Sinking telecom industry issues SOS at TM Forum bash

Telcos gathered in Copenhagen last week to moan about their financial predicament, but none seems to have the answer.

Iain Morris, International Editor

June 24, 2024

6 Min Read
TM Forum CEO Nik Willetts at DTW 2024
Like Jack Nicholson in 'A Few Good Men,' the TM Forum's Nik Willetts has declared a code red. But can he handle the truth?(Source: Iain Morris/Light Reading)

In the Hans Christian Andersen fairy tale, the little mermaid painfully transforms into a human before she is depressingly rejected by the man she loves. If the Danish author had been writing it as a telecom allegory, she would have spent years flapping around on the beach, all scales and no legs, in some "code red" transformational failure, as Nik Willetts, the CEO of the TM Forum, might describe it. The prince of the story – a stand-in for analysts or investors or even customers – would be watching from a safe distance in horror.

Telecom types attending the TM Forum's latest shindig were in little mermaid land. That's partly because the event was hosted – appropriately enough but seemingly for the last time – in Copenhagen, where a famous statue of the little mermaid acknowledges the cultural impact of the Danish author.

More importantly, what started out years ago as a nerdy gathering of IT people involved with telecom's business and operational support systems (B/OSS) has mutated into a monstrous trade show with several thousand attendees and transformation as its overarching theme. The TM Forum even calls it Digital Transformation World, slapping an "Ignite" slogan over event banners for added impact.

But nobody is very optimistic about industry transformation. The data connectivity market matured years ago. After an adolescent growth spurt when people were first signing up for mobile and broadband contracts, telcos are in that late-middle-age period of health niggles and shrinkage while younger specimens overtake them. Networks are as important now as ever, operators insist. The same could be said about a water utility with creaky pipes.

Old telcos, new tricks

On the plus side, there is less denial of the industry's crisis. "Nine months ago, I stood on this very stage, and we called code red for this industry," said Willetts during a keynote presentation at DTW. "We all know the facts. The digital economy grows three times faster than the non-digital. By 2030, 30% of global GDP will be digital. And meanwhile this industry – an industry that is the very backbone of that economy – struggles to keep pace with inflation."

Unfortunately, no one has come up with an answer. Senior executives on the technology side talk in abstract terms about "platforms" rather than new services or business models that would spur sales growth. Some equity analysts are baffled by chatter about network application programming interfaces (APIs) as a commercial opportunity for telcos. Figuring out how it could boost sales means examining a complicated flow chart of the steps that need to happen.

An easier-to-comprehend initiative is BT's "New EE" overhaul. The UK telco has spruced up its customer-facing app, turning it into an online store where anyone, not just EE customers, can shop for all manner of digital products and services – a new set of headphones, say, or a low-latency broadband service while Fortnite avatars are splattered across smart TV screens.

But skepticism is widespread. How can a UK telco posing as an e-commerce venture successfully compete against Amazon when so many retailers have failed? Around 10 million people have already created IDs on the new app and BT expects to hit 15 million before long, said Marc Allera, the head of BT's consumer business. Yet this growth has evidently made zero difference to revenues, which rose just 1% for the fiscal year ending in March.

The real difference is likely to be found in costs. Back-office systems at most "brownfield" telcos have accumulated like fatty deposits, leading to a bad case of digital bloat. Where the TM Forum has been helpful is in developing blueprints for these systems to ease changes and scrappage of legacy. "The starting point was measured in 2,465 apps and that was in 2022," said Campbell McClean, the newish chief technology officer of BT Digital, the part responsible for IT.

"This year, we're at 1,722 at the last count and have turned off a third of the estate," he told Light Reading. "We have a clearly articulated target architecture strategy called D250, which is a set of 250 strategic apps, broadly cloud native or software-as-a-service, and our target is to reach that in two-and-a-half, three years."

Saving telecom

Yet all this still leaves BT and other telcos as pure cost cutters, seemingly on a downward sales spiral. The industry still obsesses about any new technology buzzword when there are few obvious commercial benefits. Incessant babble about artificial intelligence (AI) is the latest manifestation of this trend. The tech, say telcos, could improve sales by helping them tailor services to customer segments and quickly tackle looming problems. That should then reduce churn. But once every telco has piled in, none will have the edge.

At least 5G – these days criticized for being a massive let-down – was conceived by the telecom sector. Generative AI, by contrast, has been foisted on telcos, among others, by a cluster of tech billionaires and their Big Tech sponsors. Apart from them and Nvidia, with its AI chips monopoly, nobody is making any money from generative AI. To investors who have seen bubbles inflate before, AI looks frothy.

Even Big Tech, though, seems to have caught the telecom chill. Rocketing attendance at DTW in recent years has been attributed by some regulars to the growing presence of AWS, Google Cloud and Microsoft Azure, all of which are pursuing telcos as tenants of their public clouds. But the telco appetite has looked weak. News of a reported 1,500 layoffs at Azure for Operators serves as evidence. Affirmed and Metaswitch, developers Microsoft bought in 2020, are apparently being gutted as the software giant quits the network applications business.

The basic commercial problem telcos face is no different from that of other mature businesses. Once everyone is signed up to a banking service, or even booked in for the regular weekend slot at the local pub, growth is inevitably more difficult. But the industry practice of selling unlimited data usage for a set monthly fee has not helped its plight, as recognized by at least one senior technology executive at a huge operator.

"One thing I would say is the telco industry historically has had these all-you-can-eat business models and I think the world is moving more toward consumption-based business models versus all-you-can-eat business models and so we're going to have to adapt to that reality," said Jeremy Legg, the chief technology officer of AT&T. 

Arguably the simplest solution, in principle, this would undoubtedly be hard to execute. But something dramatic is needed. "The reality is that our return on investment, our growth, is not good enough, and we can't be happy with where we are as an industry at the moment," said Kim Andersen, the chief technology officer of Australia's Telstra, in a DTW call to arms. "We need to reinvent this industry and save this industry." On that, all DTW attendees can agree.

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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