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How Telecoms Can Capitalize On The B2B2X Opportunity And Drive Meaningful 5G Revenues

Carriers are not yet seeing the return on investment from 5G they had hoped. The answer lies in breaking into new markets, establishing partner ecosystems, and scaling. 

Telcos are in a bind. As the digital revolution gathers pace and technologies like AI, IoT, and Industry 4.0 develop at breakneck speed, telecom has found itself providing the underlying connectivity without a mechanism to monetize everything built on top of it. 

The telecommunications industry does not speak the same language as digital native businesses. For carriers to claw back the sizable investments they’ve piled into maintaining their networks and investing in new ones like 5G over the years, new revenue streams are urgently needed. 

According to Bloomberg, the three major carriers in the US alone have spent $100 billion on 5G investments, yet this has not translated into major new business or revenue streams. 

It is a huge investment gap to plug. There is a combination of major issues here, in mindset and the changing role of operators. Previously, telcos were commodity businesses with near monopolies over the market and huge subscriber bases. Globally, they’ve counted on the fact that as the population grows and new emerging markets develop, they will continue to win subscribers. But this kind of commodities model will not help diversify revenues or make returns on those 5G investments. And now, carriers must also fight off fresh challenges to their traditional market dominance from hyper-scalers and smaller challenger telcos.

Additionally, telcos are more often than not burdened by the huge increases in data transfer that 5G offers — they need to keep their networks up to date, online, resilient, and secure. Still, they are not the ones benefiting most from this upkeep, which comes at a significant cost.

The opportunity lies in offering a wider array of solutions bundled with the network in a bespoke, intelligent way. Essentially, we are talking about partner ecosystems at scale, which has long been the default state of play for digital businesses but not telcos. We call this newly emerging partner ecosystem B2B2X — from business to business to everyone.

Although telcos will say they are selling to enterprises and consumers, they do not differentiate based on what each customer or sector needs. Instead, they are essentially selling the same connectivity product to their customers no matter who those customers are. Therefore, they are missing a huge opportunity to diversify. 

While some operators have spotted the opportunity to sell additional products on top of their connectivity, these tend to be handled in a decidedly unintelligent fashion—for example, in the consumer space, offering Netflix packages to one or two partners, but all managed with manual input by staff using spreadsheets to keep track of everything—in other words, old-fashioned and impossible to scale. 

And while carriers do target enterprise customers, more often than not, the use cases lack imagination: voice, data, network management and security. All are important areas, to be sure, but with limited revenue streams. 

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However, with AI, machine learning, mature IoT networks and 5G, all critical elements are there to diversify further. Take Industry 4.0. Some years back, there was talk about smart manufacturing and automated factory floors, but the technology was not quite ready to support it. Now, not only is Industry 4.0 a possibility, but most organizations have put aside budget to make it a reality — with use cases like ensuring production lines run with absolutely zero defects or VR-based training. The technology is mature enough to provide value. 

So now is the time for carriers to move from talk to action. They need to start thinking outside the box and target individual sector niches. They have the connectivity expertise and scale. They just need partners on board to bundle industry-specific packages together and make them a success. 

XHEAD: Telecoms Should Carve Out New Market Niches And Occupy ThemFast

We recommend that carriers begin experimenting now. When they spot a niche, they should move to occupy it. They can identify gaps in the market that could benefit from these packages and, crucially, try them. If they’re successful, then they can scale them. If they’re less successful than they hoped, they can move on to the next. Their resources and reach mean that pilot projects in new markets should be a no-brainer. Telcos need to use the partner ecosystem for the existing B2C market first, and extend the same ecosystem to B2B and then B2B2X market channels.

Some untapped areas for experimentation could, for example, be in smart agriculture — selling in the reliable connectivity, low latency and ability to manage operators’ data for use cases around digitized farming. Already, technology is being used to monitor and sensor environmental data with IoT and 5G. Still, in the future, a B2B2X package could include services around drone-based crop inspection, automated harvesting, or self-driving agricultural machinery.

In healthcare, platforms of customized 5G connectivity could be sold to hospitals for all users, whether medical or non-medical staff, patients or visitors, with tiered access controls and features catered to each.

Or airport management could be enhanced above the connectivity layer by using smarter CCTV cameras, passenger heatmaps and IoT-enabled retail space management, with best-of-breed suppliers contributing to each of their specialties in one digital marketplace.  

Of course, in this difficult macroeconomic climate, moving into whole new markets can seem intimidating. However, if telcos don’t do this, players from other markets will move in, as we have already seen with one of the largest retailers in Colombia, Grupo Exito, an Optiva customer since 2012, entering the telco space as a mobile virtual network operator (MVNO) in 2013 by leasing infrastructure from Tigo.

So opening up new markets is the only way carriers will create sizable new revenue streams at the scale needed to win back their considerable investment and maintenance costs. Historically, it’s understandable that telcos have viewed themselves as innovators in connectivity and connectivity alone — this is their bread and butter. With the huge subscriber bases they have enjoyed, there has been little reason to pivot into a solutions-driven, value mindset.

But there will have to be an inflection point. It will most likely arrive when carriers start viewing themselves not just as connectivity service providers but as digital service providers — that is, not only as enablers but as the innovators who help make things happen.

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