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Our flagship business publication has been defining and informing the senior-management agenda since Our learning programs help organizations accelerate growth by unlocking their people's potential. As digital proliferates the telecommunications industry, incumbent telcos find themselves in the middle of a paradox. They are, after all, not only providers of their own digital products and services but also enablers for other sectors, by providing the essential connectivity infrastructure for functioning and growing in the digital economy, which results in a growing demand for broadband access.

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Also, it is forecast that the number of digital customers will skyrocket globally, and intensity, with respect to time spent using digital platforms as a means of communicating, will increase over the next few years. At the same time, consumer behavior regarding traditional communication services is changing, and the total consumer spend on these services is expected to decline even while overall communications activity grows. Finally, as technological breakthroughs accelerate, more and more new digital natives are entering the core telco market with innovative business models and technologies, leaving many incumbents to wonder if they can keep up or if they will be displaced.

There are two-and-a-half billion digital customers globally who are under 25 years of age. On average, these young digital users spend minutes online each day versus minutes for customers over 25 years.

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More than two-thirds of this group is on YouTube daily, and 41 percent of to year-olds in the United States use video-messaging-service Snapchat for 25 to 30 minutes per day. For example, over half of all active Facebook users access their accounts solely through their smartphones. Together, these trends—digital business and mobile access—contribute to the projection that by , more than two billion users will make payments via mobile devices. Overall, this will result in an increase in the absolute number of digital customers as well as in a massive increase in the amount of time that consumers spend when using communication and broadband services globally.

According to Ovum, communication intensity in regard tof time spent will grow by 63 percent over the next ten years. As the overall digital market grows—an additional billion middle-tier customers for telcos, mainly in emerging markets, is expected by —the door for new over-the-top OTT entrants is opening. These digital natives are offering the same staple services of voice, messaging, and video calls that used to be the domain of traditional telcos. Just a few years ago, messaging, fixed voice, and mobile voice services from OTT players accounted for 9, 11, and 2 percent of relevant revenue, respectively.

In the most aggressive scenario, the share of messaging, fixed voice, and mobile voice provided by OTT players could be at 60, 50, and 25 percent, respectively, by in an all-IP environment Exhibit 1.

As those service offerings are being built on innovative business models, they will be available to users at a much lower price than traditional telcos are able to offer. According to Ovum, this will likely result in a drop in spending on traditional communication services by 36 percent over the next ten years, further pushing incumbent telcos to the margins of voice and data provision.

They not only provide their own digital products and services but also the essential connectivity infrastructure that allows other sectors to function and grow in the digital economy. The digitization trend is currently challenging every sector in industry and society. In almost all cases it is having dramatic, if not disruptive, effects on existing traditional industry dynamics and business models.

Hence, all companies and institutions will have to think about how to deal with this digital revolution and what their role in the newly arising digital ecosystems might be. Digital is all about data, but its full value can only be delivered when adequate IT and technology form the infrastructure that seamlessly connects that data and enables its exchange—anytime and anywhere. This growing demand for connectivity will require companies to have broadband access and a gigabyte or high-speed infrastructure, which would result in a rise in spending for ubiquitous broadband access.

To deliver this value, IoT envisions a world of connected devices that goes beyond mobile phones and smart watches. Everyday objects would be linked, that is, they would be able to send and receive data to and from one other.

Mobility Solutions: Developing a Mobile Device Strategy for YOUR Organization - A PSP Forum

This level of connectivity would require additional, related IT and infrastructure services, which would further drive telco revenues. Market forecasts are predicting increasing margin pressure but no sea change with respect to fundamentally questioning the relevance of telcos in the future. There is, however, something going on in the traditional telco value chain and competitive landscape that is jeopardizing the existing telco business model. Not only are we experiencing increasing competition among traditional companies—telcos, cable providers, and mobile virtual network operators—new OTT entrants are also cannibalizing services, and Internet and other tech giants are moving onto the traditional telco and media terrain as well.

OTT players are offering core telco services such as voice or messaging, and the media space is becoming their domain. Tech and Internet companies are also increasingly active in growth areas, such as cloud space and services, competing with telcos for clients and revenue.

IoT Digital Business | Alcatel-Lucent Enterprise

They are tying customers to their own ecosystems, while making reliance on traditional operators a thing of the past. With carrier-neutral connectivity for example, e-SIM , many tech and Internet companies are enabling seamless changes between operators and eliminating the hassle of changing telecom providers.

This makes differentiation purely on B2C products for traditional telcos a highly questionable proposition in the future. In addition to these revenue-eroding trends, regulatory developments—especially in Europe—have cut down roaming revenues dramatically. Worldwide, the compound annual growth rate CAGR for traditional telcos is estimated at only 0. For many telcos, largely in developed markets, the outlook is especially disappointing with projected negative growth. Additionally, these new entrants—with their global reach and a focus more on software and service than on hardware and infrastructure—also enjoy significantly higher stock valuations than do incumbent telcos.

This is because their growth potential is seen as much higher than that of those traditional incumbents continuing to operate under their existing business models. For traditional telcos, this disruption, enabled by digitization, is anything but ordinary. Developments in digital technology threaten their current investments and put their cost baseline under significant pressure. New competitors are entering the core space of telcos, which will reshape the existing company landscape. In addition, telcos will continue to be forced to make major investments in future network technology.

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But the cost of just doing this alone is expected to result in a drop in revenue in the order of 15 to 30 percent. Nevertheless, the growing importance and demand for connectivity and broadband access will ensure that there will be some growth opportunities out there, too. But to get there, telcos will need to rethink their operating models. Show related SlideShares at end. WordPress Shortcode. Published in: Technology , Business. Full Name Comment goes here.

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