The evolution of the carrier sector

By Chris Kelly, Total Telecom, Thursday 01 November 18

At the Total Telecom Congress 2018, Chris Kelly caught up with Rolf Nafziger, Senior Vice President Deutsche Telekom Global Carrier, to discuss how market fluctuations are affecting telcos

What trends are you noticing developing in the telecoms market at the moment?
In general, we realise that the market is undergoing a strong transformation and the speed of innovation is accelerating.  The number of blockchain initiatives have been increasing, with proposals being developed on how blockchain can further enhance the international wholesale business. Within the carrier industry further evolution is taking place regarding IoT offerings with discussion on topics such as traffic differentiation and local break out.

Of course, the hot topic of 5G is quickly becoming reality – in fact Deutsche Telekom plans to cover 99% of the population in its German home market with 5G by 2025. 5G is not just another network, it is crucial for the control of autonomous machines, smart cities, IoT and other advanced technologies. In addition, we are seeing increasing market consolidation. Another trend – which wholesalers must adopt to stay relevant – is digitization and automation.

What are the key challenges to be overcome?
To pinpoint a few key challenges is difficult; depending on the focus they can involve numerous issues. These range, for example, from pressure on existing pricing models from big content players and OTTs, the proliferation of IoT devices which creates a need for management of international connectivity, to the ongoing offering of free communication services via social media developers.
A key challenge for us will be to secure revenues and margins while managing the ever-increasing speed of transformation. That means concentrating on innovation and fostering partnerships to more quickly develop needed solutions.

What are your plans to overcome these challenges – and are they the reason behind your new name?
Yes, the changes we have recently made – including our new name, Deutsche Telekom Global Carrier, as well as the new strategy we have implemented – will definitely help us with these challenges. Our new name is a more appropriate reflection of what we are able to offer the market today, in light of our updated aims and wider portfolio.
In these times of a rapidly transforming telco industry, our clients need as much support as possible to prepare them for an uncertain future. That’s why we are implementing digitization along with big data and AI to intensify business ease and agility by increasing transparency. This will in turn will lead to earlier insights, enable smoother and faster delivery and time-to-market, help us innovate quicker and reduce costs.
With our expanded portfolio, we are able to cover all the requirements our clients need from one source. We already have a comprehensive security offering with our 360° Defense Strategy that covers all aspects of cyber theft and fraud. To foster innovation and faster implementation, we will continue to build partnerships with leaders in specific fields. IoT will lead to new business models and prospects as it continues to expand.

We are also always looking ‘outside the box’ for business opportunities, as has been seen with our work with OTTs or on the European Aviation Network (EAN). The EAN is a ground-breaking solution that has brought broadband connectivity to passengers flying over the skies of Europe. There is a strong need to look outside of traditional telco areas in order to stay relevant and find additional revenue sources.

What new technologies are you particularly interested in at the moment?
As I mentioned before, blockchain is a fascinating technology, which could have an extremely positive effect on the entire industry. If there is a record of business activities that cannot be changed and is easily transparent, then there cannot be questionable transactions, thus eliminating payment disputes. That is just one example of how blockchain can reduce operational roadblocks, reduce costs and improve efficiency. As the amount of transported data becomes larger and larger, it can also help with management, especially when working together with Artificial Intelligence (AI). 
AI is also a technology we are interested in and are implementing on our path to digitization. It will help us, for example, take the complexity out of processes and with the detection of anomalies, such as fraud. Combined with automation, it has the potential to block fraudulent activities without human interaction. All this will help us to reduce costs in the long run and operate much more efficiently. 
Another noteworthy technology trend is capacity-on-demand. Capacity users only pay for what they use– which can be a cost advantage, depending on how well they plan. As demand for capacity grows exponentially, telcos must be able to manage a complex balance of providing when necessary at the quality demanded. 
And of course, the Internet of Things is also noteworthy due to the impact it will have on our business with the different application areas it enables. We are always updating our IPX platform to be able to handle future needs in the IoT area and are looking into customized IoT offerings. 

What new markets are you particularly interested in at the moment?
I have mentioned many of our interests before. To reiterate, we are interested in IoT and its various sets of services and solutions which can be offered to our customer base. In addition, RCS Business Messaging is a natural development of today’s A2P messaging business and is an area we continue to look into. We’re also paying attention to unmanaged services for major ICT players as more customers develop SD-WAN technology. And, as I mentioned briefly before, bandwidth on demand for the carrier and enterprise customer base is a pertinent topic for us.

What predictions do you have for the industry over the coming 12-18 months?
There will certainly be further consolidation and transformations across the industry. AI, API, IoT and blockchain will continue to make their way into our industry. They will enable us to secure our transactional business, increase customer experience, improve quality of service and intensify flexibility - as carriers continue to focus on efficiencies and automation. Not surprisingly, traditional voice will remain on the decline. 

The technology shift in mobile will impact traditional signalling products and commercial offerings, with A2P to remain the bread and butter of messaging, and RCS BM to further develop. SD-WAN adoption will further cannibalize traditional VPN offerings and an increase in unmanaged / cheap DIA solutions will allow improved capacity management. Capacity on demand will soon be seen as a core requirement of customers. Regarding specific technology issues, there has been an ongoing shift, for example with SDH to Ethernet / MPLS to SD-WAN, 3G to 4G to 5G, A2P SMS to RCS, or hardware to software.

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