CSPs Caught in Complexity Death Spiral

Communication service providers (CSPs) are failing to handle new subscriber complexity, and they'll be the first to admit it. But one vendor says their inability to manage this complexity could spiral out of control and erode profits in the next two to five years.

"The future state could be very dire for [CSPs] as nothing more than dumb-pipe connectivity," warns Mike Manzo, CMO of Openet Telecom Ltd. "And it's not that far in the future."

The Service Provider Information Technology (SPIT) specialist teamed up with the CMO Council , a group of 5,500 C-level execs, to survey 212 senior professionals and conduct in-depth interviews with wireless operator executives, who essentially admitted they didn’t have a clue when it comes to the data-driven customer experience.

Eighty-three percent of the respondents said they need to gain a better understanding of the network resource and support challenges they face as devices and new services proliferate.

That's because the operators are focusing on traditional infrastructure and operational requirements when they should be focusing on the customer experience, says CMO Council Senior Vice President Derek Kober.

"They are working on a commodity, utility basis where they aren’t in sync with the reality of an on-demand, segmented user base," Kober says. "Support for new devices and pricing are their main priorities, whereas we feel they need to look much more at granular customer experience issues as opposed to tactical support issues."

Nearly half of the CSPs surveyed said if this complexity around bandwidth needs, new devices and pricing is left unmanaged, it could spiral out of control, making the optimization of the customer experience unattainable. And, as a February report from Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) also suggests, it will lead to dwindling profits for CSPs that can't adapt. (See Mobile Data's Doomsday Scenario.)

The importance of SPIT
Openet admits it has a big dog in this fight with its policy management software suite. But it's also a message Light Reading has been highlighting with its focus on the increasing importance of Service Provider Information Technology (SPIT) and the trend towards Bridging the Chasm. (See Openet Upgrades Policy Management Suite, Waking Up to the Power of SPIT and The SPIT Manifesto.)

Of Openet's respondents, 72 percent said there was poor alignment between marketing, sales and IT. And, while some have merged their CIO and CTO roles at the top level, Manzo says the rest of the organizations remain in silos with policy and charging managed by two separate divisions.

As a result of this approach, 81 percent indicated they struggle to launch and provision new services quickly and cost effectively, causing them to lose out to more agile companies such as Apple Inc. (Nasdaq: AAPL) and Google (Nasdaq: GOOG).

"Everyone agrees with this stuff, but you go to try to drive change within an operator, 50 people can say 'no' to anything and no one can say 'yes,'" Manzo says. "Change doesn't happen rapidly, and nothing proceeds quickly."

So what should these CSPs be doing to move forward? Manzo and Kober suggest seeking new sources of revenue by partnering with over-the-top companies instead of ignoring or competing against them. In terms of pricing, they can also explore segmented offers and promotions, improve their subscriber management and tracking capabilities and offer more personalized user experiences. (See Verizon: Turn Tiers to Smiles.)

Manzo also recommends smarter service tiers, addressable advertising, loyalty campaigns, parental controls, congestion management and fair usage policies. But, mainly, he advocates doing something before it's too late.

"The issue to me is partly lack of innovative ideas, but that's not the biggest issue," Manzo says. "The biggest one is inability to act or move quickly. It's a cultural shift that needs to take place to contend with the legacy infrastructure."

— Sarah Reedy, Senior Reporter, Light Reading Mobile