In my previous blog post, I wrote about Copper Sunset, and the challenges that all telcos face as they migrate to a post-PSTN world. Not only is serious modernization needed for telecom networks, but telcos will need to determine the right mix of services to retain subscribers and how best to monetize them.
This new world will be much more competitive, and telcos will have to adapt in ways they haven’t done before. Those challenges, transforming from telco to techco, were outlined in my earlier posts – here and here. For this post, I will explore the business side of things.
No telco can remain relevant now just with the PSTN and providing basic connectivity. In the age of AI, they must evolve to being platform providers, with a wide range of digital services that go well beyond telephony. However, technology alone will not be a differentiator; the real key lies in becoming innovation-centric and reinventing the business itself.
"No telco can remain relevant now just with the PSTN and providing basic connectivity."
As I see it, there are three business drivers for getting beyond the PSTN, and being successful in this new world that is being shaped by AI.
Business Driver 1: New Revenue Models
At a high level, service offerings need to shift from flat-rate pricing of minutes or connectivity, to usage-based pricing tied to applications that are more data-driven than voice-based. This is part of the broader digital transformation trend, where all forms of traffic can now be tracked and measured, whether it be voice, text or video. This also means that revenue can be generated based on performance-based outcomes based on how well the network is providing services, such as with SLAs.
"...carriers can take this one step further with tiered offerings, whereby subscribers pay more for higher standards of service..."
With a more modern network infrastructure, carriers can take this one step further with tiered offerings, whereby subscribers pay more for higher standards of service, such as connectivity speeds, data archiving, location-based services, and privacy protection. As such, new revenues can be derived both from digital service offerings that subscribers will consume based on the experience subscribers are willing to pay for their service offerings.
The focus here on revenue models is about different paths to monetization, and not the specific types of offerings, although the latter will be addressed in Driver 3. In that context, the best revenue opportunities will come from two core drivers of change – 5G and AI. The shift to mobility is essential given the need to provide services where subscribers are at, especially in the consumer world. This also aligns with enterprises, not just for supporting AI-based services, but also for network performance as workspaces become increasingly decentralized.
"...88% of U.S. businesses see 5G as being “critical to optimizing the use of AI in the workplace”."
In support of the latter, adoption is growing for wireless WAN (WWAN) to provide real-time connectivity both for office-based and remote workers. More support for this can be found in Ericsson’s 2025 U.S. State of Enterprise Connectivity Report, with one notable finding being that 88% of U.S. businesses see 5G as being “critical to optimizing the use of AI in the workplace”.
"...as AI-based chipsets for workplace endpoints become more common, the demand for AI applications will surely accelerate."
There should be little doubt at this point about the importance of AI for businesses and 5G represents the best approach for a wide range of adoption scenarios. Fixed line options cannot fully support many of today’s organizational structures and while there are cost and complexity challenges for businesses to invest in 5G infrastructure, the benefits for enabling AI applications should outweigh these adoption concerns. It is also worth noting that AI is still in early adopter mode and as AI-based chipsets for workplace endpoints become more common, the demand for AI applications will surely accelerate. Telcos may be having limited success with 5G now for enterprises – either WWAN or private 5G - but they should anticipate the new revenue opportunities that will come for 5G to support AI.
"...by embracing the API ecosystem, the opportunities really open up."
Another model for new revenues would be micropayments for consumer subscribers. Carriers have limited ability to do this for small, pay-per-use transactions, but by embracing the API ecosystem, the opportunities really open up. By integrating these applications with billing systems, carriers can support a wide range of third party use cases that subscribers will find very convenient.
Everyday examples include paying for metered parking, using public transit and road tolls. The same holds for entertainment, such as gaming, or virtual experiences in the realm of AR/VR/XR/MR. All the elements for mobile e-commerce are well in-place today – most notably streaming - and as 5G adoption grows, so will the revenue opportunities for carriers, but only if they build for it. The same also holds for business customers as B2B API offerings come to market.
Business Driver 2: New Partnerships
Telcos are not known for organic innovation and for most carriers, developing new partnerships will be essential. As subscriber value shifts from connectivity to digital services, traditional telcos will be at an inherent disadvantage. Not only do hyperscalers provide the cloud connectivity for today’s subscribers, but they have an ecosystem in place for digital services to run on their platforms. This is a growing threat to carriers, and the best way to counter is with a similar type of ecosystem.
"As subscriber value shifts from connectivity to digital services, traditional telcos will be at an inherent disadvantage."
API partners – in tandem with having more programmable network architectures – provide the foundation for constant innovation to keep pace with hyperscalers. One aspect of this is network optimization, where APIs can be used to drive operational efficiency, and with AI to automate processes and provide self-healing capabilities before problems arise.
A prime example of this opportunity is partnering with Nvidia, where the company has developed a purpose-built “blueprint”, specifically for helping telcos reduce Capex and become AI-ready, not just for 5G, but for 6G, which will be fully AI-native. More broadly, Verizon and Deutsche Telekom are leading examples of becoming API-centric, both for network operations and innovation for customer offerings.
Network optimization is a critical piece of the API story, but the focus here is on subscriber-facing service offerings and the need for telcos to develop partnerships around having an API-based ecosystem. This is where the innovation comes from and to enable new services and revenues, telcos will need to modernize their networks accordingly. Nvidia is one example for doing this, where the native capabilities need to be open, interoperable and scalable.
This is the essence of becoming a platform play, upon which the next generation of subscriber services will run. Modernizing the network however, is only one side of the equation; equally important will be the partnerships for creating new services and revenues.
In terms of developing those partnerships to help telcos become more API-centric, the CAMARA Project is the driving force and being part of the Linux Foundation, it is focused on helping the API developer community build applications specifically for mobile operators. Creating those applications is one thing, but it’s another to make them commercially viable and there has been limited success to date on that front.
A key reason is that given how competitive the mobile space is, telcos work in isolation by nature, trying to save off many types of players. Unlike the PSTN, where market coverage was defined by the reach of a facilities-based network, today’s customers have a much wider range of carrier options to choose from. While carriers have long operated this way, their track record of introducing new money-making services has been poor.
To that end, the GSMA has developed Open Gateway, a standardized framework for all mobile carriers to work from. This serves as a hub to make it easier for carriers to integrate 5G-specific APIs and provide common ground to support mobile operators, who are all on the same journey to support their customer bases. Again, while mobile operators aren’t there yet for API monetization, an ecosystem is clearly taking shape that will bring this to bear sooner than later.
"...AI and API-centric telcos have a great opportunity to leverage an ever-growing universe of API developers to offer innovative, high-value and customized services..."
All that said, some telcos will bring internal innovation to market on their own, but none can truly do it all in-house. Regardless of how advanced their networks are, AI is evolving too quickly for any platform provider to rely solely on their own capabilities – even hyperscalers. Conversely, of course, this also means that AI and API-centric telcos have a great opportunity to leverage an ever-growing universe of API developers to offer innovative, high-value and customized services to each and every customer.
Business Driver 3: New Services and Offerings
Generating new and sustainable revenues will be the most important business driver for telcos now and building on the right foundation of partnerships, they will be able to bring new services and offerings to market to drive those revenues. PSTN-based offerings may well bring revenues for years to come, but on a declining basis and will not present a path to growth as telcos evolve into being techcos.
That growth path will take many forms and this section outlines leading examples for the two core end-markets: B2C and B2B. Each example merits its own analysis, and this article can only provide a high-level overview.
B2C Services
- Smart homes: This is a consumer-facing use case for IoT, which is more of a meta-driver for 5G. IoT is all about hyperconnectivity – as is 5G – and there is a growing desire for today’s digital consumers to be connected to all the devices and endpoints in their homes. This trend will further accelerate as AI-based chipsets find their way into household devices – autos too, of course – at which point the “smart” moniker will drive demand for all kinds of managed services that telcos can monetize.
- eSIM: It’s worth noting this is a GSMA initiative, making it another good example of standards-based innovation that works across the entire mobility spectrum. Most smartphones are now eSIM-based, meaning that the subscriber information is embedded in the phone rather than being on a physical chip. eSIM can enable new B2B services as well, but the main opportunity is among consumers, where adding new lines is much easier than with physical SIM cards and carriers will get faster notification when doing SIM swaps. While eSIM will cannibalize lucrative roaming revenues from SIM cards, the bigger picture is about keeping customers and offering new digital services beyond telephony. Aside from upselling more lines to existing subscribers, creative offers could be developed to attract new subscribers, especially with value-added mobile services such as device tracking, ultra-fast data speeds, privacy protection and anti-fraud APIs.
- RCS: This presents far greater monetization opportunities than SMS, especially now that Apple supports RCS. With today’s mobile-first consumers, RCS is becoming a powerful vehicle for engagement on all levels – among customers, prospects and former customers. By partnering with this ecosystem – especially around CPaaS - this may well be the most promising B2C frontier for both 5G and AI to monetize new services. Again, RCS will cannibalize SMS revenues, but this has far greater potential for long-term monetization.
B2B Services
- IoT: This has long-been viewed as a leading broad use case to justify investing in 5G, but the promise has not been fully-realized. The complexity challenges remain, but as noted above, the mobile apps ecosystem is maturing and will help bring IoT closer to what telcos wish for. The impact of AI is still nascent, but it adds another value layer to make IoT compelling, not just for businesses, but in the consumer world as well. All that aside, telcos need to get better at identifying use cases and productizing them in ways that are relevant for customers. Telco leaders need to be thinking more along these lines to see the opportunity, along with developing the right partnerships for monetizing IoT.
- Smart Cities: Similar to Smart Homes, there are many “smart” vectors for telcos to address outside the consumer space. Other smart use cases include buildings, transit and utilities/energy. All of these are meta-level opportunities that are based on connectivity across various systems to manage everyday operations, rather than connectivity for individuals. These scenarios reflect a telco’s ability to deliver services in real-time and at scale. With the requisite network capabilities in place for this – especially 5G and AI - telcos will be well-positioned to offer and monetize “smart” services are becoming increasingly important as the world becomes hyperconnected.
- Vertical markets: As with RCS for consumers, this could be the best B2B vector of all for telcos. Horizontal, “smart” offerings are definitely an opportunity, but even more so with a distinct vertical focus. To name a few, retail, manufacturing logistics/transportation, and healthcare – each represents a deep opportunity for mobile services specifically tailored for their needs. The details for these would require a separate analysis, and the main idea here is to stress the importance for telcos leaders to develop specific value propositions for each type of vertical market.
"...RCS is becoming a powerful vehicle for engagement on all levels..."
Conclusion
These three drivers represent a framework for telcos as they move along from PSTN and the legacy model of being a telephony provider. The technology challenges are central to this transition, but it’s not enough to simply invest in the best technology for network modernization. If that was the whole plan, the end result would be “fat, dumb pipes” and a downward spiral of commoditization.
"...the real success driver is agile innovation."
Monopoly status is very much in the rear-view mirror for telcos and with so many types of competitors in the mix now, the real success driver is agile innovation. The drivers outlined herein will help telcos get there, but more importantly, a new way of thinking is needed to break-with legacy models.
This doesn’t mean leaving it all behind, as telcos have an inherent set of advantages that hyperscalers don’t have and these will play well if they can do everything else right. First and foremost is having a large subscriber base and with that comes a large dataset to build innovative applications around.
"...telcos will have a trusted brand that hyperscalers and OTT players cannot match."
Add to that the institutional expertise of building and managing a network at scale, along with established channels to market. When all of that meshes together, telcos will have a trusted brand that hyperscalers and OTT players cannot match. Combine that with the right set of partners and a go-to-market strategy that focuses on customer outcomes instead of network capabilities, and all the ingredients are there for a successful transition from PSTN to digital services platform.
