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Are telcos communications companies?

The return-to-work week at the beginning of January is always a time for reflection and self-examination. We continue the theme of “What industry are we really in?” with some thoughts about personal communications.

The question for operators is: to what extent they should be innovators in their core voice and messaging products? After all, these services still account for the majority of the revenue of most telcos, be they fixed or mobile.

It’s an old debate, but one which in 2007 will take on a lot more significance as the march of technology releases us from the constraints of legacy infrastructure. Broadband has become mass-market in developed countries. Some smaller operators like Telio already have all-IP infrastructures. The leading-edge incumbent operators are getting close to launching IP-based replacements for much of their legacy equipment. Mobile operators are making similarly heavy technology investments to enable fixed-mobile products. Wi-Fi marches on and the power, QoS, security and provisioning issues start to ease. WiMax reaches the market, and creates new possibilities in markets with weak or no fixed access.

Customer expectations are rising

The rising Digital Youth generation of users aren’t going to stick with 1990s telephony and messaging products forever. The decision time is approaching:

  • Invest in core communications service innovation, define differentiated software and devices, build channel.
  • Partner with someone else who has these capabilities, and be a platform enabler for payments, service, logistics, etc.
  • Exit the services space, and focus on pipes — or diversify into other areas.

At the moment we see a confusing mix of these in the market — as our survey results have confirmed. So, if you do engage in services innovation, where should you focus your money? We think we’ve got a slightly different angle on the problem.

A great deal of blog discussion has been prompted by Alec Saunders’ pre-Christmas manifesto on the future of presence-driven communications services. Alec is the CEO of Iotum, a start-up that builds intelligent call and message routing services generally targeted at mobile hyper-connected professionals. He has therefore been pondering the problem for a while. Similar thoughts and roadmaps have been previously been seen from companies like IBM and Microsoft, who have interests and products that fill a lot of the boxes.

Since your boss is taking an extended beach break and your inbox is unusually quiet, go take a quick look at Alec’s essay. If nothing else, scroll down to the diagram half-way which has the three critical buckets: profile, context and relationships.

By the time the phone rings, the money-making is done

The slant we’d put on it is that communications services providers are (amongst other things) in the business of enabling rendezvous. As connectivity gets cheaper, more of the value comes from the set-up of the conversation: the right participants, time, place, devices and medium. They should act collectively in making this process work. Service providers should then compete individually on the features and functions of the communications service itself.

Presence — the part Alec focuses on — or even “New Improved Presence 2.0”, is just fodder to feed the rendezvous process.

Upstream of rendezvous is the brokering of relationships themselves. This is a domain-specific problem best left to partners of dating, employment and e-commerce sites. Next comes the poorly-understood part of real-time relationship enablement. This is still a research project. Then comes the bit the communications industry (whoever that turns out to be) needs to focus on next: rendezvous of people who know they want to interact. The downstream part of message or call delivery is commoditised to death. Indeed, one notable phenomenon is that VoIP is the least important part of this, and that some of the best click-to-call solutions simply use the existing switched telephony system and everyday purpose-made phone handsets.

The money’s in the social interactions

We would therefore suggest IM networks should federate their presence data, but need not allow a Yahoo! user to directly IM her MSN buddy: clicking on the MSN buddy would bring up the MSN client (together with ads). Likewise, telcos could finesse some of the issues of federation and (cough) “customer ownership” by federating presence-type data but retaining the user-facing interface (with its branding, up-sell and advertising potential).

A YouTube viewer should be able to right-click a video and send it to his MySpace friend. Both parties keep their part of the user-facing experience.

Iotum’s business is about getting the timing and medium of a rendezvous right. But there is also the problem of getting together in space, with people frequently using mobile devices to manage ad-hoc or hazily-defined meetings. Today a lot of calls are made to manage the timing and place of such meetings. Given some calendar and location information, your device could be doing a lot better job of brokering these connections. Users get the most value from calls that never even have to be made!

Keep it simple

The mega-successful telecom services have been noteworthy for their simplicity: telegrams, telephony and SMS. Those that added even small incremental complexity, such as telex, fax and MMS came to serve narrower (but still broad) audiences.

The kinds of innovation or improvements we’d like to see are those which help keep the rendezvous process simple:

  • When you call me back after heading my voicemail, my called ID says “Bob returning your voicemail”.
  • When my mobile shows my next meeting, and I call the organiser to say I’m late, he sees “Jane calling about 10.30am meeting”.
  • The hard-to-use parts of the experience like voicemail retrieval would be replaced with simpler multi-modal interfaces, and we’d deliver the messages down to the device just like emails. Indeed, recording a voicemail would be done locally in wideband audio, and nobody would ever suffer a drop-out.

There are plenty more ways of limiting telephone tag and improving the user experience — it just takes a little imagination.

Innovate early and often

There are a few operators like Vodafone and Telenor with interesting portfolios of holdings of operators in developing economies. If we were looking for somewhere to experiment with “better telephony”, those are the places we’d look to experiment.

We’ve been doing plenty of thinking about the voice and messaging industry, and you can look forward to reading more (for a modest fee) when we publish our report in a few weeks’ time.

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