Four Ways the Big Three Telcos Can Find Their Mojo
By Barry Cross and Rachel Shewfelt
With the commoditization of telecommunication services, Bell, Rogers, and TELUS — the Big Three of the telecommunications industry — have shifted their business strategy away from attracting new customers and towards grabbing market share from each other. In such a transparent market with only three major players, they have been able to continuously set high plan prices without worrying about sustained competitive undercutting. This has allowed them to deliver average service at a very high price, compared to other telecoms internationally.
For the past decade, the three giants have maintained their same strategy without much innovation in their total product offerings. But there are two distinct warning signs that their industry is maturing: the dependence on marketing and stagnant market share.
As Smith School of Business marketing professor Ken Wong has pointed out, a reliance on marketing is a clear sign that the product or service by itself is not valuable enough to attract customers. This makes companies vulnerable to a fiercely competitive environment as price matching and promotion are far more replicable than a high-quality service offering. As for a stagnant market share, there has been no change on the leaderboard since 2013.
One approach to the future of Canada’s telecom industry is to cater to the “connected consumer.” This is someone who uses the mobile phone as the hub and control centre for her everyday life, from home to cars to health. This requires an investment in 5G networks to support the future of “super connectivity.” While there is currently a race among the Big Three to develop the first 5G network, the transparent and competitive nature of the industry ensures that 5G will only act as a short-term advantage. There must be other ways for these firms to create new value for consumers by either decreasing or increasing aspects of the current service offerings.
Here are four ways they can develop their offering beyond price competition to deliver tangible value to customers.
Transition to Usage-Oriented Offerings
The use of traditional SMS and voice calling has been on the decline since the development of apps such as iMessage, WhatsApp, Messenger, and Skype. These apps use cellular data instead of SMS and phone minutes, and are the new platforms of communication — 80 percent of all messaging communication is conducted on apps, while one-third of international calling is over Skype.
Unfortunately, data-only options are not yet available from the top tier Canadian telecom brands. That will change as the CRTC mandated in March 2018 that the Big Three propose lower cost data-only plans for consumers. While their submitted proposals were lackluster, it’s an indication that consumer-oriented offerings are coming soon to the industry.
There are additional opportunities to segment how consumers use their data to determine new offerings that are both valuable to customers and the telecoms. For example, Rogers’s past “my10” offering (allowing customers to choose their top 10 contacts for unlimited communication) could be augmented to offer unlimited data for their customers’ top five apps.
Alternatively, data plans could bundle apps based on demographics. Portugal’s national telco, for example, offers customers unlimited data usage for communication apps such SnapChat, Messenger, Instagram, and Facebook, leading to a large customer preference among a younger demographic. Their competitor offers app bundles with unlimited data usage.
Eventually, as 5G networks are developed and our lives are supported by the internet, packages such as “home appliance data” and “healthcare data” could be offered and billed at different rates.
Boost Network Security
As our lives become more integrated with technology and our phones hold essential information for our health, home security, and finances, network and data security will become an even more pressing concern.
Canadian telecom networks are lacking in network security, as demonstrated by 2017’s SS7 hack attack test. The results showed that international hackers only needed a phone number to trace someone’s location, listen to calls, and alter, add, or delete content. International hacker Nohl tested both Rogers and Bell networks and concluded they have “about 10 percent of the security that they need to do to protect from SS7 attacks.”
While such network insecurities have received little media attention, this will likely make future headlines as customers become ever more concerned about their sensitive information. This is a great value-adding opportunity for the Big Three. Investment in network security is not transparent or as easily replicable as price competition, so this can be used as a long-term competitive advantage and source of great customer satisfaction for one of them.
Establish Strategic Media Partnerships
Just as our data consumption patterns have changed, so have our viewing behaviours. Instead of turning on the TV to watch a show, we turn to websites and apps such as Netflix, Spotify, YouTube, Facebook, and Instagram. This has caused Rogers and Bell to see a steady decline in their traditional media portfolio.
In 2014, Rogers and Shaw Communications launched Shomi, a joint video subscription service, to try and accommodate the new media viewer’s behaviour. It was subsequently shut down in 2016 since it could not compete with the global viewership of Netflix. By contrast, Bell launched CraveTV in the same year and is succeeding as they have made partnerships with other communications companies.
The best examples of strategic media partnerships include Spotify’s partnerships with companies such as Vodafone and Sprint, and Netflix’s European partnerships. These offerings allow the media companies to expand their user base, while the telecoms are able to win over customers with worry-free streaming of services. More partnerships with media platforms and companies such as Bloomberg, Youtube, and the NHL would provide great value.
Conversely, telcos are currently unhappy with apps such as Netflix and Spotify, who rely on fast networks for optimal user experience; they have been able to free-ride off their large network investments. That begs the question if there is room for investment support deals or acquisitions that could lead to greater industry efficiency.
Enhance Customer Service
With the increasing integration of telecom services into consumer’s daily activities, the need for positive customer service experiences will become more important.
According to a 2017 study conducted by J.D. Power, 40 percent of Canadian customers weigh “good customer service” as one of the most important factors when choosing their telecom carrier. Bell and Rogers rank eighth and ninth across the nine available telecom brands in Canada; TELUS ranks fifth, charging a premium for their customer service.
There are many opportunities for improvement. It’s well established that millennials prefer online self-support over helpline support. As a result, telecoms should establish forums and troubleshooting guides to allow users to solve their own problems. This will not only let the consumer to be in charge of their own support but will also decrease phone traffic on the help lines. Likewise, there are opportunities to provide customer service support via email, social media, and online chat. These channels provide faster response times and are delivered to consumers in their preferred ways.
The Canadian telecom industry is at a redefining point in their industry story. While they are currently experiencing stagnation, there are many areas of opportunity and growth for the Big Three to create value and provide the ultimate form of customer satisfaction. If such activities are executed correctly, these firms will become more important in shaping our future world.
Barry Cross is assistant professor and Distinguished Faculty Fellow of Operations Strategy at Smith School of Business, Queen’s University. Rachel Shewfelt is a 2018 Commerce graduate of Smith School of Business.