A decade back, when I post-graduated from a leading institute, I got job offers from a telecom major and an IT giant. Apart from remuneration, I believed joining telecom major would justify my education, which was in telecom. I was excited to begin my journey in the telecom industry.
It was incredible to start to an exciting career- a job in India’ leading telecom operator, decent remuneration and benefits, absolutely fantastic learning opportunities on the job, the new areas to explore, and the future was quite bright. I joined the team of 2G radio experts, who were responsible for planning and optimising network for the city. 3G was still a couple of years away, and GPRS/EDGE was just getting attention for data technology. Voice (& SMS services) was the only source of revenue. Facebook was surpassing Orkut, Twitter just started, the first iPhone has launched, and nobody bothered about Android 1.0. Nokia was the king of smartphones (or rather phones), and Samsung was trying to find the space in the market. It was entirely different life.
Today, although I left the telecom major, I feel life has come full circle for me (& for many of us). I no long work only in technology. There are 4G and 4G Advanced getting deployed in India. Data revenues are in focus. Voice is a commodity and offered free. Nokia does not exist. Orkut is gone. Samsung and Apple are ruling the smartphone world. Video streaming services are critical to revenues. Social media applications are keeping everyone busy. Many telecom companies disappeared, including few operators. Others are trying to keep head above water.
Life is different, complex and tough out here!
It is not only about advanced technologies deployment, which has complicated the telecom network entirely, but also about hyper competition, which ruined the flavour of telecom services altogether. With 4G-LTE and 4G-LTE-Advanced, we are now managing three different generations of technologies simultaneously, including 3G-HSPA and 2G-EDGE. Networks are growing, and every year new layers are laid over to make it more complicated to manage the show. We work tirelessly round the clock to satisfy insatiable data hunger of masses, but alway fall short of targets. Automation has taken centre stage in the network management, and jobs started disappearing.
With all the evolution in network, technologies and Internet media, and with growing hunger for data services, why telecom industry is struggling to survive and cope up? Why are industry revenues falling? Why is industry growth slowed down? Why operators are merging business units and why there are more exits than entries in the market?
Some industry experts believe that the phenomenon is cyclic and corrective action is taking place. They also believe that this was inevitable, given the fact that, supply was more than demand or rather competition in the industry failed to deliver.
Partly that is true. However, more than just corrective action, the downfall could be attributed to below reasons:
- Reliance Jio’s disruptive entry in the market, with greenfield 4G operations and deep pockets, resulting in the revenue loss of incumbent players. Although Jio’s entry increased the ARPU figures, loss of voice revenues is a big hit with other telecom players, who still offer legacy voice services (2G/3G) and Voice revenues still accounted for 70-80% of total revenue for them. Moreover, as data services revenue are more-or-less stagnant, operators are finding themselves at the receiving end.
- Automation in network management is another serious issue, which made lots of skills set redundant. When 2G services planned, engineers used to design and optimise the system manually. However, with 4G and NG services, systems itself are getting smarter- thanks to SON technology. Now networks itself started adapting as per traffic load, quality requirements and most importantly- dynamically, without human intervention. I can see that at least 40-50% tasks, which were done by experts are now executed automatically, without error. The percentage might differ from subdomains, but overall, I could see 30-50% network is already running on auto-pilot and rarely requires manual intervention.
- With the loss of voice revenues, the industry focus shifted from the quality of service to becoming ‘GB Factory’. Operators are at war with each other over who offers more ‘GB’ of data at the lowest price, bundled with free voice. A decade back, the same operator had price war over ‘Voice calling rates’ and considered themselves as ‘Voice factory’, now came full circle to battle for ‘data pricing’. The focus shifted on offering more, without quality checks, resulting into destitute services offerings. In fact, due to shifted focus, the entire telecom ecosystem, which is entirely dependent on operator revenues, is finding itself in the doldrums.
- The growth of ‘App Store Economy’ with the dominance of social media, created another revenue eater for the industry. While few operators started thinking beyond ‘manufacturing GB of data’, app store economy started earning money on top of ‘GBs’, manufactured by telecom operators, leaving peanuts for them. Although it created massive parallel economy itself, the core industry is soul searching due to loss of revenues.
- The other factors include fast paced technology evolution every few years, billion of dollar spent on spectrum auctions and regulatory hurdles make life worse for an average telecom operator.
I believe, apart from Jio’s business model disruption and network automation, other contributors existed before. Telecom market was always hyper-competitive and regulators were never friendly. Technology is fast evolving than a decade back, making things worse for average telecom employee and companies altogether. However, industry disruption and automation are enough to start the shift in the equilibrium of market.
Where are we heading now?
We are heading towards new telecom market equilibrium, which will keep on shifting all the time from now onwards, every few years. I do see, the market stability is short term, and dynamics are fast paced to make things worse. However, despite all these challenges, Industry will continue to grow and evolve further. Download speeds will continue to be better, and Smartphones will be ‘More Smarter’ in future. Automation will stabilise network making certain job roles redundant, but we will need people to do specific functions, which are growing. Voice may remain free, but data might not come cheaper.
In the end, the industry will alway find the way to overcome challenges, but it may not sustain the growth all the time. That is what I call a new era of ‘Telecom’!