Telco lessons from Mobile World Congress 2013

With the meeting of telco stalwarts coming to an end in Barcelona it looks like their love affair with 4G is only growing stronger.

“We made a mistake and trained the consumer to think that data is cheap,” said Telstra CEO David Thodey at this week’s Mobile World Congress in Barcelona, a feeling shared by other service provider chief executives across the globe as they face huge capital expenditures in building out next generation networks.

But at the same time, there was real excitement about the possibilities that 4G brings. “We’re at the beginning of a new era,” AT&T’s chairman and CEO Randall Stephenson told the conference. If past developments, such as the 30,000 per cent increase in mobile data traffic on AT&T’s networks over the last six years thanks to the introduction of the smartphone weren’t enough, what’s coming next is going to be even bigger, the AT&T head insisted.

While the introduction of 3G might have changed the wireless world, 4G and the cloud are going to change every industry, the AT&T head predicted, focusing in particular on home security, the connected care, mobile wallet, mobile health and mobile and cloud-based business solutions. In fact, Stephenson insisted the combination of LTE and the cloud was probably one of the most powerful technological developments the world has ever seen. The move from 2G to 3G to 4G, he noted, has been the fastest technology lifecycle in our lifetime.

The challenge facing service providers in this era, said Deutsche Telekom CEO René Obermann, is to do more with less. There’s more demand for bandwidth, capacity and coverage, but less revenue due to heavy regulation and competitive pressure.

So how should service providers react? Firstly, according to Obermann, “we have to be more efficient, customers won’t overpay,” and secondly operators need to “do more innovation with more partners.” In other words, service providers need to get smarter, utilising smart networks; innovative services and an innovative culture.

Interestingly, there was a consensus among the service provider chief executives that service providers could no longer go it alone and that they needed to partner, even with over-the-top (OTT) players, in order to bring the services their subscribers wanted.

The important thing to understand, said Viber’s CEO Talmon Marco, is that people aren’t using Viber because it’s free. Marco gave the example of Monaco, where almost 90 per cent of that country’s residents use Viber. With four times the average per capita income of the United States, Monaco’s residents aren’t poor. Nor are they particular young; Monaco’s median age is just under 50. And SMS services provided by the local service provider are free.

But still Monaco residents are flooding to Viber because of the services it provides: group messaging, delivery confirmation, high-quality photo sharing, stickers and emoticons, an “is typing” indication and location sharing.

“Consumers want innovation,” Marco said, and so the rich, middle-aged residents of Monaco want to use Viber, not because they can’t afford to send a regular SMS, but because they want to take part in something new and fresh.

Marco argued that service providers should work with OTT players and use their services to differentiate themselves and build customer stickiness. Marco said he “would love to offer Viber calls at high quality through cooperation with a carrier.” Not only would this help carriers differentiate, he said, they might even be able to charge for such a service.

Obermann, who earlier had dismissed the OTT paradigm – You [the service provider] invest, we [the OTT player] take the profit – as unsustainable, did not rule out working with OTT players. “OTT is taking SMS/voice revenue – it’s a fact of life, we need to deal with it,” he said, and added that “we’re willing to sit down tomorrow with OTT players. We don’t see it as a conflict; we see it as an opportunity.”

Indeed, it is this need to differentiate, and provide a superior customer experience, said Telstra’s Thodey, that will ensure a service provider’s success in the new, 4G world.

Jeff Barak is Amdocs' corporate editor and the former editor-in-chief of the Jerusalem Post.