At the OpenCloud Customer Forum this week I gave a presentation focusing on why retaking control over service innovation is essential for telcos’ survival, the slides are shown below.
The presentation opens with the usual ‘doom and gloom’ presented by many who have an agenda, “It’s all bad so buy our ‘snake oil’ and you will survive.” But looking at the numbers, Telecoms is a $2T market that’s growing. SMS revenues are growing to $130B+ in 2013, as stated by Portio research, in many developing markets they are growing. SMS is ubiquitous, look at all the apps that use SMS for alerts and two factor authentication. Telcos are also in the fortunate position that their customers are addicted to the internet, there is no other word which can be used given the growth rates. Mobile broadband traffic is growing at 70% per year, and LTE devices consume 1900% more data than 3G devices. Pricing is volume based! This is a good situation. I show how for Vodafone, which is in a couple of tough markets, data revenue growth more than offsets the voice and messaging declines.
There are tough economies, like Spain and Italy where people face the choice between food on the table and owning a mobile, hence revenues are significantly impacted. But overall the telecoms market is growing, it’s human nature to overly focus on the negative. The presentation reviews markets where OTT (Over The Top) is supposed to be killing the incumbent, e.g. South Korea, and their financial results seem at odds to both the ‘doom and gloom’ MBA analysis and the rapid wide-spread uptake of OTT services like KakaoTalk. Even the good old fixed line revenues remain significant though in slow decline. It’s about actively managing the revenue mix. People declaring “you must partner with OTTs” are simply wrong – telcos must retake control of their services, customer relationship, and hence future.
I show a series of adverts from AT&T on future services from 20 years ago, see below. Once upon a time telcos did have control and built cool stuff. But then innovation was ‘outsourced’ to the strategic suppliers who have failed the industry on services. I blame that failure squarely on the ‘brown-nosed middle managers’ that plague large organizations. Telcos must cut through the noise in the market and re-take control by focusing on two things: customers and services. The recipe is simply:
- Make communications the essential spice of any business recipe, embed telco services everywhere; and
- Do more value added services.
But re-taking control is not simple, there are 2 critical actions telcos must perform:
- Culture change to promote innovation: The presentation shows a few of the litany of excuses used to stifle innovation, this has to change as a matter of urgency; and
- Focus on telecom application developers: there are three main groups, internal developers, developers within existing partners, and a segment of long-tail developers, discussed in a previous weblog.
OpenCloud provides a platform that supports all three telecom application developer segments, and is also a sponsor of TADS (Telecom Application Developer Summit) a grassroots initiative from the people building this industry. Developers and Telcos can together create a sustainable and profitable telecom application ecosystem. Come join TADS and make a difference in our industry!
As usual, VERY insightful, Alan. I couldn’t agree more RE: the need for carriers to retake services innovation.
However, I am afraid, at least in some ways, they are going the opposite direction, acting more like a utility than a source of Value-added Services (VAS) !!!
We have more opinions and details than this brief mention, but this is your blog !! Keep up the great work.
AT&T was “quasi-competitive” in 1993 and becoming progressively more horizontal, digital and generative in their thinking due to competitive forces unleashed in 1983, but still hamstrung by their vertically integrated, analog-priced monopoly offspring and their vestigial vertical mindsets.
The internet sprang forth from this competitive WAN (and monopolized MAN) via flat-rate dial-up and low-cost layer 1-2 transport giving nascent ISPs regional and national scale by the late 1980s. The ISP’s vertical integration was their undoing and led to the internet which indeed brought us everything that “we did”.
But it didn’t come from AT&T!
The point was to highlight AT&T once had lots of cool service ideas they simply did not deliver. I worked at BT in the early 90s and built many services shown in the advert. The presentation simply explains how such leadership was lost, which was in part related to vertical integration, but not entirely, as many of the solutions where ecosystem based.