Capabilities for a New Game
Migration to Horizontal Business Models
Consumers and businesses are more demanding, expecting always-on service everywhere, forcing operators to boost network capacity and connectivity.
Industries are becoming increasingly digitized, demanding new services like mobile payment platforms and cloud computing.
Vertically integrated technologies, on which operators have long depended, are growing increasingly modular and open and the telecom ecosystem is becoming more competitive.
These challenges and opportunities are creating a fundamental shift among operators from the vertically integrated business models that dominated the industry for most of the past century. Now, four distinct, though by no means mutually exclusive, horizontal business models designed to take full advantage of the opportunities are emerging:
Offering network infrastructure and related services to other players.
What next: Building these capabilities requires operators to make large investments in new fiber and LTE infrastructure, which may limit competitors to government-led networking companies and operators willing to share costs with other like-minded players.
Monetize assets by opening up their infrastructures and extending their business strategy.
What next: Incumbents that have embraced the concept and plan to open up their networks and assets to third parties should build on their partner management and wholesaling capabilities.
Offer the best combination of targeted applications and content, and a high level of user experience.
What next: This model may be the most difficult for telecom operators to follow, given their lack of experience and questionable track record in creating truly innovative new businesses. Moreover, the competition is already fierce.
The largest telecom operators that have a real opportunity to expand their businesses into multiple segments and markets, through a combination of the three models discussed above. The goal: to build value by creating synergies among different segments and markets, by managing their portfolios effectively, and by replicating the necessary capabilities from market to market.
What next: Competition among these players will likely be limited to those that already have significant scale, and the willingness to reorganize to push that scale even further.
Operators must begin making the strategic choices necessary to determine their future direction, deciding which of the four models—or combination of models—works for them. This decision should depend, in part, on whether they can effectively leverage the capabilities they already possess, and, in part, on careful consideration of their ability to build new ones.