The telecoms sector is one of those industries that needs perpetual reinvestment. Every so often there is a new technology that has to be invested in to replace the old and outdated.
“At the moment we’re seeing the dual replacement of network technologies,” explains Michael Sherman, chief strategy and transformation officer at BT, during an interview with Information Age. “Networks are migrating from the copper-based and VDSL-based networks to full-fibre, with the purpose of supporting super high speeds, which are necessary for those next generation applications.”
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The network changeover
Following network migrations, the telecoms is facing an “unprecedented level of mobile network changeover,” according to Sherman.
The move from 4G LTE to 5G has been well documented. “And, it’s a very material switch, with new radios that have to go up on every tower and new GPS coordinates needed to deliver a whole new set of services and mobility experiences,” he continues.
The challenge: it’s hard to price the right models
While doing these unprecedented levels of assessment for the mobile network changeover, there has been increasingly more value handed over to customers and they get much better prices for gigabits transmitted.
The price per gigabyte on older networks compared to newer networks was a lot more and now consumers can get massive amounts of bandwidth. “But that hasn’t necessarily historically translated into significant ARPU, average revenue per user increases,” adds Sherman. “And the challenge is that it’s hard to price in the right models for these investments.
“There’s some irrational pricing in the industry, because a lot of the pricing is still similar to a traditional utility, like energy. And no one would expect an energy company to sell unlimited power to our homes and for us to consume it.”
The implications of this on the telecoms industry are challenging.
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The unlimited data conundrum
Sherman explains: “All telecoms are running a model where they can sell unlimited data packages, but simultaneously the industry doesn’t want you to use that much of its product.
“This creates a friction between the product sold and the value they want to deliver.”
The telecoms model must change
“The telecoms model is broken, it can’t persist as is,” says Sherman.
In changing, the sector will have to develop more rational go-to-market structures. Over the next decade, as well, the next generation of use cases and communication solutions that rely on these new underlying networks will emerge — “these will start to be priced appropriately,” he believes.
“I’m favourable that over time, the telecoms industry will get back to very promising territory in terms of growth and value to customers.”