In recent months, I have become increasingly aware of how risk-averse telcos have become. Some might argue that they have never been much for taking risks. I'm not sure I agree with that: in the boom years of 1998-2001, telcos were taking plenty of risks, buying operations left right and center in an expansion boulimia, financing start-ups launched by their own employees, exploring radical service propositions that were way ahead of their time.
The problem is that this all crashed. It crashed in large part because they didn't manage the risks they were taking the way it should be managed, and also because a number of ruthless analyst firms published over-inflated numbers for internet growth that everyone wanted so hard to believe in that they threw common sense out of the window. My ex-colleague, excellent friend and super smart thinker Camille Mendler mentioned in a presentation earlier this year that the market had atoned long enough for its 90s excesses, and I agree with her.
A large part of this atonement needs to be an acceptance that you can't carve your place in the sun without taking some risks. It's a bit of an understatement to say that Telcos aren't happy with where they are being steered to in the value chain of connected services, and yet besides moaning, they're not doing much to change that. I recently pointed out at an industry event during one of my presentations that in recent months four new and highly visible video-communication services emerged (Facetime, Skype on TV, Logitech Revue and Cisco umi), all of which are over-the-top. As I have argued here in the past, this is an area that should have been natural for telcos to stake and yet they didn't.
It's high time the telcos woke up to that fact, and nowhere is this as apparent as in their NGA investments. By focusing on the known components of the business model (costs) and considering unknown components (revenues) as uncertain, the telcos freeze themselves into paralysis. Instead of exploring new ways to generate revenues, instead of accepting that they will not know where all the revenues will come from before the infrastructure is in place, they play a waiting game that will end up with them deploying anyway, but under a great deal more competitive pressure on their historical access business.
I find the following blog posting on innovation and risk very interesting: this is about bio-tech start-up investment but it clearly (and scientifically) demonstrates that a true culture and understanding of risk is how the investors succeed. If telcos aren't willing to take these risks then they should accept that they are in a business of long-term returns with limited risks and fluctuation.
That's called a utility business.