Google vs Telcos Through Two-Sided Strategy
The following is an extract from our new Telco 2.0 Executive Briefing on Google's strategy and what it means for the telcos.Members of the Telco 2.0TM Executive Briefing Subscription Service can click here for the full report. Non-Members, please see here for how to subscribe, here to buy the individual report, or email firstname.lastname@example.org or call +44 (0) 207 247 5003.]
We're just putting the finishing touches to our in-depth analysis of Google's increasingly active telecoms strategy in our forthcoming Executive Briefing, from which we publish the following edited extract covering some of the latest developments. We've also written on Google in some depth before, including Google Vs Telcos: the Tale of the Tape, Google Anchors its Carrier off Telcoland, Google's Complex Execution of Simple Two-Sided Business Model Strategies, and How Google Profits from YouTube.
The Battle of Scale: Customer Data and IT Infrastructure
Google and Telcos share a speciality in operating IT systems at very high scale - either the traditional switching, data centre and call centre capabilities of the Telcos, or the cloud computing infrastructure Google specialises in. Telcos have a lot of work to do to rival Google on cost and adaptability, but in general terms, this is an area where they have little choice but to compete - carriers are building up cloud computing capability, while Google is investing in dark fibre and other Telco-related services.
Although Google has a huge data resource of Web searches, it has essentially no customer relationships with consumers and nothing like the huge volumes of social-graph information that are to be found in the Telcos’ Call Detail Record (CDR) piles. As it will be very difficult and slow for Google to replicate these assets, this is an important ”spike” - an area where the Telcos’ profile is strong, but which doesn’t match a similar strength at Google.
Telcos are also developing important capabilities around identification/authentication and payments, which could become a second spike - Google Checkout hasn’t gained much traction, and although Google supports the OpenID project, OpenID is more a way of using identity data on the Internet than a source of strong authentication in its own right. For most OpenIDs at the moment, the security is only as good as the webmail account used to sign up - which isn’t great.
However, Google’s search engine and strong brand name has given it a potent platform from which to move into new markets. And Google does have an increasingly broad set of initiatives, such as Google Talk, Google Voice, Google Wave and Android, that encroach on Telcos’ core communication services.
The Battle for Control: The 'Google Voice of Doom'?
Indeed, Telco 2.0 sees Google Voice as a direct threat to some aspects of conventional operator business models. By issuing its own telephone numbers, Google is starting down the path of disintermediating Telcos from their “ownership” of personal numbers and identities.
Google assigns you a Google telephone number, which you can keep for life. Once you have given that number to all your friends and contacts, you can then use the Google Voice Web site to determine which of your phones actually rings when an individual dials your Google number. “Let my boss call my mobile only between 9am and 7pm, and always divert my mother-in-law to voicemail”.
This threat has been exacerbated by the recent launch of a Google Voice mobile app, which is integrated with the contacts book, to enable users to make Google Voice calls from an Android or Blackberry device. The user’s handset actually rings the user’s Google Voice number, which then routes the call from there. The mobile phone service provider can still charge the user to connect to their Google Voice number. But in the U.S., Google Voice could enable the user to circumvent surcharges for receiving calls on their mobile (by directing incoming calls to a fixed-line) or for making long-distance calls.
It is not just Telcos that have cause to be concerned. Apple has, so far, not approved Google Voice for inclusion in Apple’s App Store, saying that it “appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voicemail.”
(NB. Telco 2.0’s forthcoming Executive Briefing on Google analyses Google Voice in-depth, as well as examining the significance of Google Talk, Google Wave and Android.)
The Battle for Location: Giving Google Latitude
Location, often thought of as a Telco speciality, is being eroded by Google’s investments - they have their own network-based location API for Gears developers, which although it is based on Telco data, probably wasn’t what the carriers were hoping for. Google has made significant investments in preparing a very large database of IP address geo-location information and productising this in support of Google Maps, Google Maps Mobile, Google Local, and probably also for their own internal IT optimisation.
In a related development, Google offers a basic status-broadcasting service for location information, Latitude, which is used to provide location information for social applications, for localised search, and probably also for location-targeted ads. The location information is a mixture of cellular and IP geo-location data. It is broadly comparable to Yahoo!’s FireEagle.
It is likely to become easier for Telcos to unlock the potential of their location data as a result of projects such as the GSMA’s OneAPI, so expect the competitive balance to shift back towards the Telcos. On the downside, location data is increasingly likely to be free to the end user - GPS service, after all, already is free, and GPS chips are falling in price and being integrated with progressively cheaper devices.
Many Google products compete with existing Telco 2.0 or at least Telco 1.5 activities - search, maps, mail and the like. But, in terms of capabilities, it’s the Telcos’ advertising operation, developer community, and SMB marketing group that are also the most likely to benefit from Google’s location-based search programmes.
Grab the Hilltops
For Telcos and other service providers, there is next to no hope of breaking into the search market, barring some seismic technological breakthrough on the Telcos’ side or company-destroying catastrophe at Google. Similarly, unless the Telco side hits on a really incredible product, mail, maps etc. are unlikely to be worth fighting - especially as doing so would involve starting a fight with Yahoo and Microsoft into the bargain.
These are not key strategic losses for telcos. But the following would be:
- to fail to capitalise on the unique opportunities inherent in Telco customer data
- to lose control of the user communications interface
- to fail to create real value through Location Services
- to allow Google to monopolise the mobile developer ecosystem
- for the emerging GSM m-banking/m-payments systems to lose out to Google.
The best defence in these circumstances is to grab the hilltops before Google does. Fortunately, on at least two (developers and payments) of these, Telcos’ activity is picking up fast. But is it enough, and what else can be done?Members of the Telco 2.0TM Executive Briefing Subscription Service will be able to the full Google report using this service. Non-Members, please see here for how to subscribe, email email@example.com or call +44 (0) 207 247 5003.