2013 Outlook on Telecommunications Interview with Craig Wigginton

For telecom companies with an ear toward consumers and an eye for innovation, 2013 may bring more opportunities than challenges, according to Craig Wigginton, vice chairman and U.S. Telecommunications leader, Deloitte & Touche LLP. Read on for his take on trends to watch and strategies to consider in the coming year.

What are the key issues facing the telecom industry in 2013?

Rather than issues, let’s focus on the strengths of the telecom sector, particularly around the mobile ecosystem. The good news is that many issues for telecom in 2013 will revolve around growth opportunities tied to a dramatic uptick in data consumption. For an increasing number of people, mobile is no longer a “nice-to-have”; it’s embedded in their daily lives and integrated into the workplace. Moreover, consumers are starting to see beyond the monthly bill and derive more value from the features, functionality and applications on their devices. With fourth generation (4G) technology rolling out, as well as other technologies to enhance broadband access, along with new devices and services exploiting it, data usage will continue to expand exponentially, and the overall value equation to consumers should move in the same direction. 

Higher speeds and widespread adoption of mobile also are expected to enable additional traction in vertical markets, especially in banking, mobile payments, automotive telematics and health care. These incremental services will present new opportunities and also drive even more data needs.

The key challenges for telecom in the near term may be spectrum availability and the continued hearty capital requirements to build/enhance/upgrade networks. The projected increase in data usage will outpace the technological advances of 4G, driving toward a potential spectrum shortage in as early as a year or two. With the appropriate focus, it shouldn’t inhibit innovation, but it will require technical solutions and also escalate pressure for the government to unlock more spectrum, on a timely basis, to allow for further mobile broadband network expansion.

We also expect continued consolidation in the marketplace, driven primarily by the need for scale, spectrum positioning and vertical market development.

What are some steps telecom companies can take to manage through the current climate of economic uncertainty?

Economic uncertainty is not expected to be a significant factor for mobile in 2013. A few years ago, there was concern about whether the slow economy would push consumers to drop their mobile devices, but the trend has proven to be the opposite. And this has been at various demographic levels and across a broad range of the mobile marketplace. In fact, last year it was estimated that the U.S. mobile ecosystem generated economic activity of nearly $200 billion — enough to make it equivalent to one of the top 50 largest economies in the world.

Companies need to remain focused on marketplace growth and innovation in other strategic areas, particularly vertical industries and the cloud. The expanding array of data services provides tremendous value to consumers, in turn creating value for all of the companies in the mobile ecosystem. As the consumer market matures, “connected things” and enterprise services offer new growth opportunities. In addition to supporting their customer base, companies also need to revisit their core fundamentals around shareholder value — including “blocking and tackling” activities such as asset efficiency, cost control and service improvement.

As noted, spectrum availability presents more uncertainty for mobile. Companies will have to decide which technological solutions — smaller cell sites, leveraging non-licensed spectrum, spectrum sharing, etc. — to apply to alleviate constraints in the short-term while awaiting a longer-term policy fix.

What are high-performing companies doing to foster innovation and growth?

The overall evolution of mobile networks — which require strong fiber and other connections to core networks — is providing opportunities for carriers, equipment manufacturers, handset/device providers and others in the industry, provided their products and services have migrated accordingly. Incremental network speeds and sophisticated devices are paving the way for innovation with this new power being made available.

Specifically, we’re seeing more activity in all of the verticals and traction around new services (e.g., wireless carriers getting involved in telematics). In some cases this means partnering and joint ventures, in others, acquisition.

In nascent markets such as mHealth, mBanking and mCommerce, companies that have the capabilities are building services and applications for these verticals and leveraging the apps and content provider ecosystems. The opportunities are wide open, driven by one question: What do consumers want? For example, in mHealth, continuous monitoring has potential for people who are ill, such as diabetics who need blood sugar monitoring, but it also has potential for wellness monitoring for those who are healthy. While current and emerging services provide tremendous value, participating companies must maintain consumer confidence. Privacy and security will continue to be issues, especially as the emerging market gets bigger and more sophisticated, and different types of companies find ways to add value with all of the available consumer data.

With the evolving notion of “bring your own device” (BYOD) and the changing business environment enabled by mobile and other technologies, enterprise is another area that is ripe for development. The cloud and monetizing data are the two other big opportunities for telecom.

Visit www.deloitte.com/us/telecom to learn about Deloitte's Telecom practice. We also invite you to read our 2013 outlooks for technology and media and entertainment.

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