Most telecom operators are undergoing a fundamental transformation that is often phrased as “telco to techco”. For many decades, these operators have primarily been in the telephony business, but as those services give way to more modern forms of digital communications, they are now more in the business of technology-based services, not just for telecom, but for other services as well.
Little growth remains in conventional telephony, and only by making this transition will telcos adapt to stay competitive and become able to provide the next generation of services that is coming from today’s technologies. This isn’t about making one small change – becoming a techco requires adopting several new technologies that are not native to the conventional telephony world.
While the value of voice communication will never change, the legacy landline telephony model has been superseded by many forms of technology innovation, and this is why the evolution to techco is so important. The first wave of innovation came with mobility, but many others have followed, namely cloud, 5G, e-commerce, and most recently AI.
Not only have these innovations given rise to new expectations from subscribers, but also to what it means to be a service provider. This article will provide more context around the impact of these innovations, along with why the new business model needs to be AI-driven and based on being a digital services platform provider.
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Changing landscape and new challenges for telcos
Adapting to new technology is at the heart of the telco-to-techco evolution, but other factors are driving a sense of urgency for carriers. Most carriers – especially Tier 1 incumbents – are rooted in the world of landline telephony, hence the term telco. While the monopoly status granted to them early on to build out their networks ensured that telephony service could be accessible to all, there were no competitors to provide choice or innovative services. Also, with prices being regulated, they had no incentive to offer lower-cost services.
This model worked well until deregulation came – notably the breakup of AT&T in 1984. Only then was competition possible, and that marked the beginning of a changing landscape, which continues to this day. Initially, competition came in the form of lower prices, but the real change came from the technology innovation that deregulation largely made possible. Consider these leading examples, along with their impact on the market.
- Mobility – with cellular telephony, subscribers were no longer tethered to a landline, and today’s world has become mobile-first, if not mobile-only
- Internet telephony – VoIP enabled voice calls online at much lower cost than landline, and is now the successor technology to TDM – nothing has been more disruptive to the legacy telco model
- Cloud – enabled telephony and voice applications to be integrated into platforms with other communications applications – equally important is how cloud has given rise to the market power hyperscalers now have over all forms of communication, including telephony
- 5G networks – a cornerstone of the evolution to digital, data-based services, which now includes telephony, and has truly made the landline obsolete
- AI – early days still, but this is poised to have the greatest impact of all for how telcos evolve into techcos
These changes – and others – add up to a more complex and challenging landscape for telcos, and there’s no going back to monopoly times. Aside from the fact that nothing in this landscape is good news for legacy telephony, the pace of change is accelerating – especially with AI – and telcos do not have the luxury of time to adapt.
Consumer and business subscribers have been the big winners with low-cost telephony, and a vastly more interesting range of services that could not have existed in analogue times. The more carriers remain tied to the telco model, the more vulnerable and less relevant they become, and this is compounded by the lack of an innovation culture that monopolies produce.
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The AI opportunity for telco to techco evolution
The starting point for this evolution is recognising the need to become a digital services platform provider, along with embracing the opportunities that AI is creating. Time is of the essence, however, and most carriers lack the culture, resources and expertise to do these things in-house. Conversely, as technology has evolved from hardware-based to software-based, and as applications have evolved from closed to open, there are many viable paths for telcos to follow.
With AI evolving so quickly, no carrier can stay on the leading edge for long, and in that regard, becoming a techco is very much a possibility, no matter how far behind a telco is right now. The key to success here is understanding that AI is an ecosystem play, with many links in the value chain. While this ecosystem is constantly growing, telcos must identify the key links that will support the digital services platform they’ll need to become a techco. Some of the most important value chain links are as follows:
- Subscriber privacy – nothing is more important for carriers, especially as the touchpoints across the AI ecosystem proliferate – for subscribers to trust your platform, their privacy must be protected, and core to this is having end-to-end encryption
- Cybersecurity – closely tied to privacy, but subscribers must also be protected from a multitude of threats – robocalls, fraud, identity theft, deepfakes, etc.
- Secure payments – the biggest shift from telco to techco is moving from telephony services to e-commerce – this is where the revenue growth is, and having secure payments is paramount
- Monetisation – the real value from subscriber data is identifying monetisation opportunities, not just from new services, but also from brands and media partners who want to engage with subscribers
- Developers – this is what drives the AI ecosystem, as they have the expertise with APIs to quickly build mobile applications specific to your subscriber base, as well as to integrate them across your AI value chain
- Analytics tools – many types will be needed given the volumes of data that AI produces, both to manage network operations and to drive hyper-personalised engagement with subscribers
- AI infrastructure – AI runs through all of the above links, but is also becoming the force behind how communications networks are built, operated, optimised, and scaled for growth
There is no shortage of companies to partner with across this ecosystem, and this approach represents the greatest opportunity for telcos, no matter where they are on the techco path. While legacy carriers required few partners – most of the foundational technology was developed internally – AI ecosystem partners are rooted in a world that is new for carriers.
Not only will it be vital for carriers to develop ecosystem partnerships just to get on a level playing field with how digital service providers are leveraging AI now, but also for where things are going. Orchestration has become a leading AI buzzword in 2026, and it refers to next-level value creation from AI, where AI platforms and applications are more integrated.
This will enable service providers – including hyperscalers – to provide richer, seamless subscriber experiences, and take both end-to-end automation and personalisation to new heights. As such, the techco journey doesn’t end with developing a digital services platform. By the time that happens for most carriers, the market will already be well along the path to orchestration.
For telcos that are struggling to find a way forward, it’s important to note that the global telecom market is quite diverse, and different regions are evolving in different ways. The Asia Pacific market is widely viewed as the leader in techco evolution, as are carriers in emerging markets, such as Turkey, Brazil and the Middle East.
The common thread here is a short history of legacy telephony, where carriers were able to rapidly move to mobility, which gave them a head start for adopting the technologies that are driving the market today. Equally important would be the demographics in these markets, namely a large and fast-growing cohort of digital natives, who are mobile-only, and live much of their lives through smartphones.
This is where telcos should look to develop their techco roadmaps, since they are on track to adopt the exact same technologies. A defining characteristic in these markets would be the widespread use of “super apps”, or digital platforms that serve as the hub for daily life. These platforms have established trust with subscribers, making them one-stop shops for mobile banking, e-commerce, ridesharing, delivery services, government services, social media, messaging (SMS and RCS), streaming services, and many other mobile-friendly applications.
Also worth noting is that this trust is not just based on having good security capabilities. The human element is just as important, in that these platforms are not just regionalised but localised, where the applications are aligned with local culture, language, regulation, payment preferences, etc.
Prime examples would be WeChat and Alipay in China, Tata Neu in India, Gojek in Indonesia, LINE in Japan and Thailand, and Grab in Singapore. The largest global super app is WhatsApp, and while best-known in the US and Europe – markets with very different dynamics than just described here – it is widely used in these regional markets as well, namely India, Indonesia and Brazil (all of which have more users than the US). As such, there are many models of success for carriers to emulate as they transition to becoming techcos.
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Conclusion
There should be little doubt around the need for telcos to evolve into techcos, along with the need to take an AI-centric approach in developing the kind of digital services that subscribers value. While the new technologies are complex, and the AI ecosystem is unfamiliar, telco leaders should keep in mind that they have a strong foundation to build on.
Legacy telephony networks may only have limited value today, but telcos have the most important thing – a subscriber base with revenues, along with the infrastructure to support them. Hyperscalers do not have this, nor do they have expertise in voice networks and real-time communications. First and foremost, the priority for becoming a techco will be creating a defensible moat to protect that base, and then grow it with new digital services.
Since most telcos cannot innovate to this level on their own, they will need to develop a sound strategy around partnerships across the AI ecosystem. This requires agility, something that larger telcos struggle with, but will be essential to spotting new trends and quickly finding the right partners to address them with subscribers.
This won’t be easy, as there will be new challenges to manage, such as data sovereignty, compliance, and an ever-growing set of cybersecurity threats that can quickly undermine subscriber trust that took decades to establish. AI brings a daunting mix of opportunity and risk, and it will take more than making savvy technology choices to get this right.
As much as anything, techco evolution will require vision from leadership to embrace the AI ecosystem, but to recognise this will be work in progress to get the value chain fully in place. The status quo is clearly not an option, and by taking a global approach to innovation, there are plenty of success stories to model upon for all sizes of carriers.
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