Tag Archives: telecoms

The global telco dream is over: Mark Gregory, Chief Economist EY gives me his perspective.

The Great Telco Debate is all about putting the industry trends into context. Mark Gregory of EY can’t join us this time around but he sent the following in reply to my questions about the telecoms industry, its dynamics, broader economics and future industry structures. It is great food for thought ahead of November 29th when we next assemble for the debate.  

Image result for mark gregory Ey Mark Gregory, Chief Economist UK & Ireland EY

With telcos under pressure in a complex world…

As the first sector to be liberalised and privatised at scale across countries, telecoms has been in the vanguard of change for 4 decades but now needs to consider where it goes next.

With the freedom to develop, the telecoms industry has changed out of all recognition in its search for profitable growth. Telcos today tend to be a mix of businesses with very different economic characteristics ranging from utility like local network operations to fast-moving, constantly changing content provision. These complex business combinations have grown out of a desire to capture more of the value that the telco enables but they risk destroying value by making the company both hard to manage and difficult for investors to value accurately.

The slowing economic global outlook as identified by the IMF recently will create extra pressure on telco business models and at the same time increase the political risk that companies in the sector face. Confronted with slower economic growth and increasingly squeezed consumers, politicians will look at industries that account for significant shares of consumer spending and corporate costs for opportunities for short-term political gain. The recent introduction of a retail price cap in UK energy and the proposal to nationalise certain UK utilities are good examples of possible ad-hoc intervention.

There is also a growing disparity between the largely national operations of telcos and the multinational scale and scope of their suppliers. With the seemingly never ending process of innovation, telcos risk losing control over their technology roadmaps to companies with much greater resources and economies of scale.

…time for a new stakeholder led model…

The low growth economy without any real productivity improvement is not going to provide much if any support to telco growth ambitions. It is time to change the model and for telcos to consider how they can best contribute to economic growth and increased prosperity. In particular, how to drive improvements in labour markets as these are where so many of the issues underpinning today’s economic and political challenges originate from.

In many countries, concern over the “left behind” have become increasingly prominent in the political debate – the people in traditional industrial towns who find themselves on the margins of the modern economy. Typically these groups live outside of cities and larger towns and struggle to participate in the workforce. One option might be to take investment to these people with the telcos leading the way. Rather than starting the roll out of technologies in the major population centres, telcos could look to reach further out and bring people into the labour market providing the infrastructure for remote working. People would be given the chance to participate electronically in the labour market, reducing the level of transport infrastructure investment required and in so doing enhancing productivity and growth in the economy.

Telcos could also use their national presence and knowledge in the digital arena to support wider digital skills development at a local level. Again remote learning could be part of this approach with the aim being to increase significantly the level and number of digitally skilled people in the economy. This would serve to improve the skills pool available to telcos but also provide a platform for faster digital growth with the benefits accruing to all.

Greater local reach and capability would also open the door to cross-sector collaboration with other utility like providers such as power and water and with other major sectors such as health. As Bell Labs showed, cross-sectoral digital innovation could provide a major leg up for economic growth in local markets. Working closely across sectors at a local level would provide telcos with the opportunity to identify new applications and to participate in developing and deploying these.

…in a brave new world.

Telcos have been at the forefront of economic change in the last 4 decades, innovating with a range of business strategies. It is increasingly clear that the global telco dream is over and that the core business is of providing connectivity that enables economic activity. In this context, telcos should focus on how best they can help increase the rate of economic activity across the full geography of their markets building stakeholder centric telcos.

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The growing influence of independent analysts

Having worked with many of the leading analyst firms over the last 3 decades, it has been fascinating to work as an independent over recent years. More and more independents seem to be springing up either from an analyst or vendor background. Most vendors and service providers are happy to invite ‘us’ alongside the well-represented analyst firms to their product and strategy events as well as to major industry conferences such as MWC and CES. Not surprisingly, given our industry experience and lack of corporate constraint, we are generally more outspoken than many of the representatives of the establishment.

Industry events provide opportunities for analyst colleagues from all sizes of organisation to meet. and share thoughts. Out of some such discussions came the project I have been running with Amdocs Network Solutions Division, where different independent analysts collaborate to produce high-level papers each covering a key topic within the sector. The client gets the benefit of working through a single point of contact, whilst the independent analysts get a streamlined route into a client and the broader market to present their thoughts and opinions. And, through this collaborative approach, our combined knowledge and experience (amounting to over a hundred analyst years), the quality is excellent. Luckily, the technology at our disposal also allows us to build flexible teams to address issues despite our very different backgrounds and locations.

Initial papers have been:

What’s the CTO’s role in the digital boardroom – Marc Dowd and Chris Lewis

App-aware networks vs. network-savvy apps – Dean Bubley and Chris Lewis

The evolving supply chain and its implications for the CTO – Tony Poulos and Chris Lewis

Why 5G won’t be enough – Caroline Gabriel and Chris Lewis

Future papers already in the pipeline include Telcos and the SME, and the impact of the OTTs on telco business and network models.

People are sceptical about the independence of analysts. Some firms, and indeed individuals, have been that ‘gun available for hire’ to promote particular companies or technologies. Obviously, someone has to pay the bills. In this project, the topics are agreed upfront but editorial control remains with the analysts. Since Amdocs Network Solutions Division is using the papers and accompanying videos to help raise their awareness at a high level with the world’s CSPs, there is no product pitch, no axe to grind – just an opportunity to provide high-level content to potential customers to make them think about the future of the telco and its role. So the client benefits from the papers and their thought-leadership, whilst analysts get a platform to demonstrate how they are able to compete in a market dominated by a few major players and a very long tail of small companies.

Whether you are an independent analyst with experience of the telco sector, or a company working in the telecoms industry, there might be an opportunity for us to work together. Take a look at the papers and think about topics that you think could be addressed in a similar way.

Add to this the Great Telco Debate www.telcodebate.com (London on November 15th 2016) as a platform for the independents and more open, wide-ranging discussion around the future of the telecoms industry. Attendees love the format and honesty of debate. In 2015 we used analysts as a panel to sum up the different debates and interrogate their joint wisdom on the future of the industry! Nowhere else do attendees get the contrary perspectives on offer from such a wide variety of industry stakeholders.

Long live the independents!

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