Are Communication Service Providers Really Ready for the Future?

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The media world has been and continues to undergo dramatic shifts as content continues to be delivered and consumed in myriad ways. A recent McKinsey Quarterly paper highlights the dramatic increase in the intensity with which people use digital devices and platforms. Approximately 50% of online consumers are now advanced users of smart phones, social networks and other tools such as tablets, up from 32% just two years ago.

And these users are becoming heavier consumers of multiple media. Often these are used simultaneously in conjunction with traditional media such as broadcast TV.

But are wireless phone companies and their putative competitors, the legacy cable providers, really ready for this shift? Are they truly set up to fulfill consumer expectations, fueled by hype about 4G and LTE as well as proliferation of powerful new devices? Not unless they become a lot smarter about deriving and leveraging customer insight to tailor services and offerings.

A recent study from Tellabs (admittedly self serving) predicts that North American mobile operators will become unprofitable within the next two years, if they do not start to customize their content delivery to take into account individual consumption habits. That is because consumption of video services is growing exponentially and current pricing policies do not discriminate sufficiently between different types of users to provide more customized experiences as well as pricing. Mobile phone companies have introduced some tiered pricing for data plans, but these still treat large swaths of very diverse customers the exact same way. Companies need to pay attention to customer’s behaviors (e.g. Are they downloading large documents during the day, movies at night, songs at all hours, etc.?) and their customer value. Then they can tailor pricing as well as packages around this behavior, which will help companies optimize their networks and spread out the traffic while enhancing the customer experience.

Doing this requires a higher level of sophistication in analzing customer behavior and in personalizing/customizing offers to individual consumers or to micro-segments. Online marketers, including some content providers we work with, already do this very effectively. Perhaps CSPs need to go back to school, if they want to continue to be profitable and avoid hitting that wall.

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