Wednesday, July 25, 2012

New strategies for Telcos

The Telcos (more correctly, Communication Service Providers (CSPs)) face a severe competition and a pressure today to keep their noses above the water. They can no more sell voice and bandwidth and make that a viable business proposition. Both voice and bandwidth has become a given. Most of the customers granted that as given. Recently the United Nations (UN) has accepted Internet access as a basic human right.

CSPs over the years have built their transport networks (Core, Aggregation and Access). In developing countries, the expansion of wired access networks seems to be prohibitive with the associated cost and the demography. The incumbents specially, have started copper based access networks from the urban areas and started expanding toward the sub-urban and rural. Most of the cases we find that the  already invested infrastructure delivers Plain Old Telephone Service (POTS) services to the customer and there's a huge potential that most of them can be enabled with broadband. Even with that, the total wire based coverage will still be less than 50% of the households. As you reach the rural areas the demand is more scattered and for a developing country, the only viable option is wireless.

If the balance households are reached using wireless, and an acceptable pipe is delivered to the household or individual, just by selling voice and Internet will not make the CSP win. The Average Revenue Per User (ARPU) has saturated and CSP have to think how they can make the customer spend more. The old form of merely satisfying  their communication, information and entertainment requirements is not just enough. We have to think selling the "convenience"  to the user. One example of selling the "convenience" is the e-banking introduced by the banks. People are prepared to pay a premium to this facility as they can make all their bill payments electronically.

The CSPs need to this considering the total Information Communication Technology (ICT) ecosystem, making sure all stakeholders are benefited. Just take an example. The CSPs are good at building networks (providing the transport), but they may not be good at  producing applications to run on all three screens (computer, mobile and TV). On the other hand, the software companies can produce applications (of course after a good socioeconomic study ), but they can not build communication networks. Both CSPs and software companies can get together in a win-win arrangement to provide a service to the customer. The applications so developed need to be based on the principle of "convenience".

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