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June 10, 2011

Communications Provider: The Challenges of Business Innovation

By Michelle Amodio, TMCnet Contributor

The proliferation of communication services is creating multiple challenges for communication providers. Some of these challenges are technical in nature, but others may be more cultural, requiring new organizational behaviors in order to remain relevant and competitive in the new online world. As buyers become increasingly sophisticated and demanding, communications providers are challenged to achieve new levels of efficiency, agility and transparency.

Today's environment of rapid technological changes, parallel market and brand extension based competition, multi-play offerings and convergence of media over IP (VoIP, IPTV (News - Alert)) means a communications provider has to be able to leverage all its technological capabilities to the maximum.

According to a recent report from RCR Wireless, one of the more difficult challenges for communications providers is how digital giants are developing direct relationships with the end user, thereby bypassing the provider altogether. Communications providers in turn need to find innovative ways to reach out to customers and obtain revenue from those connections.

In considering the changing landscape of the communications provider industry, probably the biggest changes are due to the merging of the media and telecoms worlds, a merger that is creating a true multiplay and convergent playground, where content and its delivery are the focus. For example, Apple brought its own business plan and model to AT&T (News - Alert) when it launched the iPhone. Despite its imperfections, the iPhone (News - Alert) quickly grew in popularity, giving Apple a leading edge with its business plan, focusing on the proprietorship of its App Store and leaving the operator out of the equation entirely. This, in turn, equates to mega revenue for Apple.

Communications providers, specifically telco companies, need to find new avenues of revenue opportunity. A consumer’s loyalty to a wireless service company is largely driven by mobile devices and new valued-added features like social networking and mobile applications. Communications providers are losing control of customer experience and distribution power. They are pressured to find new sources of revenue.

“There are 20 different directions the world could go,” said Martin Creaner, president and CEO of the TM Forum in a statement, noting that mobile payments, healthcare, smart grid, home-environment management, machine-to-machine communications and automotive management, all are potentially revenue growth drivers. “Nobody really knows where that revenue is going to come from.”

One of the examples of what operators can pull from include Near Field Communications (NFC). In fact, U.S. chipmaker Broadcom (News - Alert) Corp expects NFC wireless technology to be a main revenue driver in coming years, when it becomes more of a norm for consumers to use their devices to make payments.

Recently, Visa announced that it is launching the next generation of payments solutions that include a secure cross-channel digital wallet and a range of customized mobile payments services. The digital wallet will store Visa and non-Visa payments accounts, support NFC payments through the Visa payWave application that allows transactions in eCommerce, mobile commerce, micropayments, social networks and person-to-person payments.

“Depending on how carriers and incumbent financial institutions innovate, the mobile wallet and m-commerce in general could remain the status quo or develop into another disruption point,” writes Tracy Ford and Matt Kapko (News - Alert) of RCR Wireless News.

Of course, one major trend communications providers have to contend with is the cloud. Cloud computing refers to the logical computational resources accessible via a computer network rather than from a local computer. Some argue this is just a fancier, newer way to describe hosted services, but many companies are investing large sums of money into cloud-based services. AT&T recently announced a $1 billion investment in cloud-computing services.

All in all, it comes down to this: communications providers need to be flexible in this changing environment. In speaking about operators, Creaner says “they are data rich, but information poor.”

Communications providers that can capitalize on their own analytics will be able to be more flexible and efficient, according to Creaner.

Michelle Amodio is a TMCnet contributor. She has helped promote companies and groups in all industries, from technology to banking to professional roller derby. She holds a bachelor's degree in Writing from Endicott College and currently works in marketing, journalism, and public relations as a freelancer.

Edited by Jamie Epstein

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