5G within sight, but challenges ahead
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The key telecom trends in 2023 connect the individual consumer experience into the broader emerging device-based economy.
A key CX paradigm for telecommunications has revolved around the ability to connect the customer to the service provider, disintermediating the role played by stores, call centers, and even websites, meaning the customer experience is completely digital – all enabled by the device.
But like most other industries, the telco sector will be shaped by geopolitical and economic developments impacting us as citizens more than as customers in isolation.
2023 telecom trends reshaping the industry
As the foundation for connecting people and businesses, the telecom industry plays a critical role in nearly everything we do. But it faces tremendous challenges that are forcing companies to rethink old ways of doing business and transform like never before.
2023 telecom trends reflect ongoing economic and geopolitical forces as businesses attempt to balance agility, budgets, and competition from messaging providers:
- Capital challenges
- 5G becomes reality
- Net neutrality and new opportunities
- Ramping up sustainability
- Ecosystems emerge
- Keeping up with the customer
- Broadband satellites, AI, cybersecurity
1. Telcos in 2023: Capital challenges & margin pressure
The telecommunications sector is capital-intensive, with this being the key factor in everything from the broadband rollout, acquisition of spectrum, to 5G deployments. Combined with global inflation, these capital challenges will be a top telecom trend, making it difficult to pass costs onto customers.
Bain & Company estimates that inflation will reduce EBIDTA margins by three to five percentage points over the next year. In times of rising interest rates and inflation, this sector is among the most leveraged with high debt to equity ratios.
Higher operating costs, additional pressure on capital expenditures, and climbing interest rates make telcos vulnerable to customers switching to lower-margin products, according to Bain and Company:
“If price increases are too aggressive or the customer experience suffers from cost-cutting or labor shortages, customer loyalty could erode and contribute to further churn.”
However, consumer price sensitivity varies across Europe, which will allow telecom operators in northern markets to raise prices more often than in southern markets.
Advanced solutions can give service providers insight into revenues, margins, and costs across their operation in order to manage economic volatility and move towards profitability.
2. Telecom trends: Keeping the promise of 5G
5G’s promise of high latency, high bandwidth, and low battery has been the key ingredients of a device-based, super-connected industrial economy.
Deloitte Global expects the number of mobile network operators investing in 5G standalone networks—including trials and actual rollouts—to double from more than 100 operators last year to at least 200 by the end of 2023.
“These MNOs are on the leading edge of helping to unlock 5G’s long-heralded benefits, opening the door to disruptive use cases that can boost productivity, enhance operational efficiency, increase cost optimization, and create revenue opportunities for both MNOs and their enterprise customers,” Deloitte experts said.
Many industries ranging from automotive to manufacturing are developing use cases to harness the power of 5G. Use cases include connected cars, smart cities, and high bandwidth for consumers.
As of 2023, manufacturing use cases have yet to be implemented, whereas we can expect to see some of automotive use cases in user-friendly trial environments. For example, Halo, an autonomous driving startup based in Las Vegas, is working with T-Mobile on a driverless network based on 5G.
The benefits of 5G for customer experience are game-changing
5G wireless technology will impact the way we live and work. 5G promises to boost customer experience in both the B2C and B2B worlds.
3. Net neutrality and new opportunities
Many of the telecom sector’s regulations have been around data sovereignty, residency, and privacy. In terms of impact, net neutrality has shifted the sector’s most value to the over-the-top (OTT) media providers. In 2023, European Union regulators will continue to examine this impact and weigh changes, making it a top telecom trend.
Juniper Research found that mobile operators will lose $2.5 billion to OTT business messaging providers such as WeChat and WhatsApp this year, up more than 20% from 2022.
Net neutrality, which was intended to provide guardrails, ensuring free and fair treatment of traffic, has created monopolistic domination by companies with the network effect from the first mover advantage, according to report on the internet value chain by GSMA and Kearney.
The existing regulatory situation has no relationship between those who profit from the investments in the sector, and those who invest in the sector, which is a disaster for consumers.
The good news is that these principles will not be applied to 5G, where network slicing could be used to support partitioned applications and services with differentiated pricing.
According to Deloitte, network slicing could allow operators to shift from simple connectivity solutions to more advanced value-added services such as private networks, managed network operations, and tailored privacy and security solutions.
In a recent development, regulators in India are reportedly preparing regulatory changes to override net neutrality for 5G.
More telco opportunities could be created as part of the new EU Digital Single Market (DSA). This will demolish the Chinese walls of the existing Android and Apple stores.
Telcos need to offer differentiated digital content leveraging high latency and location data, such as for gaming and sporting.
Customer data platform solutions can help telcos play a critical role in the value chain as owner of the customer profile, compliant to regulations.
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4. Telecom ramps up sustainability in 2023
A holistic view of telco sustainability combine the sector’s contribution to plastic waste and CO2 emissions with the industry acting as the enabler of sustainability by all other industries.
Telcos account for 4% of global electricity consumption, according to IEEE. In the future, electricity consumed by 5G radio access networks will account for more than 2.1% of the total electricity generation.
Many telcos have made sustainability a strategic priority and are following up their words with action, according to a Kearney article.
“Telcos are now beginning to make more concrete commitments on sending zero waste to landfills and aiming for full circularity of their e-waste, on the sources of their green energy—signing power purchase agreements that drive the expansion of renewable energy sources through financing of new projects—or on the shift toward e-fleets for business and service cars,” Kearney wrote.
With phone a major source of plastic wastage — approximately 350K phones are dumped every year — telcos are doing more to incentivize return of old phones and accessories to reduce waste.
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5. Telecom 2023: ecosystems and partnerships
To realize the full value of 5G, telecommunications services providers need to connect their disjointed B2B and B2C networks with ecosystems.
They need to evolve into service enablers working with businesses, consumers and even competitors to create unique 5G offerings that differentiate them in the market. These use cases need to span multiple industry verticals using automated processes.
According to Accenture, enterprise transformation, often fueled by a new approach to partnerships, can help service providers manage commoditization pressures and a hyper-competitive market.
“New go-to-market ecosystems will drive growth beyond connectivity, propelled by partnership, with a shift from vertical integration to open ecosystems,” the firm said in a research report.
An important aspect of this is creating products with global scale. SAP, together with IBM, ServiceNow and Deutsche Telekom, shows in a proof of concept how multiple underlay access networks with overlay components can be bought together to create global connectivity offerings ranging from 5G to software-defined networks.
Solutions of this nature would provide the industrial economy with a global connectivity solution.
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6. Adapting to evolving customer needs
As they transform their business models in a constantly changing environment, telcos also must keep up with rapidly changing customer needs.
“While connectivity has never been more important, markets and business models have shifted, and so have the expectations of customers – for sustainability, accessibility, versatility – whether they are personal, SMB or enterprise users,” Accenture said.
The rise of the digital native has raised consumer expectations for high-performance connectivity. In particular, Gen Z will put telcos to the test, according to a BCG report.
“Gen Zers generally prefer digitally enabled experiences and on-demand convenience as well as high-quality authenticity in games, shopping, and content. And they are willing to pay for these types of experiences,” BCG said.
“That represents a radical opportunity for telcos that target Gen Z preferences while simultaneously a risk that technology startups and innovators will squeeze telcos out before they make inroads with these new customers.”
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7. Broadband satellites, AI, and cybersecurity
Explosive growth of broadband satellites will be a top telecom trend this year, according to Deloitte Global’s Technology, Media & Telecommunications (TMT) 2023 Predictions report. Efforts to bring high-speed internet to all parts of the world will lead to a crowded sky, the firm said.
More than 5,000 broadband satellites could be in low-Earth orbit (LEO) by the end of this year because of growth in commercial data satellite deployments, according to the report.
“If every organization currently planning to build an LEO constellation succeeds, seven to 10 competing networks could be operational by 2030, with a total of 40,000 to 50,000 satellites serving more than 10 million end users.”
AI is another trend telcos will see more of in 2023. Leading service providers are already using AI and machine learning to boost operational efficiency, including streamlined customer service and field service.
Use cases cited by McKinsey & Company include “self-healing” to solve customer problems automatically, smart scheduling and forecasting in the call center. and AI-based coaching for front-line workers.
AI can also help improve cybersecurity, another area that telcos must make a priority in 2023. As critical infrastructure providers, telecom operators are a big target for cybercriminals trying to infiltrate networks to steal customer data or conduct covert surveillance.
“Given that telecom companies control critical infrastructure, the impact of an attack can be very high and far-reaching,” Deloitte said in a research brief.
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Telecom industry: Forging ahead
In closing, the telco sector will face significant challenges, but the demand for remote work as well as the cloud and internet-based products and solutions will continue to stimulate demand in 2o23.
Long-term success requires an internal redesigning of profitability, and at the market level, a new regulatory framework that levels the playing field.
