In Short:
A McKinsey report reveals that telecom companies can foster growth and new revenue streams by integrating Responsible AI (RAI) practices. RAI ensures ethical and transparent AI use, improving customer experiences and operational efficiency. Although facing fierce competition, using generative AI can significantly boost profits. Emphasizing RAI can help telcos build customer trust and attract talent, making it vital for their success.
A recent report by McKinsey, titled Responsible AI: A Business Imperative for Telcos, highlights the potential for telecom operators to unlock new revenue streams and foster significant growth through the adoption of responsible AI frameworks. The report emphasizes that telecom companies are increasingly leveraging artificial intelligence (AI) as a strategic tool to enhance their competitiveness against technology firms and stimulate expansion.
Understanding Responsible AI (RAI)
The McKinsey research indicates that AI can dramatically enhance customer experiences, lower operational costs, and increase revenue. However, to fully realize these advantages, telcos must incorporate Responsible AI (RAI) practices that promote ethical, transparent, and compliant AI deployments. RAI reflects the commitment to implement AI in manners that are ethical, safe, transparent, and adhere to prevailing regulations.
Innovative Directions: IoT, SaaS, OTT, and Beyond
As noted in the report, the telecom sector is experiencing heightened competition and pressure to innovate. Many telecom companies are diversifying into emerging areas such as the Internet of Things (IoT), software as a service (SaaS), and over-the-top (OTT) video streaming. Additionally, they are expanding into related industries like insurance, financial services, and healthcare to offer new B2C and B2B services. Despite some successes, telecom companies continue to face challenges in competing with faster and more capitalized technology firms.
The Impact of Generative AI on EBITDA
AI, especially generative AI (gen AI) and analytical AI, offers an opportunity for telecommunications firms to transform their operations. According to McKinsey, its findings suggest that generative AI could lead to substantial EBITDA improvements for telcos, with incremental profit margins potentially rising by three to four percentage points within two years and up to eight to ten percentage points over five years.
The report states, “AI provides telcos with an opportunity to redefine their operations. The objective is to evolve into AI-native organizations, integrating AI across all business facets to facilitate growth and renewal. If telcos act decisively, they can excel in employing both generative AI to enhance customer experience and reduce costs, as well as analytical AI to optimize backend operations and infrastructure.”
The Potential Value: USD 250 Billion by 2040
To further illustrate the significance of RAI, McKinsey conducted an analysis of 100 crucial AI use cases that telecommunications companies could implement. Telcos that embrace advanced RAI practices could collectively capture up to USD 250 billion in value by 2040, accounting for 44% of the total industry-wide value created by AI during this period. However, as they adopt AI technologies, telcos must prioritize RAI to protect sensitive data, uphold customer trust, and comply with evolving regulations.
An example of RAI in practice involves ensuring that customer service chatbots do not utilize biased, inaccurate, or sensitive language, and that they refrain from recommending competing products or services.
The report highlights that without a standard framework for RAI, many telecom companies have resorted to adopting governance measures reactively, only as new regulations are introduced. This piecemeal approach risks missing valuable opportunities and hampers long-term success with AI initiatives.
Establishing RAI Maturity Models and Global Standards
McKinsey notes that governments around the world are formulating legislation to regulate the safe and transparent use of AI, with international organizations proposing global responsible AI policies. However, widespread adoption remains a challenge.
Telecom industry organizations are in the early stages of defining RAI maturity models tailored to the sector, with the Global System for Mobile Communications Association (GSMA) recently introducing a tool to help telcos assess their RAI maturity.
According to McKinsey, a robust RAI strategy encompasses maturity models to evaluate AI readiness, clear governance frameworks, and deployment best practices. Telcos that effectively embed RAI throughout the AI implementation process are well-positioned to unlock significant business value and distinguish themselves in the market.
Building Customer Trust through Responsible AI
In conclusion, McKinsey states, “By prioritizing RAI, telecommunications operators can fully leverage the potential of AI, build trust with customers, foster innovation, and generate new revenue streams. A strong emphasis on RAI will also enhance the ability of telecom companies to attract and retain top talent, cultivating a culture dedicated to continuous improvement. In essence, responsible implementation of AI is a sound business strategy.”
