News
Wholesalers need to undertake a painful but necessary transformation if they are to survive.
There were metaphors aplenty doing the rounds at Total Telecom’s Carriers World and IPX Summit this week, all of them somewhat ominous, which suggests that now might be a tricky time to be a traditional wholesaler.
Almost every one of those metaphors originated from Isabelle Paradis, president of consultancy Hot Telecom. Paradis knows what she’s talking about, so when she starts mentioning certain unsavoury things hitting the fan, perfect storms, and wild animals being caught in the headlights, it is time to pay attention.
"I’m surprised by how much traffic is dropping," Paradis said in her opening remarks at the IPX Summit on Thursday. "Some pure wholesalers are telling us they are seeing traffic drop by 20% this year."
Paradis said a perfect storm is gathering above the wholesale market, a cumulative effect of several smaller, disruptive storms:
- The IP and technology storm, caused by the evolution of networks, services and devices.
- The end user storm, whereby customers, not operators have control over the user experience and the consumption of services.
- The enterprise storm, stemming from the migration to the cloud and the promise of the IoT.
- And finally, the business model storm, which is forcing telcos to rethink the way they go to market, and how they interact with customers.
"Wholesalers are like deer caught in the headlights. They know they must do something but they don’t know how to react. There is a lot of fear in the industry," Paradis said.
Indeed, "in order to stay relevant, [wholesale] operators have to decide what is their role going to be," said Jorn Vercamert, vice president of voice at BICS.
Like Paradis, he listed various disruptive forces during a keynote at the IPX Summit, including new MNOs and MVNOs, OTT communications providers like WhatsApp and Skype, cloud providers like Amazon and Microsoft, new technologies, the IoT, and regulation. However, they also represent new opportunities for wholesalers, he said, as long as wholesalers are prepared to undergo the requisite transformation in order to capitalise on them.
"How can I become innovative? How can I become agile?" he asked. "These are painful questions because they call for a transformation."
BICS believes IPX holds the answers to these painful questions; it has already migrated around 20% of its installed customer base onto its IPX platform.
IPX promises a standardised way for wholesalers to deploy new services quickly. It enables interoperability and reach, and allows wholesalers to become more customer-focused. It can also support break-in and break-out from various legacy environments, Vercamert said.
"IPX in five-to-10 years will be a marketplace" for wholesale IP services, Vercamert said.
The industry needs to do something, because "the wholesale shit is hitting the fan," said Paradis, dispensing with the pleasantries during an on-stage interview with Frédéric Schepens, senior vice president of Vodafone Carrier Services, at Carriers World on Wednesday.
"Up to now, the wholesalers have seen their traffic still growing," she continued. "The pure wholesalers are really feeling the pain this year. They felt the pain in 2014; 2015 was better, but now, really, the OTTs…are all really having an impact with 4G coming in."
Indeed, going forward, Schepens expects OTT communications apps to become interoperable with each other.
"Let’s think about that. What if that really happens, and it probably will happen in the very near future? It’s going to have quite a big impact on our business," he said.
Schepens said industry players need to continue to invest in their networks, but also must look to partnerships with OTTs, and new technologies like Web real-time communications (WebRTC), for example – where voice, video and messaging capabilities are embedded into Websites – in order to ensure that "the opportunities are being tapped into by wholesale carriers."
Cloud services represent another major opportunity/threat for wholesalers, but again, in order to capitalise, it requires them to transform their businesses so they can go after enterprise customers as well as retail operators.
"You can’t ignore what’s going on," said Interoute CEO Gareth Williams, at his opening keynote at Carriers World.
According to Williams, 29.8% of enterprise applications and services are hosted in the cloud, and that is expected to rise to 43% in two years.
The uptake "is not quite as California wildfire or Australian bushfire as you might think…[but] cloud migration is definitely underway," he said.
He warned that wholesalers that ignore the cloud will end up like turkeys at Thanksgiving.
"At Thanksgiving, everybody is happy except the turkey," he said. "If you’re not going to play in this market, you will become increasingly irrelevant to your customers; you will be marginalised until you end up on somebody’s plate, and they will have a nice dinner."
Wholesalers might also consider getting into the content space, suggested Mike van den Bergh, CMO of PCCW Global, which focuses on carrying traffic to and from emerging markets.
"Operators are afraid of content, they fear the sector is already dominated," he said.
However, carriers can provide "all the content capabilities" to retail operator as a platform-as-a-service (PaaS), enabling them to build their own OTT video offering, he said.
This year’s Carriers World and IPX Summit showed that carriers are aware of the threats and the opportunities, and deep down they know what they must do in order to sustain their existence, and maybe even flourish.
They just need to get on with it.
"There hasn’t been a transformation yet. There has been a lot of talk about it, there have been a lot of people saying they are transforming, but personally when I talk to the different wholesalers, I don’t see a leap, I see maybe a little skip, I see a little jump," said Paradis.
"What needs to take place from my point of view is not an evolution but a revolution. Wholesalers need to rethink their businesses completely," she said.
It wasn’t all doom and gloom though: the second annual Carriers World Awards took place on Wednesday. The winner in each of the 12 categories was decided by a vote, and more than 20,000 individual votes were cast. Click here to find out who the lucky winners were.
