How can telecom companies increase revenue? A guide to new revenue streams for telecom operators

22nd November  |  
13 minutes
New revenue streams telco

It is increasingly clear that the traditional telco business model is coming under pressure. The voice and data minutes businesses are now commoditised, and telcos must look elsewhere to drive revenue. As a result, leading telcos are experimenting with plays in vertical business segments, innovative technologies, and new routes to market. We are witnessing the evolution of telecommunications and telco business models as carriers seek to unlock new sources of value and win new customers.

In fact, telco innovation is everywhere in evidence. Globally, telecoms leaders are looking to evolve into “technos” – operators with data-driven technology at their heart. Telecommunication innovation can be seen in everything from 5G connected hospitals to digital advertising platforms, and much, much more.

Drivers of telecommunications evolution

The commoditisation of existing telco services has led to falling prices, which is causing the industry to look at building new revenue streams to drive shareholder value. This challenge is exacerbated by the need for infrastructure investment. If telcos are to avoid churn, they must ensure their networks remain at the leading edge of technology. Last year, Europe reached record levels of telecom investment in both fixed line (fibre to the home) and wireless (5G) infrastructure, yet estimates suggest that this is not enough for the EU to meet its “gigabit for all by 2030.” Telcos in the US are coming under similar pressures, with mobile operators having invested more than $121 billion in network infrastructure since 2018.

The future of telecom business models

However, while a significant cost, the network is a telco’s most important asset. It is also the starting point for new revenue streams and future telecom business models. Although telcos historically were slow off the mark compared to over-the-top (OTT) service providers in delivering digital services to consumers and businesses, the industry is now looking to catch up – hence the move from “telco” to “techno”. There’s never been a better time to make this move. With the 5G revolution starting to take hold, and partner ecosystems becoming the de facto operating model for innovative businesses, leading telcos are forging ahead with digital services and competing in new markets. Telcos that place a premium on partnerships and are willing to make bold moves into new industries are thriving.

Four examples of innovative telecom business models:

  1. Vodafone is joining other leading telcos by offering business-to-business cloud services. The telco’s portfolio includes cloud migration, security, and multi-cloud management tools.
  2. Bahrain’s Batelco is partnering with a Danish infrastructure company on its OneBox service, a digital post box allowing users to communicate securely with public entities and private sector businesses.
  3. Japan’s KDDI, is collaborating with data and technology provider Supership on a next-generation digital advertising distribution platform. The platform uses Novatiq’s technology to create the first privacy-safe, end-to-end digital advertising solution in the Asian advertising market.
  4. Over in the US, Verizon is making moves in the logistics space with advanced vehicle tracking solutions. The technology gives transportation fleet operators a near-real-time, 360-degree view of operations to drive efficiencies and increase productivity.

Three enablers of telecom innovation

While the journey is not yet complete, telcos are emerging as pivotal players in digital ecosystems, taking a central position in the next stage of the global digital evolution. How can telcos succeed in this new age? What elements are required for telcos to innovate effectively and realise their growth ambitions?

Novatiq has identified three key drivers for telco innovation:

  1. Partnerships. As discussed, trailblazing telcos are branching out into new sectors to reach new target groups with new propositions. Examples include Batelco and KDDI (see above) as well as Verizon’s connected car offering and Jio’s smart home innovations. Here, forming the right partnerships is critical to success. Telcos need to connect with industry experts to build powerful solutions and draw on their strengths. Telcos will be able to add value through connectivity or leveraging other key assets. For example, as part of an application layer strategy, telcos can deliver network-based ID applications to the adtech ecosystem.
  2. Cloud platforms. According to McKinsey, 75% of cloud’s predicted value comes from boosting innovation. The cloud is proving to be the foundation for agile business, enabling companies that use the technology to get new products to market and meet customer demand faster than their peers. Telcos are alive to this opportunity, and are forecast to spend $1 billion each on cloud network transformation. One of the key benefits of the cloud is that it enables a microservices architecture whereby containerised, independent services connect through APIs. Microservices enable telcos to take a DevOps approach to application innovation, which allows them to scale services faster and more cost effectively. Microservices also enable telcos to rapidly onboard new technologies as they emerge, so they can stay at the forefront of technology adoption.
  3. Application-layer interoperability. 5G, a hugely important connectivity evolution, promises to enable interoperability at the application layer. As a result, third-party developers can more easily access operator networks when designing innovations. Interoperability will help partner ecosystems and co-created solutions flourish. The GSMA is promoting interoperability though the Open Gateway Framework, which includes a set of APIs to “provide universal access to operator networks for developers.” In some cases, however, interoperability is about the service itself, such as with Novatiq’s telco-verified IDs (see below for more details). In such cases, partners developing similar solutions should base them on a common set of standards, even if the network application layer is differentiated.

Telecom business models: opening new revenue streams in digital marketing

As noted above, KDDI is discovering that the digital marketing sector is already helping telcos realise new business opportunities. One of the key drivers for the telco market opportunity is the deprecation of third-party tracking cookies.

Third-party cookies are small text files placed on websites for tracking and online advertising. Cookies store information about users’ online activity and preferences, which can then be accessed by third parties to deliver personalized content or ads across sites. However, global privacy laws are establishing strict rules around data gathering and sharing and enshrining the right of consumers to withhold consent for their personal data to be used for advertising. Given that third-party cookies facilitate tracking and profiling, often without offering users a genuine choice to opt-out, they are no longer fit for purpose.

Consumers are themselves demanding more privacy-conscious approaches. According to one survey, 86% of consumers say they “care about data privacy” and want more control. These consumers will naturally gravitate to brands that respect their privacy, including in advertising.

Combined, these trends are leading to the withdrawal of cookies by browser operators. This is a challenge for brands as it will constrain their ability to deliver personalised ads and understand consumer behaviour across multiple websites and apps. It will therefore affect their advertising strategies and potentially reduce their marketing effectiveness. Publishers may also struggle. Personalised ads, which often command higher prices, will become harder to implement and measure, potentially impacting ad revenues.

Telcos can ride to the rescue with verification services

By verifying digital IDs, telcos can securely, safely, and in compliance with all privacy laws, enabling the programmatic industry to flourish. The key is telco network intelligence, which includes websites, mobile apps, and devices. Leveraging this intelligence, telcos can verify consented pseudonymised identifiers provided by publishers, thereby enabling brands and publishers to recognise users across the anonymous and authenticated web. Importantly, from a privacy perspective this verification process takes place without needing to know who these users are as individuals.

As well as verifying audiences, telcos can also play a role in audience activation. In Novatiq’s approach, users who visit a third-party website trigger a dynamic ID. This ID can then be matched with the audience in real-time, behind the telco’s firewall. This process ensures that the transaction is highly secure and guarantees that no personal data is used in the bid stream. As a result, telco subscribers’ privacy is protected at all times.

Enabling data consent with telco IDs

User consent is critically important when it comes to processing personal data. Without consent, organisations risk non-compliance with the General Data Protection Regulation (GDPR) and other existing and emerging privacy regulations. Typically, consent is requested from users by publishers or brands using Consent Management Platforms (CMPs) which are triggered when a user visits a site.

With telco-verified IDs, consent is logged for each visit and verification only occurs when this consent has been granted. This approach is focused on the needs of the user and helps to improve their web experience by ensuring they benefit from personalised advertising enabled by an organisation they trust – their telco provider. The trusted relationship that consumers have with their telco will ensure that they embrace new ID verification solutions and may even serve to deepen this relationship.

Telco-verified IDs: a maturing market

Significantly, many operators worldwide are starting to take advantage of the opportunities on offer through telco-verified IDs. Recently, a joint venture between Germany’s Deutsche Telekom, France’s Orange, Spain’s Telefónica and the UK’s Vodafone launched a “Telco-powered Authentic Consent Service.”

The move substantiates the vision Novatiq has been enthusiastically advocating since our inception, that telcos have a massive opportunity to drive new revenue streams by offering a privacy-led identification solution to support the digital marketing activities of publishers and brands. Indeed, we’ve already supported telcos worldwide with the successful deployment of telco verified IDs, including KDDI in Japan. With Novatiq’s ID platform and solution already up and running and tested in real-world deployments, we provide the fastest route to market for telcos looking to make a move into the digital advertising vertical.

Why it’s important for telcos to act now

The end of tracking cookies is coming up fast. Mozilla already restricts cookies to the site on which they are placed so users can’t be tracked. Users of Microsoft’s Edge browser, meanwhile must actively enable third-party cookies. In Safari, Apple has implemented highly restrictive measures, with full third-party cookie blocking. Finally, Google will have withdrawn cookies from Chrome by the end of next year. Given Chrome’s market dominance, this is big news and effectively marks the end of tracking-cookie-based advertising.

Time is therefore running out for telcos to build and launch ID verification services. Brands and publishers alike are crying out for reliable and robust privacy-preserving replacements to tracking cookies. They are ready and waiting for telcos that can move the fastest. With the Novatiq Fusion platform, telcos can benefit from a proven service-layer proposition that can be integrated with telco networks and brought into production in a matter of months.

Telecommunications digital marketing: leveraging verified IDs for subscriber growth

Telco-verified IDs can also help telcos improve their own marketing strategies. For many telcos, this is an urgent imperative. At 22%, the churn rate in telco is higher than in many other industries. What’s more, telecoms is a highly competitive industry and requires large capital investments. Growing subscribers is essential to justifying major network upgrades, as without the increase in revenue that comes with subscriber growth it is harder to fund network modernisation. Seen in this light, digital marketing in telecoms is essential. Telecom marketing approaches therefore need to deliver compelling customer experiences to win over new customers and retain existing ones.

Leveraging first-party data

Telco’s first-party customer intelligence is perhaps their most important marketing asset. By using this data securely, compliantly, and with full customer consent, telcos can unlock the insights they need to deliver exceptional personalised experiences to the right people and at the right time. The key is to leverage first-party intelligence in real-time and in a privacy-first environment – so in exactly the sort of environment that telco-verified IDs can help bring about. When it comes to telecom marketing strategies, this approach delivers a range of benefits:

  • Identify existing customers. Recognise existing subscribers and eliminate wasted customer acquisition ad spend;
  • Improve retention. Identify customers at risk of leaving by leveraging contract information and web log intelligence;
  • Optimise customer journeys. Map and unify unique audiences across owned sites re-targeting with the right messages at the right time to improve customer experience;
  • Increase loyalty. Recognise existing users to engage with loyalty programmes and offers.

Through telco-verified IDs, telcos and the marketing agencies that support them can power campaigns with first-party data insights to drive the stickiest customer experiences and improve campaign costs and performance.

Three steps to effective digital marketing in the telecom sector: Creating a secure and compliant audience-driven strategy

When it comes to telecommunications digital marketing approaches, carriers face an array of challenges. One issue is the fact that telcos are relatively late to the game when it comes to personalising campaigns and content. It is vital that telcos catch up as quickly as possible. As McKinsey puts it: “…satisfying, retaining, and acquiring customers requires telcos to embark on a complex journey away from the business-driven campaigns that they have traditionally embraced and toward customer-centric, data-driven, highly personalized campaigns.”

As with most other brands, telcos therefore need to deliver rich, engaging, and relevant personalised experiences, while also meeting their obligations to protect data and consumers’ right to privacy. As telcos go about meeting this imperative, there are three key steps they should take to determine their strategic direction:

  1. Choose an implementation model. The first question is whether to activate marketing campaigns against their IDs, rely on a third-party Data Management Platform (DMP) or Customer Data Platform (CDP), or build a solution in-house that integrates with the adtech ecosystem. The latter approach gives telcos complete control but demands complex integrations and ultimately lacks scale. Partnering with a DMP or CDP is easier but requires that telcos give control of the service to their partner. Integrated in-network solutions like telco-verified IDs, meanwhile, enable telcos to maintain control of the service while also benefitting from the ease of collaborating with an expert that has already taken care of the necessary integrations.
  2. Select an ID platform. The end of tracking cookies has led to an explosion of new ID types on the market. Some are better than others and telcos should take their time in selecting which ID to use. Questions to ask include: is the solution dynamic and real-time; does it integrate easily with the telco network and the adtech ecosystem; is it easy to deploy; and does it activate at scale safely?
  3. Move quickly. As already discussed, the time to implement telco-verified IDs is now, while the adtech industry is adapting to the loss of tracking cookies. Telcos that move fast will have a window of time in which they can reach existing and potential subscribers ahead of competitors. Bold innovators will find they are better placed to thrive in the privacy-first internet that’s falling into place today.

New business models, new revenue streams, better customer experience

The deprecation of tracking cookies represents a unique opportunity for telcos to secure a central position in the digital marketing industry and the privacy-first internet of tomorrow. Telco-verified IDs add to the repertoire of new business models that are emerging today and which will define the future of the telecoms industry.

What’s more, as well as powering the programmatic advertising campaigns of vertical brands, telco-verified IDs will help telecoms companies and their agencies improve how they identify and reach out to important customer segments.

With so much to gain, the only question that remains is when to start, with success going to those who move first.

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