Shifts in customer demand, a changing competitive landscape, a weak economy and new government policies will shape carrier strategies during 2009 and 2010.
According to Gartner, carriers will struggle to maintain and grow their market position in this shifting landscape, and success will demand investment strategies that are aligned with the pace of recovery in each country and region.
"While the recession will hurt all carriers, those with a strong cash position will have an opportunity to outpace their competitors through targeted acquisitions and service innovation," says Alex Winogradoff, research vice-president at Gartner. "Weak carriers will need to aggressively realign their cost structures, reposition their service portfolios and concentrate on shoring up their customer and revenue bases just to survive."
Gartner expects three major new trends to affect carriers' market positioning domestically and globally as the economic crisis both restricts access to capital and reduces consumer demand, and as government policies – designed to soften the impact of the financial crisis- mitigate market forces.
The first trend is where consumers will demand more for less from their carriers.
With consumer confidence approaching historic lows in most regions and the macro economy likely to remain weak through 2010, consumers are enjoying increased market power and focusing their spending inside the home. While this "cocooning" phenomenon means in-home communication and entertainment expenses are protected to some extent, most consumers will not want to adopt new services unless they are essentially free.
As a result, mature carriers will focus on brand positioning and building customer trust, which will require retargeting the marketing budget and prioritising projects that focus on retention, customer loyalty and demonstrable value. However, that is not enough; they will also need to manage the life cycle of their services more aggressively and refocus innovation on improving the customer experience in terms of value and ease of use by offering context-based services, targeted advertising, social networking and user-generated content.
Gartner analysts say that the implications for infrastructure investment are manifold and will include focusing on unified internet protocol (IP)-based edge and backhaul networks, virtual call centre solutions, and customer analytic tools. Carriers will also need to explore how they can extend the use of third-party innovations like carrier-run application stores.
They are also advised to grant third parties access to their network enablers, such as billing and presence, in return for the third parties' development resources and innovative thinking. This will benefit carriers in two ways – promoting innovation (at which they are not very good) and minimising the cost of innovation.
The second trend is where forward-thinking carriers will change their cultures.
In the face of lower revenue expectations, many carriers are making workforce reductions. However, Gartner says that they will not be enough and that ultimately, carriers will need to experiment with different ways to transform the businesses and operating cultures in order to prosper. Some innovative partnering arrangements have already been pursued to distribute risk, reduce cost structure and share intelligence.
These include: network sharing arrangements such as between Telus and BCE, Telia and tele2, and Vodafone and O2; outsourcing of traditional "telco" functions, such as Vodafone's outsourcing of network operations to Ericsson; and professional labour augmentation to fill temporary skill gaps, such as in media consulting. Gartner advises carriers to explore and utilise the risk- and revenue-sharing arrangements that partnerships afford to maximise network investments.
Naturally, cultural changes must be tightly aligned with organisational restructuring and supported by infrastructure investments for carriers to achieve long-term transformational benefits. Similarly, from an external-marketing point of view, organisations need to truly understand the value of their proposition to the consumer and where the carrier successfully fits in the consumer's value chain.
The third trend will see leading mobile carriers avoiding the commoditisation of their services.
Fixed broadband has been a good business for carriers. However, the fixed broadband platform is now a platform from which over-the-top providers can generate revenue from multimedia and voice services and build their own relationships with users. Unless they pay careful attention to the user experience, many mobile carriers will create exactly the same situation on their mobile networks.
Gartner predicts that progressive carriers will redirect a large part of their investment into better understanding the user experience and improving it, to keep both customers and regulators happy. Gartner also suggests that the best way to offer customers more value and for carriers to differentiate themselves from others is to bring in innovation from outside the business and allow other entities to build services on top of carrier platforms.
In terms of network investment, Gartner advises progressive carriers to address all aspects of network space, rather than investing purely in wireless broadband technologies like Long Term Evolution. This will include investing in network control and service layers; contributing to industry initiatives like the IP Multimedia Subsystem Rich Communication Suite; forming partnerships with other carriers, device vendors and social networks to build communities; and focusing on attracting third-party developers.