The taxi world was unchanged for years until innovators took an interest in it. Hailo made it super easy to get a taxi. Uber makes taxis irrelevant. The worst thing for taxi drivers is that they were out of control of their own destiny. What would be the worst nightmares for telecom operators and traditional network equipment providers?
1) voicemails and millions of VAS that customers love
Why would this be a nightmare? Simply the fact that the most likely provider of millions a really valuable communication services is unlikely to be a traditional telecom provider. They haven’t been able to do it for years. Cloud providers or challengers are ideally positioned to add customisable cloud communications to their portfolio. Salesforce already offers WebRTC.
2) Chatty IoT
Billions of dumb and smart things will be connected to the Internet in the next 12-24 months. What if IoT hardware providers see the internet as a free transport layer and share useless data? Any device that sends 200 bytes every 5 seconds and of which 1 million get deployed, provokes 3 petabytes of useless data every day. After 10 days it would have produced an equal amount of data as the total combined literature in any language from the beginning of time until some years ago. There are many devices that could be chatty, e.g. heartbeat monitors, temperature and other sensors in home appliances like fridges, etc.
3) Cheap 4K security cameras
As soon as 4K cameras become cheap (<$50) then a tipping point will push lots of homes and businesses to install them. One cloud company is enough to provoke broadband hell. There is not a single broadband network that can handle 4K video upstreaming at large scale.
4) Mexico’s community mobile operators being successful
In Mexico there are several remote regions that were not served by traditional mobile operators. The Mexican government allowed anybody to use spectrum in these regions to build alternatives options. The innovators have moved in. What if they become too successful and customers like their services more than what traditional mobile operators are providing?
5) An innovator that uses technology to provoke telecom havoc
Until now over the top players have ignored telecom operators and are trying to eat their lunch. What if the next innovator designs solutions in such a way that operators can choose between the stick and the carrot? Ignore them and suffer or play according to their rules. It is easier to do than operators think…
The last player to join the attack on the telecom operator’s business is Apple: How to bypass carriers, Apple-style? (Special thanks to Dinesh Vadhia).
Apple never played according to the telecom rules in the first place. They have been the only mobile hardware vendor that could set the rules instead of negotiate them.
Who is attacking my assets?
So which telecom assets are currently under threat:
- SMS – instant messaging has been attacking SMS for years but now with the next generation of smart phones the number of SMS killer apps has exploded.
- Voice – Skype and VoIP providers have been attacking voice calls for years. However also here smart phones are accelerating decline.
- Roaming – Apple’s independent SIMs could easily attack the roaming segment. Also VoIP on Smart Phones will.
- Billing – Micropayment solutions from Paypal and Google Checkout are trying to enter this domain. Squared from a former Twitter-employee is attacking the mobile payment terminals in shops.
- Spectrum – Google’s CEO is the chairman of the New American Foundation that is trying to convince the American government to open medium-distance spectrum for free. Sort of WiFi but with kilometers reach.
- High-speed interconnect networks – Google is paying part of some of the under-sea links that connect multiple Asian countries.
- Fiber to the home – Google is rolling out fiber to the home.
- VAS – mobile apps are taking over from the value-added services.
- PBX like Business solutions – on-site premise equipment is being substituted by virtualized Cloud-based solutions.
- The telecom network – telecom operators are becoming bit pipes. New bit-pipe-only companies however are trying to specialize in this domain, making it hard for communication service-oriented operators to keep on making the same profits.
What should operators do?
If there was one simple answer, I would not be writing this post but living on my own private island 😉
However if history can be a teacher, let us look at an industry that has been facing similar threats: Hollywood. Prices of distributing digital content have fallen close to zero. However the industry has been trying to keep on charging €12-€30 for CDs and DVDs. They have hardly embraced digital distribution and are now in a negative spiral of demise.
Telecom operators can easily get stuck in this same vicious circle. History has been cruel in the past: extremely lucrative postal monopolies were destroyed by email. There is no rule that states that economic wealth from one business model is substituted by a similar lucrative business model afterwards. Often analogue dollars are traded for digital pennies.
Accept digital pennies but collect them all
The first survival strategy is to embrace change and to go for digital pennies. This is often hard to do within existing companies. As such the proposed strategy is to set-up a parallel organization whose objective is to focus on these new business models and how to make money with them. Let the main company focus on the telecom hits (Voice, SMS, etc.) and the other company on the long-tail telco services.
Long-tail telco services are all about enabling communities of developers and companies to create new and innovative telecom solutions that they can sell to others. The focus should be on enabling others. Not on building them yourself. Being an App Store for telecom network-assets-based applications and not a builder of telecom services.
This parallel organization should be in close collaboration with partners and even dotcoms. If you can´t beat them, join them. Find ways of enabling startups to become successful with your network and other assets, not on building a parallel solution around your assets.
The music industry never understood this message but hopefully the telecom industry does.
Go IP and forget Circuit
Accelerate IP solutions and forget about circuit networks. The speeds at which services are rolled out in a circuit-based network are too slow to fight off competition. Isolate the circuit-based network elements and put an IP-based front-end.
Use the Cloud to quickly launch beta services.
Avoid building infrastructure and use the Cloud to innovate. In the telecom world services are often not launched until they are perfect. But perfect for who? It is better to launch beta services quickly and get real customer feedback instead of marketing-surrogate feedback. Launch multiple services. Check which are the successful ones. Kill the others and heavily invest in the successful ones. Cloud computing and open source can dramatically reduce innovation costs.
Build long-tail services and a common innovation-ready architecture
If you are going to work with hundreds of partners to quickly innovate then the way to interact with them is via self-provisioning. Build billing, telco network app stores, customer care, monitoring, etc. solutions that allow a third-party to automatically provision and test their solutions. Be open with interfaces and light on approval. Let them approve a web-based contract instead of sign a physical paper.
Also enable innovation via the right infrastructure. Let teams focus on the business and services. Not on storing data, managing users, billing, monitoring, etc. Common service APIs to interact with assets and common ways of building new services should accelerate time to market and avoid reinventing the wheel.
This is a time for innovation together with smart partners. Not a time to focus only on CAPEX reduction. Too many effort is spend on operating as cheap as possible and not on generating new revenues. At the end the best CAPEX reduction is to shutdown a telecom company that does not innovate at market speed and became obsolete 😦
Most telecom projects involve installing an Oracle RAC cluster, a SAN, application server clusters, etc. Only the time it takes to procure and install the basic hardware and software takes months. We are not even talking about the costs…
If you want to launch new ideas every month, you have to use Cloud Computing. This can be public cloud, private cloud or hybrid cloud. However even then too much time is spend on installation and configuration of software.
Infrastructure automation is about making a team productive in quickly launching new services or updating existing services. Infrastructure starts with having a standardized development environment, automated build tools (e.g. Maven or Ant for Java), continuous test automation (junit but also Hudson or Cruisecontrol), etc. The next step would be to also automate deployment (e.g. Puppet & mCollective from PuppetLabs) of server software and Cloud infrastructure.
This type of automation is often 90% equal so having a standardized framework would extremely shorten the times to get software development up and running as well as deploying it into test and production environments.
This would however only be the start of the journey. Dotcoms launch new features on a weekly or even daily basis. They monitor in detail what users do and often launch multiple alternative versions of a new feature. Gradual deployment of small features allows to see performance problems strait away and avoids extensive regression tests and fast rollback.
Let’s see how this could be applied in telecom.
The key to success is copying Google. Google is having standardized architecture components that are reused among different teams (e.g. BigTable). By building up a shared infrastructure and the tools to quickly deploy new services onto it or update existing features, time to market can be dramatically reduced. Infrastructure is a secret competitive weapon that too few companies use.
We have gotten accustomed to having to choose between 5 to 10 tariff plans. However what would happen if we would have liberty to define our own tariff plans. A simple application with sliders could allow everybody to build their personalized tariff plan:
- Which hours in the day you want an all you can eat and which hours you want to pay per minute or second?
- How many minutes, mega-bytes, SMS, MMS or video calls you get included in your tariff plan?
- Do you prefer a low call set-up fee and higher tariffs or the reverse?
Moving the sliders will have an impact on what you pay fixed per month.
However why stop with the personalized tariff plan? Why not allow users to define lists of friends, family and colleagues and have their own short code dialing plan for them (VPN)? Of course also here we can add a personalized dialing plan for friends, family and colleagues…
To really hit the long tail we need an infinite list of services users can pick from. In previous posts you can read about Net App Stores. They are stores that sell telco network-based applications. With an open market for these net apps, there could be thousands or even millions of them. Since the long-tail says that 98% of the applications will sell at least once per month or quarter, operators should try to have the most extensive library possible…