The Next Billion $ for TELCO: David vs Goliath
As US Telcos navigate the complexities of 5G deployment, the ever-evolving landscape of AI, and the lingering impacts of the pandemic, a fundamental question arises: Where will the next billion dollars in growth come from? While it's intuitive to correlate current size, scale, and transformation initiatives with that elusive revenue, a closer examination reveals a recurring theme: the power of the "David" – the agile disruptor who, with limited resources, challenges the established "Goliath" by carving out a unique niche, often leveraging or even displacing incumbent assets.
The Lessons from History
Consider the case of Digital Equipment Corporation (DEC) in the 1970s. A pioneer in computing with a $14 billion empire built on its PDP-11 and VAX minicomputers, DEC was a true "Goliath." However, its commitment to minicomputers closed its eyes to the shift towards personal computing. Agile players like Apple, a "David," capitalized on this, launching PCs that ultimately rendered minicomputers obsolete. DEC even failed to realize the potential of its own internet and networking business, AltaVista, and eventually sold it to Compaq for a nominal sum.
The AI Landscape: A Modern Parallel
The current AI wave presents a similar dynamic. Large Language Models (LLMs) from companies like OpenAI, Google, and Perplexity are rapidly becoming "Goliaths" – capital-intensive, data-hungry, and requiring massive computing power. Yet, emerging alongside them are Small Language Models (SLMs) and specific, targeted use cases - potential "Davids" leveraging these LLMs to address particular business and societal needs. At Tech Mahindra, we have also undertaken Project Indus, an indigenous foundational model designed to converse in many Indian languages and dialects, exemplifying innovation emerging from diverse spaces.
Telcos and the "David" Dilemma
This "David vs. Goliath" dynamic is particularly relevant to the telecommunications industry. Telco network assets like spectrum, fiber, and equipment are analogous to the large, capital-intensive LLMs, requiring significant resources and time to deploy. Conversely, disruptive players such as WhatsApp, a "David," replicated SMS and voice services at a global level, severely impacting Telcos’ revenue expansion. Similarly, streaming platforms like Netflix and Disney, the tech ‘Davids’ rode on the Telco network but created a huge value for themselves. Now, the question is – could Telcos, either independently or in collaboration with Big Tech, be the ones to generate this next billion in revenue?
Diminishing Returns and the Search for the Next "David"
The stories of DEC, AI-LLMs, and Telcos highlight a crucial truth: scale alone doesn't guarantee success. Beyond a certain point, massive investment yields diminishing returns. The real opportunity lies in identifying and nurturing the next generation of "Davids"—agile disruptors who can carve out unique niches and leverage existing infrastructure in innovative ways.
This means moving beyond incremental improvements and embracing bold new strategies for Telcos. The path to the next billion dollars isn't about simply scaling existing services; it's about identifying untapped potential. This could involve deepening partnerships to offer specialized services in sectors like healthcare, education, or e-commerce, creating immersive virtual reality experiences, or focusing on hyper-personalization to significantly increase Average Revenue Per User (ARPU).
While we will explore these possibilities further in upcoming articles, we encourage you to reflect on these key areas for innovation: how can Telcos best leverage their existing assets to partner effectively with emerging technologies? What underserved markets present the most significant opportunities? And finally, what bold new services could redefine the customer experience and drive substantial revenue growth? Finding answers to these questions will position us better to shape the future of the telecommunications industry.
