Reinventing Telcos with AI

The AI-Powered Evolution of the Telco Industry

The telecommunications sector is rapidly transforming as both businesses and consumers explore new applications and experiences enabled by 5G technology. This new level of connectivity is driving significant advancements in autonomous vehicles, pioneering new applications for the industrial Internet of Things (IoT), and paving the way for the development of futuristic smart cities.

However, the recent rise of generative artificial intelligence (AI) holds the potential to reshape the industry in profound ways.

A Shift in Investment Strategies

Generative AI is compelling telcos to reconsider their investment strategies, especially in the face of declining net promoter scores (NPS), a critical customer satisfaction metric. Additionally, the industry is seeing disruption from challenger brands that offer feature-rich, self-service experiences and prioritize higher data caps over traditional voice minutes.

Reimagining Business Models with AI

Traditionally, shifting to new business models has been a lengthy and complex process for telcos, often requiring years of re-platforming and systems integration. But what if legacy telcos could rebuild from the ground up using generative AI?

With the availability of scalable compute resources, an explosion of data, and rapid advancements in large language models (LLMs), the idea of an AI-powered telco is no longer far-fetched. For many regulated companies, including telcos with privately held data, this presents a significant opportunity. Their extensive proprietary databases, accumulated over years of operation, can now be leveraged by generative AI models to unlock new possibilities.

Generative AI's ability to analyze and draw insights from vast datasets allows telcos to craft intelligent solutions tailored to subscriber demographics, enhancing operational efficiency and customer service.

Starting Your AI Transformation Journey

Off-the-Shelf vs. Custom AI Solutions

Telcos looking to jumpstart their AI transformation can deploy off-the-shelf generative AI models available through platforms like Amazon Bedrock. This approach can accelerate initiatives that previously required years to complete. For instance, multilingual customer service chatbots can revitalize customer service, network teams can perform fault analysis and optimization more efficiently, marketing teams can scale personalized campaigns, and developers can use secure coding assistants to shorten prototyping timelines.

Early adopters like Deutsche Telekom have already reported double-digit improvements in customer service accuracy by leveraging advanced AI infrastructure. The UK's BT Group has deployed a coding assistant that has generated over 200,000 lines of code, enhancing productivity for its 1,200 developers. Similarly, CelcomDigi in Malaysia is developing Bahasa Melayu language algorithms to create AI-driven solutions for its diverse customer base.

Telcos with digital sub-brands can also benefit from generative AI. Cloud-native, AI-enhanced billing and charging solutions allow product managers to dynamically generate pricing, discounts, and bundled offers based on granular user segmentation, along with the necessary marketing assets to reach subscribers.

Alternatively, telcos can create bespoke foundation models (FMs) tailored to their specific needs. For example, South Korea's SK Telecom developed TelClaude to power AI-driven contact centers, improve services like spam detection, and create personal AI assistants.

Ensuring AI Accuracy and Data Security

For regulated companies like telcos, which possess vast amounts of data from market research, networks, devices, and customer records, generative AI offers a powerful tool for uncovering valuable insights that can drive evolution or even reinvention.

However, safeguarding this data is paramount. Telcos, already experienced in preventing data misuse, are well-positioned to adopt AI quickly while maintaining data security. This experience gives them an advantage over organizations that have not yet addressed data management challenges.

As one telco IT leader noted, "We need to ensure that our data is secure and not used by other actors."

Customers are increasingly concerned about the provenance of their data, which in many cases, belongs to them. Generative AI raises valid concerns about transparency, bias, and hallucinations—AI-generated responses that contain false or misleading information. To address these concerns, telcos must implement rigorous testing, monitoring, and maintain a "human in the loop" to ensure AI systems operate reliably and ethically.

When selecting a generative AI service, telcos should prioritize solutions that allow third-party models to interact with their data rather than the reverse, safeguarding data privacy and confidentiality.

Human Talent: The Key to Intelligent AI

Generative AI represents a shift from traditional automation, where machines execute predefined tasks. Instead, it enhances human capabilities, unlocking creativity and boosting productivity in unprecedented ways.

A 2024 AWS-commissioned AI skills survey in the Asia-Pacific (APAC) region found that 97 percent of IT and telecommunications employers expect to adopt AI tools by 2028. As AI adoption accelerates, telco leaders must provide opportunities for employees to acquire AI skills, ensuring they can fully leverage the potential of generative AI. Collaboration between governments, industries, and educators will be crucial to developing AI training programs and aligning employees' skills with emerging roles.

Spanish telco Telefónica recognized the importance of upskilling its internal team to close the cloud-skills gap and advance its digital transformation. By partnering with AWS, Telefónica developed a multiyear upskilling plan that equipped its teams with the practical cloud skills needed to maximize AWS capabilities.

Embracing AI for Competitive Advantage

In 2024, telco leaders face a pivotal decision: maintain the status quo or boldly reinvent their value-creation strategies by embracing generative AI.

The stakes are high—not only for the telcos' success but also in light of the sobering statistic that 70 percent of business transformation efforts fail. As customer expectations continue to evolve, implementing a measured AI strategy is becoming increasingly essential.

Jayanth Nagarajan is the head of Telecommunications Industry for Asia-Pacific & Japan at AWS, a provider of on-demand cloud computing platforms to individuals, companies, and governments on a metered, pay-as-you-go basis.