Analysis Smartphones have transformed everyday life. Devices loaded with apps for productivity, entertainment and wellbeing have driven an enormous surge in mobile data. Over the past eight years, data volumes have increased roughly 24-fold while the price per megabyte has dropped by more than 95%. Few industries have seen such rapid cost declines in such a short time.
So where to from here?
Traditional mobile industry business models are under severe pressure. Voice and legacy services that once commanded high prices are no longer sustainable. In the past, a minute of voice could cost over 30p; today, modest revenue growth often requires heavy capital investment—typically 10% to 15% of total revenue—to expand networks and services.
Yet the industry has made significant progress in recent years. Widespread 4G rollouts, streamlined operations, mergers, network sharing and automation have driven costs down. Smartphone adoption has matured, which has moderated the explosive data growth seen earlier. There are natural limits to how much data a single user will consume on a handheld device. Evidence of renewed operator confidence can be seen in the rollout of uncapped data plans in many European markets. Operating margins have improved and returns on capital are moving back toward sustainable levels.
Time for strategic decisions
The sector now stands at a strategic crossroads. Service providers face a choice: continue competing as low-cost operators that rely on scale to drive profits, or position themselves as platforms that enable new digital industries. The falling cost per GB, helped by 5G efficiencies, makes the low-cost, high-volume model viable for many operators.
Alternatively, providers can become the foundation for significant industrial and societal transformation. Demand for private and enterprise 5G solutions is already strong, even before full commercial rollouts—unlike earlier generations where infrastructure rollout largely preceded demand. 5G can unlock new products, capabilities and business models while improving efficiency. Smart cities can deliver better citizen services; Industry 4.0 can become greener and more productive; renewable energy can be managed with intelligent grids; connected vehicles can optimize traffic and improve safety; and eHealth can broaden access to care and improve outcomes.
The key question is how operators should engage with these industries. Trying to own every part of the value chain is risky—customers and industry players often prefer to pursue their own paths when constrained by a single supplier.
The benefits of a partnership model
Serving many different industries requires a broad set of capabilities. Building a healthy ecosystem of partners makes it easier to address diverse customer needs. Partner-based models combine the vertical expertise of system integrators, software vendors and consultancies with the network and platform strengths of service providers. Large technology companies have shown the power of this approach. For example, Microsoft’s partner network, with tens of thousands of members, has been a major factor behind rapid Azure growth, helping that cloud platform scale quickly and generate substantial annual revenue.
The network as a platform
For operators to succeed as digital enablers, they must adopt cloud-native principles and open architectures. Traditional provisioning and service management approaches are too slow and rigid for a world of fast-moving digital services. Open APIs and modular interfaces reduce friction and invite innovation from a wide range of partners, enabling them to build and monetize new products rapidly.
In a platform-driven model, innovators develop smart, connected devices and services that integrate with an IoT platform through standard interfaces. Network slicing and quality-of-service controls ensure that each application receives the performance and reliability it needs. Provisioning, onboarding and lifecycle management of devices are handled through APIs that link the network platform with a product provider’s internal systems—billing, customer management, product lifecycle and supply chain systems—while also allowing the integration of relevant external data sources such as weather or location intelligence to enhance functionality.
A bright future
Today’s operators have a unique opportunity. Advances in technology have dramatically reduced costs, and new business models can create additional revenue streams. The world is becoming increasingly smart and connected; the era of isolated, offline products is ending. Telecommunications companies must adapt their strategies and organizational approaches to remain relevant.
To capture the upside, telcos should embrace openness, build partner ecosystems, and invest in cloud-native, API-driven platforms. By doing so, they can support innovators, win trust, and participate in the transformation of industries ranging from manufacturing to healthcare. With improving margins, better returns on investment and growing demand for 5G-enabled applications, the industry is well positioned for a productive and innovative future.