For many years, telcos have been careful not to be labeled only as connectivity players. "Connectivity" is often linked to negatively perceived terms such as "dumb-pipe provider," whereas of course devices and applications developed by companies such as Apple, Amazon, and Google are seen as being innovative, exciting, and new. But telcos must recognize that broadband and mobile data is their primary role in the future of the digital consumer and this must be a role that they look to embrace, not shun. After all, by 2023 the consumer broadband and mobile data markets will be worth $800bn on a global basis, which is bigger than the combined markets of OTT video, digital music, digital gaming, smart home, and digital advertising. Of course, as broadband and data markets start to saturate, it is imperative that telcos do look to generate new revenues beyond connectivity, but they can only do so by first delivering a best-in-class broadband experience.
This investment will serve to strengthen the telcos' position, especially in the home which is where typically 80% of digital content is still consumed, which will enable them to move into new markets to search out new growth potential. This can include high-growth areas such as OTT video, smart home, and digital gaming, but telcos are also well positioned to deliver a next generation of broadband value-added services that will take the concept of the connected home to the next level. Cloud-based AI data analytic platforms enable highly efficient operations but also pave the way for a more modular and personalized broadband service.
Figure 1: Developing new business models on the back of advanced home Wi-Fi investment
The exciting bit is that the broadband experience is now so highly prized by the consumer that such services can also be charged for, as the following examples show (though not all are broadband service providers): Plume (a home Wi-Fi vendor that sells its products on a retail basis as well as working with a number of telcos) charges $60 per year for home Wi-Fi support and advanced features; Telstra in Australia charges A$15 (approximately $10) per month for premium technical support; and Comcast has recently launched a whole-home cybersecurity subscription service for $6 per month. All are services that command an ARPU not too far off from say a Netflix or Amazon Prime subscription, and all can easily be provided under a telco's own brand. The challenge will be getting high enough customer penetration of such services to make a big enough difference to the top line. However, using greater targeted marketing capabilities, some market pilots are already starting to see signs of early success.
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