Power shift forces telecom and media industry to choose direction

Data explosion creates room for media hubs, industry moving towards extensive integration in value chain.

Worldwide, the number of mergers & acquisitions in the Technology, Media and Telecom industry (TMT) in the first quarter of 2013 is at its highest level since the 2000 internet bubble. The industry is moving towards economies of scale and radical integration in the value chain. The explosive growth in the number of social media users demonstrates consumers´ increasing willingness to share personal data for commercial use. These developments can lead to mammoth content organisations, or ‘media hubs’. Traditional telecom businesses need to focus on processing huge amounts of data and its commercialisation. The focus of new earning models needs to be on data, enhancing customer experience, convincing branding and ensuring transparency, security and privacy. These are the main conclusions drawn in the ‘Telecom and Media Scenario Planning’, in which Atos Consulting maps out key developments.

The TMT sector is changing fast. The market´s power equilibrium is shifting with the introduction of new ‘Over the Top’ players, substituting current earning models. New technological developments are demanding increasingly shorter time-to-market processes, with stricter regulations and increasingly demanding consumers. In its survey Atos Consulting presents scenarios that form a guideline for TMT players when determining their strategic course over the next few years. More than 60 industrial experts present their vision of the international TMT sector. The report sketches four scenarios based on two key principles – the degree of integration in the value chain and the degree of control in collecting and using personal data.

Scenario I: ‘A battle of Titans’
In this scenario globalisation is forcing parties to collaborate based on vertical integration within the chain, while legislators protect customers´ privacy through legislation, hampering innovation and growth of the data economy. The barriers between the telecom, media and soft and hardware market are dissolving. This results in a single, all-encompassing international market for the supply of content and services in the field of entertainment. The vertical chains facilitate the provision of end-to-end services to customers. At the same time, customers are reluctant for their personal data to be shared, processed and analysed to generate personal content. For providers the combination of a strong brand and the perception of being a loyal partner are crucial to gain the trust of the customer. Size is the determining factor in the battle between large international providers.

Scenario II: Digital currency
In this scenario data is the new currency in a widely digitised and globalised world. Free access to data, based on data mining and data analysis, combined with far-reaching market integration offers huge economic potential for ‘media hubs’: parties with a deep insight into customers that provide tailored end-to-end communication and media services. The market parties have again integrated vertically. The result is a competitive landscape with players rooted in content, telecom and hardware/software. Not only is the number of people connected to digital networks increasing, but also the number of devices. Citizens are data ambassadors and accept that data commercialisation is the price they pay for using (free) services. They are barely concerned about who manages, controls and uses their personal and non-personal data. This opens the door to an enriched digital world based on augmented reality where you can  scan an individual and obtain a detailed profile. Providers distinguish themselves by creating a special customer experience to enhance their brand value. This requires thorough and real-time knowledge of customer needs.

Scenario III: Chinese walls
In this scenario specialised niche players start operating in specific links of the value chain. There is intensive government control and strict legislation. Physical data location is important due to local differences in legislation. The commercial use of individual data makes customers reluctant to store and share their data. Security, reliability and quality are key distinguishing aspects for providers. The value chain is widely fragmented, resulting in a highly competitive playing field in which every organisation is specialised in a specific market segment.

Scenario IV: Brokers’ world
The fragmented international market combined with the commercial potential of data enables the emergence of new brokers responsible for the aggregation and distribution of content. Their strength is based  on a differentiated assortment of products and services that encompass the entire value chain. This is bundled into a platform and offered to end customers via a single point of contact. The extensive fragmentation makes it difficult for customers to choose from the many options. This creates room for players that are able to bundle services and simplify the customers’ choice. They position themselves as brokers specialised in exploiting personal data. They use this information to restrict the complexity of an environment in which so many different providers operate and to provide services in an intelligent way. In order to be successful in this scenario, traditional telecom providers must focus on getting to know their customers by processing and analysing personal data and using good supplier management to enable the fast and flexible procurement of  the required services.

Is the TMT sector ‘up-to–data’?
The TMT sector needs to find out whether the commercial use of data has been broadly accepted or not. Do consumers and the government put privacy first and is the use of data regulated? Or are citizens prepared to share their data and will this result in a lively trade in data? At the same time, there is vertical integration in the value chain: from content to distribution and devices. In order to be successful, the traditional telecom sector must focus on processing huge quantities of structured and unstructured data (Big Data). The challenge is to use this as the basis for developing new earning models.