Tag Archives: Great Telco Debate

Are telcos losing pole position as digital disruption impacts demand and supply?

A client recently asked me to present on the top 5 disruption themes in the industry. A pretty broad brief given that I have covered almost every aspect of the industry over the years of being an analyst. So, I had to find a framework within which to identify the disruptions. The following evolved:

  1. Demand is taking over from supply in shaping the telecoms market so the start point has to be the demand side.
  • The individual: how do individuals see the telecoms piece of their digital lives?
  • Households: is the household a market and if so, who is the domestic CIO?
  • Business: what is driving business’ use of telecoms services?
  • Society/government: how is telecoms fitting in with the increasingly joined up whole public sector play?
  • IOT: Cuts across all the segments above, throwing a whole new light on the demand side with its mix of personal, household and business/industry connections. How will this fit and who will provide these business process services?
  1. Supply has to face this massive shift in demand with several constraints:
  • Firstly the flat if not shrinking market for telecoms services in terms of revenue. This is especially acute in the highly regulated European markets but it is increasingly true around the world.
  • Secondly, the revenue position belies a massive uplift in volumes and complexity of traffic. The more granular networks have to cope with video but also with complex series of loops including our personal, business and society links that may be private, open to public scrutiny or part of a 3rd party business process such as in the healthcare sector.
  • It is not that the role of connectivity is lessened, but that it is being absorbed into much broader business activities. The clear end-to-end nature of the early telephony systems has been replaced by either ‘end’ being variable, virtual, and dynamic and often via cloud-based 3rd party application. The connectivity provider may get the blame for poor performance of an application despite there being many steps in the process beyond their control.
  • The disruption on the supply side in terms of investing in the long term suitability of the networks to cope with this new age demand means that NFV , SDN , small cells, WiFi, shorter application development cycles and a generally more agile approach to business all add up to a short term need to increase budgets to get over the investment hump of removing siloed, legacy networks and services in favour of simpler more adaptable fixed and mobile services.

Given the pressures on the connectivity front, telcos are, of course, tempted to shift up the value chain towards the applications that really make different industries tick. And, the IOT also represents new territory to ‘conquer’. Neither, in my opinion, are that easy to achieve. The business applications players are already well versed in the industry-specific apps and that also translates for the major integrators when it comes to IOT in specific industries.

The answer is to adopt a much more open stance towards partnering with other specialist players and accept a supporting role. As ever, the caveat is that every country market is different. Some telcos will continue with prime contracting with a strong business, retail and/or media presence, but all players should seriously consider a multi-channel approach to the customer and let the customer choose.

And, by the way, there is little sympathy for the telco from outside. It is often perceived as having taken high profits over many years and neglecting to invest for the long term of the industry. Outsiders see the telcos as fair game when it comes to exploiting them in the digital marketplace. Customers, of course, see the benefits of their app-based worlds across their different devices as either part of their hierarchy of needs or just their basic human right.

Policy has to ultimately rebalance this demand and supply issue. If telcos are not incented properly to build future-proof networks then the politicians won’t be able to use broadband and digital inclusion as just another thing to throw around during election times.

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It was a Great Telco Debate!

The idea for the Great Telco Debate www.telcodebate.com came from almost three decades of participating in and organising telecoms industry events all over the world. Presenting and discussing industry topics in real time, with a live audience, is always the best way to get to the root of an issue. However, there is nothing more frustrating than taking time out of a busy schedule to an event only to find that the content is of marginal interest, and worse still, a series of blatant sales pitches dressed up in marketing blurb.

On 7th November in London we assembled a healthy collection of opinionated independent industry analysts and some of the more innovative industry players to spend the day focused on the many aspects of the future of the telco. In many ways, we managed to squeeze a 2 day conference into a single day. A mark of the quality of the content was that the early Friday evening drift off was minimal. And, if the volume of discussion over lunch, coffee and speed networking was anything to go by, people certainly found plenty to absorb and challenge in relation to their future role in the telco industry. Requests for more time on the next event for more open debating and more speed networking (where all delegates met all analysts) suggests we hit the right note.

Feedback praised the punchy combination of industry content followed by well-informed analyst perspectives. Once again, the levels of audience participation also proved that the senior management in the room were comfortable to air their views as part of the debate.

It’s difficult to pick out a highlight from the day. The professionalism of speakers sticking to their unusually short 10-15 minute slots should be praised (perhaps encouraged by the threat of my bell and Graham’s whistle), as should their frankness. The idea was to allow these very varied opinions to be aired to help industry leaders shape their thinking as to their future strategies.

A vote on what role the telco should take in the future: wholesale, retail or a blend, saw a narrow margin in favour of the wholesale or new business model approach. The spread of voting just goes to underpin the potential that is out there, just a matter of aligning strategy and execution.

However, many of the so-called value-added areas of TV, business applications and IOT were seen more as broadband retention strategies and not as significant additional revenue lines. This was in the light of the total telecoms services market flattening and indeed declining in some markets. Connectivity, fixed and wireless, is part of almost everything now but it is just that – part and not the whole thing.

The financial analysis of the telcos shows a significant discrepancy when compared to the valuation of the new digital service providers. Competition and regulation , both from within and outside of the telco sector, combined with enormous traffic increases, all add up to a challenging question of how to fund the long term network infrastructure both fixed and mobile, needed for the industry and society as a whole. Broadband is doubtless becoming part of Maslow’s hierarchy of needs. It is increasingly part of every daily activity, business or personal. New business models, new attitudes to partners and channels will be needed, along with regulation and government blessing to drive investment and innovation. With all of these changes taking place, the clear message running throughout the day was, apart from getting closer to customers where possible, to work with the right set of partners and channels to allow the market to allow demand and supply to settle into a new sense of equilibrium. Still a lot to do for all telcos and a lot of opportunity for providers of service and technology into the telecoms sector.

For those not fortunate enough to have been there with us, a full record of the presentations and discussions are available. Visit the web site www.telcodebate.com.

The Great Telco Debate will be back in November 2015. If you have any thoughts about how this independent analyst based event can be improved or if you want to get involved, please drop me a note chris@lewisinsight.com

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