There is a major shift in the value proposition for telecom operators today because voice revenue, which has been the core revenue source of telecom operators, is on the decline. There are many signs in the market that shows voice is on its way to becoming "just another application" on data network like messaging or gaming. For example, 8 percent of international voice traffic is now carried by Skype.
The main obstacle that stands before the widespread adoption of voice as "just another application" is the cost of mobile access network which is rapidly changing with the evolving mobile access and backhaul networks. In five to six years, mobile broadband will be readily available everywhere and that is going to change the game totally for the telcos. Simply put, operators will have to find different ways of making money.
Recent studies show that the revenue mix will shift towards growing revenues in non-traditional businesses. Setting their strategy in this direction, telcos will first and foremost need to answer the very basic question of "what line of business are we in?"
This question is not being faced by an industry for the first time. As Theodore Levitt eloquently put it in his famous paper Marketing Myopia, published in The Harvard Business Review, "The railroads did not stop growing because the needs of passenger and freight transportation declined. That grew. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was because they were railroad-oriented; they were product-oriented not customer-oriented."
There's a similar shift in telecom. Telecommunications companies have to rethink their positioning. Are they in the communication business, the entertainment business, the killing time business?
Wireless provider Verizon in the U.S. has decided that it is in the communication business. Last week the company inked a deal with Skype that will allow Skype users to access a 3G Skype app on Verizon's wireless data network and smart phones. Essentially this moves even voice calls to the data network, which at a glance looks like a cannibalization of voice users. But look deeper in the overall customer experience and it's actually the opposite.
Skype CEO Josh Silverman told CNN's Richard Quest last week that results from a similar partnership with mobile operator 3 in the UK show that many customers switched to 3 specifically because of Skype, and once there, generated 20 percent more profit than customers who don't use Skype. According to Silverman, this is because Skype customers "communicate a lot" with Skype calling and chat, but also with a high volume of voice calls and text messages. "They are very valuable customers for 3. They were acquired cheaply and have very low churn."
As technology improves and customer demand for untethered communication grows, telecoms need to explore unconventional options based on the customer experience. It's the beginning of a new chapter for the telecom industry, if they are willing to write it.
About the author: Mujdat Ayoguz is a director at Peppers & Rogers Group. Contact him at mujdat.ayoguz@1to1.com