Communications Service Providers are under increasing economic pressure. Revenues from their traditional services—fixed and mobile telephony—have been in decline and the growth of the data revenues has not yet off-set the result.
Meanwhile, customers get hyper-connected - 41 percent of consumers in mature markets (and 39 percent in emerging) own a combination of a smartphone, tablet and laptop/desktop according to Accenture survey1 - and have an ever increasing digital appetite, consuming video over the Internet, using apps for communicating and going increasingly mobile. As a result, the data traffic growths exponentially, driven especially by media content. For example, mobile data traffic in Europe is predicted to grow six-fold by 2019 and video is expected to account for 72 percent of the total volume.2 Operators have made significant investments in 4G mobile networks as well as fiber access for fixed broadband to increase access network capacities.
Quest for profitability
However, the increased data consumption is monetized by OTT (over-the-top) providers such as Netflix, YouTube, Spotify and many others through advertising or paid content. The telecom operators look for partnerships to participate on that monetization as well as exploring technologies to help them drive down costs to operate their networks and provide increased flexibility.
In 2015, Accenture has conducted a global Digital Consumer Survey among 26 000 respondents and a global Network Transformation Survey interviewing 32 network executives, as well as harnessed Accenture expertise to answer the following question:
"How can operators satisfy increasing demand for network capacity and quality of service while managing the network operating costs, while staying competitive with the new low cost entrants?"
Network quality back on stage
On the consumer side, network experience is once again a key driver for customer experience and loyalty. Customers are frustrated with connectivity issues that impact their experience. 52 percent of consumers face connectivity issues daily or weekly. Waiting time for the content to start playing or distortions during the play are top frustrations and 39 percent of customers globally consider switching a provider due to network issues. For our network survey respondents, Network Quality Management is among top 3 priorities, next to access capacity and optimizing operations.
Replacing legacy infrastructure by migrating to All-IP
Telecom operators need to restructure their networks to strategically drive down costs as well as to enable time-to-market for new digital services. Supporting legacy network infrastructure, composed of various network protocols and technologies is increasingly complex and costly for operators. Leading operators migrate to All-IP networks to maximize the benefits of unified network within their groups and achieve truly cross-border presence for their customers.
Network virtualization on top
In addition, they consider implementing network virtualization technologies (SDN/NFV) to transform their operating model and achieve further effectiveness. Virtualization will allow replacing thousands of proprietary hardware devices scattered in the field with software functions that will be standardized and managed centrally from a data center. 80 percent of network directors in the Accenture survey3 agree that this will significantly impact their operating model. A repair or upgrade will no longer require a truck-roll but will be handled in a matter of minutes and remotely. This trend has already transformed the IT industry and telecom networks is next.
For example, Deutsche Telekom4 that is present in 13 European countries plans to migrate its PSTN to all IP and optimize its core network within the decade, creating a Pan-European IP network, integrating both fixed and mobile worlds. Orange5, present in eight European countries, plans to go all-IP, implement the cloud and the virtualization of network functions, as well as preparing for 5G.
There are questions, to be answered, however. According to the survey, 38 percent of network directors believe they lack execution capacity to perform active migration of their customers and for 47 percent of them, the business case remains unclear. As a result 75 percent of telecom operators will seek outside help with their migration efforts. As far as SDN/NFV implementation is concerned, 84% of respondents consider the technology to still have low maturity and most carriers prefer to get familiar with the technology using research and pilots before safely believing in the business case.
Network transformation needs to include technology as well as operating model transformation and be driven by a business ROI from strategy to staged execution, including quick wins, while continuously taking into the consideration the end-user experience and customer feedback.
Operators can achieve strategic network cost reduction, accelerate time to market and enable new digital services to remain competitive in the changing industry landscape. Accenture continues to watch these trends and cooperates with a number of network executives globally, via its Network Advisory Council that meets annually in Europe and North America.
1Source: © Accenture CMT Digital Consumer Survey 2015
2Source: © Cisco Systems, Inc. Cisco Visual Networking Index (VNI), Feb. 2015.
3Source: © Accenture Network Transformation Survey 2015, among 32 global network executives
4Source: GTSCE. Our presence in Europe. http://www.gtsce.com/deutschetelekomgroup/
“We connect people in Europe!”. Telekom. May 2015. https://www.telekom.com/media/company/276408
Deutsche Telekom aims for all IP pan-European network http://www.eurocomms.com/industry-news/9652-deutsche-telekom-aims-for-all-ip-pan-european-network
5Source: Essentials2020, Orange’s new strategic plan, Orange, March 2015