Telecommunications operators in the new digital era

The theme of this year's World Economic Forum (WEF) in Davos was “Mastering the Fourth Industrial Revolution” and the main topic was the challenges of the digital transformation for global society as a whole. Over three days, heads of state, business people, leaders of regional and global organizations and civil society discussed solutions to the challenges posed by new technologies. One of the main conclusions was clear: the world has initiated a technological revolution (digital revolution) that will radically transform how we live, work and interrelate.

This revolution is different to anything humans have previously experienced in scale, scope and complexity. Three things confirm that we are bearing witnesses to profound structural change:

• The speed of current advances has no historical precedent. Compared with the linear development of previous industrial revolutions, this one is evolving at an exponential rate.
• Its scope is affecting practically all industries in every country.
• The breadth and depth of these changes is leading to the transformation of entire systems of production, management and government of all players (businesses, institutions, etc.) that comprise this world economic system.

The possibilities of billions of people connected by mobile devices, with an unprecedented facility of access to information and with enormous storage capacities and drastically reduced processing costs, are almost limitless. Today these possibilities, driven by the exponential increase in computing power, are beginning to reflect on our daily lives: from cars and planes crewed by virtual assistants to software that translates and algorithms that deduce our tastes and cultural interests.

In the center of this revolution are the telecommunications operators. At present these are the agents tasked with facilitating the connectivity of the entire ecosystem (people, companies, machines, etc.) at an adequate speed and with the necessary quality. 

Despite playing this central role in the digital transformation of society, telecommunications operators are not significantly capturing the increased value generation from the digitization of economic activity and the new business models growing up around it.

The top service providers (OTTs ) have been the first to identify and understand the new consumer demands and transform them into successful business models. These new entrants are having a significant impact on the operators' business models:

1. On the one hand, they have eroded the sector's main source of income : voice and data transmission. New players such as Skype, WhatsApp and Facebook have redefined the communication standards among people through their free applications, drastically affecting the sector's income (e. g. long distance calls and SMS).
2. On the other hand, they are generating exponential demand for broadband . Players such as YouTube, Netflix and Spotify have digitized the consumption of audio and video by consumers. At a business level, providers such as Amazon, Microsoft, IBM and Google have made the use of cloud infrastructure globally widespread. This new reality is demanding heavy investment from telecommunications operators to accommodate the extraordinary increase in data traffic required by the new digital ecosystem.
3. Last, these new players are completely transforming the structure of market prices by commoditizing the value of connectivity, in favor of monetizing knowledge of customer or user needs through advanced data processing.

This study aims to describe the main opportunities for telecommunications operators in this new digital era. To this end, the document is divided into two sections, with two objectives:

• To describe current industry trends.
• To analyze the main challenges to operators in the current market context. 

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