Are US Telco’s The Next Industry To Topple?

The global telecoms industry is being challenged by a wave of innovative startups - where do they go next?

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The global telecoms industry is being challenged by a wave of innovative startups - where do they go next?


Are US Telco’s The Next Industry To Topple?

The global telecoms industry is being challenged by a wave of innovative startups - where do they go next?

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The telco industry finds itself in the centre of a media maelstrom, as a new wave of ‘unlimited’ pricing wars has swept the US market once again.

Without surprise, the big four wireless companies have made headlines with new plans attempting to compete on price, but this time even smaller players like US Cellular and content providers such as Comcast have jumped into the fray.

The business model is problematic and short-lived at best, and at worst it has the potential to completely derail the telco industry. Margins remain tight, and there is only so much leverage to be found when trying to compete with pennies on the dollar.

The implication is that Telcos who continue cut-throat pricing battles are also not addressing the problem of brief customer loyalty, as customers flit from one network to the next, whichever one is offering the best deal.

Another factor is that unlimited data puts, even more, pressure on strained networks as the appetite for data continues to increase. As industry analyst Chetan Sharma told Bloomberg last month, “in an all-you-can-eat data market, total wireless traffic is expected to grow at a 70-80% annual rate, up from 50-60% now.”

All carriers, particularly those who have made a name on network capacity, face additional overhead from expanding their networks to cope.


Networks are coming under pressure from unlimited data offers

These Telcos run the risk of overextending with their unlimited data offerings, and it won’t take long before customer complaints are at an all-time high as data speeds are throttled and consumer mobile service expectations are disappointed.

On the telco side, data offerings are being devalued and customers have no input into deciding for themselves what is valuable to them and what is not.

The Devaluation of Data

Perhaps most interesting is what is motivating Telcos to devalue their most prized offering - data. By taking one of the key cornerstones of their service and turning it into ‘unlimited,’ they are essentially saying it is a throwaway commodity.

Most consumers have no real understanding of how much data is used to power their apps and services, making it hard to extrapolate that into how much data they really need in their plan.

In this aspect, competing for unlimited data offerings only appeal to the customer’s instinct to take as much data as they can get at the lowest price, without placing any real value on the service.

On the positive side, this gives Telcos a big opportunity to compete smarter by providing better awareness of the value of data to customers.

In a world where you can customise your coffee, your sneakers, and pick what music you want in your Uber, customers expect highly granular control over what they buy and relish in individualized experiences.

If Telcos could offer the same level of choice, control and individualization – it would provide that differentiation needed to give them levers to attract and retain customers other than price.

When the consumer can place value on their mobile experience - much like you would when walking into a grocery store and choosing an item based on cost, size and ingredients - she can determine how to best buy and use data services.

In effect, customers want to manage their own budgets, and ‘go shopping in the data store’ - they dislike the impersonal ‘one box, one price’ approach of today’s data plans, and expect a full retail experience from their telco.


Customers are getting used to a lot of choice

Smart Telcos know that the next frontier for competition is customer experience, and they’re planning to personalize services to unique customer needs, whatever they might be or whenever they’re needed.

For example, what if rather than the typical US family share plan that requires additional cost for each individual line, mom and dad could own a data pack and share it with their children only when they see fit?

Like on that long road trip to grandma's. And then stop sharing during the family dinner. In this scenario, sharing becomes a service that is controlled by the customer and therefore has more value.

Finding a Way Back to Value

Retailers, social media, and app companies live and die by their number of active users.  In today’s noisy market of price wars and unlimited plans, some Telcos have forgotten to listen to their customers.

People use their smartphones 150 times a day on average, giving telcos the opportunity to engage hundreds of times a day with each customer. To take advantage of this, they must transition away from the old-school perspective of a utility company delivering the exact same service through every pipe.

There are examples of mobile operators outside of the US who are doing this well. Two Degrees lets customers pay for data via the amount of time they use it.

The company’s thinking is that, while customers may not understand data in terms of megabytes and gigabytes, they do understand time, and time is precious to them.

In Australia, Telstra completely turned around customer perception by providing more customer control and insight over data usage, helping increase the company’s Net Promotor Score by 23 points.

That counts for a lot in an industry where NPS scores are very low and sometimes in the red.

These mobile operators have proven that a new approach to data can, in fact, improve customer experiences, increase loyalty, build longevity and - ultimately - change an industry. U.S. Telcos understand the price competition has an expiration date.

To move forward, they must be willing to reimagine themselves as not just a gateway to the consumer mobile experience, but the most pivotal relationship within it.

Jennifer Kyriakakis, Founder and VP, Marketing of MATRIXX Software.

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Are US Telco’s The Next Industry To Topple?

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