Teles is trying to inaugurate a new business model at MWC

The operator’s networks serve, in essence, for the transmission of data traffic since voice has ceased to be the main service. According to surveys, global mobile data traffic will reach 282 exabytes (EB) per month in 2027. Fixed Wireless Access (FWA) is excluded from this account. Fixed wireless connections are limited to the location where they are installed, and since the number of users per connection is limited, this results in relatively higher bandwidth. On the other hand, mobile broadband has lower bandwidth since the network tower is shared with many other users in the same area. Adding FWA and mobile access, the total mobile data traffic will be 368 exabytes (EB) per month by the end of 2027.

Last year, about 20% of all mobile data traffic was FWA. In 2027, it is estimated that 60% of mobile data traffic will go through 5G networks. The US and China are two competitors in global mobile data usage. In the US last year, mobile data traffic was 5.6 exabytes (EB) per month. In 2026, mobile data traffic in China will amount to 61 exabytes (EB). In Europe, it reached 3.4 exabytes per month last year.

Sustainability of investment

The exponential growth of data traffic is a challenge to the sustainability of investments in European networks. As discussed at MWC, telcos themselves are making the necessary investments to meet this growing traffic demand, financing the expansion of network capacity and coverage solely with revenues from broadband connectivity and other services provided to customers. Over-the-top (OTT) platforms, such as streaming service providers, do not reimburse telecommunications companies for the cost of delivering traffic to end users through their networks. In addition, their current business model predicts that profits increase when more traffic is delivered, which creates a vicious circle: they need Internet traffic to grow, and they need ever-increasing investment in the network. So, and this was a point of contention between Deutsche Telekom and Netflix during the event, shouldn’t the biggest traffic generators contribute fairly to the cost of delivering their traffic to end users?

Internet bandwidth (measured by download and upload levels) increased by 30% annually in 2020 and 2021, and this trend is expected to continue in the years to come. Streaming video, social media and games account for more than 70% of all global internet traffic. Only six companies in the world are responsible for more than 56% of the total turnover. European telecoms have invested €500 billion (more than R$2.7 trillion) over the past ten years to ensure that networks can handle this traffic growth.

burden sharing

During MWC, José María Álvarez-Pallete, CEO and President of Telefónica, together with his colleagues from Deutsche Telekom, Orange and Vodafone, made it clear that digital OTT platforms must share the burden of telecom use fairly and proportionately. The Frontier study calculated the cost of delivering OTT traffic on European networks. The analysis, based on cost, traffic and network data provided to the consultancy by Deutsche Telekom, Orange, Telefónica and Vodafone, puts the annual cost at 36 billion euros. Given the asymmetric bargaining power and unbalanced regulatory framework, network operators cannot negotiate with OTTs who receive fair compensation for the transmission of OTT traffic to end customers. Because of this, the telecommunications sector of the European Union is in a financially weaker position, which impairs its ability to invest in 5G and optical networks. The question is how to enable a structure where European telecommunications operators receive fair compensation from the large OTTs for using their networks to deliver traffic to end users.

two initiatives

The two initiatives may signal one of the ways in which telecoms will try to change their business models and become independent from this circle in which they need more traffic, and for that they have to invest more, paying for data transmission from the so-called – so-called Tier 1 countries. 1 (Level 1): GSMA, the entity that organizes MWC, announced the GSMA Open Gateway initiative, which is a universal network of APIs (Application Programmable Interfaces), aimed at providing developers with global access from operator networks. Open Gateway was born with the support of 21 telefaxes and indicates the trend of development of services based on the economy of open APIs. Operators Orange, Telefónica and Vodafone, in partnership with Ericsson and Vonage, have announced an agreement to open up their 5G networks to application developers.

As for Tier 1 countries, all countries, for the purposes of global marketing advertisers, are conventionally divided into three groups, called Tiers. Level 1 obviously includes the most attractive countries (just over twenty in the world) for advertisers, and levels 2 and 3 combine developing countries. If economists classify countries as developed, developing and third world countries, including Brazil, based on the economic development of each, for marketing purposes, advertisers generally divide countries into levels in a different way: the focus is on consumer solvency and their average income.

The most wanted of advertising

Tier 1 countries are the most desirable locations for advertising, although they are the most difficult to work with. This is where the biggest payouts are for offers, but the cost of attracting users is significant. The population of these countries is not only difficult to attract with advertising. Even worse: they know how to disable or ignore ads. Tier 1 has very high competition among advertisers. More experienced brands win with exclusive sales schemes. In addition, the legal regulation of advertising is very strict.

All this has to do with what telecoms think about the near future. A business model focused solely on charging users for Internet access, whether for fixed speed or mobile data, is no longer sufficient. Therefore, they have to deal with players who pass through their networks (streamers and hyperscalers) and those who make money from them (advertisers who invest in marketing automation, programmatic and others, especially in Tier 1 countries). Telecoms know that they have left enormous power to digital platforms (such as Google, Meta, Amazon) and therefore have been demanding for years that investment in infrastructure is not their sole responsibility. And they know that many large capacities of their infrastructure are reserved for large clients: a businessman who has just founded a startup will never be able to negotiate with Telefónica or Orange from the beginning with the same position as YouTube or Netflix, for example.

The post Teles tries to inaugurate a new business model at MWC appeared first on Meio e Mensagem – Marketing, Mídia e Comunicação.

Related posts

Leave a Comment