In the 20th century, telephone companies provided the world with widespread and reliable voice telephone services. More recently, telcos leveraged their vast infrastructure to support Internet access and data communications. But, for the greater part, they have not benefited from the rich multi-media services that ride on top of the Internet.
This has gone to the FAANGs and their brethren, who have built cloud-based businesses “over the top” of the communication channels provided by the telcos. Worse, this has diminished telcos in the food chain, and has placed them under constant pressure to provide higher bandwidth pipes for a smaller portion of the revenue pie.
But telcos are refusing to stand still. They are taking bold steps to expand their service offerings to obtain a larger piece of the revenue pie, while simultaneously lowering operational costs to improve profitability. The sum total of these steps is termed telco digital transformation.
So what constitutes a successful transformation? Here is my take on three phases of transformation evolution.
The first phase is dynamic delivery of telecommunications services, to business, residential, and mobile customers. It is all about giving customers the control and responsiveness they have come to expect from cloud-based applications. Via a portal, customers can order and turn-up services, customize them, such as modifying bandwidth or assurance levels, and add on features like security firewalls. And they can turn down services when they are no longer needed. The days of static services with fixed contracts, which can take days of weeks to deliver, are over.
The second phase is delivering and facilitating edge-cloud services. This new class of services combines communications and computing, as do regular cloud services, but with a twist. They also require very fast response times, or to use a technical term, low latency. There is a growing demand for platforms to support such services in new fields like smart cities, augmented reality, autonomous vehicles, and digital health. And where the end-users are often not people but machines or IoT devices. An edge-cloud can reduce response delays from a few hundred milliseconds, which is typical when accessing today’s centralized cloud services, to 10s of milliseconds or less. Don’t we all expect our autonomous vehicles to receive updates on surrounding conditions in real-time. With a ubiquitous network that reaches out with close physical proximity to all end-users, telcos are ideally positioned to provide low latency edge-cloud platforms and services.
The third phase is becoming a complete digital services provider. This is getting into the business of providing media and content services, as well as computing and storage services. Telcos will compete directly with cloud service providers. Telcos have the building blocks to enter this market with a large customer base, widespread network, and physical buildings to serve as data centers. As a digital service provider, telcos move up in the food chain to obtain their share of higher margin revenue streams.
Stay tuned for part 2 of this blog, where we discuss the three “ions” on how telcos are achieving digital transformation, through network modernization, cloudification, and automation.
Jonathan Homa, is Senior Director Portfolio Marketing at ECI for the last few years. Jonathan enjoys French beer in Nice and loves to discuss the 3 hottest topics in networking today: softwarization, virtualization and cloudification.