data is also completely flat and follows more or less the same trend, albeit at a much lower revenue level.

“Traffic will increase dramatically but the increasing number of broadband pipes and the advances in compression technology means the revenue will be flat.” The area telcos need to get into, says Edwards, is services. Without services to differentiate themselves, incumbent carriers run the risk of becoming marginalised, he says. “If you only offer connectivity, you’re out of the game. If you only offer content, you’re out of the game.”

Edwards says service offerings can be broken into four broad categories.

“The first one every telco is into — it’s the network-based solution.” Edwards says things like integrated voice and data, unified messaging and video conferencing fall into this category.

“The next is the network-centric solution — network design and management.”

The third area is application hosting and service provision — something telcos are struggling with, he says.

The fourth area is custom application development.

Join the newsletter!

Error: Please check your email address.
Show Comments
[]