Telco 2.0 FAQs: A Starting Point for Change
Below are our responses to 56 tough questions about the new $250bn+ telecoms two-sided 'platform' opportunity generated anonymously in real time by the 200 participants at the Telco 2.0 Executive Brainstorm last month. The questions were responding to the opening stimulus presentation by a Telco 2.0 analyst which boiled down 400 pages of new market analysis into a 25 minute summary.
This rich set of 'FAQs' fall into 4 broad categories:
1) Market Opportunity and Structures.
2) Dealing with Google.
3) Operational issues.
4) Technology and Iinnovation.
We will continue to build up this FAQ list as we believe it's a critical step in helping to increase understanding of the opportunity, refine it and define how to practically realise it.
A C-level exec at one of the world's largest and most innovative telcos told us yesterday: "There is still too much organisational ignorance and resistance to these ideas. We need a better sales pitch and more details on the practical requirements to make it happen." Our view is that the best way of starting to tackle ignorance and resistance is to give people the chance to process the ideas for themselves and to openly feedback back their issues and concerns. As a wise man once said:
"Tell me - I forget
Show me - I understand
Involve me - I learn"
The April event's brainstorming process was essentially a large-scale involvement exercise. We think you'll find the FAQs below instructive:
The Two-Sided Platform Opportunity - Some FAQs from Telco 2.0 Executive Brainstorm, 16-17 April. (Read this first if you're new to topic)
MARKET OPPORTUNITY & STRUCTURES:
A lot of people are concerned with issues of market structure - that is to say, how many and how large the companies or other organisations that take part in the future telco market will be, and how they will interact.
Typically, people wanted to know how it would be possible to build enough scale for a future platform to compensate for the crash in margins on voice, and whether the regulators would let them either charge a price that would permit this or else merge into a big enough system to make up the difference on volume. A related issue, which overlaps between markets, technology, and standardisation, is how multiple platforms would interwork - will we need a new standard, a GSM for transactional B2B VAS?
We think not. The models for platform economics are likely to be comparable to the alliances between airlines, or those between banks that operate financial transfer networks and credit-card systems; which suggests either agreements to use a common technical solution and terms of business (like VisaNet), or jointly-owned platforms used by multiple carriers (like the London Internet Exchange). Whilst some large operators may initially attempt to go it alone, a more likely outcome is that of co-operation.
The alternative is for outsiders -- existing aggregators, SIs, IT and online companies -- to become the platform, with much lower-level interfaces into the operators. The danger is that the operator has very little pricing power in this situation, where they are not a true participant or owner of the platform, just a supplier to a monopsony (single buyer).
Here are specific Q&As:
Q1: What's new about the 2 sided business model? Isn't it just an evolution of the existing wholesale model?
A: Today's wholesale models don't bridge the retail and wholesale. For example, a smart call centre service (enabled by a two-sided telecoms platform) would allow a customer of the same telco to bypass the 'se hable espanol' IVR when they already know your preferred language. Traditional wholesale models just resell capacity, shorn of any end user relationship.
Q2: What's the user need and problem we are solving here?
A: There is a lot of friction and poor user experience in the purely 'horizontal' internet model, just as there was a lack of innovation (if wonderful integration) in the traditional telco vertical model. Fraud, payments, data quality, difficulty of timing rendezvous (missed calls, voicemail, etc) - there are huge numbers of user problems in everyday business processes, just the answer isn't a telco service, but rather it's allowing upstream customers who understand their end-user needs to re-package telecoms assets to solve end-user problems.
Q3: I did not find the fedex example that relevant because the Telco networks are open to anyone to distribute content or over-the-top applications, whereas to access fedex you have to pay from the get-go, it is a closed network.
A comment to the above: One has to compare a single Telco operator with fedex and not the global Telco industry: fedex is one of the major players like DHL etc. A national Post Office is also comparable to the incumbent Telcos
A: The important take-away is that there is a difference between the feared 'dumb pipe' and the actual reality. For example, upstream partners (e.g. media companies) don't want to have to deal with the complexity of P2P networks, broadcast caches, CDNs - plus the B2B VAS services like payments, age verification, remote diagnostics and support, etc. The logistics/Fedex metaphor is meant to illuminate the similarities, although there will always be significant structural differences between industries.
Q4: Operator platforms need to be unified to be attractive for the upstream providers, at the moment there are too many visions of the platform play per operator.
A: Yes and no. In some areas, such as advertising, we need to rapidly move towards a common platform and rate card. This is just starting in mobile - an example being in the UK where the biggest networks have agreed to collaborate on this. In other areas, e.g. BT offering business services like SugarCRM, there may be opportunities to open up the platform in telco-specific ways (e.g. integration of BT call centres with CRM offering). There are also probably significant rewards for the larger operators to achieve scale first, creating de facto standards. Plus there may be regional standards (e.g. Personal IM in Nordics). So yes, more co-operation is needed, but that shouldn't stop anyone making a start.
Q5: Can a Telco as a 'local' player compete against 'global' internet players - is there a real chance of a 'Telcos hub' and 'user info exchange' that will pass info between players. How will this be handled from a regulatory perspective?
A: Yes, telcos can and do compete locally. You should also not over-estimate the global reach of Internet players - e.g. lots of strong local players in China (eg. QQ), Japan, Korea. The telco assets are ones often tied to locality - retail distribution, regulatory compliance, location, brand, media partners, etc. The job is one of co-opetition, not competition. Each side needs to trade with the other to mutual benefit. We already have some hubs, such as for bulk SMS, and some emerging around mobile money transfer, so the same structures and rules can be evolved to support a wider range of interconnected services.
Q6: Given need for scale and interoperability, what investments does national Telco have to make overseas to be able to offer application developers global reach? Also could country Telcos hold back btw efforts to offer global reach?
Q7: What about local, small (200,000 cust, for example) Telco's which will have a bad time negotiating with big players in this new side of business... Should they find (or fund) a middle contractor or concentrate on local/regional businesses (to which they are close and understand better than big Telcos)?
A: There may be a role for small, agile telcos, but this really looks like a space for the big boys. You need scale to operate a platform. They can probably carve out niches in e.g. rural areas, or targeting very specific segments, and insourcing wholesale platform capabilities from other operators or IT players. So you could imagine a next iteration of IBM's SPDE platform coming with all the relationships you need to do mobile ad insertion, and IBM operates the platform.
Q8: This can only work if the operators and vendors across the world adopt some consistent set of information and interface standards.
A: It depends on the market. Verizon, AT&T and China Mobile are probably big enough to 'go it alone' to some degree. Plus many of the technology standards already exist, just the commercial framework around them is missing or inadequate.
Q9: Do operators provide enough scale to be a platform, given that they regionally bound?
A: Yes, in places - see responses above. The critical part is finding the channel partners (e.g. Salesforce.com) who can provide the volume of developers and smooth out some of the differences between operators.
Q9: Would like to see the assumptions on the $250Bn number. Can't just throw out an exorbitant number like $375Bn and not provide details on the assumptions behind this number. Most external players have eyeball models - how will this $ be created?
A: Chris presented a 20 minute summary of 2 reports totalling 400 pages. All assumptions in there!
Q10: I have a problem with Chris' forecast, the static Telco retail figures underpin the entire growth of $350Bn. Skype minutes are only 6% monetized hence 94% FREE. That surely diminishes the Telco retail DRASTICALLY.
A: In our model we've assumed that the B2B VAS element is incremental but the distribution part of the platform (inc voice) is largely substitutive - this is the conservative approach. Thus the growth comes from selling wholesale access and minutes to Skype, plus Value Added Services to them like enabling Skype calling using your existing prepaid balance. Dozens of different ideas on how to communicate can then compete, with the telco winning regardless. The hidden cost with Skype is getting an ISP plan, and then hotspot plans all over town to get online; it's only 'free' at the margin, and the average rate per minute, properly accounted for, is not insignificant. There's a clear opportunity for a win-win here, as Hutchison3G UK have shown with the Skype phone on their circuit network.
Q11: How to exit the current mutual price squeezing situation? What is needed to stop competition on lowering prices? What are the key added values that the Telco2.0 model should use to differentiate?
A: You can't, which is why you need to develop a whole new business model.
Q12: If the Telco is the logistics company and the consumer pays the merchant and the Telco gets paid by the merchant, isn't there a risk of price erosion to the Telco?
A: Yes, but you make it up with (i) volume, (ii) added VAS. And the alternative is your leaner competitor does it anyway and you end up with nothing. There's no reason why services like SMS should have 90%+ gross margins forever.
Q13: Isn't platform business model just a nicer word to describe a 'pipe' business?
A: No, it's far more complex and richer - see comments here and our various blog posts on the logistics metaphor, for example - www.telco2.net/blog.
Q14: Upstream = value-add = margin. To get higher margin, will operators truly embrace a confederated model for innovation in service delivery, or maintain the traditional culture of monopolisation and acquisition. Can the leopard change its spots?
A: It's interconnected products (PSTN/PLMN voice, SMS) that generate all the money today, and there's little growth anymore in mature markets - is there an alternative but to look upstream?
Q15: I don't understand the comment in Chris's presentation that c99% of core telco revenue is (one-sided) 'retail'. 20% of revenue and 30% of EBITDA is already from wholesale termination receipts. In the two-sided model are we simply talking about termination receipts for data together with leveraging the metadata?
A: These termination receipts are an interesting case. Ultimately they are almost all being paid for through another telco selling retail services. To avoid double counting, we've therefore included them as retail receipts, since there's no extra wholesale or platform money coming into the telco system as a result. They would therefore inflate (artificially) the retail bucket. However, you could reasonably argue that things like automated call distribution are part of an existing 2-sided model. I can certainly imagine us producing a richer model in a subsequent iteration which accounts for the revenue flows in a more fine-grained manner. Many of these new models, e.g. using presence and location to time an outbound call, or even presenting an ad, can be thought of as "next generation call termination", and are blessedly unregulated.
Q16: Why will the content providers pay the operators - for example if we buy a Dell computer - why would Dell pay the operator?
A: If you think about the friction in their businesses, you'll see...We've had this conversation with PC makers! They like it!
Q17:Do you see content owners warming up to this model? Major movie houses and broadcasters are still very uptight in owning the distribution model in a very controlled fashion.
A: Well, we saw what happened to the music industry
Q18: What happens to the 2 sided model with the BBC iplayer example giving away free the content? How does the Telco recover costs?
A: That isn't a 2-sided model yet! Eventually the ISPs will tier out 'with iPlayer' and 'without iPlayer', and the users will pay for what they use - unless the BBC gets smart and makes allies of the ISPs by throwing them some money. More analysis of this issue here.
Q19: Will we see a mobile payment service with a business model comparable to credit cards or paypal on the mobile (smaller cut to operator)? Which operator dares to be the first?
A: We already do, with Felica in Japan, which is spreading to other markets.
Q20: With operators competing so aggressively amongst each other, what supplier power do they hold over upstream customers?
A: Think of the platform as the 'next generation termination fee', but unregulated - you've subsidised the retail customer with handsets and discounts to come on board. Now the only way of getting to that customer is via the telco, so there's no choice - a very localised form of significant market power. So you might charge 1p/min termination fee to the customer, but 10p to a merchant to leave a voicemail directly in the users inbox without the phone ringing (and annoying them), and 50p for a 'smart' voicemail that would be a Voice XML document with an IVR embedded to allow them to order the goods by pressing 1 etc.; check out the 'communications enabled business process' space, and think through the many ways the operator can use location and presence to help the timing and nature of interactions, and you can see a huge untapped opportunity.
Q21: What will be the tipping point for operators to adopt the platform model - and how will platform competition pan out - what is to stop this being commoditised in the same way as core revenues? Is there opportunity for a monopoly platform?
A: There is growing interest in this concept right now. But it is just building up. Very early days, but there is a realisation that something needs to be done. In the last Telco 2.0 industry survey, 55% of 800+ respondents said we needed a new business model. 20% said pure ISP was fine, and 25% said triple play was fine.
Q22: How do we exploit without getting public and watchdog groups to get too excited? Last thing we need is more regulation.
A: Go manage expectation now, start to educate the regulators. In particular, 2-sided models may require retail rates that are 'predatory' in the traditional model, but vital to creating volume for the upstream side. What happens when Blyk-like models spread everywhere?
Q23: What are the implications for platform competition - is one platform enough? Any thoughts from ofcom?!
A: There probably will be many competing, overlapping platforms, not one monolithic one. Maybe like the airline clubs - Star Alliance, OneWorld, etc [see also comment above introducing this section of the FAQs]
Q24: The transition requires huge investments. With current constraints how can the Telcos practically ramp funding to transition to the 2 way model?
A: We think there will be a lot more consolidation, and a lot of the investment heavy lifting will come from IT players - who will justly extract their share in return.
Q25: What is the channel partners' clear role?A: The channel ecosystem is quite complex, too much to describe here, so we'll be covering that in our next report on executing on the opportunity.
DEALING WITH GOOGLE
'Google' is in the list of FAQs for the very good reason that quite a lot of respondents' questions could be summed up as "Won't Google do this first? How can we compete with Google? Will Google actually run private telcos in each of its major markets?" To answer this, you have to realise just how big, and expensive, the telecoms infrastructure is; we've pointed out before that there is simply not enough advertising in the world to solve the industry's problems, even if we captured 100 per cent of it. Further, telcos have highly unique information assets.
Q26: Google, with gmaps, is already accessing user data. What kind of user information is Google ready to pay for and not able to access without the help of the MNO?
A: When presenting the contextual adverts, Google would love to know which freephone number you've called, which demographic group are you in, which web sites do you access. Today Google is shooting blind with the ads. The telco can also take the pain and friction out of distributing Google Maps to cell phones, making 'click to call' seamless, making it easy to put called vendors into your address book, integrating address book search with google search, etc.
Q27: How do Telcos make sense of this artificial notion of platform with a FOOTPRINT, we already have a platform that is EVERYWHERE, its called THE INTERNET...?
A:..which has no payment mechanism, no identity mechanism, is a cesspit of abuse and fraud, no deployed bandwidth-on-demand mechanism, no promises to keep... there are good reasons why we still use telco networks!
Q28: What are the network elements that operators own that are best in the core and can't be duplicated by others? For example, we talk about locations, but Google has figured out how to do this. What's left?
A: The others find it hard to 'slice and dice' connectivity and package it up with applications and devices. Expecting the user to buy a $40/month unlimited ISP plan with every device, or location they frequent, just doesn't cut it. Plus these others simply don't have the breadth and depth of data the telco has - see the event handout pack for more details.
Q29: 'It is vital that we integrate alongside of new apps' -- yeah, but Google says they don't really need you. They are content with over the top service. They don't need billing. You can't sell CPE. All you have is QOS, but then that is passed to consumers, who want flat rate.
A: Not true. Chris described the key things that Google envy about operators, also how much Google is currently paying out to other partners. More on Google vs Telcos here.
Q30: What's in this for the upstream companies - particularly the content players - I see why the Telco needs them but why do they need the Telco when they already have many of the assets (customer profiling data, presence in the case of Google)?
A: They don't have the same data, they can't package up distribution with their service, and they can't handle money!
Q31: Given Google's success revolves around KILLING ALL THEIR ADVERTISING COMPETITORS like WPP, Omnicom, HAVAS, IPG, Publicis who are ALL under threat. Why won't they just buy a bunch of Telcos in each country and run a private Telco?
A: It's possible, but the ad revenues are way too small to sustain telco networks today.
Q32: Regulation for "information services" has traditionally been far more permissive than regulation for specifically "telecoms" (in the legal sense) service. Google, for example, worries much less about regulation than any telco. Can operators compete with the likes of Google when the regulatory environment is harsher for operators?
A: It's not like-for-like; and anyway, in the US for example, 'information services' are on a pretty level playing field.
OPERATIONAL ISSUESOperational questions were a big concern for the contributors; does that mean they are beginning to turn their attention to putting Telco 2.0 into practice?
For example, we were asked how to price telcos' data assets, what the telco could offer upstream customers, and how to reward end-users for the use of their data. Looking at disasters like the Phorm furore in the UK, what's increasingly clear is that if you want to let one lot of customers use the other's private information, you'd better make it worth your customers' while; they put time and effort into creating it, after all.
In a sense, individual end-users are a little like depositors in a bank; they put their accumulated social data in at one end, and you lend it out at the other. But in order to get the end-users to put their money/data in the bank, you need to offer them absolute confidence in its security, and a reward - interest. It doesn't have to be cash, but it has to be real.
Another contributor pointed out that "third party" is an increasingly silly thing to call people who are going to be telcos' most important customers; why not call them "upstream customers" instead? Sounds good to us. And, of course, how will the customer-care process work in a world of complex services, made up of components from dozens of providers? Answering these questions will obviously require a big change in the structure of telco management.
Q32: How can the Telco know the identity with 70% of mobile penetration being prepay?
A: identity is a far richer thing than knowing name and address. For example, being able to stop multiple accounts for an online service being created for the same device. Or being able to issue the user with a PIN to access some premium or adult content. Or knowing who else is in your social network. Your phone might be anonymous, but you would know that if you got caught doing something illegal, you'd risk being tracked down.
Q33: What exactly is the information the fixed line operators hold about our behaviour as users that can help to provide targeted delivery of services by 3rd parties?
A: Who you call, what web pages you visit, what TV programs you watch, where you live, ....
Q34: Upstream businesses are driven by what you can do for their brand, not just what collection of information you may own. What does the Telco service add to the upstream brands?
A: The telco brand is a trust mark, much like VISA - we're assuring privacy, security, reliability, legality, etc.
Q35: How will Telcos deal with the 'privacy issue' if consumers data is being packaged up and exploited?
A: You MUST inform and reward the user - share the benefits. This was the failing in the recent Phorm ISP news in the UK - the ISPs were too greedy.
Q36: If mining customer info requires customer consent does the business model still work if the Telco has to give the customer a monetary incentive to use the info?
A: A reward, yes, but need not be money.
Q37: Should we not kill off the term 'third party'? They are customers, and we should think of them as such. Chris used the term 'upstream customer'. I will adopt that.
A: Indeed, it's this change of mindset that seems hard for many people, as Disney or NBC goes from being only a cost (buying content from them for IPTV or mobileTV) to also being a customer (e.g. telco offers age verification and payment services to Hulu.).
Q38: Do you consider the 'Premium SMS' market an early Telco2.0 success or is it another animal all together?
A: Yes, it's a good example, although with some lessons on governance that need to be heeded going forward. Mobile payments is another good example
Q39: Telcos have data on people; people want to generally hold onto their profiles/info, how do we get the people's consent for the info to be shared with 3rd parties. What is the holy grail for obtaining their consent?
A: Look at the Blyk case study - you need to reward them!
Q40: How do we, as operators, go about valuing the data assets? We've never done this kind of pricing before.
A: We have to be careful here not to get into cost accounting fallacies - how much are the toilets in your office worth, as without them...? However, that said, there's plenty of precedent in companies like Acxiom who manage and accumulate data to provide metrics on their potential worth. Plus, you can create new value by correlating and combining data, such as how Google has done by scraping hyperlinks to build a search engine. So it's a bit of a 'how long is a piece of string' question. The thing to measure is probably the loss caused by bad or missing data.
Q41: If carriers are supporting services from many third parties, who is responsible for the customer care when it all goes wrong?
A: Depends on the positioning and the wholesale product. If a TV download from iTunes doesn't work, you're not going to call your ISP, even if they are supplying a CDN to Apple. Market segments that require a lot of hand holding will inevitably end up paying for it. Maybe the era of the mass market telco brand is closing - just look at how BT are amassing a portfolio of brands instead to match business model (e.g. premium rate vs free calls to support) to the segments.
Q42: What kind of skill set do we need to succeed? What kind of org changes and talent are required? In this scenario, change management might require change of management.
A: There are three companies struggling to get out of each telco: an infrastructure management company, an IT services platform, and a marketing and CRM retailer. Today they're artificially bundled together as an artefact of the (previously necessary) vertical integration to get networks built. So the org needs to think of a stronger retail/wholesale/infrastructure split, moving the last one towards shared capex where possible. The retailer needs to bring in blood from FMCG and retailing; the wholesaler can draw on traditional telco strengths augmented with some extra Netheads, and the infrastructure co needs to look at long-term investors as its constituency (e.g. pension funds, land management companies)
Q43: Which industry forums are best positioned to help solve the opportunity for the 'information management model' necessary to drive this $350 Bn opportunity?
A: TM Forum, GSMA, 3GPP (enabling wholesale model) - there are too many to name and each has a potential role. One for our next research report.
Q44: How do I measure success along the path to 2.0? Especially early on when my 'platform' and 'VAS' revenues are dwarfed by existing 1.0 voice and BB service $$?
A: That will be one of the things we examine in our next research report and at the next event in November.
TECHNOLOGY & INNOVATIONTechnology is another way of making things happen, of course, and some telcos are already working on the enabling systems we'll need for 2-sided business models and new forms of voice & messaging; but so far, the pioneers haven't seen very much commercial success. This is clearly an important point - so what did they say?
Q45: Are there technology barriers preventing 3rd party application providers from using alternative mechanisms to access user rich data outside the operator environment?
A: Sometimes, yes. For example, in principle you can access call logs on phones via Java etc., but it's far easier to get the data from the telco (subject to privacy, regulation laws etc). Sometimes you need universal coverage, and an 'edge' approach (e.g. GPS in handset) just doesn't deliver. Sometimes the economics of non-operator solutions just don't stack up, which is why the telco micropayment service around premium SMS gets such high margins.
Q46: Consider the business model Apple is following, there aren't really major chances for a Telco. Apple is almost taking the customer relationship over; it's going to happen with the iPhone, with AppleTV and it might happen with the iPod Touch on Wifi. If this will result in a successful strategy further players might follow (Android) with the risk to use telcos as a pure data pipe. This might jeopardize the Telco2.0 principle; how to cope with this threat?
A: Produce something that makes the Apple experience even better! Integrate ITMS with pre-paid, create a CDN, make it work with the home hub - plenty of opportunity to sell Apple stuff.
Q47: How does the operator harness the disparate personal data stored in numerous closed systems?
A: THE core new skill telcos need to develop is managing their data/information assets and data mining. Today that data is indeed locked in too many silos, in the wrong format, with poor quality. Once there is a revenue stream from the platform, then there's a business case to fix some of those problems nearer to their root cause.
Q48: Has anyone considered the concept of LEAKAGE [retail theft] - stopping this is a major opportunity in itself? Media & music piracy according to the Institute of Policy Innovation cost the US alone $20.6 billion and 141,000 jobs.
A: The telco can indeed help to secure the end points, and reduce leakage. Plus the telco can help to make distribution cheap, so it's more convenient to get the legitimate version. So whilst DRM isn't the future, simple and easy certainly is.
Q49: To be successful in this new model world, requires real innovation on behalf of the carriers, in the last 10 years; they have not been that innovative, what fundamental changes do they need to make to show true innovation?
A: Operators have been innovative, just not always in ways that correspond to end user product innovation. For example, the network roll-outs have required great expertise in constructing supply chains. Telcos have always been at the bleeding edge of data mining and data warehousing. The change is to raise the importance of wholesale in the organisation, and to focus on making it cheap, simple and quick for partners to integrate with OSS/BSS systems. If your answer is "we can't do that, our legacy is too messy", well, survival isn't mandatory.
Q50: In some markets, 80%-90% of bandwidth consumed is P2P; we already have 100% of bandwidth capacity used, so things like Joost or ibbc iplayer will not make a difference in costs for ISPs.
A: We've yet to see figures that high, and nowhere is 100% of the capacity used because the user experience would be awful. [In fact P2P is nearer 26% nowadays. Streaming is the bigger issue now] In many markets there are high 'middle mile' backhaul costs, which means all video downloads are creating incremental costs to the ISP, even if they are peered with the content providers. The figures we published on our blog show how there was a tripling in streaming costs for one UK ISP the month after the launch of the iPlayer. For wireless, the traffic increases we've seen over the last year can be 1000% or more, as 3G dongles become popular - and laptops watching video will become a major cost headache to mobile operators.
Q51: Telcos don't have the innovative culture of internet companies how on earth can they cultivate such an innovative approach. Is it the big guys or the small guys who can drive the 2 sided evolutions?
A: Telcos are experts at network engineering to deliver valuable bits and bytes, like phone calls and broadband. They have brands associated with trust via their billing relationships. The two-sided platform strategy helps them to build on what they're good at, rather than try to diversify into areas they are unlikely to innovate successfully within, eg. Media
Q52: Initial 'platform' initiatives such as Sprint's Open Mobility Platform have generated little traction to date - are we sure this opportunity is real?
A: We are describing an opportunity that is subtly different. Most initiatives today have focused on opening network APIs (inc BT's Web21C). A number of things have been lacking: 1. A commercial focus on business processed, particularly leveraging the existing retail base, rather than trying to build VAS. 2. Mixing in enough customer data into the offering. 3. Commitment and scale necessary to persuade partners this is a long-term bet, and a foundation for their business. 4. A suitable sales and channel strategy.
Q53: The endpoints are already smarter than the network. Does this mean that the Telcos are forever held hostage by Moore's law?
A: No. Remember our container shipping industry analogy. Physical containers could be filled with iPods and plasma screens, but the cleverness of the content isn't really important to the logistics provider. In the digital world there's still a supply chain management problem for data to be solved, such as managing authentication (your 'waybill' and port checks), getting software distributed and pre-installed, managing home network environments, etc.
Q54: How do you identify new trends (content wise such as facebook or myspace)? Is it coming from the end user directly? How efficient will Telco be at integrating it and delivering it before it quickly becomes outdated?
A: See our new 'Voice & Messaging 2.0' report for more details, but the job of the telco is not to second guess application innovation, but to provide a point of integration of all those experiences. For example, the telco doesn't need to host your calendar, but it should know who does, and make it easy for App A to insert a calendar event without having to know where the calendar is hosted.
Q55: With the challenges in environmental issues: traffic congestion, healthcare delivery, urban/rural development, should not the vision for Telco 2.0 be much bigger? Ditto for BT 21CN, where cost reduction and PSTN replication is put ahead of delivering a Broadband service which remains in essence a best endeavour cheap-as-chips uni-directional service.
A: A lot of those issues fall into the 'infrastructure' bucket, and we're not pushing the two-sided business model as a solution to that problem.
Q56: Can Telcos learn from retailers like Tesco how to use customer information to target end customers?A: Yes, absolutely. Why aren't minutes used as a loyalty currency like airmiles? - See here. This was really the consensus of the event - the real value in telcos is in the service-creation and relationship management capability of their OSS-BSS, and the way to get at it is to make this available to anyone who needs the APIs to invent something. Businesses exist that need the unique telco assets; but the real problem is how to execute on this. The answer to that is to form alliances in order to build scale, and to recruit channel partners in order to market the telco assets to the 10,000s of possible upstream customers.
[Ed - watch this space for more FAQs as we continue to proselytise around the world. Next publicevent: 3-5 November 2008, London]