As part of Solutions Review’s Expert Insights Series—a collection of contributed articles written by industry experts in enterprise software categories—Marc Price, the CTO at MATRIXX Software, outlines four trends that telecommunications companies can expect from 2023 (and beyond).
Telecommunications is at a crossroads, with new technology on the horizon to drive new experiences and diversified services. The following 12 months will drive substantial advancements, with leading telecommunications investments beginning to pay off and lead to new revenue streams. These four trends will be essential for the industry as a whole this year:
1) Telcos will consider new ways to generate revenue to relieve pressure on profits
Telcos are growing, but at a glacial pace: T-Mobile reported its yearly service revenues were only up 4 percent in 2022, operating income at Verizon was at 2.4 percent growth for 2022, and AT&T had a 5.1 percent increase in service revenue over the same period. These numbers reflect the industry’s struggle to make the most of the new digital services era.
Some telcos believe they’ve solved the digital transformation problem with the investments they have already made into edge architecture and 5G technology. That’s not the case: the next few years are critical for the industry to deliver differentiated services and establish the value customers seek. With hyperscalers and direct competitors adding to the pressure from investors to improve margins, telcos will focus on the following to present better bottom lines:
Move beyond prepaid and postpaid to a hybrid model.
This has two significant benefits for telcos: one model instead of two creates more trust with consumers through transparency, and operators can trim down legacy billing systems to a more efficient system, saving costs.
Take a global instead of a regional focus.
With a more interconnected world than ever, telecommunications that can offer enterprises and consumers global offerings through their relationships with cloud providers and other operators will reap the benefits.
Focus on indirect revenues.
As new IoT wearables, appliances, and other gadgets with embedded connectivity as a selling point hit the market, telcos can create new revenue opportunities through consumer packaged goods. Telecommunications can also leverage enterprise partnerships as a secondary revenue segment.
Redefine their position around marketplaces.
Controlling customer relationships is critical—78 percent of CSPs say that is their top driver for developing a marketplace solution. Marketplaces provide the perfect platform to own the relationship while bringing in two revenue streams via revenue share and direct sales. Moreover, a marketplace that provides unique benefits or offers to customers strengthens a telco’s offering and its relationship with the customer.
2) Telcos will change their relationships with hyperscalers and cloud architecture
Traditional network architecture is being transformed through the capabilities and nature of 5G networks (and beyond), where functionality is now divided across interconnected servers. As a result, the privacy and security demands are higher since architects now must protect components at each connection and manage the risks of having so many connected devices simultaneously.
With such high privacy and security demands from telcos to confidently place workloads of scale into the cloud, hyperscalers have focused on building secure solutions at the scale needed for such large networks. As these technologies prove their capabilities for security at scale, telecommunications’ critical infrastructure will continue to integrate more cloud-native components. As this transition continues, telcos and hyperscalers will increasingly have an evolved and more synergistic relationship.
3) A wider set of standards beyond telco will become relevant
The relevance of open standards has never been clearer as telcos and enterprises seek to adopt these new technologies. The launch of the Telco Global API Alliance (otherwise known as the CAMARA initiative) by the Linux Foundation in conjunction with telcos, hyperscalers, and vendors is perhaps the strongest proof point yet. Many companies are now joining the project, recognizing that its goal of publishing user-friendly APIs and definitions alongside a standard set of requirements is key to more seamless coordination across all players.
CAMARA and other projects like it also provide the chance to create more revenue streams for telecommunications. As these standards permeate the industry, telcos can find new ways to collaborate with enterprises, and network and business orchestration will be easier than ever before. While the enterprise and the telco collaborate on the back end, customers can buy differentiated services directly.
As for the movement towards more cloud-native automation in telcos, Project Nephio is poised for a big 2023. This open-source initiative aims to use cloud-native automation to simplify building and deploying scalable 5G networks across multiple edge locations. In short, Nephio aims to reap the benefits of Kubernetes and other cloud-native software—while supporting high-volume, low-latency workloads that give the telcos the speed their customers are looking for.
4) 5G will move from hype to revenue generator
5G almost feels passé, considering how long it’s been spoken about. As mainstream media moves on to discussions on 6G and the metaverse, the truth is that 5G is about to deliver value through nascent 5G standalone networks and network slicing. By contrast, 6G and the metaverse are both a significant amount of time (and money) away from having an impact beyond the hype.
Meanwhile, 5G standalone’s strong features will lead to early use cases emerging and deployments consequently rising. Look for enterprise services in verticals like MVNOs and retail to start leveraging network slicing before the year is out, too—making physical infrastructure go further and meeting the needs of customers faster is good for profits on both ends.
Ultimately, in the months ahead, we’ll see the hype cycles about cloud architecture and automation and even 5G start to really benefit telcos. The technology has finally caught up, and while there’s reason to look to the future (like 6G)—the present has more than enough to provide the digital transformations telcos need to survive long beyond this year.