As I have frequently written on this blog, the telecom industry is on the cusp of major changes (as are other industry verticals), but a new report suggests many telco leaders may not be adequately prepared. The report from Rock Creek Advisors (link below) highlights several key trends that are poised to disrupt the traditional telecom business model in the coming years.
The telecommunications industry is undergoing a period of significant disruption, presenting both challenges and opportunities for technologists. Telcos are grappling with sluggish 5G adoption, intensifying competition from tech giants encroaching on their turf, the need to rapidly digitalize legacy infrastructure and offerings, mounting sustainability pressures, and acute talent shortages in critical technical domains. These forces are putting immense strain on traditional telco business models and organizational structures. To remain competitive, telcos must accelerate their digital transformation, develop innovative software-based services, optimize energy-efficient and environmentally-sustainable network operations, and recruit top technical talent from the broader technology sector. Technologists with expertise in areas like cloud computing, software engineering, data analytics, and sustainable IT can play a pivotal role in helping telcos navigate this period of disruption and reshape the future of the industry.
Telco Technology Trends in 2024
- 5G Adoption Lagging: As we have mentioned before, Global 5G subscriptions reached 1 billion in Q3 2022, but this represents only 14% of total mobile subscriptions [1]. The report notes that 5G uptake has been hindered by limited 5G coverage, high device costs, and a lack of compelling 5G-enabled services. As of 2022, only 20% of global smartphone users had a 5G-capable device [2]. Telcos will need to find ways to drive faster 5G adoption, such as improving coverage, subsidizing 5G devices, and developing innovative 5G services.
- Competition from Tech Giants: Major tech firms especially the hyperscalers are aggressively expanding their telecoms offerings. In 2022, Google Cloud announced a 5G edge computing partnership with AT&T [3], Amazon launched its own satellite broadband service [4], and Microsoft continued growing its Azure for Operators cloud platform for telcos [5]. These tech giants have significant financial resources and technical expertise that many traditional telcos struggle to match. Telcos must identify ways to leverage their network assets and customer relationships to compete against the digital capabilities of hyperscalers.
- Shift to Digital Services: Legacy telcos are often organized around physical infrastructure like cell towers and wireline networks, rather than flexible digital platforms. The report found that only 20-30% of telco revenue typically comes from digital services, versus over 50% for leading digital native companies [6]. To meet evolving customer demands, telcos will need to accelerate their transition to cloud-native, software-defined networks and develop more agile, data-driven digital service offerings.
- Sustainability Pressures: The telecom industry accounts for 2-3% of global greenhouse gas emissions, primarily from powering network infrastructure [7]. Regulators and investors are increasingly pushing telcos to improve their environmental impact, with some countries mandating carbon reduction targets. Meeting these sustainability goals will likely require major investments in renewable energy, energy efficiency, and circular economy initiatives around e-waste.
- Talent Gaps: A known issue – telcos often lack the technical expertise in areas like software engineering, cloud architecture, and data science that are critical for digital transformation. The report notes that telcos struggle to compete with tech firms for in-demand digital skills, with vacancy rates as high as 50% for certain technical roles [8]. Telcos will need to overhaul their talent acquisition, training, and retention strategies to build the capabilities required to drive innovation.
The overall message is that the telecom industry is at a critical inflection point. Telco leaders will need to make bold moves to transform their organizations and stay competitive in the face of these disruptive forces. Those who fail to adapt may find themselves quickly falling behind.
References:
[1] Ericsson Mobility Report, November 2022
[2] Counterpoint Research, Global 5G Smartphone Shipments, Q4 2022
[3] Google Cloud Announces 5G and Edge Partnership with AT&T, June 2022
[4] Amazon Launches Satellite Broadband Service ‘Project Kuiper’, November 2022
[5] Microsoft Expands Azure for Operators to Support Telco Transformation, March 2022
[6] BCG Analysis: Building the Telco of the Future, 2021
[7] Sustainability in Telecoms: Charting the Path to Net Zero, GSMA, 2021
[8] Rock Creek Advisors Report: Preparing Telcos for the Future, 2023
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