Lately I have been thinking hard (and discussing a lot) around the role of telcos in the decade to come. This train of thought is prompted by a variety of elements in the news, my own research work and discussion with some colleagues. In this post I will try to synthesis all of this into a coherent whole...
One point on terminology before I get going: it was pointed out to me in DC last week that the term of "telco" is not as precise a denomination as I thought. What I'm talking about here is "service providers that own or lease the facilities they operate on". Since that's a long denomination, "telco" will have to do, but at least you know what I'm talking about.
Telcos are dying. That may sound like a very blunt statement considering we are talking about some of the largest corporations on earth, but as someone pointed out to me last week, no-one ever thought GM was going to go bankrupt, and yet...
Telcos are dying for - in my mind - two cardinal sins: sloth and greed.
- Sloth because they have - for the most part - refused to undergo the transformation that would have made them lean enough to stay at the top of the pile. For one Telia, how many DTs ? Most incumbents in Europe have probably twice as many employees as they really need if not more. Telia (who underwent this transformation) shrunk from 50 000 to 9 000 employees in 10 years, and has more turnover now than it ever had in the past.
- Greed because as they saw other companies making profits on the net they suddenly decided that as enablers of the internet they should get a share of these profits. This led them to emulate over-the-top players instead of finding their own space in the ecosystem and focusing on delivering that in the best possible way.
The disintermediation that they fear for the future is actually a story of the present. Their service strategies, for the most part, make no sense, are undifferentiated and will not please customers who have been given a taste of choice.
Don't believe me? It's in the news this week: Fairpoint, who bought over Verizon's incumbent rural network in New England is dying, incapable of upgrading it's network even to provide basic DSL services (see Fairpoint, Please Have Patience and David Isenberg's analysis thereof). BBC's iPlayer is opening up to external broadcasters, presumably to become a full-on disintermediation engine for telco video services.
I don't think it's all doom and gloom, but I do think that as we shift from a DSL driven bandwidth constrained world to a fiber driven bandwidth abundant world, these trends will accelerate. Which means that telcos need to acknowledge there issue, to accept that obstruction, litigation and favourable net regulation will not get them out of this one, and find solutions.
What these solutions are is a large focus of my upcoming work in the coming months, so you'll pardon me if I'm not too specific at this stage before the work has actually been done, but let me just say this: the answer lies for a large part in a word that has always been seen as distasteful by many (but not all) telcos in the past: wholesale.
Finally, I'll leave you to ponder on the following advert, pointed out to me by my colleague and telecom ad expert Vince. It's ten years old and yet strangely actual with the exception of two little things:
- we're not quite there yet
- telcos don't see themselves in that place anymore.