Why telcos are fighting to increase revenues, and ignoring the need to innovate
In an ongoing campaign to secure financial compensation from companies such as Meta (Facebook), Google and Netflix, which generate large volumes of data and video traffic, the CEOs of 16 leading European telcos have signed a statement calling on European Union (EU) commissioners to introduce legislation that would force the so-called “big tech” companies to contribute towards broadband network costs.
Telcos argue they can’t afford to shoulder the cost of the network infrastructure upgrades that are needed due to the increased strain on these networks, and that they have too much money building out capacity to carry the traffic that these big tech companies bring. In early September, the EU Commission announced that it would launch a review into whether tech companies should pay the price to the telecoms networks.
But is this a legitimate cause, or a lazy attempt to get more cash?
Telcos have had their finger off the pulse when it comes to innovation for decades. Despite some movement within the space, such as 5G, many telcos continue to run on outdated infrastructure and legacy IT. At the same time, digital first challenger brands are becoming a disruptive force within the market, constantly outperforming older legacy telcos with their customer happiness scores and lower prices.
The perfect storm of challenger brands strengthening the competition, and the worsening economy in a rapidly changing world, has led telcos to point the finger elsewhere. What they’re failing to realise is that routing around at the bottom of the barrel for loose change isn’t going to save them from their fate if innovation doesn’t come first. This arguably tactile move to make ‘big tech’ pay for network costs is more likely a result of declining revenue than an honest plea for help.
Arguably, there isn’t a fair way to make companies like Google, Meta (Facebook), Amazon or Netflix shoulder the costs of network improvements just based on the traffic these companies bring to them. It’s absurd to blame the users of the infrastructure, in this case big tech, instead of finding ways to monetise as part of their business model.
Telcos are no longer connecting people like they did in the pre-Internet era. They have a new role now - to provide the right networks that are fast and inexpensive. Historically, people relied solely on the services of telcos to make phone calls and connect with one another. This function became less and less used with new communication technologies such as instant messaging via apps, social media platforms and video call services like Zoom or Facetime. All of this which runs and relies on the networks.
Very soon, telcos will need to choose if they want to be a network or service provider. This happened to banks as part of the fintech revolution when PSD2 entered the force - banks were complaining just like telcos are now. Some banks were able to monetise their payment platforms, some lost revenue because they were too slow to change. Innovation is vital and needs to happen now for telcos to survive.
Telcos have been stuck in their old ways for too long. Today, they face a digitise or die moment. But with investment in the right areas, like automation, cloud-native platforms and rebooting organisational processes - the industry can reinvent itself. And while this reinvention might seem like an uncomfortable process now, it is critical and can not be achieved by looking for others to blame. It’s time for telcos to review their revenue models and decide what to excel at instead of fighting for quick ways to increase their cash flow.
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