For over a century since Alexander Graham Bell invented the telephone, the pair of copper wires that connected households to the central exchange of traditional phone service providers was primarily used to provide nothing more than voice services.

That began to change as the industrial age gave way to the information age. Even though telcos had a “pipe” to reach their customers, in the mode of copper wires, they hardly made full use of the bandwidth until they started to provide internet services. Similarly, the mobile network operators (MNOs) started their businesses by providing basic voice services, and over time, they have adopted different technologies with higher spectral efficiency, which enhanced the internet data rates tremendously.  

Today, with the availability of ultra-high-speed broadband technologies, most of the world is seamlessly connected by voice and data services and the internet is likely to become a utility service such as electricity, water or gas. Its importance has further enhanced with the introduction of smartphones, the popularity of social media and the intensified digital revolution.

With such a huge transformation taking place, can communication service providers (CSPs) survive and at least retain their market share by providing no more than connectivity to subscribers? The obvious answer is “no.” So how should they transform their businesses to cope with this change in the marketplace, and when should they make this move? They must adopt a newer business model to suit market demand while mutating the business to become a digital service provider (DSP), and the sooner they make this change, the easier it will be to stay ahead of competitors.

A few years ago, the co-founder of Matrixx Software Inc., Jennifer Kyriakakis, defined the term digital service provider as “any company that distributes media online, and in the case of telcos, it's an organization that has moved on from offering core traditional telecom services to providing mobile broadband access, services, content and apps, all sold directly from the device.”

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This definition elaborates everything that telcos must have in their armory to successfully withstand market changes and to grow sustainably thereafter. If you are a fixed-line operator, you need to have a mobile wing or at least adopt mobile technologies, preferably 4G and above, to extend the wireless reach from a few meters to several kilometers. Further, the extensive and effective use of digital channels will not only create new revenue streams but also reduce operational cost considerably.

Now let’s talk about the role of emerging concepts such as Internet of Things  (IoT) and mobile edge computing (MEC) in leveraging this transformation. IoT has the potential to impact the economy substantially, and Cisco predicts there will be 50 billion devices connected to the internet by 2020. The significance of the IoT is further enhanced by its ability to support, boost and coexist with the “smart” ideas, from smart homes to smart cities, which will change consumers’ lifestyles in the 21st century. MEC, meanwhile, is a striking illustration of network performance optimization and improving the quality of experience by distributing the services, functions and contents throughout the network, more toward the edge than at a central location. Furthermore, it is an enhancer for IoT and it creates novel avenues for operators to reach new customer segments, including locals as well as tourists, based on their interest in location-based customized services.

With IoT and MEC, any digital service provider that wants to maximize revenues while achieving a significant growth in its market share must have a well-directed strategy focusing four main areas: innovation, adaptation, customization and monetization.

Innovation will keep DSPs ahead of competitors and help create a “blue ocean” scenario, where they can make moves without hassle. The billions of connected devices  that will be designed and manufactured by different makers will seek connectivity using multiple protocols, and it is a challenging task to connect them, but DSPs must adapt to the situation or risk losing customers. They also have to provide solutions customized by industry, location and other requirements. With proper analytics and market research, DSPs should be able to monetize their solutions effectively.

The fate of these companies – the traditional telcos transitioning to DSPs – lies in their own hands, in the actions they take, the way they foresee the future, how they face novel challenges and the degree of success in the transformation. How soon they achieve it will determine the future composition of the market, the change in lifestyle for the people who live there and financial position of the companies themselves.