Advances in technology are changing the world, and the telecoms industry is no exception. The growth of the Internet of Things (IoT), 4G, and even 5G, as well as changes in consumer behavior and expectation, have turned the traditional telecom business model on its head. Telcos can no longer rely on the Annual Revenue Per User (ARPU) increasing year-over-year by charging subscribers for solutions such as voice, text messaging, or roaming. Those days are long gone. But that doesn't mean the end for telcos; there are opportunities afoot, but before those opportunities can be realized, the issues and challenges for today's telco should be fully understood. So let's dive in...
Simply put, today's consumers are incredibly different from consumers a mere decade ago.Previously, consumers—particularly mobile users—were happy to pay for voice calls and text messaging; being able to chat on the move was a huge step forward and people were only too delighted to pay for the privilege.
Voice calls were the all-important thing and the quality of those voice calls, or the Quality of Service (QoS), was the standard upon which telcos were measured. People wanted great quality sound on their calls and they didn't want calls to drop for any reason. It was all about QoS and this, with all their tech know-how and experience, was what the traditional telco provided, in spades. And everyone was happy.
Now, these advances in technology have paved the way for new entrants to the market and, in turn, for consumer behavior and expectation to change completely. New entrants such as WhatsApp, Skype, and Netflix have changed how consumers use their mobile devices forever. Instead of voice calls, Skype has become the norm. Instead of text messaging, WhatsApp has become the norm. Instead of calling expensive international numbers,people now have a choice of Over-The-Top (OTT) solutions such as Skype, WhatsApp, and many more. And of course these OTT providers are, free to use, for the most part. So they have understandably quickly grown in popularity and consumption with consumers.
In addition to the changing landscape of calls and texts, consumers have also fundamentally changed what they use their mobile devices for. With companies like Netflix and YouTube offering streaming services and the more general proliferation of mobile applications, data is the commodity in demand now.
Of course, these OTT solutions couldn't, and one could argue, still can't, match the QoS that telcos provided, but because they are free, consumers let the odd bad connection slide; very quickly, their expectations of voice and video calls are lowered. QoS became the standard of yesteryear; today it’s all about new, innovative solutions that are pushing the boundaries and offering consumers Quality of Experience (QoE).
The Effect on ARPU
With these technology advances, the new entrants, and the change in consumer behavior, the traditional ways of sustaining or even increasing ARPU is truly dead in the water. It's not improved by the fact that consumers are much more deal and tech savvy, and are therefore much more inclined to shop around for the best package—which can now only lead to increased churn. Telcos simply can't charge what they used to for voice calls or SMS and most are now offering unlimited packages to compete with the new entrants. But as you’ve probably guessed, that's not a long-term strategy.
Telcos, now more than ever, need to find new revenue streams. They need to capitalize on the opportunities that these advances of technology and changes in consumer behavior offer them, rather than ignore them or be afraid of them. While telcos won't be able to charge a consumer very much for a voice call, that same consumer now expects to get a text message reminder about their doctor's appointment. The successful telco of tomorrow will see these changes as opportunities and create solutions to fulfill them; they’ll know when to collaborate instead of compete; and they’ll look at the technologies used by these new entrants and think, “How can we use these technologies to compete in this new world, but on our terms?” The successful telco of tomorrow will change the conversation today.
Sound familiar? Stay tuned for advice on how to get beyond these challenges and capitalize on the opportunities this new world presents.