Creating Competitive Differentiation

The world of mobile networks, devices, and services is changing at a blistering pace, driven by a combination of technology innovation, strong competitive forces, and apparently limitless demand from consumers. Some operators have seen 8,000% growth on their networks over the last 3 years, but dealing with that level of usage is not without cost-a lot of cost. By some estimates, the required network investments need to keep pace with demand that could top $1 tn over the next 10 years.

Operators are also competing within an industry value chain that is significantly different than it was just a few years ago. In many cases, operators are not competing as well as they could. Recent Accenture research has found that from 2002 to 2010, return on invested capital (RoIC) for mobile operators declined by 32% globally. At the same time, content owners, aggregation platforms, and device manufacturers saw their RoIC rise significantly-50% or more in some cases. In other words, mobile operators' investments are being monetized more effectively by content, device, and over-the-top (OTT) service companies.

Cost Control

Mobile traffic demand will continue unabated and the move to 4G will drive the need for continued investments in the radio access network and the backhaul. Upgrades to available capacity are required, along with a move to fiber based backhaul to remove high-cost TDM circuits to radio base stations.

One of the complicating factors related to new infrastructure investments is that, in today's environment, the investments are only to a limited extent justified by new revenue growth. And, although new network technologies such as LTE promise a much simpler architecture and reduced operating costs, operators may be blocked from realizing these benefits because the next-generation platform often has to co-exist with legacy platforms that support current services and customers.

So, in parallel with new platform investments, operators must pursue an aggressive campaign of migration and decommissioning of legacy platforms across network, IT, and OSS/BSS. This is a tough challenge. It requires product simplification and, most difficult of all, persuading and incentivizing customers to move to a new platform.

An additional opportunity for cost reduction is in network outsourcing. Accenture's experience has shown that outsourcing a provider's non-differentiating network operations and related business processes-such as provisioning, network engineering, applications management, inventory data management, and end-to-end testing-may reduce network operational costs by 20 to 50%.

Collaborative Business Models

Collaboration is another key imperative for network operators today, a trend that is driven by several factors. First, one of the paradoxes of today's mobile industry is that the most important physical part of the overall ecosystem-the network itself-is decreasing as a source of differentiation, particularly as the costs to maintain and upgrade that network increase. Cost issues will become especially pressing as large investments in a new network architecture based on fiber and IP are required to support the upgrade to LTE.

Collaboration is also likely to increase between mobile operators and fixedline operators as mobile players begin to understand the level of backhaul fiber investments required. Mobile and fixedline operators are likely to align their rollout plans and footprints to maximize the use of available fiber capacity.

Other forms of collaboration are also increasing as companies see non-differentiating functions as an opportunity to cooperate. France Telecom and Deutsche Telekom, for example, created a new joint purchasing entity, while in the United Kingdom and Sweden, network operators have announced collaborations around mobile marketing and payments.

Effective governance will thus be essential to achieving success with collaborative endeavors.

New Customer Value Propositions

As operators alter their mindsets about where they can establish marketplace differentiation, they must develop more customer-centric mindsets and capabilities.

Analytics will become an increasingly important capability in creating a more consistently satisfying customer experience that can drive profitability. Analytics capabilities support new customer value propositions in several ways.

Through analytics, operators can get an accurate view of the various contexts applicable to a customer and, on that basis, provide them with better tailored services and offerings.

Innovation

Another important opportunity for competitive differentiation in the mobile marketplace is based on innovation. Network operators are looking to develop value propositions beyond simple voice and data plans.

One area of incremental growth and innovation is likely to come from the enterprise marketplace, with telcos increasingly developing vertical solutions tailored to the needs of a specific industry or market. Cloud computing will form an integral part of this solution stack.

For operators, cloud is a way not only to improve traffic volumes but also to drive higher average revenue per user (ARPU) by moving up the value chain and selling integrated packages of connectivity, infrastructure, and software-as-a-service. These kinds of packages can create long-term loyalty with customers.

Recent take-up of Apple's iCloud service shows the value to the consumer in backing up valuable music, videos, photos, and other personal data.

Machine-to-machine (M2M) products and services are also poised to break into the mainstream. Falling component costs, new regulations, and innovation are increasing the prevalence of M2M industry solutions, specifically in industrial applications, telematics, and energy and utilities.

To successfully capture the M2M opportunity, operators should develop a strategy that establishes a solid basis of differentiation.

Operators should identify where they add value over and above selling or white-labeling an established product. They must also identify the partners with whom they need to collaborate to drive the biggest market impact.

Network innovation will also be important. As network capacity requirements continue to rise, Accenture expects operators to accelerate the development and deployment of more creative network solutions related to offloading and content delivery. For example, most mobile network operators are pursuing Wi-Fi solutions to offload traffic and decongest their network.

Also important are content delivery network (CDN) and caching-style technologies. Operators should be rolling out test deployments of CDNs to see if this strategy can help them manage the mobile network traffic deluge.

Conclusion: Succeeding in a New Competitive Ecosystem

The migration of value across the mobile industry, combined with the current economic climate, is driving reconfiguration of the telecommunications ecosystem. Fundamental marketplace changes require that players throughout the mobility value chain improve their ability to collaborate, cut costs, and innovate.

Christian Rouffaert, Warren Tucker, Daniel Lyons,
and
Paul Bultema
The authors are head of strategy, network practice; lead,
network practice; senior manager and communications industry
strategist; strategy lead for the communications industry,
Accenture, UK and Ireland, respectively
vadmail@cybermedia.co.in