Chapter II: How are Indian telecom companies donning a 5G skin?

Telecom companies are at an inflection point witnessing a broad landscape of significant changes. There has been a business and customer model disruption, with technologies like AI, big data and the internet of things redefining service-delivery and value-capture models, while start-ups/OTT setting new standards for seamless customer experience.

With the pandemic staggering the world in the last two years, the recovery post pandemic has shifted the focus to supporting consumers and businesses through digital transformation and building an ecosystem that adds value. Consumers are heavily relying on bandwidth as activities like remote learning, work from home and gaming have become permanent.

With the telecommunication industry as a whole and telcos in particular being the backbone of digital services, it is imperative for them to move beyond connectivity and lead digitization from the forefront to support the growing demand for digital services. 

With the spectrum auctions taking place now, India can expect by the end of the year to join the ranks of countries with 5G telecom networks. It will also bring a radical change to the telecom sector in India. Telecom companies will need to reinvent themselves to stay relevant in the enterprise segment as they may face competition from non-telecom companies that could soon start offering their own 5G services focused on the enterprise segment.

The 5G standard for cellular networks has advanced the experience of communication not only due to reduced latency, better coverage, and energy savings but also by transforming various sectors and revolutionizing the functionalities of emerging technologies such as AI, AR/VR, edge computing, and the internet of things (IoT) in more than 70 countries where it has been launched. From self-driving vehicles to remote surgery, machine-to-machine communications, and smart cities, 5G will enable various new use cases in consumer and enterprise markets across industries. 

The entry of non-telecom companies into the 5G ecosystem will completely change the current shape and structure of the telecom sector. Further, the lines that separate businesses will become increasingly blurred as companies from IT to online retail are working on their own 5G solutions that will eventually compete with or complement telcos’ offerings. While Telcos will still retain their hold on retail customers, most also realise that the enterprise segment offers the bigger and more lucrative pie.

The prospect of future competition as well as the evolving needs of their enterprise clients is also making Telcos change the way they have traditionally operated. From being plain vanilla suppliers of bandwidth, they are transforming to business ecosystem partners. In their new avatars they will be providers and aggregators of private 5G enterprise services that include solutions in platform, analytics, security and more. 

Driving the demand for 5G solutions is the adoption of Industry 4.0 which is finally coming into its own as enterprises transform into “digital enterprises”. The convergence of AI, 5G and IoT require a deeper shift in investments, IT systems, operations, skills, and even organizations’ culture. Operators need to define a detailed vision of what the next-gen telcos will look like with some bold moves focussing on digital service models, improving cost and capital efficiencies. 

Indian telcos are better placed in terms of technology solutions than peers in many other geographies as a delayed entry into 5G has allowed them to leapfrog ahead. They have been experimenting with virtualization, ERP on the cloud, analytics and business intelligence, and other such approaches. At the same time, they had to respond to complexities when the COVID-19 pandemic pushed up data consumption by more than three times. 5G is tailormade to handle such types of data deluge. 

Telcos’ traditional Operational support systems/Business support systems (OSS/BSS) were initially not geared for a sudden data explosion. (OSS refers to the network architecture, software used, etc. while BSS deals with the service end components like subscriptions, billing, and notifications for retail and business customers.) 

Building broader functions

The increasing demand for platform-wide solution providers is pushing telcos to go beyond pure connectivity.

Some of these solutions are being developed and offered by the telcos while others are provided by outside, specialized service firms with the solutions integrated into the telcos’ platforms. This also requires a change in the OSS/BSS stack as the new systems need to be interoperable, agile and scalable. This shift is essential as the revenue growth through 5G will be directly related to the transformation of OSS/BSS systems. 

Telcos are also aggressively transforming their internal digital structures; processes are getting digitized through apps or various other digital touch points. Some of the big organizations are transforming their entire IT system with layered architecture where all lifecycle processes are automated in the backend layer; the middle layer is driven by virtualization with limited human processing; and the front-end enables seamless provisioning of services. 

Telcos expect 5G requirement to come from enterprises that increasingly require AR/VR for various functions, smart factory solutions, and private dedicated network solutions, among other things. 

Apart from the jump in demand, the investment required to provide 5G services makes it imperative for telcos to broaden their enterprise client business. Where retail customers used to drive fortunes, future revenue growth and profits will increasingly come from enterprise solutions.  

New tools of trade

To achieve sustained outperformance telcos should work towards creating an enterprise-agile operating model, digital first approach in building new businesses and customer experience and a lighter IT stack which is fully cloud native. 

Telcos are not only moving internal functions and OSS/BSS stack on the cloud – the shift was initially tentative because of privacy and data protection functions – but are increasingly looking at digitalization and virtualization and even ERP on the cloud. Over the next few years, all new services are likely to be offered only via the cloud.

Analytics is becoming the lifeblood for telcos with some providers setting up entire departments to measure and offer analytic solutions to organizations that need to segment customers, understand customer preferences and behaviour, as well as drive internal efficiencies in employee and retail productivity and network and partner performances. Analytics tools also help make network capex more predictive than reactive and in generating revenue. 

The future of the communications industry lies in embracing partnerships to create a marketplace that different entrepreneur and businesses can join, to gain the connectivity and resources that the CSPs can make available to them.

Security services are expected to be another major segment of business for telcos. With 5G, organizations will have more data to handle, and thus an increased need to strengthen privacy frameworks. As telcos invest heavily in their own security requirements like encryption, managing consumer data, and avoiding thefts, they are also beginning to offer these and other security services to clients.

Maintaining security has never been more challenging. Cyber threats have moved from attacks on individual institutions to attacks on the networks at large and the shift towards 5G is only accelerating the convergence of IT and operational technology (OT) thus introducing new vulnerabilities. 

5G presents an exciting open-source environment that no longer depends solely on the leading original equipment manufacturer (OEM) and vendor giants of the technology industry. There is a beneficial influx of other smaller companies who are deploying new technology in order to enhance the operating environment. However, it can also be an incredibly complex environment to navigate wherein the risks related to supply chain, legacy technologies, customer data and business processes and skill shortage must be proactively addressed to ensure a secure deployment. Further the main usage of 5G will also extend to private campus networks outside telco environment, thus accentuating the need to further secure the extended networks.

5G also requires telcos to revamp their network functionality. While software-defined networking (SDN) will help manage features from a centralized location, network functions virtualization (NFV) and cloud native platforms (CNF) will replace network hardware with software that can be scaled to meet 5G demands. Use of network slicing technology will increase as it divides a single physical network into multiple virtual networks enabling operators to deliver services based on each customer’s needs.

With 5G, the telecom sector will witness a need to expand into new capabilities and functionalities, which will then further propel customer needs and technological revolution that will continue into the 6G era when it comes.

The next wave of change in the telecom sector will be shaped by today’s leaders who can recognize the magnitude of change, act fast and with conviction to become the catalysts of the future.

Co-authored by Kunal Bhatia, Partner Cybersecurity, EY India.

(The article first appeared on ETCIO on 25 August 2022.)