Following the publication of the white paper entitled ‘Pivoting the international carrier business’, Telecom Review spoke to one of the contributors, Andrea Faggiano, partner, telecom, information, media & electronics practice lead, Arthur D. Little Middle East to highlight how the wholesale industry has evolved and what strategies should telcos adopt to realize the full potential of their international wholesale strategies.
How do you assess the wholesale industry today? Is it evolving as rapidly as other telecoms-related industries?
When assessing the wholesale industry, it is apparent that the segment today is a pivotal center of transformation for the entire sector due to business layerization, which is essentially the split between networks and service operations. Benchmarking against other telecom-related industries would not be an uncommon practice when measuring the scale of evolution that has transpired within the wholesale market, yet a basic assessment of the sector itself showcases the magnitude of recent progression.
For instance, the wholesale telecom industry was, in the past, solely associated with voice termination, wholesale line termination, bitstream, roaming, mobile virtual network operators (MVNO), international connectivity, and Internet access. Today, though, the wholesale perimeter is much broader and also includes mobile towers, local fiber access, application programming interfaces (APIs) for cloud communications, and data centers, to name a few examples. This sheds light not only on the wholesale industry’s progression in itself but also on the evolutionary pace that has matched other advancing telecom areas.
In your opinion, should telcos rethink their international wholesale strategy?
First and foremost, it is important to appreciate that the international landscape has changed significantly over the past five years, so much so that telcos now operate in a reality where the notion of wholesale demands becoming a solution at the global level is somewhat imperative.
Legacy businesses have matured drastically and are impacted by over-the-top (OTT) services and regulations, capacity businesses have become the main driver among legacy businesses due to exacerbating bandwidth demands, and emerging service and asset innovators are demonstrating value creation. Therefore, it would undoubtedly be prudent for telcos to rethink their international wholesale strategy. After all, this segment is highly dynamic and also brings the highest degree of innovation, such as software-defined wide area networks (SD-Wan), edge connectivity, and communications platform as a service (CpaaS).
To realize the full potential of their respective international wholesale strategies, telcos should pursue several actions simultaneously, including placing a strong emphasis on innovative mega-infrastructure, revisiting global telecom initiatives with operating companies, and building strategies based on investments and innovation. Furthermore, they should prioritize governance principles from the outset, secure commitment from third-party facilitators, and ultimately attract capital and talent for new assets and product development purposes. In doing so, telcos will best position themselves to execute a comprehensive wholesale strategy that delivers positive business outcomes on the international stage.
A whitepaper you contributed to, entitled ‘Pivoting the international carrier business’, highlights that international telecom wholesale remains unknown to many. Why is that? And what should be done here to reverse this trend?
There are several factors behind international telecom wholesale remaining unknown to many. Firstly, the telecom business as we know it is generally focused on national boundaries, which holds a majority in terms of value. Secondly, the international business segment is categorized as niche and comprises a relatively small community of incumbents, although this segment has proven to be highly dynamic and the cradle of today’s Internet-related business. In terms of how these trends can be reversed, telcos can begin by rethinking their international wholesale strategies, adopting the measures previously mentioned, and driving innovation.
The topic of innovation is certainly intriguing, especially when one considers that new products have demonstrated high innovation potential due to transparency, automation, and real-time platforms being developed on a global scale. To ensure international telecom wholesale is fully acknowledged and appreciated, innovative projects should be pursued that focus on value creation and place digital technology and software at the forefront of every proposition. Many players have stood by outdated approaches and products for years, which has hindered international wholesale telecom and presented opportunities for market disruption. Therefore, the recommendation of focus should be explored to eliminate this trend and ensure new opportunities are fully capitalized on.
Where do you see the wholesale industry heading in the future? In your opinion, will we see new emerging trends that will positively impact it?
Looking ahead to the future, it is evident that the wholesale industry will witness fundamental reform. In due course, we will see new shareholders enter the market based on asset classification, as well as many new entrants with greater specialties and new business models due to process cloudification and hardware virtualization. This interview began by touching on the wholesale industry’s evolution, and this is relevant once more because, in the future landscape, it is inevitable that traditional players will continue declining should they fail to reinvent themselves and explore pastures new in different business areas.
Innovation is certainly a topmost ambition that aligns with many players’ long-term aspirations, however wholesale consolidation could also drive positive impacts and deliver short-term benefits from a cost standpoint. By consolidating, telcos can pool their resources, make better infrastructure and platform investments, and offer services while maintaining value. Afterward, the value of these assets will increase and, if and when backed by an interconnected international network, telcos could reach more locations and deliver world-class services and solutions. Such consolidation initiatives have been delayed in the past due to internal resistance, yet the value they provide can ultimately break this trend and help propel the wholesale industry to greater heights.