The telco turning point is here: How to strike | Kyndryl

Imagine being in the room in 2008 when the then-scrappy dot-com startup Netflix came in to pitch its value as an acquisition to the Blockbuster executive team. Saying the $50 million dollar price tag was met with skepticism would be quite an understatement.¹

Could an online business ever seriously compete with brick and mortar—especially a video rental giant like Blockbuster with more than 9,000 storefronts across the country? Who would ever want to get their movies by mail?

There are moments of sea change when action isn’t just a wise business move, or even a matter of success, but necessary for survival. The communications industry is experiencing such a moment right now. The telcos that survive will be the ones that pay attention to three key concerns—security, customer experience, and employee satisfaction.

How did we get here?

Digital connectivity has never quite been equal in the U.S. Only 72% of rural residents have access to home broadband, compared to 77% living in urban areas and 79% in suburban areas. When our entire lives went online, this discrepancy gained new urgency.² During the pandemic, rural areas used telehealth services 30% less than urban areas, a trend that correlates strongly with lack of broadband access.^{3  4}

The Infrastructure Investment and Jobs Act of 2021 aims to close this gap, allocating $65 billion in funding for broadband expansion and access.⁵ Telcos are rushing to secure grants, build out infrastructure to reach underserved areas, and find new customers, which is increasing competition to provide the content and services running over those channels. Hyperscalers, cable providers, service integrators, and more are seeking to scoop up market share in plays to stay relevant through a combination of new offerings and key partnerships.

How communications companies can own the moment

All this activity comes together to jolt what was once a quiet scene into a revitalized and hypercompetitive market. Local and regional telcos are competing with international giants. Hyperscalers and cable providers are racing to secure IP rights and content partnerships before their competitors do. Businesses across industries are doing everything they can to come out on top.

Winning this moment will require keeping pace and differentiating. Telcos must continue to provide the services and content their customers have come to expect (and keep expecting more and more of) while setting themselves apart from other players. The industry is at a turning point, and it is up to telcos to determine how they will rise to the occasion and become more than connectivity providers.

Consider security

First and foremost is security. The newfound bandwidth in rural areas will be used for the video call connecting at a child’s soccer game, the streaming content entertaining the family on the couch, or the telemedicine appointment with the doctor to ask about a rash. This increase in bandwidth, powered mainly by the ability of 5G to connect devices at ultra-low latency, will change everyday lives for the better while dramatically increasing vulnerable surface area of networks. With so many devices, methods for connecting, and ways in which we’re using our connections, the possible cybersecurity breach vectors will explode in number.

The days of a single, centralized security ops center are long gone. Security measures must be built into every inch of a network, both physical and digital and both broadband and 5G, from the server all the way to the end user. The average cost of a destructive cyberattack is $5.12 million today, making prevention as much a matter of fiduciary responsibility as one of informational integrity.⁶

Just as every bank today is an IT company that moves money around and every airline is an IT company that moves planes around, telcos today are IT companies that connect us to the world around us. These factors must be considered at each level, from how networks are designed to who is recruited for boards of directors.

Consider customers

Of course, as with any business, telcos must also consider their customers. Today’s connected end user expects everything, everywhere, every time. They don’t want a version of their streaming library on their TV and another on their phone—they want to be able to access it regardless of using any number of devices. As bandwidth capacities increase with broadband and 5G infrastructure investment, content and service providers will continue coming up with new ways to use all of it.

Telcos have to find dynamic new ways to keep customers coming back to their connectivity. This can include new content, services, transactions, and experiences. But the most important thing for companies to do when developing their offerings is to understand what the business is and is not. AT&T famously bought Time Warner and all its subsidiaries in 2016, only to sell it all off six years later in favor of refocusing on what it’s best at: building connectivity infrastructure and providing fast, reliable service to its customers.⁷

Rather than trying to be all things to all people, telcos will want to focus on their core offerings and partner with those who are already excelling at something else. For example, telcos can partner with content producers, as Verizon has by offering access to the Disney bundle. And mobile service providers can join with e-commerce outlets, just as Android has made itself the exclusive mobile platform for Fortnite.

There is also the sizeable B2B customer base to consider, a global market projected to grow to $117.01 billion by 2026.⁸ Many of these enterprise customers provide connectivity to their employees and devices, both on-campus and off for travel and remote workplace needs. Working strategically with these B2B customers to deliver communication and content can be a massive boon for telcos.

Partnerships, not expansion into new sectors, will be key to scaling quickly, building the value proposition through differentiation, and reaching new segments.

Consider talent

Finally, consider the people that design, build, diagnose, and maintain the telco networks. More than half of tech workers surveyed, 57.1%, said they plan to look for a new job in the next six months.⁹ Attracting and retaining in-demand talent starts with creating desirable workplaces and compensation packages, of course, but must extend to consider the employees and their goals.

Of workers surveyed, 71% said job training and development increased their overall job satisfaction.¹⁰ Workday, an employee management platform, offers interdepartmental gigs throughout the company that give employees chances to learn on-the-job outside of their skillset.¹¹ Telcos that provide the tools and support workers need to do their job well, while also connecting them with the education and training needed to stay current in an ever-changing industry, will proactively fight off potential poachers.

Attracting and retaining exceptional talent will be important, but just as important will be defining who that talent is. The most desirable talent will obviously be the people who are 100% committed to cloud-native practices and digital transformation, but there is an underappreciated group of workers who may still have untapped value. Those with skillsets dedicated 90% or more to the digital and cloud-driven network of the future will be highly sought. But what about those whose skills are 80% dedicated? 75%? What about workers with applicable skills from other fields who can be quickly retrained and deployed to securing and maintaining this infrastructure of the future? These high-potential workers are worth a look.

Turning point

This moment in communications is ripe with advantage through the right strategies, but the advantage can be lost if not approached intentionally and aggressively. The industry is at a turning point, and it is up to telcos to determine how they will rise to the occasion and become more than connectivity providers.

And if that moment is not seized? Well, one can check what’s left of the last remaining Blockbuster store on Earth in “The Last Blockbuster,” a 2020 documentary streaming exclusively on Netflix.

Todd Mason Scott is a Senior Vice President and Managing Partner for Kyndryl, focused on the telecommunications sector.

¹ Blockbuster CEO ‘struggled not to laugh’ at chance to buy Netflix, new books says, The Independent, Feb 2022
² Some digital divides persist between rural, urban and suburban America, Pew Research Center, August 2021
³ The Surge of Telehealth During the Pandemic Is Exacerbating Urban-Rural Disparities in Access to Mental Health Care, Health Affairs, October 2021
⁴ Community Factors Associated with Telemedicine Use During the COVID-19 Pandemic, JAMA Network, May 2021
⁵ Infrastructure Investment and Jobs Act: Broadband Affordability and Infrastructure, The Council of State Governments, 2021
⁶ Cost of a data breach 2022, IBM, 2022
⁷ AT&T’s Short, Bumpy Ride in Hollywood: Timeline of WarnerMedia’s Road to Discovery Spinoff Deal, Variety, March 2022
⁸ The B2B Telecommunications Market Is Set to Grow at A 15% Annual Rate, Due to Rising Industrialization and Urbanization as Per the Business Research Company's B2B Telecommunication Global Market Report 2022, GlobeNewswire, Nov 2022
⁹ Navigating an Uncertain Hiring Market: 2022 State of Tech Salaries, Hired.com, 2022
¹⁰ The American Upskilling Study: Empowering Workers for the Jobs of Tomorrow, Gallup, 2021
¹¹ How Workday is investing in its employees’ skills to boost retention, Human Resource Executive, December 2021