Telcos are Dead, Long Live Telcos

The telecommunication landscape has undergone significant transformation in recent years, driven by digital disruption, increased competition, and evolving customer demands.  

But a strange phenomenon no one talks about today, is that in an information and data-addled world, the companies who provide data and voice connectivity make the least percentage of profits to come from their industry. A simple explanation is that telcos today are utilities, and comparing their profits to other utility companies is a good way.  

I would posit it is a flawed explanation. No other utility company has the ability to turn on additional revenue sources on a dime, and yet, most telcos globally are still not pressing the button to enable CPaaS in their sales mix.  

Telcos have unparalleled communications infrastructure, which is now becoming stronger with growing 5G deployments. This is complemented with a solid enterprise brand, strong business relationships, deep sales organizations, strong brand recall and customer trust.  

While speaking to C-Suite executives at Telcos globally over the past few months, the following issues plague their decision-making process: 

1. Lack of software development capabilities: Developing and maintaining a CPaaS platform requires an elevated level of technical expertise and knowledge in cloud computing, APIs, and various communication protocols. This is not an area of expertise for Telcos.  

2. Cost of development: Building a CPaaS platform involves significant upfront investments in research and development, infrastructure, and technology and is a multi-year project for any organization. Telcos are reluctant to make such investments, especially if they are uncertain about the potential return on investment. 

3. Market competition: The CPaaS market already has well-established players with feature-rich and mature platforms. Entering this competitive space by creating their own solutions will be challenging for telcos.  

4. Time to market: Developing a CPaaS platform from the ground up can be time-consuming. Telcos may be concerned about the time it takes to build and launch a competitive solution, during which the market landscape could change significantly. 

5. Focus on core competencies: Some telcos may prefer to concentrate on their core competencies, such as providing reliable network connectivity and traditional communication services, instead of venturing into new, unfamiliar territory. 

6. First Mover vs Matching up: Telcos are generally more concerned about what other competitors are offering and emulating that rather than offering what is required for enhanced customer engagement & experience 

While keeping these challenges in mind, the reality remains that voice, data and SMS markets in most developed countries has matured, and growth/challenger markets are yet to deepen in a way where revenue growth assumptions can be made reliably. 

In sum, telcos are facing challenges on different fronts that are impacting their growth and profitability. One of the most significant threats is the rise of Software as a Service (SaaS) products and over-the-top (OTT) services, which have disrupted traditional revenue streams for telecom companies. As a result, most service providers are confronted with significant challenges.  

Some common areas of concern shared by telcos include: 

• Loss of Revenue: SaaS and OTT providers offer a wide range of communication services, such as messaging, voice, and video calling, which were once exclusive to telcos. As these providers gain traction, telcos experience a decline in revenue from traditional communication services, such as SMS and voice calls. 
• Higher Costs for Clients: In many cases, clients end up spending more per unit of communication when using SaaS and OTT services compared to working directly with telcos. This trend is primarily due to the additional features and convenience offered by SaaS products, which often come at a premium. But no one is doing the math if these features offer additional value to customers. 
• Increased Competition: The proliferation of SaaS and OTT services has led to heightened competition in the market, further exacerbating the pressure on telecom companies and service providers. This competition forces telcos to invest in innovation, marketing, and customer acquisition to maintain their market share. 
• Customer Churn: As customers are attracted to the advanced features and seamless user experiences provided by SaaS and OTT platforms, telcos face the challenge of retaining their customer base. Customer churn can have long-term implications for telcos, affecting their profitability and reputation. 
• Adapting to Market Changes: The rapid pace of technological advancements and changing customer preferences make it crucial for telcos to adapt their offerings and stay relevant. This need for constant innovation and evolution can strain their resources and present significant operational challenges. 

We have a pretty clear understanding of the challenges being faced by service providers globally. So how do we help Telcos move from here? As someone who’s worked with Telcos for over two decades, I have been looking at these challenges over a period. And while Telcos have continued to grow, digitisation’s pace has, in my view, left them behind.   

We built EnableX as a true solution provider and enablers for telecom companies from the beginning, and every day, we add more capabilities to our platform to make the offering more aligned to the thought process and GTM for Telcos. 

The Power of CPaaS for Telecom Companies & Solution Providers  

By adopting CPaaS, telcos can offer a range of communication services, including voice, video, SMS, and messaging APIs in the enterprise market. They can also innovate quickly and expand their own service portfolios and adapt to the ever-changing market dynamics. 

Driving Revenues 

A report by Synergy Research Group found that the CPaaS market is growing at an annual rate of 40% and is expected to be worth over $25 billion by 2025¹. By integrating CPaaS into their offerings, telcos can tap into this lucrative market, diversify their revenue streams, and improve overall profitability. 

A CPaaS platform offering communication APIs for different channels of communication opens the entire developer market for Service Providers – a segment that Telcos have traditionally not addressed or catered to in the past.  

Telcos should therefore accommodate this buying power of developers, by offering their assets in a developer-friendly environment. Given this landscape, it makes sense for an aggressive telco CPaaS play.  

Deepening Customer Relationships 

As customers increasingly demand seamless, personalized communication experiences, CPaaS enables telcos to meet these expectations, fostering long-lasting customer relationships. A study by PwC revealed that 73% of consumers consider a positive customer experience as a key factor in influencing their brand loyalty². By offering tailored communication solutions through CPaaS, telcos can enhance customer satisfaction and promote loyalty. 

The table below shows a clear path to revenue and its impact on customer relationships when Telcos integrate a true CPaaS solution into their product portfolio.  

EnableX CPaaS: Empowering Telcos to Excel 

In an era of rapid technological advancements and shifting customer expectations, CPaaS serves as a powerful tool for telcos to innovate, drive revenue growth, and foster enduring customer relationships. By leveraging EnableX’s comprehensive CPaaS offering, telcos of varied sizes including local service providers, MVNOs etc. can capitalize on the growing market opportunities and strengthen their position in the competitive landscape. 

Ready to transform your telco with CPaaS? Schedule a demo with EnableX and discover how our platform can help you unlock new revenue streams and deepen customer relationships. 

Sources: 

1. Synergy Research Group. (2021). CPaaS Market Forecast  

2. PwC. (2018). Experience is everything  

About The Author

Pankaj Gupta

Pankaj, CEO of EnableX, is the driving force behind the company’s strategic focus since its inception in 2017. He is a serial IT & Telecom entrepreneur with more than 20 years of proven experience in building successful businesses in the APAC market. He led his last venture, ConferIndia, for more than 10 years, building it into one of the most successful collaboration services companies in India, before it was acquired by Arkadin, an NTT Communications company.

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