The purpose of this CXTech Week 4 2023 newsletter is to highlight, with commentary, some of the news stories in CXTech this week. What is CXTech? The C stands for Connectivity, Communications, Collaboration, Conversation, Customer; X for Experience because that’s what matters; and Tech because the focus is enablers.
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Covered this week:
- Thank You Commio, Briefing – January 2023, with CPaaS Expert Alan Quayle
- Willful Blindness
- Truphone sold for $1
- HTK Acquired by ITA Group
- Data Residency in Programmable Communications
- vCon and Data Residency
- People, Gossip, and Frivolous Stuff
Thank You Commio, Briefing – January 2023, with CPaaS Expert Alan Quayle
A big thank you to Tim McLain and the Commio folks for inviting me in to give a briefing reviewing programmable communications through the pandemic. We jumped forward 10 years in only 3!
Three articles this week showed to me the telecom industry and those around it are being willfully blind to the reality of the telcos’ situation.
Seeking Alpha reported “Verizon: Hammered By 5G Costs.” Verizon Communications reported Q4 2022 results generally in line with forecasts, but the company slashed 2023 EPS targets. Verizon Communications stock is trading at 8.5x lowered EPS targets, which is rather low.
What analysts are worried about is the billions Verizon has spent on 5G with little impact on cash flow and profits. As I’ve pointed out many times since the beginning of the 5G hype cycle, fixed broadband shows there’s little with respect to new revenues, it’s mostly operational cost savings and some incremental fixed and business wireless access. 4G is good enough for most mobile customers.
Remember back to the 3G to 4G transition, HSDPA / HSPA was already driving up mobile internet adoption for business customers in 3G networks. Then with the roll-out of 4G, mobile internet packages where priced more reasonably for the general consumer to drive up adoption and revenues. 4G investment was made and revenues grew, everyone was happy.
Today, 5G investment is being made, and the revenues remain mostly flat. The analysts are not dumb, they know 5G will not repeat the mobile internet boom, fixed broadband shows them that.
Other stories such as private mobile networks, well, that’s a mature $20B market (TETRA, GSM, 4G/LTE, airports, mines, factory complexes) which will see some incremental growth but no sea-change in adoption, and the market is getting much more competitive. You’ll see in the coming years programmable private networking / communications, as vendors other than the traditional telecom ones expand into this segment. I’ll consider all the telco cloud silliness and mobile edge compute in a minute.
For financial analysts, change in stock price that they can pre-empt is good for their business. So what we’re seeing is, “Verizon, you’ve investment in 5G, where’s the new revenues like with 4G? Yes we know 4G is good enough and you have to invest in 5G to remain competitive, but where’s the new revenues?” The VZ stock goes down, they buy some more, and then wait for some good news they can hype the price back up, like another stock by-back or a major government account win or a nice profit bump from laying off more people.
Bottom-line: Verizon is a state-granted oligopoly, with a 3-way split of a high ARPU market, like a supermarket its a license to print money. 5G investment will be made, they just need to improve operational costs and lay-off a few more people and profit will grow to keep the financial analysts happy. All the marketing claims on new services are generally noise to make it look like something more is happening, rather than simply milking an asset. BTW at TADSummit 2022, Vish from Dell did a great piece on 5G, Great Expectations: The life and times of 5G.
You just need to look at the programmable communications market to see tens of billions of dollars created in new revenues. There are sources of new revenues in telecoms, though they do tend to impact telcos’ existing revenues, e.g. SIP trunking, enterprise comms (UCaaS), customer comms (CCaaS). But it’s best to eat your own revenues than have some else do it. And telcos do to an extent, e.g. reselling RingCentral, or competing with the SMS aggregators for A2P revenues through their wholesale divisions.
On the operational costs, LightReading did an article, “Collision between telecom, public cloud.” They were positioning telcos moving their network software onto the public cloud would create a collision between the telcos and the public cloud providers. It does not.
Some of the false assumptions in the article included:
- Telcos can become ‘tech-cos’ by adopting the public cloud. This is false. Telcos have adopted public cloud for their business and operational support systems for over one decade. It’s almost BAU, Business As Usual. They did not become tech-cos then, and will not now. If we look at some of the early cloud adopters, they began on AWS, then moved off AWS to lower their operational costs. For example, Dropbox saved $75M moving off AWS. Telcos will likely repeat this learning experience, rather than learn from it.
- At TADSummit 2020 we had some great presentations on telco cloud, in particular the panel discussion clearly defined the challenges in public cloud adoption for network software. It’s far beyond a technology issue, as always, there are people and processes to be changed. And back to Dropbox, they do use AWS for analytics today, a workload discussed in the TADSummit 2020 panel session.
The public cloud providers know how to run computer infrastructure, generally at lower cost than telcos. The move to the public cloud for telcos is a decade old, the network is just another workload. Though with rather more exacting requirements and with call sessions that limit the use of serverless. However, the people and processes are also going to need to change for the transition to be successful, that’s where the focus need to be. And in about 10 years time there will likely be another initiative to follow what Dropbox did in moving away from another company’s computer (cloud computing).
And finally, STL were talking about MEC (Mobile Edge Compute) APIs. The red flag for me is: “However, taking advantage of this opportunity is currently complicated due to lack of standardisation.” Like OneAPI? We really need to learn from the past. Edge compute and mobile edge compute are different, I’m talking here about MEC only.
The fundamental issue is a clear definition of how MEC could be used in a way relevant to developers, i.e. an API that just works for all their customers, without telco implementation differences. As soon as the application is limited to a telco or telco group, then the telco is better implementing the application themselves to solve a compelling customer problem.
SMS was implemented by telcos first, then they interoperated amongst themselves, then they enabled aggregators to expose those services, and now they’re competing with the aggregators for the big name accounts in some regions. MEC APIs are irrelevant, focus on using the MEC capability’s to solve a problem for which your customers will pay today. Then build from there. Once you’ve found some use cases, have a look at working with aggregators or other partners in exposing an API across carriers. And please, no standards.
The whole industry appears willfully blind to the 5G situation, they have no choice but to invest in 5G, there are no significant new revenues in the near to medium term. Vish identifies some possible opportunities in this TADSummit 2022 presentation, link above. The move to cloud computing is old news, most industries have made the move for some workloads, and some are a cycle ahead, e.g. Dropbox. It’s just someone else’s computer, the people and process issues remain tertiary in the discussions, when they should be primary.
And finally MEC API, sigh, remember MobiledgeX, check out CXTech week 18 2022? To be talking about API standards for developers reminds me of this quote, “Those who cannot remember the past are condemned to repeat it.” – George Santayana, The Life of Reason, 1905.
Truphone sold for $1
Roman Abramovich’s British telecoms company Truphone, once worth half a billion dollars, to be sold for $1. Truphone, valued at $512 million ($410 million) in 2020, has received almost $375 million of investment from Abramovich and two business partners, Alexander Abramov and Alexander Frolov. Sanctions against Abramovich’s, because of the war in Ukraine, meant he needed to exit Truphone.
German businessman and tech entrepreneur Hakan Koç and former telecoms executive and private equity investor Pyrros Koussios, (the “Investors”) announce that they have completed, with immediate effect, their acquisition Truphone. Now there are some rumors about connections between the new and previous owners. And dropping from $500M to $1, is a feat worthy of Elon Musk.
Commenting on the acquisition, Pyrros Koussios said: “We were attracted to the breadth and sophistication of the services offered. The company has continued to grow strongly in 2022 despite the uncertainties caused by its prior ownership and delivered growth well above 20%. This impressive performance underlines the quality and resilience of the business as well as the commitment of its employees.”
Hakan Koç added: “I know a great tech company when I see one. Truphone’s R&D hub in Lisbon is impressive. We now look forward to executing on our accelerated growth plans and deliver new and innovative products for our customers. The funding that we are providing will accelerate capital investment in the core network, while building new software and API-driven digital capabilities to address not only the needs of enterprises but also those of tech companies. I consider myself the startup ambassador of the company and it reminds me of banking before the Fintech-wave: this may be one of the last big industries where tech meets legacy processes, and we are here to fix it – it will be fun.”
João Casal, Head of R&D at Truphone. Truphone presented at TADSummit 2022 in November on eSIM as Root of Trust for IoT security. Here are his Slides and Video.
HTK Acquired by ITA Group
Congratulations to Marlon, Justin and all the HTK Team. I interviewed Marlon at TADSummit 2020.
Marlon has been CEO of HTK for over 24 years. Before customer experience (CX) was even a fashionable thing, Marlon was working on it for telcos enabling marketing and loyalty programs that included programmable communications.
The contextual relevance of voice, SMS, email or web chat as channels will remain for years to come. We really are at the early days of using WhatsApp, FB Messenger, Android Messenger (with RCS hidden under the hood), etc..
Another great point made was the importance of brands putting smiles on people’s faces, when and where it matters (context again). Marlon gave loads of use cases. One that interested me was O2’s Marketing IVR, which customizes the IVR menu to the person calling in. If it looks like they need to top-up, then that’s the first item in the menu. If it looks like they could be a churn risk, then give them a bonus with the top-up.
Overall it’s a great practice-focused guide to the reality and complexity of omni-channel communications. I think there’s much we can do in using the data across programmable communications to aid context awareness and put more smiles on people’s faces. It also highlights the importance of professional services to help brands navigate this complex and evolving topic. Omni-channel aggregation is the tip of a massive customer experience and loyalty iceberg.
Data Residency in Programmable Communications
This is a nice article by SkyFlow reviewing the growing problem of data residency and their solution, there are many others BTW. Data residency has a growing impact on the programmable communications industry, and it’s only getting more complex. I see regional programmable communications providers taking a hit on performance and costs to move off AWS and onto in-country data centers.
Data residency is a central element of modern privacy laws. It is a set of requirements that govern the location, control, and security of sensitive data that is collected or stored in a particular country, state, or region. From a user perspective, it is typically embodied in pop-up warnings or requests for consent to collect user data. From your perspective, it is a set of technical requirements that your business has to meet to collect or use data in or from a new region.
There are a growing number of data privacy laws and regulations which define data residency requirements, including the General Data Protection Regulation (GDPR) in the European Union, Brazil’s General Data Protection Law (LGPD), and the Canadian Personal Information Protection and Electronic Documents Act (PIPEDA). There are similar laws on the books in nations such as Australia and Korea, with more cropping up each year. Its become a country by country compliance check.
Costs, maintenance, and analytics are just the start of the data residency issues you’ll face with a geo-duplicated architecture. What makes this so challenging is the fact that cloud storage solutions aren’t typically set up with the level of granularity or storage flexibility needed to support this. You probably set your system up in compliance with the laws of your company’s “home” market, building pipelines that store all data in a single database or data lake in a cost-effective local datacenter, in compliance with local laws.
A geo-replicated architecture lets you operate in the markets where you’re already operating, expanding into a new market (even with just a single customer) requires new data center infrastructure, possibly with a unique architecture because of the local data center. And each local datacenter could require tweaks and adjustments as laws change. Making this even more complicated is the ‘federalization’ of data privacy laws, with unique laws being written and enforced that span multiple countries, a single country, a single state within a country, and possibly even smaller jurisdictions, like counties and cities.
Hence the rise of Data Privacy Vaults, allowing you to centrally store all the data you collect while giving you granular control over where the data goes, what it is used for, how it is secured, and where it is stored. By storing all of your data in the vault, you ensure that it is encrypted in transit, at rest, and in memory, meeting legislative requirements without limiting the usability of the data. In 2022 I started to see significant migration of programmable comms providers’ architectures to be in compliance with data residency laws, and this will continue in 2023.
vCon and Data Residency
Here’s a timely post from Thomas Howe showing how vCon transforms conversations into first party data (information a company collects directly from its customers and owns) that is privacy law friendly. vCon needs to be part of your Data Residency plan.
People, Gossip, and Frivolous Stuff
Arvind Rangarajan is now Director of Product Marketing at Observe.ai. I first met Arvind back in his Broadsoft days.
Kola Layokun has just left Telesign, previously Syniverse. If you’re looking for a director product management in programmable communication? I recommend you have a chat with Kola.
Barry Marron is now Director, Sales Enablement & Go-to-Market at Amdocs Networks. I’ve known Barry since his time with Openet, which was bought by Amdocs in 2020.
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