Digital healthcare: Opportunities and challenges for telcos
As we discussed in our recent operator growth strategies report, growth is slowing for telcos all over the world. While there are some exceptions in certain markets, the overall picture is that operators cannot continue to rely on their core competencies such as voice and data connectivity, to drive revenue growth. In response to this trend, some operators are branching out and investigating opportunities to seek out new revenue streams. One sector which is seeing increasing attention from traditional telcos is digital healthcare - but opportunities in this new sector aren't without challenges.
The digital transformation of healthcare has seen steady implementation and proliferation of both consumer and enterprise-level innovations. In the United States, between 2008 and 2014 the percentage of hospitals with some form of basic Electronic Health Records (EHR) grew 700%, from under 10% of hospitals to just over 75% of hospitals. [i] Deloitte forecasts that revenue growth in the UK of EHR (referred to in its report as "digital health systems") to be nearly 45%, reaching to just under £3 billion by 2018[ii], during that same time period the global market is expected to reach £43 billion by 2018.
Telcos seeking to establish themselves in digital healthcare need to determine their strategy and approach to the sector. One route to entry is to focus on acquiring existing digital healthcare platforms to create a vertical healthcare division within the telco, as Telstra has been doing since 2015, which we have analysed in detail in our 2016 report. Other telcos have opted for a more organic approach, building on their existing competencies and pushing for in-house innovations, such as Verizon's dedicated cloud-based solutions and M2M connectivity[iii].
As part of their efforts to find synergies between their existing offerings and digital healthcare technology, some telcos have launched pilot projects to examine possible next steps. For example, AT&T partnered with IBM Watson and the University of Texas healthcare network on a project dedicated toward managing chronic diabetes and obesity, Project DOC. In the Rio Grande Valley region of Texas where they operate, over 60% of the population is in need of healthcare for chronic illnesses and the healthcare network has 40% fewer primary care physicians than elsewhere in the state. By using big data analytics, patient data syncing and management, mobile self-care, and other innovations from the two technology giants, the University of Texas healthcare network is seeking to optimise and improve their healthcare capabilities to better serve these patients and manage healthcare in their community.
During Mobile World Congress 2017, a number of operators displayed their innovations across the telecom industry and told us about their plans for the future, as well as some of the challenges that they're facing. One major hurdle to succeeding in digital healthcare is regulation and security, which may explain the hesitancy with which other telcos have approached this area. In countries with nationalised healthcare, the regulations can be seen as cumbersome, politicised, and less market-driven. Laws and regulations are often blamed for slowing down innovation in healthcare, and for telcos seeking to make quick-wins this can make the sector unattractive. Security was another major concern expressed to us, as any failures or breaches can prove to be catastrophic for business relationships and trust. In fact, some operators believe the risk is simply too much to justify expanding into healthcare.
There are many areas within the digital healthcare field for telcos to consider, and it is important that they make the right decisions now if the sector is to help them boost declining revenues. Like with other cases of balancing risk and reward, for some major telcos the advantages of entering digital healthcare suit their appetite, but to the challenge will be to convince investors, regulators, healthcare providers, and consumers that they should come on board.