The last 12 months have been interesting for the telecommunications sector. From the rise of generative artificial intelligence (AI) to continued macroeconomic instability, telecom operators have had to take a hard look at their business models and shift their strategies.
Traditionally, revenue growth was the top priority, but today the focus is on maximizing efficiency in the face of more expensive access to financing. According to Omdia, only one in ten telecommunications operators have reduced their operational expenses (opex) relative to their turnover over the last decade. Global spending on digital transformation is expected to reach nearly $3.9 trillion in 2027, and the telecom industry will see significant variations on capital expenditure (capex) management.
Today’s networks are increasingly expensive to build and operate, which will drive changes in how telecom operators adjust spending to meet their needs. Here are some emerging trends they will face in 2024.
Embracing the Next Phases of Generative AI
No other technology has garnered as much attention recently as generative AI. According to a study by Altman Solon, spending on generative AI could increase sixfold compared to the current amount for telecommunications operators. The use cases will average 34% adoption among communications service providers (CSPs) over the next year, rising to 48% adoption over the next two years.
Telcos are in the early phase of using generative AI, where solutions such as call summaries or chatbots complementing existing systems enable rapid implementation and adoption. Customer-facing chatbots are the most widely adopted use case for generative AI in the telecom industry. In fact, 92% of CSPs are very likely to implement chatbots, and 63% of them say they already have one in production.
In 2024, we will witness the next phase of adoption, during which tools and experiences powered by generative AI in the telco sector will mature and drive a change of scale for its stakeholders. The focus will be on integrating generative AI into the customer experience, including through personalized product and marketing offerings to create new value opportunities. One New Zealand has already introduced a generative AI solution that helps its call center agents better understand why customers are calling and how to proactively support the resolution of those calls. This resulted in a 10% increase in customer trust. Cox Communications also uses generative AI to drive innovation and improve customer service by reducing the time spent on manual documentation searches from two to three hours to just seconds.
Increase in the use of software as a service (SaaS)
Many large telecommunications companies have traditionally been builders, combining various technologies to develop services. Telecom operators rely on SaaS solutions to solve problems like technical debt, which helps improve the overall customer experience. Carriers like T-Mobile rely on SaaS solutions from Salesforce or Adobe, Amdocs and others to quickly transform their customer experience while completing complex systems migration work.
In 2024, telecom operators will continue to focus on the use of SaaS as they strive to improve information access time. The market for new products, improved financial performance and business agility are all objectives to be achieved.
Unlock new network capabilities with APIs
Telcos will focus on exposing network capabilities through application programming interfaces (APIs) by unlocking information from 5G networks, giving more control over network programming managing domains such as quality of service and bandwidth.
As the industry has standardized APIs across carriers, telcos will need to consider whether they host their own API network or work with cloud providers. It is important to consider the components needed for an API network, including the necessary capabilities in terms of computing power, storage, databases and machine learning, to provide developers with an enhanced experience.
Improving carrier value by using the cloud to transform the potential of infrastructure networks
Many telecom operators are using the cloud to create more cost-effective networks that can reduce operational expense-to-revenue ratios by more than 10%.
The focus on cloud RAN will continue in 2024, and telcos will leverage the full benefits it offers, including greater efficiency, lower costs and lower energy consumption. CSPs like NTT DOCOMO and NEC Corp, for example, have shown they can reduce their energy consumption by more than 70% using cloud RAN.
In addition to cost optimization, the cloud also opens up new revenue opportunities for CSPs, such as updating product lines and their capabilities. It is also possible to create a globally distributed system, as Deutsche Telekom has done by combining its connectivity services with third-party connectivity, computing and storage resources. TELUS launched a smart home solution in 2023 that reduces the need to use multiple apps and simplifies the process of installing new devices.
In summary, it is important for telcos to evaluate and select the right cloud provider – their choice of partner will determine which generative AI capabilities are safe and appropriate for the business, the scope of cloud SaaS solution providers native, developer availability for their APIs, and the industry’s potential to build the next generation of execution capabilities. To stay ahead of the curve, telcos must remain agile and evaluate how these emerging trends and technologies can accelerate their business goals and prepare them for long-term success beyond 2024.