Non-traditional players including social networking sites such as Facebook, Twitter, and YouTube as well as players like Apple and Google, are increasing their share of what used to be exclusively the telecom sector’s revenue and continue to threaten long-held business and customer-relationship models, “Fixed telecom operators continue to hold sway over a large, captive customer base and have unparalleled infrastructure and relatively significant investment capabilities. Combined, these constitute a powerful array of assets that telecom providers can use to compete in the race to offer next-generation telecommunication services and applications. Owning the consumer relationship is an essential element of their sustainability,” the study revealed.

“To protect that relationship, telecom operators are reinventing their home communication business-giving consumers the capacity to use services and applications that far transcend basic voice and Internet access services,” said Karim Sabbagh, a partner at Booz & Company.

“The rapid emergence of increasingly powerful digital devices is also contributing to global consumer sophistication, including in the Middle East and North Africa (MENA) region, producing a significant shift in consumer behavior toward adoption of digital content,” said Hadi Raad, a principal at Booz & Company. This shift is evident in behavioral insights about customers in accessing the digital content. The Twitter community in the region grew by almost 300 per cent during the first six months of 2009 with 61 per cent of social networkers updating their Twitter status at least twice a day and 80 per cent of them accessing Twitter through a mobile device. There are 10 million active Facebook users in the MENA region. In countries like the UAE, Jordan, and Lebanon, more than 40 per cent of the online population uses Facebook. Regional broadband growth has been strong and will sustain its pace. According to one forecast, there will be 22 million fixed broadband telecom connections in the MENA region by 2014, representing a household penetration rate of almost 32 per cent.

“Customers can find, manage and interact with a vast array of digital content in just a few clicks of their remote control. Over-the-top applications that run over TV include interactive advertisements, gaming, and remote shopping,” said Sabbagh.

Telecom operators are recognizing the content and application space as a source of future revenue growth. Multimedia applications will continue to grow broadband revenue. Through premium content, interactivity, and personalization, IPTV could evolve as a key application in next-generation homes, despite the abundance of piracy and free-to-air TV channels in the MENA region. “VoD could prove to be a huge regional success, given the popularity of DVD rental shops and the lack of movie theaters in countries such as Saudi Arabia. Forecasts indicate that roughly 10 per cent of broadband connections in the region will be bundled with IPTV in the next few years,” said Raad.

“With the anticipated surge in broadband applications and revenues, telecom operators are changing their business models to create new methods of interaction with customers as well as with content and application service providers,” added Sabbagh.

“The boundaries between telecom operators, Internet players, and entertainment providers continue to blur, and almost every telecom operator faces a rapidly changing competitive landscape rife with opportunities and challenges,” Raad said.

Three key priorities have emerged for fixed operators to reinvent their home communications business and capture the opportunity in next-generation homes i.e. preparing their infrastructure, ensuring a high-quality experience for consumers and developing a clear applications road map with the right partnerships and business models to foster innovation while securing their own position in the emerging ecosystem.

“For telecom operators, the mounting business generated by applications is more than just another growth opportunity. It is an imperative-a necessary component of the future of the business, in which telecom operators must actively participate in order to thrive and not just become utility-like operators of pipe,” the study added.