How should a traditional telecommunications carriers position itself when under threat from new emerging terminals and content aggregation platform services: as a network communications service provider, as a voice data service provider, or something different? What new technology or business model do carriers need to leverage to stake their claim in the market?

Economist and renowned expert of business strategy, Michael Porter, argues focus (specializing on a single industry or field), differentiation (products unique to the competition) cost and leadership (low cost but maintaining value) are the most important factors. For telecoms carriers, the traditional approach has been to win over existing customers – what management experts would refer to as ‘red ocean strategy’. But in the age of the Better Connected World, carriers must seek out ‘the blue ocean’ – leaving their traditional position and forging a dominant position in new value chain.

It’s no surprise that some leading carriers have already started to reposition themselves in the market and initiate new strategies. China Telecom’s Sichuan subsidiary (Sichuan Telecom for short), has transformed its value chain by cooperating with Huawei to position TV business as the key engine of value chain transformation. In 2014, Sichuan Telecom prioritized video above all other products, so as to offer a comprehensive video capability: the net increase of video, fiber-optic broadband and mobile users was number one across China Telecom’s subsidiaries.

In 2014, Sichuan Telecom prioritized video above all other products, so as to offer a comprehensive video capability: the net increase of video, fiber-optic broadband and mobile users was number one across China Telecom’s subsidiaries.

Repositioning Business Objectives

In the years leading up to 2013, Sichuan Telecom had to deal with an issue facing many telecom companies. On one hand, the industry was up against severe competition from traditional broadband and mobile users. On the other hand, new IPTV services offered by telecom carriers presented new challenges, as they risked being amalgamated with broadcast, TV systems and other service providers. At that time, Sichuan Telecom was having to compete against various threats, from broadband, to mobile and IPTV. It needed a way to provide a richer, more valuable experience for its customers, and it needed a way to improve its pipeline capacity and competency without becoming a pure pipeline.

In 2013, Sichuan Telecom initiated a new transformative strategy named “zero-one-two” to try to forge a new direction and increase their value. “Zero” referred to the free HD video programming that was to drive business; “one” referred to the single fiber optic cable as business’ core; and “two” referred to a pair of mobile phones, symbolizing the focal point of the company’s products offerings. The strategy focused on the needs of an average household consumer, with mobile video the main selling point. By doing so, video user volume increased, which in turn boosted fiber optic broadband and mobile Internet business. Sichuan Telecom had enacted a comprehensive reform of planning, construction, operations and maintenance to positioned video as its core business.

Building the ultimate 4K experience

In order to provide customers with the best 4K experience, Sichuan Telecom has been cooperating with Huawei since 2012 to optimize its network architecture and increase speeds. The partnership also helped increased bandwidth and flux, making 100MB broadband and visual management for video a reality for household users.

By consistently updating its video offerings, Sichuan Telecom was able to transform itself from a telecom carrier offering traditional services – such as live broadcast and video-on-demand – to an OTT service, merging rich video content and imported Blu-ray, 3D and 4K video. Through a step-by-step and stage-by-stage developed network and CDN collaborative construction, resource allocation was able to be optimized. The resulting increase in fluency and resolution revolutionized the video watching experience. In just three years, Sichuan Telecom’s IPTV users increased from 720,000 to 4.3 million.

Crucially, Sichuan Telecom further identified the need for upstream and downstream cooperation for this transformation to work, so varying video formats could be adapted to different applications. In 2014, Sichuan Telecom cooperated with numerous device manufactures, telecommunication equipment manufacturers, and audio and video content suppliers to form a 4K ultra HD industry alliance. The aim was to promote a more complete industry chain with better cooperation among companies across the industry.

4K video to usher in an era of new value chain

Sichuan Telecom has positioned HD video as its engine, directly boosting the growth of its broadband and mobile business. Income from TV value-added service increased threefold from late 2013 to late 2014 and lowered the risk of losing customers. In 2014 Sichuan Telecom estimates that their HD video service helped them retain 700,000 broadband customers. For potential new users, meanwhile, the new services on offer made the signing up a more attractive proposition. Single port ARPU, for example, was bigger than traditional TV and Internet videos, which makes telecom IPTV use more engaging.

“According to statistics from China Telecom Group, from January to May 2015, Sichuan Telecom’s net user growth across IPTV, fiber optic broadband and even smartphone user indexes was number one in China,”

Zhao Maiqing, General Manager, Sichuan Telecom

“According to statistics from China Telecom Group, from January to May 2015, Sichuan Telecom’s net user growth across IPTV, fiber optic broadband and even smartphone user indexes was number one in China,” Zhao Maiqing, General Manager of Sichuan Telecom, reported. “Compared to the same period last year, primary business income increase also ranks as number one – truly remarkable results.”

Of greater significance perhaps is the emergence of video as the breakthrough for telecom carriers to gain users. It has shaken up the value chain, releasing the new business model of value combined with entertainment, content, advertisements and big data. The business potential of HD video has allowed Sichuan Telecom to take control of the most significant device in consumers’ living rooms: the television. Through this platform, Sichuan Telecom can offer products relating to smart homes, home security, health and pensions, community services, education and a host of others.

By entering a tactical partnership with Huawei, Sichuan Telecom has benefitted from rapid network deployment, stable operations, user experience innovation, jointly developed innovative, ubiquitous and agile video, broadband and mobile network environments for rural and urban areas and bring citizen and rural residents into a better connected world.

Sichuan Telecom’s transformation has been
based on the Internet business model innovation.

With the help of Huawei, they have used HD video to gain new users, and integrated content, broadband, mobile and other technological innovation to overcome competitors from non-telecommunication industries. It’s the kind of bold innovation that typifies the vision behind Better Connected World: continuously pushing the boundaries of ICT so that every corner of the world can enjoy the pioneering innovation that is enriching humanity.

Learn More