A quiet revolution is happening in the telecoms world. We are moving on at a meteoric rate from a fixed-line universe to a digital one, in which the stationary telephone is quickly going the way of the fax machine, the VCR and the boom box – soon to be obsolete. I recently received a business card from a young man with his own business, and only his cell number was on it. Out of curiosity, I asked about the office number. He informed me he has no office phone, and, moreover, no home phone. Everything through the mobile. Hello, Brave New World.
The tradition of pay for TV is also a core element of our business, and is undergoing change. Watching something on demand – viewing what you want whenever you want to – is being replace by a revised ‘on demand’ service, meaning people can view on whatever device and wherever you happen to be at the moment. You could be watching Game of Thrones on your tablet while you’re on the commuter train to work, for example. The TV has nothing to do with it (see Fig. 1).
You could be watching Game of Thrones on your tablet while you’re on the commuter train to work, for example. The TV has nothing to do with it
Moving with the times
What does this mean for telecoms companies? How do we prevent ourselves from going the way of the dinosaur? As the head of Rostelecom – Russia’s largest telecommunications corporation – this question is consuming quite a lot of my time at the moment, and I wanted to share some thoughts with you. The first is that we are seeking growth not within our traditional markets, but by expanding into new segments. Breadth is more important than depth at the moment. Polaroid failed to explore other areas of business. Kodak did not move from film-based products, and the results are well known. We are looking at the full spectrum from content creation to management and delivery, as are our counterparts internationally. This means increasing M&A activity in the sector, and we are no exception.
Last year, we merged our mobile assets with Tele2 to create a mobile services provider, and at the end of 2015 we entered the Moscow market – where there are, on average, two SIM cards per inhabitant – to great fanfare. We have created a serious rivalry to the traditional options, by offering, among other things, much more competitive pricing, some 25-50 percent lower than before. We recently announced a partnership with the South Korean company GS Home Shopping, to create a Russian analogue to the highly successful Home Shopping Network. Ours will be called Boom TV, and will launch at the beginning of 2016.
We are also pursuing deals in the fields of data storage, digital television and more. Of course, when it comes to capturing the viewing audience, content remains king. Amid the exponential growth in the choice of outlets to view content – television, cable, satellite, subscription services, video-on-demand and so on – we find a genuine dearth of original material. Now we are looking at the whole chain of supply for the audience, from original or adapted content to its distribution to new technological options.
The second point I’d like to make is that we must move toward a services-based model and away from one that is technology based. As an integrated services provider, we are offering our clients not only the technical capacity for high speed internet and calling, but also a full range of digital services. Some examples are that we are already working with Big Data, creating centres to accumulate information of value to a wide range of businesses about the behaviours and needs of consumers. Cloud technology enables us to offer easy and vast storage for businesses, making them more globally integrated and flexible.
Over-the-Top video offers us a potential change in the model for video streaming by allowing us, as the provider, to transfer content directly to the customer. Geodata will enable us to monitor and effectively use resources, such as reservoirs and arable land as well as to manage transport infrastructure, like railroads and shipping. The Internet of Things (IoT) will allow everything in our lives to communicate, which opens up huge potential in the industry. Today, your DVR studies your habits and records programs it thinks you will like, based on prior behaviour.
Tomorrow, your refrigerator will talk to your car, which will be driving itself to restock bread, eventually – although you will have to eat the bread yourself! And that will all be paid for without a single bill changing hands using mobile-based payment systems that are already available in the marketplace. This interconnectivity will also permeate the Industrial IoT, managing economic and production processes without human involvement. The McKinsey Global Institute estimates that by 2025 the IoT will contribute up to $11.1trn annually to the world economy. Accenture estimates that, by 2030, the Industrial IoT will contribute some $14.2trn to global manufacturing, increasing the world’s GDP by 11 percent. Are you listening, shareholders?
The third point, is that we are moving toward a world where the customer is in danger of being overwhelmed by technology and its limitless potential. Young children today touch every screen, assuming it will respond to their fingertips on demand. But there are generations of people being lost in the wave of inventions, apps, gizmos and gadgetry, and it will be decades before that brand new generation of super-savvy tech babies are running the world. Simplifying the process – and our message – to the public is part of the winning strategy. Technology as your friend, not your frustration.
We need to be able to win over the millennial, who is known to be super savvy – but may not have extra money for an expensive cell phone plan – as well as the middle-aged manager who may not use social media or apps, but needs a fast internet connection to work from home and convenient home viewing of their favourite movie when that work is done. This requires a much higher level of customer relations in a much more competitive field, where services can be bundled to become even more attractive both in terms of price and convenience.
For example, offers of pay TV and home internet are becoming increasingly intertwined, and the customer reaps the benefit. Catering to very specified segments – focusing not only on the majority groups, but digging deeper toward the ‘long tail’ is the challenge for us today.
We are closely examining specific applications of new technologies in an array of areas. Here, we have played a large role in digitising government services – everything from paying your taxes to getting a parking pass. The medical industry is becoming increasingly mobile and integrated, with medical records and diagnostics becoming remotely accessible. In Russia, even the educational process has been modernised to the point where college entrance exams are scanned in the classroom, immediately scored, and the results posted online for each candidate to see within a matter of days, together with all of their test materials.
In every nook and cranny of our modern lives, we see the potential for the implementation of technology. This is good for companies, customers and for business. The requirements of today’s market are for a company that is quick to identify the next wave of technological breakthroughs, and develop platforms for using them. Right now in Russia, there is a common understanding that we need to be developing our own technologies – operating systems, payment processing, cell phones and so on. We have an excellent pool of IT experts that is the envy of many countries, and our programmers and engineers are in high demand worldwide. We must be quick to identify new opportunities and develop workable, competitive products using these significant resources.
Rostelecom is a state controlled operator, employing some 150,000 people. It has many rich traditions that are positive, and the company remembers the thousands who laid cable in the harshest Siberian winter with great respect and love. While preserving the core standards and values of a large blue chip company, we need to learn to behave like a startup – quick to respond, creative in our thinking. This means introducing new management mechanisms which reward innovation over fulfilling the annual plan, which encourages each and every employee to embrace a new way of thinking and behaving. It’s the kind of operational transformation that will allow us to evolve with the times, and even set the trends.