The Roadmap from CSP to DSP

- The Future of Industry is Intelligent

Industrial companies have already undergone significant transformation, especially within enterprise management, as digital technologies have led to new customer experiences, as well as new sales and marketing services, and the development of ecommerce. In the back office, a more agile digital core means greater automation of processes that support corporate functions.  

Now these companies – and soon every company – will need to focus on how to digitize the key industrial parts of their businesses. This will allow them to rethink the products and processes they offer to their clients, rethink their own operations, and invent new services too. 

Thanks to intelligent automation, and other ways of adding intelligence all the way along the value chain, everything a firm does will become digitized, leading to new platforms and portfolios, and ultimately more profitable and sustainable businesses.

By taking an Intelligent Industry approach, businesses will be able to unleash waves of innovation across every dimension of what they do, and how they do it: 

• Intelligent products and processes: smart and connected, so they can be continuously improved thanks to real-time feedback
• Intelligent operations: enabling supply chains, factories, plants and networks to become more efficient and cheaper to run
• Intelligent services and support: where products become the centre of ecosystems, leading to new business and revenue models.

- Communication Service Providers (CSPs)

Communication Service Provider (CSP) is the broad name for various service providers in broadcast and two-way communication services. A CSP provides telecommunication services or some combination of information and media services, content, entertainment and application services over a network, using the network infrastructure as a rich functional platform. 

The types of providers under the CSP umbrella include traditional CSPs such as wireless and landline telecommunications, wireline and satellite communication providers with their own infrastructure. Also includes content providers and cloud communication providers, which use the customer's own bandwidth (BYOB) model.

Traditional providers once had a monopoly on company-owned communications infrastructure. This limited ownership results in low competition and high cost, high profit communications, especially when it comes to international communications. There is also little overlap between specialized communication methods such as wireline, satellite, wireless, and traditional landlines. Deregulation and the addition of new technologies in the 1980s led traditional providers to offer more service choices, breaking the established categories of traditional communication services.

Today, changes in IP telephony technology and regulations have eroded communications profits and reduced costs. Changes in costs lead to intense competition among suppliers. This shift in the market is the result of competition around traditional providers, as they cannot continue to rely on monopolies when other services can provide low-cost or even free overseas communications.

Today, CSPs are focused on the digital transformation of their industries with the growing popularity of technologies such as artificial intelligence (AI), analytics, and automation.

- Digital Service Providers (DSPs)

A digital service provider (DSP) is a business that provides digital content and services. This can include anything from providing access to digital content such as music, movies and TV shows to providing digital services such as internet access, web hosting, online backup and online security.

A digital service provider might be a traditional telecommunications company, such as a cable operator or phone company, or an Internet Service Provider (ISP). Today, it is no longer a question of whether a service provider should go digital or not; the question is how to start. With the introduction of 5G, and all the business opportunities enhanced or created with 5G.

To meet future demands, no service provider can realize the full potential of 5G if the digitization of telecommunications and IT infrastructure cannot proceed in parallel. 5G and digitalization, while separate transformations, are entirely dependent on each other's successful implementation to ensure complementary environments for network capabilities and business support. 

5G platforms will create the required network environment, and digital platforms will create the required business environment. The result will be a platform that can achieve its goals - to provide a profitable and thriving open ecosystem for service providers, their customers and their partners - to support new revenue opportunities and new business models. 5G meets digital, and digital meets 5G.

- The Transformation from CSPs to DSPs

The difficulties faced by communication service providers (CSPs) in recent times have been myriad. From getting to grips with the complexity of 5G and other emerging technologies to battling the fall-out of the COVID-19 pandemic, it has not been smooth sailing for the beleaguered sector. According to Nokia, the solution lies in CSPs reinventing themselves as digital service providers (DSPs). 

Transform, update, and innovate” should be the motto of CSPs in the digital economy. CSPs have to transform to become DSPs – digital service providers; otherwise, they risk not managing to cope with the increasing demand for their networks. CSPs, who failed to keep up, will be gradually squeezed out by their competitors that are already leveraging IoT, 5G, big data, and multi-edge computing (MEC) among other technological advancements.  

By adopting the latest advances in automation, artificial intelligence and machine learning (AI/ML), and virtualization, CSPs can manage the scope, scale and rising complexity of their networks. And CSPs are doing just that – according to a Nokia survey, nearly two-thirds (60%) of IT leaders in the global telecom industry say the COVID-19 pandemic has accelerated the pace of their digital transformation efforts.

- The Roadmap

Every CSP will have unique business objectives and need to define their priorities accordingly. The two main variables that impact the extent and nature of the digital transformation are complexity and cost. 

With the advent of 5G, CSPs are confronted with the daunting task of upgrading their systems and processes to prepare for next-generation technologies. For instance, a CSP that operates 35,000 base stations and manages eight different bands, will have 50% more of each by 2025. An analysis of a medium-sized CSP based in Europe showed that in the next five years, it would witness a 73% spike in network growth due to 5G rollouts, re-farming of spectrum assets and LTE refresh. 

These complexities will only increase with advanced 5G services that will demand varying performance parameters and service-level agreements (SLAs) for distinct network slices tailored to different use cases and customer segments. As network complexity grows, so do their related costs. If CSPs were to seize a piece of the market, the need to digitalize becomes imperative. 

CSPs should aim to focus digital transformation efforts where they stand to make the greatest gains soonest. 

- Some Statistical Data

The role of a digital service provider (DSP) is decidedly different than that of a traditional communications service provider (CSP). Moving up the value chain to deliver comprehensive end-to-end digital services to businesses and consumers requires a technological, cultural and operational transformation that extends from the core of the network to the partners providing applications and content. 

In general, only 10 to 15 percent of digital services revenue will come from connectivity, the transition from a CSP to a DSP will require a way to protect and increase revenues. 

According to a Nokia survey, in 2021 the top three digital transformation priorities for CSPs are:

• automating operational processes (53%)
• upgrading legacy IT systems (41%)
• cybersecurity (38%)

But with over half (53%) identifying insufficient budget as their top digital transformation challenge, how should CSPs go about balancing their initiatives? 

Based on real-world experience in virtually every region of the globe, Nokia has identified some clear principles of digital transformation success. All depend first on taking a structured approach to setting priorities while avoiding the pitfall of “too much at once.” CSPs then need to view the transformation effort holistically across three interconnected areas — the network, processes and people — with a rigorous approach to balancing complexity and cost. 

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- Challenges

Communications service providers (CSPs) today face challenges from a wide and varied set of competitors, including other CSPs and web-scale service providers, such as Amazon, Apple, Facebook and many others. This shakeup in the communications landscape has necessitated big changes on the part of CSPs, including major steps toward revamping their network and services as well as their business models and, perhaps most importantly, their relationships with an increasingly mobile and discerning customer base. 

As traditional business models and boundaries collapse, CSPs are no longer in the driver’s seat of value creation, which means they need to evolve to become true enablers of services. The transformation into a digital service provider (DSP) will not happen evenly across all dimensions in CSP businesses. Service providers must transition from physical to digital products and services but will need to have a clear long-term vision for their businesses. 

For example, they’ll need to evolve their infrastructure to provide connectivity and services for machine-to-machine (M2M) and Internet of Things (IoT) applications. As such, successful DSPs will also create new service models in partnership with third-party vendors, such as over-the-top (OTT) content providers. 

A service provider that can successfully manage partners will be able to maximize its revenue potential across the digital value chain, regardless of where services originate and how those services are delivered to customers. 

The transformation from a CSP into a DSP requires business, cultural and technological changes that drive unprecedented levels of business focus and operational efficiency across the organization. Beyond the impact on individual service providers, changing an industry that has operated successfully for more than a century is no small task. 

For CSPs, delivering digital services represents new and unprecedented revenue opportunities, though not without the challenges of managing a nearly incomprehensible competitive operating environment. 

- Strategies

Today, any business can conceivably deliver digital services on top of any network infrastructure, yet the service providers that operate those networks are hamstrung by construction costs, operating expenses and regulation. As communications and network access become critical infrastructure, network operators are becoming more regulated. In some countries network infrastructure is being nationalized like power, water and other utilities. Although less extreme, and perhaps as a means to preempt nationalization, many CSPs are defining DSP strategies that divorce their network operations from their services business to establish new organizations intended to compete as DSPs. 

Transforming into a DSP requires much more than creating a new business unit. A DSP must: 

The transformation from network operator to DSP cannot and will not happen overnight. As customers begin to dictate when, where and what products are delivered, DSPs must recognize that the kind of fundamental transformation currently underway in the network must be extended to every aspect of the business. 

In general, more than one-third of the service providers felt that the evolution to a DSP would have a significant impact on the improvement of their organizational effectiveness, as it would force internal organizations to transform to meet the needs of customers and think more holistically about operational efficiency. 

Meanwhile, most service providers want their digital transformation to enable greater customer and competitive differentiation. This is closely aligned with the drive to improve organizational effectiveness, as it can be extremely challenging to differentiate from other service providers without the most efficient organizational structures and processes.

[More to come ...]