Unisys Predicts Differentiated Bundled Services Will Drive Telecom Sector in 2005

Telecommunications companies will focus on revenue growth and bundled services in 2005 after several years of deferred capital investment and concentration on cost reduction, say industry consultants at Unisys.  This trend affects all segments of the communications industry worldwide.

"Cost control will take a back seat to service innovation and revenue generation in 2005," says Glenn James, president of Unisys Global Communications and Media industry practice.  "With no obvious single 'killer application' on the horizon, the 2005 challenge for telecommunications companies is to develop and deploy new revenue-generating services for their markets."

James sees communications companies focusing on the following trends in 2005:

1. The launch of multimedia and converged services to maximize new network investments.
2. A focus on building customer relationships - communications companies' most important asset.
3. A revamp of business models to personalize services and enhance customer loyalty.
4. The creation of a new converged world.
5. The elimination of product silos for better speed-to-revenue.

Overall, incumbent fixed line service providers face challenges in new market entrants and substitute technologies such as voice over Internet protocol (VOIP).  Cable television providers, alternative local transport companies, and new entrants taking advantage of regulatory provisions that unbundled the local loop have been successful in providing a variety of IP-based telephony services, broadband network access, and layered value-added services.  This effort will likely further erode the market dominance of incumbents, particularly in their core customer segments.  In addition, wireless carriers have enjoyed some success with wireless substitution, bundled long distance, and value-added services all taking market share from fixed line carriers.  However, wireless carriers will have to address declining subscriber growth rates, decreasing prices and average revenue per user (ARPU), and increasing competition from non-traditional sources.

Incumbent fixed carriers will be more challenged to make new network investments to provide broadband services and IP-based services that represent both an opportunity and a threat to their core revenue sources.  Wireless carriers will continue to struggle with leveraging 3G network investments and deploying new value-added services to reverse the harmful market trends in their segment.

James elaborates:

• Launch of multimedia and bundled services to maximize network investment - CEOs are increasingly under pressure for revenue growth and profitability. This is true for both wireless (3G) and fixed (DSL/Cable and IP) providers.  Carriers will need to direct money toward defining and launching new value-added services and content.  Expect greater penetration of IP-based telephony and new services like video over IP, mobile conferencing, and unified communications to play a prominent part of this broadband services rollout.
  
• Focus on building customer relationships - Communications companies are realizing that enhancing their customer's experience will create "sticky relationships" through brand loyalty.  More investment must be directed at the discovery and effective management of user preferences including business intelligence, new services and content, use of partners and alliances, and distribution alternatives that will enable a customer-centric business model.  The communications company's entire operation must be designed to establish loyalty, emotional connection, and lasting value.
  
• Revamp the business model to personalize services and enhance customer loyalty - Cost engineering over the past couple of years was largely about operating faster and cheaper.  Now, carriers realize that faster and cheaper must translate to better customer orientation, better customer satisfaction, and better margins.  All customer interactions and key internal operations will need to put the subscriber experience first and incorporate customized services such as time-based, location-based, and personality-based content and communications services.
  
• Create the new converged world - Over the past few years, communication companies have invested billions of dollars in their networks.  Telecommunications companies now realize that they can build additional value from content and advanced services through partner collaboration and alliances, so 2005 should see increased partnership activity, collaboration, and potentially, consolidation.  Carriers will use partnerships to expand coverage, increase the number of services, improve distribution and extend overall brand value.
  
• Eliminate product silos for better speed-to-revenue - In the race to launch new revenue-generating products and services, time-to-market and cost competitiveness are the critical considerations. The traditional orientation around products must be eliminated in favor of lifestyle-oriented solutions that segment customers as opposed to products.  2005 will be the year that carriers re-think their traditional product-led approach with a dramatic shift to subscriber-led business models.  These providers will be looking comprehensively across their entire organization - keeping the customer at the forefront - to tie together the strategy, process, applications, and infrastructure for rapid execution of new services.

"The communications industry is undergoing widespread change with new, sometimes disruptive technologies, new competitors with different business models, cost structures, and value propositions, and a shift in choice and control to the customer," says James.  "Carriers around the world realize that their most important asset is their customer base, and the way to create shareholder value is to launch services that better meet the needs and lifestyle of specific customer segments."