Build. Operate. Plan: The Fallacy of Delayed Monetization Planning

If, as a telco, you had the opportunity to design a new revenue management system from the ground up, the question is, would you end up with what you have now? I have to believe that for the vast majority, the answer would be a resounding no. And yet, like a ship dragging its anchor along the seabed, too many remain tethered to approaches that are really holding them back, stalling growth, profitability and the future investment attractiveness of the sector. Attempts at rectifying that, such as billing consolidation and “new billing” projects, are analogous to changing that anchor for a slightly smaller one, thus attempting to address the symptoms, not the root causes of the issue.

Of course, the key questions this raises are how we got here and what should be done about it?

Monetization Delayed Is Monetization Missed

It’s interesting as we move through 2024, I am beginning to hear a collective “mea culpa” from the telco industry regarding the failure to deep monetize the major investments made in 5G. Many now point to the need to have started that journey with a clear monetization plan, with business outcomes at the front and center of that plan. And yet, most didn’t. During the peak hype period around 2019/2020, I was often taken aback by how many times I heard that monetization was a phase 2 or even phase 3 activity in the telcos 5G plan!

It turns out, phases 1 and 2 were mostly stuffed with what I would call bright, shiny object activities, putting out new spectrum, new devices, new core equipment and new fiber deployments, etc. Of course, all of those are massively important for any new network build project, but telcos were making the mistake of believing that either the revenue management systems that were in place were up to the task of driving new monetization models OR that, simply put, consumers would be wowed by the new speed benefits of 5G and pay more for them with no new monetization models needed. It’s fair to say both ideas failed.

That delay in monetization planning was, I believe, a reflection of the challenges telcos face when confronted with wanting to do something new and breakthrough with revenue management systems designed for yesterday’s challenges: high cost, long delays to implement new ideas, delayed time to market, the complexity of siloed data, 10–100 separate billing systems and the associated impacts on staff productivity and morale to name but a few. Monetization was moved to a phase 2/3 activity because it was too challenging to address in phase 1. The can was kicked down the road and telcos are now paying the price for it.

The issue with legacy revenue management systems is also the foundation for a longstanding, strategic monetization challenge, which is the imbalance between revenue invested in network CAPEX and that spent on R&D.

The R&D Imperative

For too long, telcos have over-invested in the build-out of network assets but have not focused enough spend on R&D to help drive the sustained service innovation, creativity and monetization of those assets. Poor revenue management, billing systems and processes have heavily contributed to that imbalance — it has simply been too hard to innovate in monetization terms and many telcos have simply left that to others, such as techcos, to solve. In doing so, telcos have relinquished strategic control and self-determination.

That balance is shown very clearly in the chart below from STL Partners, which shows how telcos have historically invested 15-20% of revenue in Network CAPEX but only 2–3% of revenue in R&D.

The Strategic Benefit of Digital Monetization

Permanently Closing The Monetization Gap

Ergo, great networks are being built, but with not enough focus on building and resourcing a strategy focused on service innovation, commercial outcomes, deep monetization and the associated return on capital invested. A monetization gap has arisen. Compared to techcos who typically invest some ~15–20% of revenue into R&D, this is major imbalance.

That model is unsustainable — telcos need to re-balance the need for network build-out with sustainable business outcomes. Legacy revenue management systems are fundamentally holding the telco business model back and impacting the ability to drive business growth and profitability from major network investments, both tactically and strategically. With planned investments in areas such as NaaS, AI and 6G on the horizon, new monetization approaches and thinking are badly needed.

Fueling that new era of telco-driven monetization via the simplification, unification and real-time alignment of all monetization activities is a critical path imperative for telcos in addressing both the delayed monetization and R&D imbalance challenges. The issues witnessed with early 5G deployments cannot be repeated.

MATRIXX Software estimates that typical T1 telcos could save over one billion dollars in annual costs and achieve a ~10% uplift in EBITDA from such an approach.  A leaner, fitter and more agile telco, driving consistently better business results from a monetization strategy that’s fit for purpose, both now and tomorrow.

Time to shift gears from mea culpa to carpe et diem.