Are telecom operators the turkeys of the digital transformation farce? While the internet sector as a whole grew by 7% per year between 2015 and 2020, telecom operators’ connectivity services only grew by 2% over the same period.
In its 2022 report, the Future of Telecom Operators Commission, from the think tank Digiworld Institute, drives the point home. She notes that players in this market are facing stagnant revenues and declining margins, even as the explosion in data volume with the digital revolution is forcing them to maintain a high level of investment in their networks, in particular with the deployment of fiber and 5G.
According to a study by Arthur D. Little commissioned by the French Telecoms Federation (FFT), the level of investment in the telecoms sector in France reached, in 2021, a historic level of nearly 15 billion euros. , “the equivalent of 900 new colleges, or 150 hospitals”
The cuckoo clock strategy of GAFAM and OTT
However, according to the cuckoo clock strategy, the GAFAMs and OTT (Over The Top) platforms, such as WhatsApp or Netflix, monopolize most of the value and bandwidth, without participating in this massive investment in modernizing the network. The monetization of new uses is pre-empted by these “Big Tech” while the growth prospects of operators are based above all on the increase in the number of subscribers.
While the Covid crisis has highlighted the crucial role of operators, this has not translated positively in terms of market capitalization. “Capitalizations lack optimism, and access to capital at excessively high rates limits investment in innovation or in the acquisition of new talent”, observes Digiworld Institute.
How then to get out of this vicious circle? The think tank outlines a few tracks. The first is to offload assets to reduce debt or finance future investments. The new director general of Orange, Christel Heydemann, intends to refocus the group’s activities and put an end to the diversification initiated by the previous managements. The OCS channel package and the Hello bank! could come out of the operator’s portfolio.
An operator can also pool or transfer its infrastructure. After selling its telecom towers in France and Portugal, Altice would like, according to L’informé, to sell 92 data centers of its subsidiary SFR. At the end of November, Bouygues Telecom announced that it had sold 2,166 pylons in France to a specialized fund, Antin Infrastructures Partners, for 205 million euros.
Innovative services in the cloud or metaverse
Conversely, an operator can choose to maintain the integrity of its model by combining part of the infrastructure, the network layer and the distribution of connectivity and communication services. It can thus offer a wide range of services, meeting the needs of different customer segments. Orange, Verizon, Telefonica or Vodafone would have embarked on this path.
The “100% Tech” approach consists of an operator capitalizing on its network skills to offer new value-added services. On the B to C market, we can cite streaming subscriptions, cloud gaming or the development of the metaverse. In B to B, an operator can surf the collaborative trend (videoconferencing, virtual reality conferencing, etc.) or the cloud (CPaaS, Edge computing). NTT or Colt follow this approach.
For the Digiworld Institute commission, “these different scenarios will co-exist depending on the strategy of the operators, their respective assets and the regulations. Each operator will be able to adopt a differentiated strategy globally and/or by geographical area”.
A new favorable European regulatory framework
In fact, the report recalls that the market benefits from a new favorable European regulatory framework. Certain measures of the Digital Markets Act (DMA) could allow operators to gain independence from Big Tech and circumvent them. They could for example have the possibility of launching cloud services based on 5G, or of offering their own application stores (app stores).
After the DSA and the DMA, the European Commission would like the GAFAMs to also contribute to the infrastructure costs incurred by operators and Internet service providers (ISPs). A position shared, of course, by the FFF. It is necessary, according to the federation, to restore conditions of fair competition between the actors of the digital ecosystem.
“The major platforms should be asked to finance the networks they use and which operators are forced to size to avoid saturation. The solution chosen to achieve this “fair share” must “obviously be fully compliant with the rules of net neutrality, in order to guarantee an open and non-discriminatory internet”. The FFT also calls on public players to support the investment effort of operators, “via the alleviation of regulatory and fiscal constraints for the deployment of new infrastructures”.
Finally, the European Union’s desire to recover its sovereignty over its digital infrastructures will benefit national operators. The creation of a resilient European submarine cable network or the development of a sovereign cloud with the Gaia-X initiative are part of this challenge.