How telcos can improve their P/E ratios

June 14, 2016

Microsoft Buys LinkedIn: The Value of a Huge Directory

So Microsoft has acquired LinkedIn, for a $26bn cash consideration. Leaving aside the possibility Satya Nadella thinks he’s finally found a way to stop them sending him so much e-mail, what is Microsoft thinking?

The bear case is pretty clear. LinkedIn lost $166m for 2015, and Microsoft paid a premium of nearly 50% over Friday’s closing price. The losses are getting worse, too - in Q1 2015, the company lost $17m at the operating level, which had risen to $66m in Q1 2016, putting them dangerously close to beating 2015’s loss in the first half of 2016. Meanwhile, Microsoft shares fell 2.6% on the news. Depending on whether you like total users or monthly-active users (MAUs), Microsoft paid somewhere between $60 a user and $250 a user. The deal values LinkedIn at 7 per cent of Microsoft’s market capitalisation, as much as Sky TV. Really… is it worth that much?

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November 1, 2011

Telco 2.0 CEO at ITU World speaking on ‘Personal Data’ on Futurists Panel

As a warm up to our EMEA Brainstorm in London next week here’s a link to a video of Telco 2.0’s CEO, Simon Torrance presenting at the ITU World event in Geneva last week on ‘Personal Data as a new class of Social and Economic Asset’ on a panel of ‘futurists’ looking at the Future of the Networked Society. Simon’s presentation is about 11 minutes into the session and there are charts accompanying the video.

simon at ITU video screenshot.png

The graphic below was created by artists at the show, trying to summarise the key themes.

Visions networked graphic sarah clark oct 2011 ITU.JPG

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July 28, 2011

Take the Telco 2.0 survey on the value of ‘smart pipes’

We are publishing a report on the value of operators being ‘smart’ in early September. It is being produced 100% independently and kindly sponsored by Tellabs. It will be freely available.

As part of the research process, we are conducting a short survey. Click here to participate

The survey covers:

  1. The definition of a smart network and smart services strategy

  2. The value (or otherwise) of being ‘smart’ for an operator

  3. The challenges involved in becoming smart

The survey takes only 15 minutes to complete and, better still, all participants will automatically be sent the report. The link again.

It closes on the 5th August - so hurry!

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January 2, 2011

BlueVia: Telefonica’s new global developer platform

Back in February 2009, we blogged about O2 UK’s Litmus project, a developer platform that offered more than any other. As well as a range of useful network APIs and the typical revenue-sharing element, it provided access to crowdsourced testing from Mob4Hire, hosting with Rackspace, and to an internal Telefonica venture-capital group.

Six months later, we reviewed Litmus again, finding a worryingly empty web forum, and were able to interview Jose Valles Nunez and James Parton from Telefonica and O2 respectively about it. They argued that one of the main goals Telefonica had with Litmus was to spot potential star applications that could be integrated with their mainline products in a process of “co-creation”. (An example: Sun Microsystems was eventually so pleased with the open-source community’s version of its Solaris operating system that they decided to use OpenSolaris in their commercial products and have the engineers who worked on Solaris contribute code to the community version instead.)

Developer communities are a major concern for Telco 2.0 (see our Apple vs. Nokia note) and therefore we’re following the story further, in the build up to a new research and event programme for 2011 called ‘Mobile Apps 2.0’.

A few weeks ago, just before Christmas, Telefonica launched BlueVia, a further development of Litmus that will be deployed across the whole Telefonica footprint rather than just O2 UK or Telefonica O2 Europe. Here’s the latest public presentation on Bluevia:

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December 14, 2010

Strategy 2.0: Vodafone’s ‘Happy Pipe’ Vs NTT’s ‘Two-Sided’ Approach in APAC.

Presentations by NTT Research and Vodafone’s division containing its African, Indian, and Asia-Pacific operations revealed very different market strategies. Here’s a quick preview - we’ll be looking at these in more depth in the strategy report ‘The Roadmap to New Telco 2.0 Business Models’, plus a more detailed Analyst Note on these two case studies, and at our US, EMEA and APAC Brainstorms in H1 2011.

At the recent FT World Telecoms event, Naohide Nagatsu, general manager of NTT Research in Europe, presented on their plans for transition to an all-IP NGN. They intend to switch off the PSTN relatively quickly, which is hardly surprising as 68% of Japanese subscribers are on either FTTH or DOCSIS 3 cable and 96% of mobile subscribers are on one 3G technology or other (there being a choice of NTT DoCoMo’s Japanese-flavour 3G, Softbank’s UMTS, or KDDI Mobile’s CDMA-2000).


NTT is currently making an actual majority of its revenues - 58% - from its ISP and IT solutions businesses, the ones BT terms its New Wave operations. They expect that voice will be down to 25% of revenues in two years’ time - a little behind the schedule Telco 2.0 delegates expected way back in 2006, but not by much.

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December 3, 2010

M2M doomed to remain a cottage industry?

Is the machine-to-machine market doomed to remain a cottage industry dominated by overpriced SMS? Delegates at the ‘M2M 2.0’ session at the 11th Telco 2.0 Executive Brainstorm in London last month were quite clear what the problems, opportunities, and solutions are.

As this chart shows, the biggest barriers to greater adoption of M2M were the costs of switching between operators, the technical and commercial interfaces between operators and customers, and the lack of global solutions for seamless and economic roaming.

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November 18, 2010

FT World Telecoms: VNL, Disruptive Rural GSM

A genuinely fascinating presentation at last week’s FT Conference
was given by Rajiv Mehrotra of VNL, an Indian startup that aims to deliver connectivity “where the roads stop”. The big issue here is OPEX - the GSMA estimates that by 2014 there will be 640,000 base stations operating beyond the reach of the electricity grid, which will cost a round $15bn a year in diesel fuel alone. We can only realistically expect the price of oil to go up, and storing tanks of it in a basically unpoliced environment brings its own problems. 60% of a typical African MNO’s OPEX is diesel. 37% of a typical Indian MNO’s OPEX is diesel.

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October 21, 2010

Customer Data 2.0: Telcos Must Vie for a slice of the $Multi-Billion ‘PIE’

Facebook, Google and others are pioneering the creation of the Personal Information Economy (PIE) based on consumer/user data. Our new analysis outlines emerging participants’ roles, and why, where and how telcos could and should play.


In this first of a series of briefing notes, Telco2.0 sets out to describe the potential roles for Telcos within the trust networks that we believe will underpin the future personal information economy. We’ll also be discussing this at two important sessions on this topic at our Los Angeles (Oct 27-28, 2010) and London (9-10 Nov, 2010) events.

Personal Information - digital data relating to an identified or identifiable person - is being generated, transmitted and stored on a vast and increasing scale, primarily for internal use by organisations looking to better serve individuals, but increasingly for external use to support third-party organisations to better interact with those same individuals.

Still only a nascent industry, the business of using personal information to create value for individuals and income from third parties, holds considerable promise. For example, Facebook, only 6 years old and generating an estimated $1bn in revenues, somehow commands a $33bn valuation, by doing just this.

Personal Information Economics (PIE) isn’t just a new area for Telcos. It’s new for everybody, including individuals themselves and the regulators / legislators tasked with safeguarding personal freedom and privacy. Many disciplines cover aspects of PIE and the associated areas of Privacy and Identity (Law, Information Systems, Information Science, Economics, Public Policy, Psychology, Social Psychology, Philosophy) but few are geared to supporting those wishing to pursue it as a commercial practice. Subsequently, there are few frameworks to help Telco strategists and innovation practitioners to understand, communicate and quantify the opportunity.

To read more of this new analysis, please see the article on our research site here.

For other, related Telco 2.0 analyses, please see ‘World Economic Forum: Strategic Opportunities in Customer Data’, the ‘User Data & Privacy’ and ‘Adjacent & Disruptive’ categories on our research site. Other articles include ‘Can telcos Unlock the Value of their Customer Data’, and ‘Google - where to compete, where to co-operate’ and ‘Facebook: moving into Telco Space?’.

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October 20, 2010

Entertainment 2.0: Can Telcos help save the Video Distribution Industry?

The physical distribution of digital video is in turmoil, and the entertainment industry is in a state of fear and denial about online distribution. The signs are that Video could emulate the music market’s disappearing act. Can telcos help?

In the run up to our Executive Brainstorm events in AMERICAS, EMEA and APAC, and Best Practice Live! virtual events, we provide some background analysis:

If you want to know what the entertainment supply chain thinks of the digital online opportunity, then the ESCA Edge conference, the premier entertainment retailing and supply chain event, is not a bad place to start. At the event held in London last month, a major theme coming through from speakers and delegates alike was fear - fear of declining physical sales and fear of online eating into margins legally or pirates destroying them completely.

As a result, most discussions targeted the short-term and were based around protecting physical margins by reducing costs in the supply chain, such as minimising returns and on site disposal. Additionally, the conference questioned the ability of online to deliver video effectively, clinging to a hope that the Internet’s weaknesses would provide the best defence against it.

Negative approach to online
This was highlighted by a strange presentation from Tom Moran, senior director, business development at Savvis, who laid out the limitations of the Internet infrastructure to support professional video. Pitched as ‘realism’, the messages were a little misleading. While it is certainly true that the Internet would not be capable of supporting the switch of all broadcast and physical video today, this is not what’s happening, it is a gradual transition and broadcast will remain a mainstay in the market for the foreseeable future.

Furthermore, customer behaviour online is different to traditional TV as users choose when they watch, rather than always watching live. Finally, the amount of dedicated infrastructure available to video or the development of specific structures such as CDNs that reduce pressure weren’t mentioned.

At Telco 2.0 we would argue a better and far more positive approach to online is to develop an effective supply chain for it and leverage the unique characteristics of both physical and online mediums to maximise profits from both in the medium and long term.

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September 18, 2010

The ‘Big Picture’: Disruptive Strategies for Growth

This week, we’re publishing a post each day that summarises our recent research in key areas, and the new research we’re working on for the Americas Brainstorm in L.A., 27-28 Oct, and the EMEA Brainstorm in London, 8-9 Nov. It’s also the ‘last chance to see’ the material from our first ‘Best Practice Live!’ online event, with the videos coming offline on 28th September, so please watch the ones you want to see before they’re gone.

NB. To watch the ‘Best Practice Live!’ videos in this post (links marked* below or here) you will need to register on the first page that the embedded links take you to, or log in if you’ve already registered. If you have any problems please email us at

Disruptive Strategies for Growth

We’re currently working on a major new research report, titled ‘The Roadmap to New Telco Business Models’, articulating our perspective on the development of new and ‘Two-Sided’ Telecoms Business models initially described in The $125Bn ‘Two-Sided’ Telecoms Market Opportunity, and following on from the recently published report Telco 2.0 Case Directory - 5 ‘Use Cases’, 10 Case Studies. This new ‘Roadmap’ report examines international comparisons of operator strategies against our innovation framework, and explores what different types of operator should be doing in each region to maximise their chances of success in a Telco 2.0 world.

As part of this, we’ve developed ‘Ten Principles for Disruptive Innovation’ that we’ll be featuring at the forthcoming events. But why do we think it’s necessary for operators to think and act differently, and what should they do?

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September 1, 2010

GMail voice - nice, but no Skype Connect

So you can now make telephone calls from within Google Mail. Well, among other things this is a fine example of something we said back in 2008 in the Consumer Voice & Messaging 2.0 strategy report. Jamie Zawinski said that every program tends to expand until it can read e-mail - we said that the same was now true of telephony. Everything expands until it can place phone calls. As a result, although total minutes of use keep rising, the market is deconcentrating, with the total spread across an increasing diversity of players - games, Voice 2.0 companies, enterprise VoIP networks, mobile apps, perhaps even the odd telco.

But we actually don’t think Google’s move is enormously significant. Consider this: if you’re a telco, and you provide plain SS7 circuit-switched voice, everyone agrees you’ve got a problem. Telephony is now a software application and it’s very often free, which doesn’t leave you much scope. If you’re one of the traditional alternative voice providers - calling cards, carrier VoIP like Vonage, discount MVNO, etc - you also have problems, because you’re trying to undercut a price that’s going to zero. We recall Boris Nemsic, when he was CEO of Mobilkom, saying that their answer to “fixed-mobile convergence” was a new tariff that offered unlimited national and on-network minutes for €10. There wasn’t any point being cute, when they could just cut prices and squash the margin players like bugs.

So you need to find some way to differentiate - to offer better voice and messaging.

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October 30, 2009

Quotes of Note

Ed. - To warm us up for the forthcoming Telco 2.0 Exec Brainstorms on new business models (this week in London and 9-10 Dec in Orlando, Florida), Telco 2.0 is reports from last week’s eComm.

Some quotes of note:

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May 28, 2009

Enterprise Services 2.0 - Output from Telco 2.0 exec brainstorm, May 09

Below is a summary analysis of the Enterprise Services 2.0 session at the May 2009 Telco 2.0 Executive Brainstorm. It builds on some of the issues we described before the event here.

The premise we explored was this:

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Retail Services 2.0 - Output from Telco 2.0 exec brainstorm, May 09

Below is a summary analysis of the Retail Services 2.0 session at the May 2009 Telco 2.0 Executive Brainstorm. It builds on some of the issues about selling to the ‘digital generation’ that we described before the event here.

The session involved short stimulus presentations from leading figures in the industry, group brainstorming using our ‘Mindshare’ interactive technology, a panel discussion, and a vote on the best industry strategy for moving forward. Below is the vote, followed by some of our post-event analysis on key lessons and industry next steps:

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April 27, 2009

APIs: How to make money from them?

APIs is a big theme of our work currently. Plenty of technical activity going on, but not enough work on how to monetise them. On stage for the first time together next Thursday at Telco 2.0 will be leaders of the major API programmes - GSMA, TM Forum, MEF Smart Pipes, OMTP BONDI, Orange Partners - and some of their potential users (eg. BBC). We’ll be presenting some analysis of the options for monetising API’s to kick off the debate, and Alcatel-Lucent will be sharing new research on what enabling capabilities ‘over-the-top’ players are willing to pay for (and thus could profitably be exposed via APIs). Below is a short preview of the session:

[Ed. - if you want access to the output from the brainstorm, but are busy or can’t travel next week, do consider our new ‘distance participation’ package.]

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January 25, 2009

The High Road and the Low Road to Fibre

Telco 2.0 ally Brough Turner points everyone to an interesting story from Lahore in Pakistan, where not only can you get fibre to the home, but it’s cheap as well. It’s well worth reading.

Essentially, the government and the incumbent telco don’t know or can’t enforce their control of the right-of-way, which means that they have effective Layer Zero openness. Anybody can, in practice, string cable from the existing power and telephony poles; and it turns out that quite a lot do. Using basic IT gear, they place cheap Ethernet switches on the poles and run Cat5 or 6 cable into their customers’ homes, then get an aggregator to link the whole thing to a PC running an open source router implementation and a fibre-optic cable to their HQ.

The Low Road: Rawalpindi The Low Road in Rawalpindi. (Flickr user temp 13rec.)

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November 24, 2008

Ring! Ring! Hot News, 24th November, 2008

In Today’s Issue: Internet forecast wars on again; Odlyzko fights the nonsense; experimental high-def YouTube, and how to get it; BT: OFCOM ate my homework; Amazon’s CDN has landed; Telefonica wants a spaceship or two; T-Mobile UK is down; T-Systems blows the German secret service’s cover; VZW peeks at BHO’s CDRs; SearchWiki, another Google web-hoover; Ubuntu for mobiles; Lotus Notes for Nokia; Nokia and Yahoo!; Nokia and TD-SCDMA, possible faster Chinese rollout; HOWTO manage devices OTA in S60; GPS SIMs coming; Qualcomm’s WLAN LBS; CTIA fights for lucrative convict market; Clearwire-Sprint JV signed, shares tank; Indian consolidation coming; T-Mobile USA’s digiframe comes with data but no music; a cautionary tale about age verification.

It’s another round in the Internet traffic forecast wars. The vendors’ side last week published research claiming that a coming exaflood would lead to “Internet brownouts”; as TelecomTV points out, not only did they use identical language to everyone else who’s predicted this over the last 16 years, but just as always, world authority Andrew Odlzkyo disagrees and is probably right (his MINTS project claims that backbone traffic actually fell recently).

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November 12, 2008

Exclusive Interview: The ‘Long Tail’ Interrogated (part 2)

Last week the fifth Telco 2.0 Executive Brainstorm continued its theme of business model innovation at the intersection of telecoms, media and technology by welcoming back Will Page, Chief Economist at the MCPS PRS Alliance, a copyright collection society that represents over 50,000 songwriters and 5,000 publishers.


Will took the opportunity to present, exclusively to Telco 2.0, new research - based on an unprecedented analysis of digital music sales data gathered over a year - that opens to question the recieved wisdom around the ‘Long Tail’ theory, and helps to re-define what it actually means and for whom. The presentation created quite a stir at the event, in the media and blogosphere. Here, Telco 2.0 discusses at length the presentation and the reaction to it with Will Page.

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October 29, 2008

The Long Tail - turned on its head, says research

Exclusive: Will Page, the MCPS PRS Alliance Chief Economist, will be presenting at the Telco 2.0 event next week for the first time new research that all is not what it seems with the original Long Tail theory - and questions whether the future of business really is selling ‘less of more’.

The theory as developed by Chris Anderson back in 2004, and which has since become a widely accepted buzzword, doesn’t stand up to robust statistical analysis he says.

On stage next week, to support his argument, he will share analysis of digital music sales data gathered over 12 months from a catalogue of 13m songs. This is part of pioneering work with Harvard Business School and Andrew Bud of MBlox. At the event we will explore this analysis with the 250 senior execs gathered and try to decide what it means for investment strategy in markets disrupted by the long tail effect. Ultimately, should you bet large, small or not bet at all?

In the meantime, as an introduction, this Harvard Business Review article is strongly recommended.

Watch this space for more on this topic…

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October 7, 2008

Guest Post: Device Management - The last leg is in your hands

Operators are familiar with the benefits of device management for their own services. The challenge ahead is to re-model the device management architecture that was originally put in place to address in-house needs so that it becomes a revenue generator in new two-sided business agreements with third parties. This involves a change in mindset, away from the “blackbox” telecom culture and towards more open thinking. Dominique Schmid, CEO of Sicap (a specialist in this field) explains further…

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September 17, 2008

Telco 2.0 Interview: Steve Zimba, Microsoft

Continuing our series of interviews with major industry thinkers, Steve Zimba is Microsoft’s Managing Director, Global Telecoms Business. We interviewed Steve about their ‘Telco 2.0’ strategy. This integrates their PC, IPTV and mobile offerings with a combined software and services offering, supported by telecoms-specific capabilities and a third party ecosystem.

Steve Zimba

Microsoft is a particularly interesting company to us because they are in a unique position. They bridge the consumer and enterprise markets, which places them well to create technologies and operational businesses for two-sided markets. Their Internet competitors are consumer-centric, and don’t have channels into the enterprise. Rivals such as IBM don’t have the consumer brand or media properties to run experiments on the scale Microsoft can. Furthermore, Microsoft is active across all of the B2B value-added service areas we believe will drive future telco growth: identity, advertising & marketing services, e-commerce, order fulfilment, content delivery, billing & payments, and customer care/CRM. The difficult challenge is whether Microsoft can make the whole more than sum of its software conglomerate parts.

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September 2, 2008

New Internet Video Distribution Survey - have your say

Today we launch a new survey, part of a major investigation into new business models for internet video distribution (kindly supported by the TM Forum, TelecomTV, the Mobile Entertainment Forum, and TVoverNet.)

By ‘internet video distribution’ we mean: any video material (movies, TV, infotainment, sports, UCG) distributed via internet technologies (IPTV, web streaming or P2P downloading) over any bearer (fixed or mobile broadband networks) to any device (PC, TV, handheld). We exclude traditional broadcasting and physical means of distribution, although the consequences of internet video distribution are looked at.

Do take part here. It takes 15-20 minutes to complete and you’ll get a free copy of the summary results if you invest the time to complete it properly. (The system allows you to come back to complete it if you need to take a break). Survey closes 1st October 2008.

Some of the questions are pretty challenging, so it’s well worth reading the context for it below first:

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July 16, 2008

Verizon’s P4P initiative: will it support the value chain effectively?

The Telco 2.0 research team is undertaking some detailed business modelling around ‘Rich Media Distribution’ over the summer. We’ll also be debating this with industry leaders on 4-5 November at our next event in London. More on both of these anon. In the meantime, here’s some analysis of Verizon’s P4P next generation file swapping initiative:

We’re not sure how it happened, but Verizon appears to be turning into one of the most interesting telcos around. For a start, there’s the fibre - but then again, even AT&T has an FTTH roll-out of sorts going on. Then there’s ODI, their developer platform initiative. The whizzy portal-like Dashboard application Verizon Wireless is putting on its LG Chocolates has a publicly available API so people can do evil things to it. But perhaps the most significant change at Verizon is P4P, an attempt to reconcile the huge RBOC with the world of peer-to-peer applications, using a technology developed at Yale University as Haiyong Xie’s PhD research project.

We’ll start by noting that a lot of people read “P2P” and think copyright. Of course, the means by which you distribute something don’t determine its content, and certainly not its intellectual property status, so this is a red herring. Anyway, we’ll recognise this and move on - we’re interested in the telecoms aspects, not the record industry.

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June 19, 2008

Prospects for FTTH in Britain: considered slow

So, with two major US carriers rolling out fibre to the home, a string of European cities doing the municipal-fibre thing, Iliad fibreing-up their own network in France, and Japan and Korea having long started wiring up whole apartment buildings, how soon will the UK get cracking? Telco 2.0 went to the Broadband Stakeholder Group’s conference to find out.

Background to the issue

The broadband incentive problem tells us how there’s little incentive for network owners to invest in networks when they can’t capture much of the incremental value of the traffic. One way out would be to make a radical cut in the underlying incremental costs of bandwidth, and to stretch budgets further. And that’s precisely what we’re seeing all over the world, as operators upgrade in order to substitute new CAPEX for old OPEX.

There are many ways of doing this: deploying fibre, DOCSIS 3 cable systems, and advanced wireless in the access loop; moving to technologies like Carrier Ethernet inside their networks; and substituting peering for transit whereever possible. Mobile operators are increasingly pulling fibre to their cell-sites in order to cope with a rising tide of data traffic encouraged by the arrival of megabit-plus radio links.

Verizon estimates that it saves up to 70% of OPEX on every link it converts to FiOS. So you’d think the pressure would be on to get the fibre out there in Britain, a country criss-crossed with high-maintenance copper in a damp climate. The UK is also perhaps the guinea pig for the broadband incentive problem. But FTTH is further behind in the UK than almost anywhere else in Europe. So far there is literally no SOHO fibre access anywhere in Britain. What’s going on?

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June 4, 2008

Use Case: Optimising Rolls-Royce’s ‘Product-Service’ business

This is a ‘Use Case’ taken from our 2-Sided Business Models report, which is out now (10% discount to readers of this blog). We have chosen Rolls-Royce as an example of both the type of target business model (mixing services with products) and a specific B2B VAS (Value Added Service) opportunity - field service - for telcos to sell into.

A major trend of the times is the blurring of the distinction between service industries and manufacturing, creating product-service systems — in our own technology field, we can already see plenty of examples. Is IBM a manufacturer or a service provider? Ever since its early 90s crisis, it’s put a lot of effort into its services businesses (consulting, systems integration, hosted/managed service operations), but not only does it still make computers, it carries out fundamental R&D on topics like semiconductors, lasers, batteries and magnetic materials — even more hardware than the chip makers.

Similarly, everyone would agree that Ericsson manufactures telecoms equipment, but one-third of its profits come from Ericsson Professional Services. On the other hand, Google would seem to be a quintessential services company, but it actually makes its own servers. Further, some functions that are typical of tech manufacturers - R&D, design and engineering - are found in companies that outsource all their manufacturing, but whose output is still recognisably a physical product, like ARM Holdings.

But this trend is even more pronounced outside the IT/telecoms world. Many, many companies turned to integrating their products with services as a way of fighting commoditisation over the last 30 years - and it’s often cited as a way of making industry more sustainable (pdf). We’ve picked one example which offers insights into where telcos might take their business.

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April 21, 2008

Ring! Ring! Hot News, 20th April 2008

In Today’s Issue: Online businesses crave telco capabilities (potentially…). Motorola rearranges the deckchairs. Nokia profits up 25%, but you wouldn’t want to see what went into that. Is Comes With Music a lossmaker? Nobody pays for the stuff anyway. Silverlight everywhere. And Moonlight. Is Microsoft IBM in 1993? 1,788 entries in the Android dev competition, but Google can’t keep a SIP server running. They can send a man to the moon… O2 users optimise radio network by whingeing. FTel+TeliaSonera=nightmare on Wall Street? Truphone gets a cash dump. UPS saves fuel with a platform. Pat Robertson, selfless crusader for your digital rights? AT&T fearmongering vs Andrew Odlyzko; there can only be one winner. Data centres in containers will eat the world. EBay finds giving away telephony is not a business. And there’s the day the YouTube died.

Ed Wray, CEO of Betfair, the world’s biggest betting exchange, came to last week’s Telco 2.0 Executive Brainstorm and told the assembled crowd of telcosians he would be delighted to pay a telco to solve his ‘digital logistics’ problems. Authentication is crucial to Betfair’s business, not just to prevent fraud but also to prevent Americans and the under-age from using the site, something which can lead to an executive jail problem. And telcos, he says, can provide it. At the moment, it’s costing him $22 to verify the identity of each new customer; with 1.5 million active customers, you could see how that might get expensive.

“There’s a tendency when building a platform business to do too much yourself - I come back to payments, I come back to authentication. People in this room can do this,” he said. A couple of telco execs came up to him afterwards to double check that he really was supporting the analysis on which the event was based.

In a keynote the day before, Sally Davies, CEO of BT Wholesale, described the 2-sided business model opportunity as “exciting and compelling”, but with many challenges in execution ahead. If there was a single theme of the conference, that was it; you couldn’t move for people who’d independently come to similar conclusions to those in the newly released the Voice & Messaging 2.0 and 2-Sided Business Model reports. The issue, of course, is how to disseminate these ideas more widely…

Much more analysis of last week’s Telco 2.0 event to come…

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March 30, 2008

Music 2.0 the Telco 2.0 way

The week that the real Music 2.0 book launches, we were having a backchannel conversation on future business models for the content industry. We think there’s a strong parallel between music and telecoms — high fixed cost businesses trying to recover that value through products with zero marginal cost of production, and therefore a tendency towards zero as the marginal price.

The thought process therefore needs to be similar: What’s the fundamental value in music… or telephony?

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March 25, 2008

Ring! Ring! Hot News, 25th March 2008

In Today’s Issue: 37% of Ultra-Mobile PCs to get WiMAX; Virtual PBXs could eat your business customers; low-cost telepresence like low-cost spaceflight, i.e. not very; MSFT buys callcentreco; Don Price on managed services; topology aware P2P; variable speed limits for the Net; price war rages; i-mode fails in Europe; huge telcos win huge telco auction; epic Aussie brawl over WiMAX; Sprint’s new core network - platform perfection or IMS infection?; Vodafone & MTN; French FTTH; Deutsche Telekom disaster; sickening “human skin” phones.

37% of ultra-mobile devices to fit WiMAX. So says Intel — but then again, how big will the market for ultra-mobile PCs really be? Time will tell…

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March 17, 2008

Voice Revolution Watch

The vision of our Voice & Messaging 2.0 project is coming ever closer in reality. Two pieces of news this week underline this; first, Sony extends in-game VoIP to more PlayStation Portables. (You’ll remember, of course, that earlier this week Sony filed patents on a PSPhone.). Second, IBM pours $1bn into unified comms. In this article we explore where the telco can fit in…

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March 5, 2008

Trends in Mobile: New Global Survey

Please take part in a new survey from our good friends at Telecom TV on Trends in Mobile: here. It covers:
- Revenue & Cost Predictions for your home market
- Business Models & Investments
- Services & Applications
- Disruptions
- Industry Leaders

It’s deliberately short (10 mins). Telco 2.0 has designed some of the questions, so that it ties in with our broader Telco 2.0 research programme and we’ll be helping with the analysis. All participants get a free copy of the results, highlights of which will also be presented and discussed at the Telco 2.0 event on 16-17 April in London.

The survey is sponsored by Qualcomm CDMA Technologies. Note also, for each survey completed, TelecomTV will donate $1.00 to UNHCR’s (background here). The survey link is here.

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February 25, 2008

Ring! Ring! Hot News, 25th February 2008

In Today’s Issue:: Flat-rate menaces US cellcos, mobile voice volume booms, COLT feels the pain, Voda/Orange mast-share, OFCOM after the fibre, mobile filth disappoints, DVD Jon turns on mobiles, Pakistan breaks the Internet, GSM crypto cracked, BlackBerry down again, Facebook loses traffic, microwave spectrum in demand, France resists Reding, pretty PDFs, and Sprint-Nextel goes all Telco 2.0…

It was the week of flat-rate: all US national mobile operators are now offering flat-rate calling plans, as well as flat-rate data plans. Some day this war’s gonna end. We knew T-Mobile USA’s UMTS rollout would boost competition; we just didn’t think it would happen quite that quickly. Broadband incentive problem, meet US MNOs; US MNOs, meet broadband incentive problem…as Telegeography points out, this is ugly news for the landline world as well.

Here we go; mobile voice minutes of use in Europe are expected to whizz past fixed any time now.

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February 18, 2008

Telco 2.0’s Private Mobile World Congress

So everyone else has done their 3GSM…sorry…Mobile World Congress round-up posts; what did Telco 2.0 think was cool? As you’ll no doubt guess, it wasn’t the shiny gadgets that got us; even at MWC, the anti-shiny goggles all Telco 2.0 team members get issued still block them out. It was a very serious conference this year; we think it may have been the first to get serious about the kinds of communication and enterprise-focused activities that will eventually make serious money for carriers. We broke them down by themes…

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February 11, 2008

Ring! Ring! Hot News, 11th February 2008

Telco 2.0 comes to you from the Mobile World Congress … sorry … 3GSM this week; not only were we covering the news but we were part of it, but that’s another story.

A big theme in the news this week was mobile Linux; Orange joined the LiMo Foundation, the outfit Motorola ginned up to boost open-source operating systems on shiny gadgets. Azingo, an Indian software house that markets a LiMo-compliant Linux distribution and developer kit, was showing off some of the unexpected capabilities of the technology.

Specifically, using a Broadcom reference gadget running their system, they were successfully using Nokia S60 widgets on a device that was neither a Nokia nor a Symbian S60 platform; we’re not sure if this is fantastic or scary. Which one depends whether you work in the S60 or Maemo Linux groups at Nokia, presumably.

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January 31, 2008

Platform businesses: Competing with Big Tech

When you’re lost in the cycle of product development, marketing and customer support it’s sometimes hard to see the big picture of the forces reshaping the structure of the telecoms industry. In particular, telcos are in an unfolding position of co-opetition with what you might call ‘Big Tech’ — the IT technology, commerce and services giants. These increasingly overlap with telco functions. Many of these companies have platform business models. These create value for end users as well as upstream suppliers, and extracting revenue from joining the two sides together. Think Google, Amazon, Sun Microsystems or Companies like IBM specialise in construction and servicing of platforms, even if they don’t always feel the need to own them.

We strongly believe that telcos need to form a platform around their own unique assets. But what drives the economics of platforms, how should the telco platform be positioned against those IT platforms, and what lessons can telcos learn from them?

Mass-produced IT processes for a mass-production world

It’s often been suggested that various so-called network industries exhibit increasing returns to scale; whether or not you accept Metcalfe’s law, it’s empirically obvious that the Internet years’ most significant companies have been ones that made their first priority to build scale and volume. For all the above examples, their businesses are all centred on very large IT platforms and their economic models often involve selling at very low prices, or even giving services away, in order to pull in more volume.

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January 30, 2008

Separation, Success, and Failure

We’re usually very keen on the notion of vertical separation in the telco industry. The idea is to chop the underlying network assets out of the telco in order to permit others to use them. This stops the telco locking out the competition by owning the access bottleneck. But there are many different options:

  • structural separation, often used to describe almost any separation, transfers the network assets into a new organisational entity,
  • operational separation does this and also places them under separate management control with their own profit-and-loss account, and
  • ownership separation removes them from the telco entirely.

Within those categories, there are many more shades of detail. Julian Salanave, director of telecoms markets and strategies at IDATE, recently gave an excellent presentation [PDF] on the parallels between these and some other industries.

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January 16, 2008

Ribbit! The amphibian of telco voice platforms

We’ve been putting together a directory of all “2.0”-type players for our forthcoming Consumer Voice & Messaging 2.0 Report. One newcomer, Ribbit, is offering an early foretaste of what the future environment for developing voice and messaging services might look like.

Ribbit reckons it’s “Silicon Valley’s First Phone Company”. Silly us, we thought that was AT&T. So what is it? The actual product is a VoIP softswitch, available either as a standalone installation or a hosted service, which offers an unprecedentedly extensive collection of APIs for developers to work into their sizzling lashups. Then, there’s a Flash toolkit intended to let the front-end developers design interesting user interfaces to the system’s voice functions, whether on desktops, laptops, or mobile devices. All very Telco 2.0, really.

Perhaps the most impressive thing about Ribbit is that one of the existing applications for it integrates it into, the hugely successful web-based sales/CRM system; you can’t get more platform-based, enterprise-focused, or two-sided than that. We’re sure there’s huge scope for creativity and user-driven innovation here; but there are some issues that worry us.

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January 15, 2008

Vodafone Betavine: Nice Platform…but Where’s the Commercial Framework?

We are busily beavering away on our latest research project, The 2-Sided Telecoms Market Opportunity, some of the findings of which we will be presenting at the CMO Forum at the Mobile World Congress in February. The final analysis will be a key input to our own Telco 2.0 event in April. As we’ve pointed out in previous posts, this report seeks to explore the opportunities for building a 2-sided (platform) business beyond advertising (the current area of industry focus).

As part of our research, we have been exploring a number of successful ‘platforms’ from outside Telecoms (Google, Amazon, Ebay, Monster, The London Stock Exchange, Betfair, Maersk), to understand what capabilities and strategies are required to build a successful 2-sided business model.

We have also been looking at existing platform efforts from telcos. One example of this is Vodafone’s Betavine.

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January 14, 2008

Ring! Ring! Hot News, 14th January 2008

This year, we’re focusing on seven themes in the industry; Investment and Market Valuations, Disruptive Threats, Two-Sided Business Models (a key theme in the forthcoming Platforms report), Adjacent Markets, Core Products and End-User Needs, and of course Regulation. So these news posts will be centred around these concerns.

Despite everything, it looks like Sprint is going ahead with the big WiMAX rollout; launch is scheduled for mid-April, and a gaggle of new contracts have been issued to hardware vendors like ZyXEL. The mob that is the Apple fanbase is working itself up over the thought that this year’s Macworld might see the launch of a WiMAX-capable device of some sort — apparently they’ve got ad banners reading “There’s something in the air”. There’s conclusive evidence for you.

However, it’s true that Sprint is looking at bundling WiMAX connectivity with devices, just as it wraps EV-DO data in the price of the Amazon Kindle (“In Amazon, book reads you!”), so perhaps there’s something in it. Meanwhile, China Mobile doesn’t want the iPhone.

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January 7, 2008

Ring! Ring! Hot News, 7th January 2008

BT strikes in the set-top box market; they’re the first to ship Xbox360 consoles as IPTV endpoints. And there’s more; BT Vision gets an “on-screen magazine” based on the same single platform. We’ve often said that the fixed-line world doesn’t get user equipment, and that this creates interesting opportunities; BT has just leapt right on it. See our case study on Iliad’s Freebox in the Broadband Business Models report.

PS: we’re trying out a new format for Ring! Ring!…

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December 17, 2007

Ring! Ring! Hot News, 17th December

Telco 2.0 Strategy

Structural separation? We don’t need no stinkin’ separation! So says Belgacom…

Telco 2.0 Comment: They built a VDSL network, and now their competitors want to play. Belgacom of course claims they took the risk and therefore should reap the rewards; but the biggest competitor is the company that laid the fibre already everywhere else, and now wants to offer unbundled service in the rest of the country. Will profits come from pleasing customers, or regulators?

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December 13, 2007

Advertising: The Telco Trojan Horse

We recently gave readers of this blog a summary of the key highlights from the Advertising and Marketing Summit at the Telco 2.0 Executive Brainstorm in October, run in partnership with the GSMA. This post seeks to build on the last one and give further insight into why Advertising should be interesting to operators: not because it will fill the gap created by declining voice and messaging revenues alone, but because it represents an entrée into other lucrative areas.

Let’s look at what was covered at the Advertising and Marketing Summit in a bit more detail:

Customers: “Why aren’t you doing more?”

We kicked off the day with three potential customers of Telco advertising services:

  1. Nick Strauss, Senior Planner, Mather Advertising - ‘The Brand’
  2. Sunil Gunderia, VP Mobile EMEA, Walt Disney Internet Group - ‘The Content Provider’
  3. Richard Wheaton, Managing Director, Neo@Ogilvy - ‘The Media Buyer’

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December 11, 2007

IBM/Economist CEO Survey Supports Telco 2.0 messages

IBM and The Economist’s annual survey of top telecoms executives is out; it reinforces the messages we’ve been trying to convey in this blog and via the Telco 2.0 Initiative as a whole.

69% of IBM/EIU respondents thought that “business model transformation” was the most important source of value, compared to 34% in 2002. 72% of those people specified “collaboration with external partners” - and that certainly isn’t the first time you’ve seen that here - as a “critical initiative”.

Compare this result from our Broadband Business Models 2.0 report; when we asked our (rather larger) sample of telecoms types about the best commercial approach to delivering video, this is what we got:

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November 29, 2007

Verizon Wireless’ volte-face: Virtue or Vice?

It’s been all across the tech news and blogosphere: Verizon Wireless has announced that they’re moving to a, well, less closed, network attachment model. For those whose job isn’t to surf the web, the summary is that pace certification testing by Verizon’s labs, and an unknown amount of bizdev negotiation, you can attach any device you like to the Verizon Wireless network. If you had to sum up Verizon’s strategy to date, it would be “Execute!”. They’ve simply done a great job of merging Airtouch, GTE and other properties; building out more coverage than the opposition; keeping an adequate level of handset and content innovation; and generally not screwing up.

The key details of the new offer — price, process and terms — remain hidden behind the PR fog. So what’s the unique Telco 2.0 slant on the news? When the market leader switches strategy, it’s not some short-term panic over Apple, Google, WiMax or spectrum auctions. It’s part of the deeper structural shifts in progress. So as we’re in the final assembly stage of our shiny new Broadband Business Models 2.0 report, here’s what’s on our minds about the future of connected devices:

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Liberty Global Inc: Is TV Dead?

Liberty Global Inc, Europe’s largest cable-TV company, presented at the Telco 2.0 event last month to answer the question of whether or not TV was dead (“Will Video Kill the Telecoms Star?”). Despite the slightly alarming information that TV viewing in the UK, for example has been static or declining since 2001, Liberty’s Managing Director of Corporate Development, Andrea Salvato (i/c global M&A), concluded that there is life in it yet.


Here’s our take on it:

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November 28, 2007

Triple play, go away!

Yesterday we were running through four case studies from our new Broadband Business Models 2.0 Report looking at how the content aggregation and distribution businesses interact with one another. The four products we picked on are Joost, Iliad’s Free service, Sky Anytime and BT Vision, but of course we’ve been following many others. We’re seeing some common themes, plus some ideas of our own, that we thought we’d share with you:

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November 15, 2007

Standardising the Definition of ‘Telco 2.0’

The Telco 2.0 team has been travelling a lot recently - spreading the gospel and testing response. For example, some of us were in Dallas last week for the TM Forum’s Management World Americas event, a big show of 1500 people that has traditionally catered for the OSS/BSS industry. The TM Forum is growing in stature fast as its software standards are increasingly being adopted by the cable and media industries as well as telco.

We were invited to sit on a keynote panel on the first day to talk about ‘Telco 2.0’, along with IBM and Oracle’s global communications sector leaders and BT’s CIO. We then took part in a closed-doors session for operators only - CIOs/CTOs from most of the biggest players in the market. Finally a ‘masterclass’ the following day, looking at ‘the future of telecoms’. In the sessions we tested a new definition of ‘Telco 2.0’ (see slides below) which we’ve been working up over the last few months (esp. following the summer research programme on business models). It seems to be going down very well: “new and progressive” is a common refrain. “We’re doing some of this already, but you’ve clarified the commercial rationale and described a coherent end goal.”

Our focus has been to try to make it very SIMPLE without being simplistic. We’ve found that there is a growing number of people (vendors, trade bodies, pundits, senior industry execs) saying similar things, but we are all using different (and incomplete) ways of saying it. We are starting from different points, or drilling down too quickly into our different domains of expertise.

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November 14, 2007

Q&A on ‘Future of Broadband’ analysis

Following our earlier post on the ‘Future of Broadband’ keynote presentation given at the Telco 2.0 event last month, we’ve responded below to a sample of the questions we captured in real-time from the participants via our ‘Mindshare’ collaborative technology.

We’ve grouped them into 7 sections (Retail, Wholesale, Regulation, User Proposition, Business Models, Infrastructure, Other Industries). (Note: More detailed reports and summaries from the rest of the Telco 2.0 event brainstorming will be available privately to event participants in the next few days).

1. Retail pricing and packaging

Q: Why is Korea going back to metered? Goes against the theory of the carrot…
A: Transit and network capacity upgrades ultimately do cost money, and low-use price-sensitive users aren’t going to cross-subsidise the others. Also usage patterns diverge over time (compared to dial-up’s massive spike of 2-3 hours online at a constant low bitrate) making one-size-fits-all pricing ever less attractive.

Q: Given that devices will need to be open to any network, who will subsidise the price to the end user? … The current subsidy models in some markets are responsible for putting technology into the customer’s pockets that they otherwise would not be able to afford — cf the popularity of Nokia N95 for example.
A: Not true. An artificial bundling of a credit scheme, device and service can be picked apart. Plenty of other expensive consumer electronics are sold on credit or hire purchase.

Q: Some hotels (e.g. Marriott) already have FREE WiFi as competitive differentiator…
A: So wouldn’t they like some more revenue from mobile operators to allow direct roaming, and also for the operators to avoid having to buy spectrum and backhaul for all that EV-DO traffic?

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November 7, 2007

Platforms = success in Web 2.0 and Telco 2.0?

It’s one thing to exhort business model change and write about platforms and better telephony and Telco 2.0 all day; but what about the financial results? So, here’s a chart we made earlier. It shows the change in the share prices of 6 major telcos over the last 24 months; from top to bottom, MTN, AT&T, BT, Vodafone, Sprint-Nextel, and Deutsche Telekom. You may recall that we did a similar exercise back in November, 2006; our conclusions back then are borne out by the results.


It should be pretty clear that they fall into two groups; the Group of Success and the Group of Stagnation. If you were feeling dramatic, you could even borrow a soccer term and call the latter the Group of Death, the one in which the teams are most evenly matched; no-one is safe.

MTN’s go-go performance should come as no surprise; they count as the world experts on emerging markets mobile and are also quite innovative. (The anomalous downward spike was from a plane crash involving senior executive staff.) They are following a “Telco 1.0” strategy of vertical integration because that is precisely what the market requires. Forget “horizontalisation” and clashes with the consumer electronics and IT giants; in many markets MTN is one of the largest electricity generators, just to be able to operate its networks. Just as Henry Ford once owned the rubber plantations, all emerging industries require entrepreneurs to facilitate a whole supply chain as well as often to work on demand creation. Nokia sends trucks round India demonstrating its services. These immature markets form natural barriers to entry.

AT&T has been able to reconstitute its old monopoly over large parts of the US. It’s a Telco 1.0 where there naturally should be none. So far, so good — but a change of party in power and some populist corporate bashing could present shareholders with significant political risk. Could AT&T survive with its current cost and product structure if Unbundling 2.0 came to the USA?

BT’s advanced business model and technical strategy have been repeatedly praised on this blog. Most notably, they’ve played a perfect combination of defence (against the regulator to protect their legacy cashflows) whilst restructuring the business in ways that wean the retail and services side off monopoly rents of the copper access network. The shareholders get the cream without the company’s culture getting fat.

On the other hand, Vodafone, DT and Sprint are all in the business of being just another really big telco; even if they are all beginning to think about how to get out of it. All three remain highly reliant on voice minute margins in fiercely competitive markets.

But surely, however far we go with Telco 2.0, we’ll never catch up with Google? Will we?

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VoiceSage and the business of…business

One of the most interesting companies that took part in October’s Telco 2.0 Executive Brainstorm is VoiceSage, a small Irish firm that develops innovative enterprise applications using telco services. This was a major theme of the event - if you want MySpace for monkeys on LG Prada phones, or the nth twist on music downloads, you’ll be fine asking Vodafone or Sprint, but if you ask anyone who gets Telco 2.0, they’re probably working on something for business users.

There is a very good reason for this; compared to telecoms, most of the trades that conventional wisdom thinks will provide growth and margin in the future are tiny. Telcos could completely crush the ad business - eat every ad agency in the world - and notice only a minor blip in their revenues. The telecoms industry could take over Hollywood and barely feel the bump, like some grey-suited monster lumbering over the Los Angeles canyons. For an encore, they could crush their way up the coast to San Francisco and eat the computer game industry. And it still might not be enough.

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November 6, 2007

Broadband Business Models Survey - Upstream Revenues are Key to Growth

For the 800+ experts around the world who took part in our broadband business models survey, the summary results presentation will be sent out next Monday. We’ll be exploring in depth all the issues raised from the survey (and the Executive Brainstorm) on this blog.

In the meantime, here’s a sneak preview of the survey results:

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November 2, 2007

MSP: ISP plus Content

Our good friend Keith McMahon blogs on Playlouder, a British company which plans to offer unlimited, DRM-free music downloads to its customers who buy their DSL service. Naturally, there’s a premium associated with the music, which is the core of the business.

Now, interestingly enough, Playlouder describes itself as a “Media Service Provider” rather than “just” an ISP, which tends to confirm that their content business is part of their solution for the famous broadband incentive problem. The economic value created by widespread Internet use mostly happened after always-on broadband became available and cheap. Flat-rate broadband gives the user every incentive to use as much of it as possible; but the network operator has no corresponding incentive to create more capacity. Therefore, usage tends to increase until the network becomes congested.

Certainly, Playlouder expects their customers to run the copper hot downloading all that music; but they’re paying for it, and presumably Playlouder’s sums assume that the content charge covers the extra traffic, the licensing costs, and some margin. What they are offering, then, is connectivity plus. When we carried out a survey of industry experts recently, the idea of offering inclusive content as a way of managing costs was very popular; you can learn more in our Broadband Business Models 2.0 report when it comes out in December.

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October 30, 2007

Guest Post: IPTV - Gateway to New Business Models?

Alcatel-Lucent is one of the major sponsors of the Telco 2.0 Future Broadband Business Models study, and was a Platinum sponsor of the Telco 2.0 Executive Brainstorm, two weeks ago in London. We asked Martine Lapierre, Vice President Marketing Programs, and one of our panelists at the event, to sum up the potential of IPTV to support new business models, rather than just emulating existing broadcast services.

One of the important insights to come from the Telco 2.0 Future Broadband Business Models survey, and a recurring theme of the Brainstorm event, was the need to give more consideration to end users as a critical telecom asset, and not just as a profit centre. Survey respondents certainly believe broadband service providers should focus on revenue opportunities from partners who want to reach and do business with this customer asset.

We believe that broadband service providers can keep their customers brand-loyal by packaging third party services in a way which addresses end user demands for convenience and simplicity. They can attract upstream revenue by providing meaningful customer intelligence to these third parties (advertisers, government organizations, content providers), who can in turn make their marketing targeted and relevant to end users.

One of the strategies operators are employing to realize this vision is the deployment of IPTV services to households around the world.

Why? IPTV services give broadband service providers the following:

  1. A touch point within the customers’ home network — strengthening the broadband service provider’s relationship with that all-important customer asset.
  2. Ownership and management of a back-end channel capable of providing very rich customer behaviour and intelligence, which can be monetized.
  3. The ability to broker engagement between a number of 3rd parties and consumers through the most-watched screen in the household today.
  4. An anchor to evolve towards more sophisticated ad insertion, ad-sponsored distribution, and other models of content distribution.

The survey — sponsored in part by Alcatel-Lucent — will finally close at midnight tonight GMT. Last chance to complete it if you want a free copy of the summary results!

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October 29, 2007

New Ideas for Incremental Muni-Fibre and Metro-Fibre

We continue to be fascinated by the presentation by Roy Gradwell, Director of Connected Real Estate Ltd, at the Telco 2.0 Digital Cities session. We think the ideas he floated deserve a much wider audience. He presented a new option for financing network build-outs, different from existing vertically integrated models (e.g. Verizon FiOS) or Muni/open models (e.g. Amsterdam’s Citynet).

What interests us most is that it provides a practical framework for realising Malcolm Matson’s open access vision of the future, where networks are funded and owned by long-term low-risk investors and any service provider can ride on top. This is called an OPLAN (Open Public Local Access Network), and implies both the end-user access and metro backhaul are part of the same open network. It’s an intellectually attractive proposition. The trouble is finding the route from “here” to “there”.

Some of the biggest problems with municipal fibre deployments are down to the fact that it’s a big, expensive, monolithic project. The up-front cost is hefty, and its repayment means you have to be very sure there will be enough demand to pay it back. It’s difficult to trial the idea of muni-fibre (or any other kind of metro-fibre rollout) without making a huge investment and therefore taking a big risk. This is the “anchor tenant” problem Dave Hughes, Director of BT’s Wireless Broadband division, mentioned during the session. Other speakers noted how hard it was to co-ordinate the purchase of connectivity across multiple public services given their varying contract commitments and buying cycles.

Plus, if you’re the city government, you can run into problems in the courts - in some places you might get sued by an incumbent telco, and in the European Union quite a few cities have run into trouble with the legislation on state aid to industry.

On the other hand, as Roy points out, for enterprise and government users the bottleneck is between the LAN and the WAN; and in the UK, there’s been hardly any metropolitan area network investment since the end of the cable boom in 1996.

The principle doesn’t need too much stretching to cover residential users either - after all, there’s not much difference between a LAN-wired office block, a LAN-wired factory, or a LAN-wired block of flats from this point of view, and getting fibre reasonably close to the home is the precondition of fibre-to-the-X, VDSL, WiMAX, and the like.

Nobody wants to build a metro backhaul network without access network customers; but nobody wants to build an access network without a plentiful supply of cheap metro backhaul. And few are willing to risk doing both. So, what is to be done?

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October 18, 2007

BT Wireless@Telco 2.0; Getting away from “Why-Fi”

On the Digital Cities track at Telco 2.0 today, Dave Hughes, BT’s boss of wireless access networks, was talking about
the importance of pragmatism and the difficulties metro-WLANs face in cities that don’t have an American grid plan.

It’s well known that there have been a succession of metro-WLAN deployments that have gone bad; the sector’s icon, the Google-championed San Francisco deployment, is currently stalled after EarthLink pulled out. And Hughes offered a quick review of dozens of press reports on failed projects. Typically, they launch in a burst of hacker idealism and city-booster hype, but soon discover that radio engineering is actually quite hard, a point IT people seem to have to learn the hard way.

But there’s worse; what about the economics?

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October 17, 2007

What will those 40Gbits Grannies download?

One of the less-discussed points about the joy of muni-fibre, and for that matter commercial FTTH, is what happens in the next hop. At the moment, the last mile is the slowest hop, in terms of data rate. The backbone is usually considered to be OK, thanks to the dark fibre phenomenon, technical improvements such as DWDM, and the fact it’s easier to lay more fibre in one dig next to the highway than ten thousand digs in the city centre. Especially in L2TP/bitstream markets, the sector from the aggregation point to the ISP’s gateway router is more of a problem, but this is usually a matter of ex-incumbent pricing rather than a real shortage.

But if the access network gets replaced by fibre, what then? ISP engineers deal daily in interconnects up to Gigabit Ethernet, but if 40Gbits Granny’s in town, there’s going to be a quantum leap in demand at the next hop after the fibre access ring. In fact, it’s worse than that; Granny is a special case, but a town’s worth of 100Mbits/s Mums means you’ll rapidly reach genuinely huge demands on the pipe out to the backbone. For that matter, you wouldn’t need that many to strain your friendly local IX.

That’s the sort of thing you have to think about when you’re sitting next to Ad Ketelaars of Eindhoven’s munifibre deployment, while Chris Schoettle of Akamai is presenting. Shoettle, unsurprisingly, thinks CDNs are great, and so do we; but there’s better than that. He makes an important point about distance and speed - quite simply, going from less than 100 to 500-1000 miles’ worth of speed-of-light latency means that a file you could be pulling down at 44Mbits/s (if you have fibre) instead arrives around 4Mbits/s. If you’re constrained by the local loop, you’re unlikely to notice the difference; once the speeds go up, though, you certainly will.

No wonder, then, that Eindhoven is keen to get not just CDN capacity in their backyard, but another IX somewhere in southern Holland or Belgium to take some of the load off AMS-IX. Screaming-fast local loops will force us to invest in content-delivery networking and related problems.

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Empowering the User through CDRs

CDRs - Call Detail Records, the database entities that permit telcos to bill their users - are getting a bad press at the moment with the latest revelations about US networks’ willingness to let the NSA dig through their databases without getting warrants or accepting any other quaint legal restrictions.

But at Telco 2.0 yesterday, we heard how CDRs might actually empower the users in a Telco 2.0 future. Keith Wallington of mobile SIP insurgents Truphone suggested that “in the future, this will be bigger than mobile number portability”. Wallington proposed the ability to have calls routed intelligently depending on your preferences and the patterns of use revealed by network data. And this brings us right to his point.

If all your contextual services depend on the contrail of signalling data you leave behind in the operator network, the ability to take that information with you when you churn is going to be crucial. Perhaps we need a right to claim our data; however, the really important point is as always the practical implementation of such a thing, just as it was with number portability.

So, of course, are the legal and privacy problems; the incentives for the operator to implement a platform for interesting contextual services are all about the clever things the operator could do with the data, but the strongest protections for user privacy essentially rule this out. If the user data, for example, was encrypted with a key the user controlled, the user could grant access to it for each service they wanted. But the operators will insist on being able to analyse the data themselves; or they probably won’t do it.

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October 10, 2007

Will Video Kill the Telecoms Star?

In preparing for the plenary brainstorm next week we’ve come across a couple of useful items. The first is a report just out by Bain for Liberty Global on the European Video Content Market (99 pages here, but summarised for you below). The second are some recent ‘strategic presentations’ by BT (‘Generating Revenue in the New World’) and Accenture (‘The First Trillion Tridgets’) given at a public conference a few weeks ago - both available here.

The latter demonstrate a couple of things. Firstly that BT definitely knows where the future lies - it’s in the ‘platform’, beyond just APIs. Secondly, the big advisory companies like Accenture are heading in the right direction too, although they haven’t quite worked out what the business model for the platform is (it’s an open issue!) or how to describe the wider set of assets the telcos have to make it into a true commercial growth story. As you’d expect they’re also very good at not confusing telco execs too much, and using some gimmicky phrases to differentiate their ideas. Accenture’s are ‘pods/plexes/pipes’.

The trouble, of course, is that this sort of framework for thinking about the future environment is based on technologies not business models. There’s a lot more strategic commercial richness in each of these areas, especially the one people shun quickest - the ‘pipe’. (We’ll reveal our thoughts on this next Wednesday, and continue the debate on this blog).

One view is that a lot of telcos will have to surrender to BT in the next few years in an IT arms race. They’ll have the networks, alright, but won’t be able to keep up with building the IT and services platforms. BT’s competition is indeed Google (as their CTO said, slightly unguardedly, last year) and the Googleplex’s incredibly low cost of operation. Some thoughts on how BT might like to tweak it’s Global, Open and Real-Time product strategy are here.

So, back to Bain research and video: ie what might fill the pipe and need supporting by a platform:

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October 8, 2007

Ring! Ring! Monday News Analysis, 8th October

As a preview to the Telco 2.0 event next week in London, here are some relevant news items from the last week to help stimulate the furious debate among the participating cognoscenti:

Ever wanted to physically wave a game controller round your head? Now you can, thanks to Nokia researcher Paul Coulson.

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October 2, 2007

How’s your Google Strategy?

At the 21C Global Summit a few week’s ago former BT Chief Scientist Peter Cochrane - an industry ‘guru’ who likes to shake things up - presented a number of thought-provoking ideas about telcos competing with Google, including this rather cryptic slide:


This is how we decipher it:

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October 1, 2007

Ring! Ring! Monday News Analysis - 1st October

Digital Product Innovation

Here’s an example of negative product innovation: an Apple software update that kills hacked iPhones. Hacking was once defined as unauthorised innovation; all third-party apps, among other things, are eliminated by the patch. So all the enthusiasm that oozes out of that video is now going to waste, or else turning to virus-building bitterness..

Telco 2.0 Comment: Apple’s decision to bundle its own services with the iPhone made it rather less like a computer company and rather more like a telco. Fascinatingly, it’s now behaving in a way that shows all the worst features of telcos.

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September 27, 2007

How Practical is your SDP?

Members of the Telco 2.0 team went on a trip to the Italian Lakes this week, where we were stimulating and facilitating an impressively organised conference for Service Delivery Platform experts jNetX and a gaggle of telco people from most parts of Europe. We used a basic version of our interactive Mindshare approach to elicit audience feedback on the issues raised.

Some people there had a funny reaction to our use of the word “platform”, central as it is to the Telco 2.0 vision - isn’t a platform really an operating system? Or something used when drilling for oil? They’re right, of course; a Telco 2.0 platform is a sort of operating system, just as or Amazon’s IT infrastructure can be seen as a sort of single huge computer. But it became increasingly clear that this cuts both ways; you need the right platform in the second sense to do a platform in the first sense right.

Where did it all go wrong, Telco 2.0?

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September 19, 2007

The Joy of ‘Functional Separation’ - Panel on Telecom TV

Following our Q&A last week with Steve Robertson, CEO of Openreach (“proud guardians of the UK’s local access network”), we organised a panel on Telecom TV to discuss the impact on business model innovation of the ‘functional separation’ of this unit from the BT Group (see vid below). Anne Heal, (MD, Openreach) and Kip Meek (Chairman, BSG) were there too. They were on opposite sides of the Ofcom-BT negotiations that led to this groundbreaking separation two year’s ago. Beware: The European Commission is very interested in how this model could be spread elsewhere…

We met the Openreach team yesterday to discuss Steve’s stimulus presentation for the Telco 2.0 Executive Brainstorm Plenary on the 17th Oct. Building on the Q&A and the panel, Steve is working up something new for the event: his analysis of the technical, commerical and cultural/organisational changes that could have the biggest impact on business model innovation for ‘communication providers’ in the next 3-5 years. Also, his rating and criteria for judging how easy/difficult these might be to implement. The audience will then feedback their views via the ‘Mindshare’ interactive process. This should stimulate a great panel discussion with Gord Graylish from Intel (who’ll have spoken about innovation opportunities around new device categories) and Ross Fowler from Cisco (who’ll unveil latest thinking on how to deal with OTT players). A big thank to all these guys for putting real effort into contributing something new - not the toothless corporate presentations we see so often at events… Here’s the Telecom TV panel:

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September 14, 2007

21C Global Summit: A Weird Consensus…

Telco 2.0 was supporting the 21C Global Summit at Blenheim Palace this week. And what did we find?

Well, it’s increasingly clear that our ideas have traction. Everyone who so much as touched on telco business models, or the infrastructure that underlies them, agreed on key points; points that could have been taken from the last few months of this blog or the main texts of Telco 2.0. The challenge now is to fully internalise what these mean within telco organisations and create some action plans to do something about it. This requires stronger leadership - a recurring theme of the event.

For example, Andy Zimmermann of Accenture’s Technology Strategy practice opened the conference pipes on Wednesday morning by explaining the importance of some Ps; portals, partners, and platforms were all there. Another was “plexes”, which rather than being another word for your navel was used to refer to big IT infrastructure. Again, that’s certainly a theme you’d meet in your daily Telco 2.0. Further, Zimmermann cited content-delivery networking, secure control of sensitive data, and payments as crucial functions telcos need to develop.

Not just that, but the means he recommended had a notable Telco 2.0 feel; specifically, telcos needed to work on their service-delivery platforms, which don’t need to be IMS. (See Martin’s post for more on this…)

He wasn’t the only one, either; Ross Fowler, Cisco’s VP in Europe, drew everyone’s attention to the curious way the functions of content providers are converging with those the GSM/UMTS standards world think are the core functions of a telco. For example, they require high-level applications such as video editing and collaboration, policy/authentication functions to control how their output is released - and the indispensable networking infrastructure to haul bits. Ross, by the way, will be going into more detail about this at the Telco 2.0 Executive Brainstorm on the 17th of October.

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September 5, 2007

Making Structural Separation Work: Interview with Steve Robertson, CEO, Openreach

Readers of Telco 2.0 are probably well aware that we like the British model of structural separation, where the local loop is controlled by a specially-created company with a duty to provide nondiscriminatory access to all-comers, a lot. This approach helps to mitigate risk across the BT Group and, theoretically at least, liberates the individual units (Retail, Wholesale, Access) to be more innovative and responsive to customer needs (levelling the playing field a little with internet players like Google). (More on the benefits of this here).

Naturally, we jumped at the chance to interview the good people at Openreach, the BT access division. Especially in the light of rumours that BT might be considering a KPN-like deployment of fibre to the street cabinets; which would make the Local Loop Unbundling model Openreach was formed to defend partly obsolete.

Our interview with Steve Robertson, CEO of Openreach, (who will also be a stimulus speaker at the Telco 2.0 Executive Brainstorm in October) is below the fold…

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September 3, 2007

Ring! Ring! Monday News Analysis - 3rd September, 2007

This week we look at important stories concerning Product Innovation, Broadband Connectivity, Technology Disruption, Regulation, Partners.

Digital Product Innovation

Nokia is reconceptualising itself; it wants to be an “Internet-driven experience company,” not just a crummy old vendor. To that end, its web presence is being shuffled into a new portal called “Ovi” (it’s Finnish for “door”), which will integrate its new music shop, its Web 2.0 activities (eg Lifeblog), and a rebooted mobile games division. Even N-Gage looks like it might get a new lease of life..

Telco 2.0 Comment: Horizontalisation isn’t just for travel agents and bloggers, y’know. Nokia is probably the keenest of the vendors on trying to shunt the carriers out of the way and get a direct relationship with users; this was only to be expected.

100 million prepaid subs in the Middle East.

Telco 2.0 Comment: Note the surging growth at Iran’s two heavily prepaid networks, Taliya and Irancell (MTN Investcom); contrast the sluggish incumbent MCI. The recipe for emerging markets is still low prices, prepay, credit transfer, SMS, and autonomous distribution. These strategies also work pretty well in Germany too…

China Telecom’s business is hammered by mobile.

Telco 2.0 Comment: It’s not just in the 100% mobile penetration world that the fixed-line business model is sinking fast - it’s also in rural China.

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August 30, 2007

New Online Survey on ‘Future Broadband Business Models’ - now live!

If you’re a strategist in the Telecom-Media-Technology sector please help us predict the future by taking part in the latest Telco 2.0 online global survey on Future Broadband Business Models, HERE.

You’ll need to put aside 20-30 minutes and be prepared for some challenging and thought-provoking questions. In return for your considered input you’ll get a free summary of the results.

The survey closes on 17th September. The results will be publicly launched at the Telco 2.0 Executive Brainstorm in London on 17th October.

More background and details

Our Telco 2.0 hypotheses on future business models have grabbed the attention of many people in the TMT sector over the last 6 months or so. We’ve been running workshops and events with all kinds of players around the world to work out what it could mean in practice and what needs to be done to prepare.

Now it’s time to test these hypotheses more thoroughly, using the theory of the ‘wisdom of crowds’ — i.e. a mass online survey of practitioners from around the world.

It directly addresses the $1.6 trillion question: Where’s the money in fixed and mobile broadband in the future?

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Rebuilding the “mobile Internet” business around ‘Identity’

I was having a Groundhog Day moment yesterday as an executive from a fixed operator was telling us how urgent is was for telcos to find new ways to create and capture value as an adjunct or alternative to offering “dumb pipe ” connectivity. Just a few weeks earlier we played out the same “hunt the value” game with a client around the “mobile Internet”. The winner is the one who finds the most latent assets that can be woven in with new capabilities, partners and channels to create new profit centres.

The mobile Internet has only really created significant returns to operators in markets where fixed Internet access is weak or absent, or where you have a large, homogenous, rich technophile audience. Oh, or where you can use the Internet to bypass operator voice and messaging charges, as has happened in South Africa with MXit.

So, if you’re head of “data services” at an operator, what’s on your to do list?

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August 28, 2007

Music as DSL Subsidy, and Cuffware

French ADSL operator Neuf Cegetel has turned platform, recruiting Universal Media as a partner in its new music service.

For €4.99 a month over and above their usual €29.90 triple-play tariff, you can download as many songs as you want from the entirety of Universal’s back catalogue. A less extensive service is free. It’s clear what Neuf Cegetel is up to, right? Facing the usual DSL operator’s struggle to survive incumbent competiton, they’re adding new revenue-generating services that cross-subsidise the ISP operation. And, as usual, one of the simplest ways to do this is through platforms and partners.

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August 27, 2007

Ring! Ring! Monday News Analysis: 27th August

These weekly news roundups are a new Telco 2.0 service; they focus attention on news items that might not be Telco 2.0-related at first sight, or big enough to warrant a whole post to themselves, but do contain important developments. They are grouped under the same categories as the rest of the Telco 2.0 blog.

Digital Politics and Regulation

Rene Obermann, CEO of Deutsche Telekom, wants to keep some monopolist privileges; and who can blame him?

Telco 2.0 Comment: It’s curious how some of the regulations introduced to create competition in the telco market are actually profoundly anti-competitive. Network-sharing, for example, was discouraged in order to create competing physical networks. Now, of course, it’s becoming ever clearer that competition is horizontal; and requiring duplication is really a way of protecting big telcos by increasing the barriers to entry.

Viviane Reding is reportedly plotting a new, broader European regulator on the model of Ofcom.

Telco 2.0 Comment: As the competition spreads horizontally, so does the regulator.

700MHz auction set for the 18th of January.

Telco 2.0 Comment: It’s gradually coming closer; soon we’ll see the colour of Google’s money. Speaking of money, the FCC seems very keen to insist on big reserve prices, a total of $10bn. As usual, the notion of free spectrum is a long way away.

Digital Product Innovation

Microsoft Windows Live apps on your Nokia N-series phone.

Telco 2.0 Comment: It may “only” be Live Messenger, Hotmail, Contacts and Spaces, but please note that these are all communications applications. And the carriers? They’ve been disintermediated.

New MVNO offers cheap roaming rates…with an interesting twist.

Telco 2.0 Comment: Now this is interesting; we wonder what the “network” they claim to own is. Clearly they haven’t got spectrum rights in 110 countries, nor have they bought enough base stations to cover the world. Perhaps this is one of the first rogue core networks?

Damned cool idea from Hewlett-Packard: the printer that is everywhere.

Telco 2.0 Comment: Here’s a cracking idea; rather than print documents and take them with you, why not print-to-file on one of HP’s servers, which gives you an SMS shortcode in return? When you need the document, you send them the code as an SMS, and they either send you a PDF file, or route it to a publicly-available printer of your choice. There’s a Google Maps mashup to help you find them. HP is bringing in chains of copy shops as commercial partners, Google as map provider, and acting as a platform itself; so where are the telcos?

Digital Worker

Unified Communications vs End Users

Telco 2.0 Comment: Is the vision of unified enterprise communications, so dear to companies like Cisco, opposed to end-users’ freedom to organise their own communications and communities? Skype, and the Asterisk folk, seem to think so.

Digital Youth

Security expert: beware security threat. According to F-Secure there are now some 400 items of mobile malware in the wild.

Telco 2.0 Comment: It’s not malware, it’s unauthorised innovation!

Online gaming shoots past social networks

Telco 2.0 Comment: We’re talking low-investment casual games here; but even if the margins are tiny, the growth rates here show that there is real potential in this sector. Clearly, it addresses some human motivation.

Broadband Connectivity

Indonesia ; mobile network number 10 launches

Telco 2.0 Comment: No-one should need telling that the emerging markets can’t get enough telco, but this is extreme. 10 mobile operators? It’s also interesting that the new entrant, Smart, is a greenfield CDMA operator. Far from common..

Hutchison 3UK loses slightly less money.

Telco 2.0 Comment: Perhaps their new role, competing with T-Mobile as the geek’s mobile operator and throwing out partnerships with MSN, Yahoo!, Slingbox, and Skype, is beginning to help? You’d do well to remain sceptical, though. It’s not as if 3 hasn’t spent enough money being cool.

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August 15, 2007

IT Giants: Commoditise This!

Not so long ago, Indian IT services company Wipro joined the IMS Forum and announced that from now on, it would offer a range of IMS development services. There’s a whitepaper of theirs here on IMS, but this paragraph from the EE Times story interested us more..
With the evolution of the IMS technology, Wipro has matured its IMS offerings towards becoming an integral part of the converged digital media delivery ecosystem,” said Nagamani Murthy, Wipro VP, mobile and consumer electronics group.
Clearly, Wipro sees IMS as just another data transport system; “he’s not the messiah, he’s a very naughty means of transporting information goods.” Of course, as far as developing applications for IMS client devices goes, this is precisely what IMS was meant to do (at least, one of the vast number of things it was meant to do) - open up applications development to a bigger community outside telco R&D groups. Traditional telcos might even be cheered by this as evidence that rather than letting just anyone develop applications, they are being developed by big companies on contract to other big companies.

But who would imagine it would stop there? At Wipro, they have a constant risk of a namespace collision with another IMS; Infrastructure Management Services. This is the line of business where they install, commission, and manage private networks, including (according to their website) high-capacity switching systems. And IMS is nothing if it’s not a high-capacity switching system. OK, so network outsourcing is not that new an idea, but the shift to IP-based networks means there’s something much more disruptive out there..

scientists prepare to experiment on a helpless telco

Scientists prepare to experiment on a helpless telco

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August 10, 2007

Why are there no mobile CDNs?

If you’ve been with us so far, you probably know that Telco 2.0 likes content-delivery networking (CDNing) a lot. So much so we invited an executive vice president from market leaders Akamai Networks to the next Telco 2.0 executive brainstorm this October. Even though a couple of CDN operators - Akamai and Limelight - recently had a bad day on the stock market, we’re still confident of this judgement. After all, when Wall Street is annoyed because your profits were only up 55 per cent, it’s probably their problem rather than yours.

A CDN, to recap, is a way of delivering bandwidth-heavy content (usually video) over the Internet efficiently. Standard methods have the downside that the same material has to be transferred out of the provider’s network, over the backbone, and into the user’s ISP network at least once for each user; peering and transit costs are incurred at each stage. Further, the load on the provider’s servers is a problem. In a CDN, Web servers are placed at strategic points inside customer ISPs and filled with content. Requests are then redirected to the CDN box, so each item only has to be transferred outside the ISP once.

It has the major advantage that everyone’s happy; you’re happy because the load on your own servers is relieved, and your stuff is delivered faster than the competition, your ISP is happy because their peers aren’t yelling any more, and the downstream ISP is happy because the weight of traffic has been moved inside their own system, where (depending on their business model) it’s either cheaper or effectively free. And none of this involves reducing other people’s quality of service or doing any other evil. It’s elegant engineering, and good economics.

The reason, deeper down, why CDNing works is that it understands where the bottlenecks are; the critical paths, the limiting factors, the maximum cuts. In this case, the bottleneck is the network edge, because it’s where the economic activity occurs. The Internet’s economic model is that interconnection is what creates value, realised either by barter (peering) or in cash (transit).

So why are there no CDNs in mobile networking?

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July 30, 2007

Google anchors its carrier off the coast of Telcoland

So what’s up with Google and the 700MHz spectrum? Well, Google has “pre-bid”-that is, declared its interest in bidding-for a large block of radio spectrum in the US’s 700MHz ex-TV band. (See here.) The big friendly search engine (or menacing, Orwellian data monster, depending on point of view) doesn’t just want the spectrum for itself; it wants it to be sublicensed for public access.

Traditionally, the economic value of radio spectrum has been largely an economic rent, originating from the fact that licenses grant a monopoly of its use. No cash changes hands when the various unlicensed bands, such as the 2.4GHz swamp beloved of Wi-Fi users worldwide, are used; even though, of course, its use creates value for the user, this isn’t accounted for.

So why would anyone want nonexclusive spectrum? Isn’t it a contradiction in terms? And what does Google plan to do with it? Google, after all, is a model Telco 2.0 company, designed around the
horizontalisation of the industry (NB: in the plenary session of the Telco 2.0 Executive Brainstorm in October we’ll be talking about ‘coopetition’ strategies based on some new analysis by our senior stimulus presenters).


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July 25, 2007

France Telecom, Part 2: Little Boxes, All The Same

So we mentioned Liveboxes. The box contains an ADSL modem, a four-port Ethernet/WLAN router, and some other stuff running on its kernel. Specifically, there’s a socket for a standard PSTN handset, so you can use FT’s carrier-VoIP service, and a Bluetooth radio so you can walk about with the same service. There’s also an IPTV client, so you can watch FT’s TV.

Now, I don’t know what’s actually driving the thing - but many of these boxes have a real operating system, usually a small Linux distro. (Note that if you want to DIY, there’s a Linux available for the Linksys WRT54G router.) A lot of them can be remotely managed by a system administrator over the Internet - something which has already had embarrassing consequences for at least one ISP, whose CPEs shipped with the default passwords set and were promptly hacked.

This has all been a little techie by Telco2.0 standards so far. But here is the vital upshot: this is what a platform for new services looks like. Once you have a little box in the customer’s living room with an IP address, a general-purpose OS, and remote admin access, you’re in a position to come up with new ideas and get them out to the market very quickly indeed.

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Hidden Potential: France Telecom

How do major telcos respond to the challenges of Telco 2.0? France Telecom’s experience offers some answers.

FT is perhaps the archetypal traditional PTT; still part-nationalised, with a dominant position in fixed-line, ISP, and mobile markets at home. During the .com boom, the carrier expanded heavily and ran into debt (it didn’t help that the government hit it up for some cash to meet the requirements of joining the Euro). Meanwhile, the fixed-line voice market began a steady slide as the first alt.telcos, VoIP, and fixed-mobile substitution began to bite. Although the French government was slower than some to take regulatory action, eventually the new regulator ARCEP began to hammer at the de facto monopoly.

So, what did they do about it?

FT’s acquisitions turned out to be better deals than they looked in the smouldering aftermath. Among other things, they had given the company one of the strongest brands in the industry, Orange, a strong ISP in France (Wanadoo), and stakes in global cable backbones and other world-wide presence that permitted them to build strong businesses in bulk IP networking (Opentransit) and enterprise VPNs (Equant). More recently, the company has decided to go all the way, rolling the entire consumer side into Orange.

In terms of a business model, F Tel/Orange is very keen on bundling. As an integrated full-service carrier, it can offer quad-play in France. Interestingly, it’s trying to take advantage of industry horizontalisation to expand this vertically integrated model elsewhere; in the UK, Orange Broadband is providing PSTN and DSL service over Openreach’s wires through local-loop unbundling, and selling GSM/UMTS mobile service along with it as part of a “free broadband” offer. Telco 2.0 readers are of course well aware that “free broadband” really means “compulsory old technology”.

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July 17, 2007

Behold the Data Transport Systems Project

So you’ve read about our methodology, and you understand that it’s all about the distribution of bits that the recipient considers valuable. You’ve read the map, and the essay that goes with it.

But how will all this be put into practice? For that, you need our Data Transport Systems project - think of it as Telco 2017. From here to October, Martin Geddes, Rafil Khatib, Keith McMahon and I will be inquiring into how the forces detailed in the maps will twist the telecoms industry over the next 10 years. We’ll be looking at everything from BitTorrent to cinemas and USB sticks, and drawing lessons from electricity grids and container shipping networks on how mass wholesale businesses can make very personalised, targeted ones possible.

Not just that, but we’re also interested in failure.

We’ll be looking at the differences between things that succeed and then go obsolete, and the ones that hit the trees at the edge of the airfield. MMS, this means you. There’s also going to be peering, interconnection, and the pressing question of whether telecoms is going to be a for-profit activity in 2017, rather than a huge cost centre like a corporate IT department, a government agency, or Haiti with routers. And if it is still profitable, where it will be making money.

Remember, the Map says by then we’ll see “other” passing broadband, steamphone, and NGN added together. DTS is intended to answer the question of what the other will be. It’s traditional to say that the future might be X, Y, or “something we can’t imagine yet”; but it’s also trivial. It’s abundantly clear that the traditional telco model won’t be “it”, but there are also good reasons to imagine that classic ISPs are not “the future” (so many are morphing into sizable telcolike entities, after all). So what will the synthesis be?

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June 19, 2007

Converged security — Do we need a new model?

We’re running a couple of “think pieces” about the role of telcos in assuring user security and privacy in the converged world of communications and IT. For our appetiser post we noted how telcos are getting into the security business, and IT companies are struggling to keep their products secure. Then for the second course we served up some thoughts on how security was just one means of changing the basis of competition.

Now we’re onto the main course. This is going to be a high cholesterol intellectual diet full of unrefined ideas and potentially hazardous raw ingredients. Follow this recipe at your peril. The same caveats as the first article apply: we might be really, deeply mistaken and these are just provisional thoughts.

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June 14, 2007

Real-time services: Changing the basis of competition

In our earlier article we began to muse about some of the problems and opportunities for offering security-based products and services in the communications value chain. In particular, the challenge is to go from trusted computing technologies to confident communications value propositions to end users. The idea that large numbers of computers can become zombies under the control of third parties shows something is deeply amiss.

We’ll dive into the complexities of network and processor design and float some radical ideas in a subsequent post. In the meantime, let’s look at the business issue:

Changing the basis of competition to something that favours the network owner over its direct industry competition, as well as outsiders.

In this case we’re looking for a security answer to commodity minutes and megabits. But in the meantime, let’s go for a side trip on how the basis of competition shifts around and examine a wider pool of case studies.

Competing on security and convenience, not price and features

We’ll stick with security and privacy for the first example. I recently saw this advert from Paypal in the newspaper:

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June 12, 2007

BT’s product strategy — the Telco 2.0 version

We’ve been thinking a lot recently about BT’s product strategy (don’t ask why, we won’t tell!). Ben Verwaayen, BT’s boss, has a vision of BT’s business model supporting global, open and real-time services, for which he got some stick in the trade press.

Let’s re-interpret those words, but with the Telco 2.0 spin (and penchant for puns):

Glocal, clopen and hard-time.

What BT is trying to do is establish some guidelines/principles on how products and services access the development resources of BT. It’s the gatekeeper to the product and project pipeline who needs to be testing each proposal to spend money against:

  • Is it protecting and extending the existing business lines. (The first Telco 2.0 strategy.)
  • Is it creating a open platform (Second Telco 2.0 strategy) for global, real-time services. (More below.)

The pipe (third strategy) is assumed, and given the Chinese walls and equivalence rules, Openreach and access infrastructure is a separate world we’re not considering here.

We think the global-open-real time mantra is heading the right way, but needs some refinement.

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June 6, 2007

From trusted computing to trusted communications

We try to make our writing here at Telco 2.0 practical as well as analytical and philosophical — as would commercial writing in more formal media. Normally we try to end articles with something that addresses the “so what?” question. We like to bring you answers. This time, we’ve just got an important question. Fortunately, a blog is also a great place to float half-formed ideas as well as force you to structure your own scattered thoughts. Blogging is a different medium from a newsletter, or a journal. As Doc Searls, editor of Linux Journal, puts it:

So I write a lot about the Net, the Web, blogging, podcasting and the rest of it. And maybe I’m wrong about a lot of it too. Hell, what does anybody know? The whole thing is still new. Everything we say about it is unavoidably provisional.

So, this is the first of a few essays with some provisional (and possibly wrong) thoughts about delivering security and privacy to users in a mass and massively networked age. These problems and opportunities for everyone in the communications value chain. Indeed, they were sparked by a consulting assignment for someone at the silicon part of the ecosystem. Our punchline (you’ll have to wait) will be this: there’s a very deep architectural problem in how computers and networks interact, and we’ve got some ideas on how to do things differently.

The economics of security are different from the rest of the communications value chain

There’s big money in the security game. Why? Well, consider the four basic means of making money from any communications service:

  • Create or capture valuable bits. This could be shooting a movie, or giving the users a phone to talk into.
  • Add value to existing valuable bits. For example, there’s a great platform opportunity for telcos to open up their infrastructure to deliver personalisation services to third party application, portal or search providers who don’t know anything about you.
  • Move valuable bits from A to B so they can interact with the user. Enough said.
  • Stop unwanted negative-value bits from getting through to the user, or even being sent in the first place.

This last category is special. For the first three, the amount of value you create roughly corresponds to the number of bits you process. But one rotten bit can undo the value of billions of tasty ones. If only there was an easy way of identifying them… hmm, well there’s an IETF standard:

Firewalls [CBR03], packet filters, intrusion detection systems, and the like often have difficulty distinguishing between packets that have malicious intent and those that are merely unusual. The problem is that making such determinations is hard. To solve this problem, we define a security flag, known as the “evil” bit, in the IPv4 [RFC791] header. Benign packets have this bit set to 0; those that are used for an attack will have the bit set to 1.

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May 31, 2007

The Telco 2.0 methodology — Business Model Innovation

In our previous post on Telco 2.0 methodology, we described the 15 key Telco 2.0 transformation issues and how the industry currently scores against them. ‘Appreciating’ these issues was Step 1 in our Telco 2.0 A-C-T process to create a sustainable growth strategy. Step 2 is ‘Clarifying’ how to approach business model innovation, a tricky subject for any industry that we discuss below. Step 3 is ‘Test’, and you can find a record of all the latest developments across these steps on our constantly updated Telco 2.0 research portal here.

To start with we need a framework to guide our thinking. To help with this we’ve drawn inspiration from our friends at arvetica on an overall business model ‘framework’. (View their slide deck, it’s very good.) We find the diagram below extremely useful in getting our clients to understand what are the one or two things they do exceptionally well, and what other areas they need to make sure are considered in re-designing their business models:

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May 22, 2007

Telco 2.0 Methodology: Key Transformation Issues

In our introduction to the Telco 2.0 methodology we said the first step was to define the process. The process is about one thing — preparing your business for a Telco 2.0 (all-IP, modular, interoperable, layered) world. To do this we need to A-C-T, a “mash-up” of best practice in Strategic Planning, Product Innovation, and Change Management, created specifically for Telco 2.0:

  1. Appreciate more fully the fifteen Telco 2.0 Key Transformation Issues that need to be addressed to stimulate sustainable growth. (That’s the focus of this post and, in 150 pages of more depth, of our Telco 2.0 Market Study.)
  2. Clarify how to approach Business Model Innovation (our next blog post on methodology). Most business people have an intuitive understanding of business models, but a documented and telco-specific framework provides the essential structure for debate and business model redesign.
  3. Test the ideas in the market by focusing on a few key areas where new business models and customer propositions can be applied. Once you’ve learnt how to apply Telco 2.0 thinking you can then apply the lessons more broadly across the organisation.

The deep telco-centric insight is really in the tools that companies can use in defining Telco 2.0 strategy, rather than the process itself (which as noted is adapted from current corporate best practice). In this post we’ll drill down on the key transformation issues that need to be addressed. This situation analysis requires you to address six areas:

  • Market understanding (which our customers are generally already strong at, having plenty of feet on the telco street).
  • Structural change insight (where they’re weak, so they hire us).
  • Business model (a challenge for vendors and operators with a technology- or engineering-centric culture).
  • People and processes (an even greater challenge, with telco culture self-identified as a key issue in our surveys).
  • End-user products and services (an opportunity given the slow evolution of core voice and messaging products).
  • Technology and networks (no point defining things you can’t deliver).

The inter-relationship of these is shown below:

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May 16, 2007

The Telco 2.0 methodology — Introduction

The journey from Telco 1.0 to Telco 2.0

We’ve been doing a lot of consulting work and proposals recently for large network equipment vendors, operators, industry associations as well as start-ups. We’ve got to the point where we’re seeing the “big picture” of what Telco 2.0 really means to them in terms of business problems to address, and a repeatable set of tools and approach to solve them. Indeed, we’re feeling pretentious enough to say that we’ve got a methodology coming together. (It’s telco, so it’s good to have an ‘ology.) The full details will be in the forthcoming second edition of our Telco 2.0 Market Study.

In case of business vertigo, lie down horizontally

On one hand there’s the vertically integrated Telco 1.0 (or even the analogue Telco 0.1) where you control everything: service, devices, retail, network, identity, partners, the lot. A world of “take what you’re given” for the customers. At the other end extreme is the future disaggregated Telco 2.0 — where users are the masters of every device, network and service - “take what you want”. There aren’t hard dividing walls between them: it’s a gradual journey with shades of grey.

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March 20, 2007

Telcos as digital identity enablers

We’re looking forwards to the Telco 2.0 event next week. One of the presenters on Day 3 for our Technology Insiders workshop is Aude Pichelin. She is Head of Multimedia Services Standardisation at France Telecom, and will be reporting the results of some of their work in the area of operators and digital ID.

This session particularly interests me because I was personally on a project to create a single customer identity at a large carrier, and the task proved virtually impossible. Fifty million customer records from three independent business units and dozens of silo-built applications meant that the process of matching records could never be accurate enough, and the effort of users claiming and merging their multiple accounts always too difficult to implement in practise.

Phone calls might be free, but spam and fraud are expensive

Whenever I walk past an mobile operator retail outlet, I don’t see a “phone store”. What really happens is someone goes in wanting service, and presents various credentials (e.g. drivers license) and personal data to pass a credit check. They leave with a SIM card which happens to be wrapped in a radio and provisioned with a phone number. It’s a strong digital identity retail store.

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March 8, 2007

The Telco 2.0 ‘Business Model Map’: Part Four, Action stations

In this final instalment on our Telco 2.0 Business Model Map we’ll look into some of the consequences for network operators. You’ll want to read our introduction, explanation and map timeline before reading this article. We’re going to stick with the ten-year-out map just for sake of typographical clarity, but the points apply to the industry evolution at any stage on the way.

The opportunity isn’t where you think it is

The received wisdom in telcoland is that bundling a triple/quad/n-play is the route to a profitable future. We’re less convinced. A few media owners control the blockbuster content (and the rest is on YouTube); telephony — even with feature add-ons — is coming under margin pressure on both fixed and mobile; and the broadband offering just sucks up capital without giving a good return (unless you’ve got a weak regulator and great lawyers).

We think the biggest opportunity lies in a different quadrant, where the apps are less tied into the network (“idiot savant pipe”, rather than “dumb pipe”) — but the billing and value-based pricing remain in place.

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March 6, 2007

The Telco 2.0 ‘Business Model Map’: Part Three, Ten years of turmoil

This is the third in our series of articles depicting how the business model of the telecoms industry is fragmenting. The first article explained the need for the map, and the second article introduces the key concepts that label the axes. Now we’re ready to bring on the map. In the final article we’ll delve into some more detail as to what is means and how the business model of operators needs to evolve.

Just as a reminder, we’ve discussed:

  • The communications industry is part of a distribution system for bits — ones and zeros.
  • Those bits have value to the users, and sometimes (but not always) there is payment for those bits.
  • There are many “bit delivery systems” (e.g. broadcast, Internet, SMS) with varying degrees of vertical integration. The weaker the integration, and the more modular the technology, the more vendors there are and the more control the user has.
  • There are also many degrees of commercial integration between the services and the content delivery, with payment varying from fully integrated and automatic (e.g. SMS) to completely separate (e.g. fixed-line Web).
  • Strong technical forces are separating bit delivery from the services those bits represent.
  • The under-explored territory is where that separation occurs technically, but the commercial side remains integrated.

2007 is a simple world you’ll look back on nostalgically

Today we live in a telecosm divided between two major sources of revenue for network operators:

  • Full vertical integration of technology and payment for the “traditional” carrier services of telephony and SMS messaging.
  • Broadband Internet access.

It’s a bi-modal industry located at two extreme corners of our map. Yes, there are some other profit centres (we’ll come to them) — but they’re pretty tiny in comparison.

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The Telco 2.0 ‘Business Model Map’: Part Two, Bits and Money

It’s a bit cruel, we know, but we’re not going to show you the full Business Model Map quite yet, despite the promise last time. We first need to get clear about what we mean by the two axes of the map that borrow from the latitude and longitude metaphor.

The axes of the Business Model Map

We want to describe some new archipelagos and islands that telcos need to explore. Our thesis is that operators need to:

  • slice and dice the broadband connectivity offering in different ways, then
  • package it in different ways together with devices, software, services and
  • distribute it in different ways via the standard channels and sales methods.

Thus they assemble a portfolio of business models for paying off the network.

We’ll go into more detail once we’ve done the map (next article in the series, I promise).

Don’t just take it from us

Network providers want value-based pricing for traffic and knowledge of what’s flowing over the network; users want a free ride and to hide what they’re up to. We’re far from being the only ones seeing this tension between the technical and economic design decisions in building networks. For instance, Andrew Orlowski in The Register knowingly winds up the end-to-end principle founders in this diatribe:

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February 22, 2007

The Telco 2.0 ‘Business Model Map’: Part One, Introduction

If you’re heading to a new world, navigation is everything. The Vikings made it across the Atlantic without really knowing where they were going or where they’d got to. Columbus got his units mixed up, didn’t know he hadn’t got there at first, but claimed the credit anyway. Amerigo Vespucci did make it, and got immortalised in the process (thankfully avoiding precipitating the United States of Vespuccia in the process).

The Telco 2.0 Business Model Map is our best effort at distilling half a decade of exclusively studying the tectonic forces colliding telecoms, media and technology industries, and ripping apart connectivity from application services.

Why is it important?

If you a telco exec or supplier, and are worried about structural change and Internet encroachment, you need to understand this map: the shape of the world, where the land is, and which way is up.

Where am I?
Where do I want to go?
Which way do I need to go to get there?

We’re presenting this here because it seems to crop up in most consulting proposals we’re writing for top industry names. One picture seems to crystallise the situation in a way that a thousand Powerpoint bullets never will.

It ties together several of the most important themes about industry change:

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February 20, 2007

3GSM - CEOs say 2007 is ‘Year of the Business Model’

For the Chinese, 2007 is the Year of the Pig. For Hamid Akhavan, CEO of T-Mobile International, it’s the Year of the Business Model, or so he suggested in his keynote at 3GSM in Barcelona last week. We support this, of course, as it’s what the Telco 2.0™ Initiative is all about.

If 2006 was the Year of the Dog (telco investors might agree with this description), the Year of the Pig looks more promising, as our translation shows:

The pig is highly regarded for its chivalry and pureness of heart (“We’re just trying to help people ‘make the most of now’”), and often makes friends for life (“We call it ‘Customer Lifetime Value’”). For pigs in 2007 any recent setbacks or obstacles (decline in share price, new technologies, lack of confidence, sub-optimal strategy) can be overcome, so look forward to a year in which to really shine (“We need some of that ‘Blue Ocean Strategy’ the Telco 2.0 team have been telling us about).

To market, to market, to buy a fat hog

Hamid’s presentation talked about the key changes in the mobile industry around three themes:

  1. Customer Needs — Tailor-made services, Ease of use, Simple and worry-free pricing,
  2. Markets — Even stronger competitive and regulatory pressure, and market saturation and price erosion, and
  3. Technology, specifically:
    • Digitisation of comms and content,
    • Broadband mobile and IP networks,
    • Acceleration of innovation in devices and apps,
    • Delayering of access and services, i.e. apps becoming network-independent, therefore operators losing control.

He described ‘Tomorrow’s World’ as being about:

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January 17, 2007

Unbundling the telco

The telecoms industry is torn between two forces:

  • the desire to maintain control over every stage of production: retail, services, network delivery and user equipment.
  • the reality of the Internet and open standards/open source forcing these things apart.

We’re finding it interesting to compare and contrast some of our own analysis with that of leading thinkers in the field. John Hagel is one of the “must read” writers on the matter, and he recently re-capped his thoughts on unbundling of the enterprise. You can go read the original, but the heavily edited summary is:

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January 11, 2007

GSM Association Collaborates With Telco 2.0 Initiative

STL and the Telco 2.0 Initiative is delighted to announce a collaboration with the GSM Association (GSMA).

The GSMA is expanding its range of services for its members and has recognised the cutting-edge thinking and practice that the Telco 2.0 Initiative is bringing to the market, especially around catalysing clearer understanding and change in response to the opportunities and threats for mobile operators in an increasingly IP-based world.

So, we’ll be doing the following:

- Undertaking joint research into new business models and new service areas, specifically: ‘Telco 2.0 Strategies’, ‘Voice & Messaging 2.0’, ‘Ad-Funded Services’.
- Supporting GSMA events (inc. 3GSM) with our ‘Mindshare’ interactive brainstorming processes.
- Collaborating on the Telco 2.0 Industry Brainstorms programme.

GSMA members, of course, will get preferential access to this activity.

Watch this space for updates.

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Telcos in Advertising Value Chain - Threat or Opportunity?

We’re delighted to be working with Alan Patrick of niche consultancy Broadsight on our Ad-Funded Services programme, which we’re running with the GSM Association. (Alan will also be ‘analyst in residence’ in the Digital Home stream at the Telco 2.0 event in March). Alan has been exploring developments in online advertising for many years based on his experience of working with companies like BBC, British Telecom (OpenWorld and Ignite), AOL Time Warner, ntl and UPC and consulting at McKinsey.

Below he gives us ‘Some thoughts on the impact of Online Advertising on the Telco 2.0 Landscape’. He says:

As we know, over the last few years, the penetration of broadband internet has risen rapidly across much of the world (see here for stats). China and India have recently started to catch up, with China predicted to overtake the US about now.

There is a link between Internet pentration, e-Commerce, and Online Advertising which I have described here. As broadband connections have risen, online shopping and e-Commerce have rapidly followed, due to the ease of use. The rise of online advertising has also risen with the rise of online shopping and e-Commerce, up from a very low percentage of all global advertising in 2002 to c 6% by 2006.

This “rush to online advertising” has also had a knock-on impact on online mobile advertising - SMS advertising has been around for quite a while and has grown respectably, but the rise of 3G services has led to a plethora of partnerships (Yahoo / Vodafone for example) in 2006 between Telcos and Search Engines to gain search engine advertising revenues from mobile portals.

However, the sheer scale of online advertising is also potentially a risk for Telcos of all stripes, for two main reasons:

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January 8, 2007

Deconstructing Microsoft’s “Telco 2.0” approach

I’m an admirer of Microsoft. I have friends who are current and ex-Softies. Microsoft has probably been the single largest source of privately-generated consumer welfare in the last 20 years. Although it’s now largely forgotten, their success came from making more functional, more usable, and consistently more affordable products than the entrenched competition.

But they struggle to achieve the success you’d expect in the telecom space. That’s probably because of a mismatch of cultural expectations and motivational incentives, as well as their propensity to treat telecom as “just another vertical”.

The following story is not apocryphal, but we’ll keep it anonymous to protect the innocent. It’s 2002. Microsoft are doing a tour of telcos demonstrating their upcoming Live Communications Server product. A crowd of senior telco execs are in the room watching the demo. “And now, the user just chooses who she wants to talk to based on her ID, and she picks the carrier from this drop-down box…”

Someone in the audience asks: “How does she know which one to pick?”

“Well, I guess she’d choose the cheapest.”

Errr, sorry, and how do we, the telco, build a customer relationship and brand here? And how are we supposed to be differentiating ourselves? I don’t think they understood why the reception seemed quite so frosty.

They recently put out an interesting press release on their “Telco 2.0” strategy. (If they’re having problems doing trademark searches, we can recommend a good lawyer or two to them — anyhow imitation is the sincerest form of flattery). Let’s see how they’re progressing: is Microsoft the telco’s enemy, friend … or lover?

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December 18, 2006

Gold from straw: profiting from “low-value” customers

You may have come across the business book Blue Ocean Strategy. The central idea is to create a new uncontested space in which to compete, rather than (ahem) “leverage” competitive advantage to compete against existing players. I’m sure these folk won’t mind if we quote the their summary diagram here in return for some Google link-love:

In many ways it complements Christensen’s Innovator’s Dilemma, which suggests the optimal strategy is often to compete against non-consumption. You could argue that this was Skype’s forte, by enabling new forms of extended casual conversation that didn’t fit in with metered minute anxiety. (Skypers don’t use any less standard telephony — Skyping is incremental use.)

I’ve been challenged to come up with a telecom Blue Ocean strategy, so here goes. It takes our earlier effort at a differentiated MVNO strategy to the next level.

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December 14, 2006

What should telco brands stand for?

In conversation with an executive from a major Internet company the other evening, I came across an interesting thought. His hypothesis was that telcos don’t understand the resentment and anger that users have against the operators. Whilst the operators will attempt to match the softphone, IM and real-time communications features of the Internet players, their brands will get in the way of adoption. He isn’t saying telco brands are poison: just that they don’t stand for what the operators think they mean. Both sides will only be successful in new revenue-generating services deployment if they work together.

So what do telco brands really stand for? And what (if anything) needs to change in the horizontalised Telco 2.0 world? We’ve had out thinking caps on here, and below is our first effort at an answer. We’d love to get your feedback on this thorny question.

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December 13, 2006

Telecom Vendors - Wake Up and Smell the Coffee

The advisory and ventures side of our business is getting more and more approaches from vendors keen to work out how to sell into the rapidly changing ‘Telco 2.0’ market. These are major players who are seeing old market certainties rapidly dissipate and who are searching for a profitable role for their company. Often the people who approach us are semi-isolated visionaries within their own companies, often fighting against internal myopia.

Our response is: yes, by all means you need to keep selling ‘what’s on the truck today’, but, given the key Telco 2.0 trends, you need some lateral thinking to find a sustainable long-term role in the market. And you need to put serious resources behind this NOW in the S-curve cycle.

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December 6, 2006

Less than 40% of Operators Have a Strong Strategy for Telco 2.0 World

We have started analysing the 561 responses to the survey, What does Telco 2.0 mean for Operators? It will take a couple of weeks to do the basic analysis and participants should have the summary results in their inbox during the week of 18th Dec (for perusal over the Christmas festivities).

Even at this early stage of the analysis several revealing (and somewhat disconcerting) findings are emerging. As a teaser, I’ll outline a couple of the quantitative responses below. However, much of the value of the survey is contained in the answers people gave to the open qualitative questions. We are poring over reams of news, views and comment and figuring the big ‘So What?’ take-aways from the survey. Those interested in the full survey results (where we look at individual operators and do all the cuts by geography, company type, job function etc.) and our analysis of this and other Telco 2.0 topics, should consider our quarterly publication, Telco 2.0 Insider. Each edition builds on much of the analysis we carried out for our (now updated) 270 page market study, How to Make Money in an IP-based World, and contains in-depth and up-to-the-minute analysis of how Telcos are (and should) be developing new:

1. Business Models
2. Service Portfolios and
3. NGN architecture

to serve the four customer segments we are focusing on in our March Telco 2.0 brainstorm:

  • Digital Youth - Comms, Entertainment, Social Networking, Self-Expression
  • Digital Home - IPTV, FMC, Home Hub
  • Digital Town - FTTX, Muni-nets, WiMAX, OPLANS
  • Digital Worker - Flexible working, mobility, collaboration

So what news from the survey so far?

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December 1, 2006

Credit to BT: a diversification strategy

In our market report, we see several likely strategies for a network operator: pipe, platform, or customer intimacy (with varying degrees of product specialisation). There’s also an “outside the consultant 2×2 matrix” strategy of diversification.

In my email inbox on Friday night I received the following offer:

BT Market Research Survey - A chance to win £500!

As a customer of BT, we would be very grateful if you would participate in the attached survey. The survey concerns a new financial product that BT is considering offering to customers. […]

Only a small number of our customers have been invited to take part, so your chances of winning are good.

The survey opens with the question:

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Telco 2.0 Trends Survey - Last Chance to Have your Say

So far we have had over 550 of the global telco cognoscenti participate in the Telco 2.0 trends survey.

The survey closes at midnight GMT tonight (1st Dec). So, last chance to make your voice heard…and get a free summary of the results. Click here.

If you’d also like more in-depth analysis, including details of the key implications (the ‘so what’), you can always subscribe to the mightily good value ‘Telco 2.0 Insider’ - a quarterly journal for those seeking the crown jewels of Telco 2.0 insight. Next edition hits the virtual newstands in January 2007. More details here. (Readers of this blog can claim a 10% discount if they sign up in 2006).

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November 29, 2006

Licensed spectrum: saviour or false hope?

We’re really enjoying reading the qualitative feedback from our survey. One recent comment from the chief architect at a major European pure-play mobile operator has stirred some internal debate at STL headquarters. In responding to our agree/disagree on James Enck’s Ten Things I [the investor] Hate About You [the operators], he says:

I agree with most statements for a fixed telco. I do not think they apply equally for a mobile operator. Mobility is built using licensed spectrum, which is mastered by mobile operators, and no one else, certainly not by Yahoo, Skype etc.

This is a common view held across the mobile industry. It is clearly true to a degree — and certainly from a historical perspective. The question is to what degree, and how strong a force is licensed spectrum in keeping the mobile ecosystem closed and controlled going forwards?

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November 28, 2006

GSMA and networks of compatibility

The GSM Association has recently conducted some research on which services users most value. We’ve taken their headline list of ranked services and added our own spin. We’ve categorised the types of services being offered (“chatter”, information, content or transactions), and what parts of the value chain are the operators involved in (service promotion/portal, service delivery, data pipe charges, and payments).

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November 27, 2006

Boost Your Share Price with a Telco 2.0 Strategy

Warning: The following does NOT represent investment advice. Past performance is NO guarantee of future success. Before investing in any stocks, we recommend you speak to your stockbroker or independent advisor.

We have often held up BT as a great example of a Telco that is ahead of the competition in moving to a Telco 2.0 world. Similarly, whilst pointing out the competitive threats from muni-nets, James Enck has praised KPN for its reporting transparency and Telco 2.0-style ‘Pipe’ strategy with its Direct ADSL tariff.

I thought it might be interesting to see whether the Telco 2.0 strategies adopted by these incumbents have been borne out in stronger share price performance over the last 2 years. I selected 2 other traditional incumbents: France Telecom and Deutsche Telekom, as well as Vodafone from the mobile world. Vodafone, although it has a stronger mobile bias than either FT or DTAG, does have similar scale and has been associated with a strong Telco 1.0 strategy.

For reference, I also added the internet player and stockmarket darling, Google.

The results are very interesting:


Looks like a very clear split between the Telco 2.0 duo and the Telco 1.0 brigade! I did a quick check by also looking at Telefonica and Telecom Italia. Telefonica falls roughly half-way between the two camps and Telecom Italia tracks the Telco 1.0 group.

Now it is very different to distinguish between ‘fundamental’ (operational and financial) drivers of share price and non-fundamental drivers such as bid rumours. Rumours about private equity takeovers of some of these companies have been circulating for a while and have clearly affected share prices. It was for this reason that we specifically excluded TeliaSonera from the analysis.

However, overall it looks like investors like what KPN and BT are doing. Key question for investors now, I suppose, is whether to keep investing in the Telco 2.0 duo or buy the out-of-favour Telco 1.0 players and hope they move quickly down the Telco 2.0 route.

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November 23, 2006

Only 18% of industry confident about future of Telco Operators

We ran an instant vote at the end of Day One of the Telco 2.0 brainstorm in October about confidence levels in the ability of telco operators to create a sustainable future for themselves in an increasingly IP-based world. This was a gathering of leading thinkers and practitioners. We’ve been testing this since with a broader sample of 250 people around the world via our ongoing online survey. The ‘good news’ is that we’ve moved from 10% to 18% of people confident about the future. The bad news is that still leaves 82% who are not confident or unsure.

Survey closes 1st December - have your say on this, the timing of key ‘Tipping points’, and other issues here. 15 minutes investment gets you a free summary of the report in December. Tell your friends!


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November 22, 2006

Ten things to hate about Internet services

This is a jointly edited guest post by the Telco 2.0 team and Keith McMahon, who writes incisive insights over at Telebusillis. Keith strongly feels that network operators are not putting up nearly as good a fight as they could or should be doing in competing with Internet services.

Last month, securities analyst James Enck gave a hammering list of reasons why investors are shy of putting their money into telecom operator stocks. Whilst telcos need to play to their strengths, it is where those strengths are opposed to weaknesses in the Internet players that the biggest opportunities can be seen.

So here are Ten Things to Hate About Internet Services. Some of these problems are derived from issues with the Internet’s architecture, many are about the businesses built on top of the network.

Continue reading "Ten things to hate about Internet services" »

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November 7, 2006

IPTV via the Edge or the Network?

An important hot off the press piece here reminding us again about how value is moving increasingly to the edge of the network. In this case Microsoft announcing that it’s new XBox 360 will offer HDTV and HD movie downloads for rent or sale.

We’ll be releasing the details of our next Telco 2.0 Industry Brainstorm programme for 27-29 March (London) later this week. The news above is perfect context for a need for telcos to think MUCH more creatively about their role in the value chain. And quickly. Hence the brainstorm.

When we describe these ‘edge’ developments at our in-house workshops we often hear telco execs respond “Well, at least they’ll be using our pipes, that’s fine by us. More broadband take-up…” At which point, of course, we describe the ‘Broadband Incentive Problem’ (beautifully elucidated in a hot breakout room at the October Telco 2.0 event by John Watlington, participant in the MIT Communications Futures Programme and Principle Research Scientist at France Telecom’s R&D iLab in Boston.

This is pretty critical. Here’s our take on it (as a sneak preview of the Day One theme of the March Industry Brainstorm):

There is a fundamental challenge to network operators as they hurtle rapidly towards a ‘Telco 2.0’ world:

Who finances broadband access networks? End-users, municipalities, content providers, merchants, advertisers?

Broadband is heralded as the golden growth opportunity for fixed and mobile telcos and a driver of economic and social well-being for local and national communities.

However, recent studies of the advanced markets in Japan and South Korea are demonstrating that the costs of providing broadband access rise faster than revenues.

Continue reading "IPTV via the Edge or the Network?" »

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October 30, 2006

IMS - what is it good for?

Apologies for quietness on the blog - we’ve been digesting about 150 pages of dense verbatim output - ideas, comments, debates, votes - generated by 220 participants at the October Telco 2.0 Industry Brainstorm. We’ll be summarising our findings here later in the week, and announcing more details of our follow up brainstorm on 27-29 March in London and some new research programmes.

In the meantime, at a time when IMS is still being publically hyped by senior execs in the industry - largely for political and investor relations reasons, we believe - we’ve just written a piece on our view of the value of IMS in a Telco 2.0 world on our sister IMS Insider blog here.

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October 13, 2006

Carphone Warehouse: Telco 1.0 thinking?

There has been much excellent reporting on the troubles of Carphone Warehouse (CPW), the UK’s leading independent retailer of mobile phones and services. Their current crisis is that Vodafone have punished them by selecting a rival for an exclusive distribution contract, and other operators are thinking of following the same track. The result has been carnage of the CPW stock price.

This has been precipitated by CPW trying to become more of a vertically integrated business. Their MVNO, Fresh, was a relative flop, and the operators have been willing to ignore the fiasco. However, their suicidal leap into offering rock-bottom broadband and telephony service — just as the network operators were feeling the squeeze to enter the same multiplay markets — is harder to fathom.

In short, you simply have to look at the Telco 2.0 basics: get horizontal, unless you’ve got a good excuse otherwise. CPW have swum against the Telco 2.0 tide, and have found the currents away from their home beach not to their liking. If they had absolute power in retail distribution, then their strategy would make sense. They don’t, and it now looks foolish.

Post-paid mobile plans and up-market mobile phones are relatively complex sales that supermarkets can’t follow, and their business is in extending that knowledge to new domains, not bundling loss-leading network distribution which their core business doesn’t benefit from. Even media companies are running away from distribution ownership!

So what should they have done? Go for the kill within that horizontal segment. They should have either a bought out rival distributors, or devised a distribution plan for a wider range of “digital lifestyle” goods and services that competitors couldn’t have matched quickly enough. They could then use this hardware/software-driven strategy with operators to show that they are helping pull through operator services…but the trojan horse is that they are actually freeing customer from operator control and managing customer relationship and attention.

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Finding growth outside of network assets

“Convergence” is typically used to describe a process whereby the anarchy of the Internet will slowly bow to the economic (un)reality of Telco 1.0 and controlled introduction of “combinatorial” services. Unsurprisingly, we eschew such language here in favour of more precise terminology. Nonetheless, if there is one place where “convergence” does happen, it is in devices. Since mobility is valued so highly, users are willing to make functional and user interface compromises to achieve their goals. (The usual jokes about nobody buying combined microwaves and fridges wouldn’t look so funny if told from the perspective of a Mongolian nomad in his yurt, who might find such a device quite useful tethered to a small generator!)

Many “intimate” and personal objects have been sucked into the mobile device already: radios, cameras, watches, dictaphone, address book, diary, and so on. Ring tones compete with neck ties to add colour into drab corporate environments. (Who will want to work in cubeville in 20 years’ time? I’m not going back!) Phones even evolve into pieces of jewellery.

Yet there are a few notable exceptions sitting in our pockets. Time is already running out for our wallets. No doubt identity documents like driving licenses will follow suit. A biro, scrap of paper and a handkerchief will hide in every handbag until the end of time.

But what’s the one thing you won’t leave home without — even above your mobile phone?

Continue reading "Finding growth outside of network assets" »

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September 25, 2006

Profiting from adjacent businesses

I can commend this short article by Doc Searls to readers. The nub is in the last few paragraphs:

I’m especially interested in exploring what I’ve been calling the because effect. This is what you get when your new business isn’t just about inventing and controlling technologies and standards, but about taking advantage of the new opportunities opened up by fresh new technologies and standards. For example, making money because of blogging, or RSS, or desktop Linux, or whatever — rather than just with those things.

The because effect is a kind of jujitsu. While other people look to make money with something, you’re finding ways of making money because of something.

Prime example, because of search, Google and Yahoo make money with advertising. […]

This morning I flew from Edinburgh to London. The airport operator, BAA, makes money because of the foot traffic passing retail outlets on the way to aircraft; it doesn’t make serious money with flying, as that’s heavily regulated to a fixed rate of return. (It might however explain the telecomesque need to build glass palaces to ensure maximum capital deployed.)

Continue reading "Profiting from adjacent businesses" »

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September 20, 2006

Will IT vendors displace network equipment suppliers?

Whilst we don’t cross-post articles from our sibling IMS Insider blog, many Telco 2.0 readers will find our discussion of the upcoming battle for service delivery platform dominance of interest. Will the IT vendors get to eat the lunch of the network equipment providers? You decide…

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September 19, 2006

Business platforms vs. technology platforms

My regular flow of PR releases today includes the following typographically-challenged news from AOL:

Open Platform Enables Developers to Integrate AOL Video Search Results Into Third-Party Web Sites
Also Makes it Easy for Content Owners to Submit Video Feeds in Real-Time to AOL Video Search Index

Whilst it’s easy to poke fun at their copywriting skills, this is part of a bigger and important trend among the Internet players to open their platforms. AOL have already announced their open voice platform approach. Yahoo enable plug-ins for their IM client; Skype have made many mis-steps with their partners, but are clearly hitting the channels with co-branded hardware. This could become an innovation space that telcos, who mostly lack vibrant developer and partner programs, find hard to match, even on the promised rapid deployment cycles of IMS.

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September 14, 2006

Building a Telco 2.0-Compliant MVNO

I have been talking to several middle and senior managers at mobile operators around Europe in recent weeks and the overall mood is grim. Several are sitting on or waiting for redundancy packages (which are generally quite generous), but most are not positive about securing another job within a competitor. The ‘musical chairs’, where employees could walk out of one operator and into another, of the last few years has come to an end and lots of people are wondering what they are going to do in the future.

Despite the bleak prognosis for many MVNO’s, as blogged by Om Malik amongst others, many coming out of mobile operators are considering a move into this area as a way to leverage their existing skills and earn an honest crust.

This got me thinking: what would a Telco 2.0-compliant MVNO look like? We have already blogged and covered in our manifesto and report in detail about how the integration of handset, UI, Services and Network is breaking down and how this will continue in the Telco 2.0-world. The premise for an MVNO start-up would thus be about customer control and choice versus traditional operators: the ability to choose any handset, customise your own UI and select own and third-party services.

I have jotted a few thoughts down below for a prospective Telco 2.0 MVNO. Please feel free to throw stones or, better still, come up with an alternative. The key assumption is that you do not have a bundle of capital to build infrastructure and market a brand. Rather than KISS, the CASH (Conserve All Spondoolies Herbert) principle applies.

Would this model make money? Don’t know, there is not much new here except the concept of putting it all together and focusing EXCLUSIVELY on customer control and value, but if anyone nicks the idea then I want 5% of all revenue achieved.


  • UK Mobile players battling for unique position in mind of consumer - high advertising but low differentiation = lots of noise:
    • Vodafone (formally positioned as quality premium brand) now premium + innovation (live!) + value & simplicity (Stop the Clock, Vodafone Simply) + instant gratification (Now!) - all for essentially same product
    • Orange used to be positioned around optimism (The future’s bright…) but now lots of mixed messages

Continue reading "Building a Telco 2.0-Compliant MVNO" »

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September 12, 2006

Telecom Italia U-turn

Just as we discussed in our last post the limited value of FMC, so we see that Telecom Italia has U-turned on it’s convergence plans with the likely divestment of TIM in Europe and Brazil. Lots of uncertainty about why exactly (but probably nothing to do with the subtleties of user value we describe below!)

Here are some useful perspectives from analysts today:
Communications Breakdown Blog
Disruptive Analysis

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September 11, 2006

Ideas for efficiency

Mostly the Telco 2.0 initiative is about strategy and changes to business models. We look outside the telco, and focus on the interface between the customer and the network. For a change, let’s look inside at execution.

Here are some quick ideas for making your organisation a leaner, more agile and efficient place by improving the supply-side equation of labour and capital.

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September 6, 2006

Deutsche Telekom 2010 initiative - make sense?

Coverage here of Deutsche Telekom’s re-structure. In it is says:

“The telco also introduced its Telekom 2010 initiative - which it describes as a 7-point programme aimed at securing market share in Germany, targeting sustainable revenue growth in European markets, and ensuring T-Mobile USA becomes the Group’s largest business unit in the consumer area. Deutsche Telekom is currently bidding for (and is likely to win) additional mobile spectrum in the US.

As well as the specific regional and country focus, the three-year plan also calls for Deutsche Telekom to achieve a top three market position across all European business customer segments. It also calls for the company to concentrate on the main fields of innovation in the industry, including IPTV, mobile Internet and ICT services. “

We’ll be hearing from DTAG’s VP of Strategy Development at the Telco 2.0 Brainstorm on 4-5 Oct. A few questions we”ll be probing him (plus Gordon Smillie, his BT co-panellist, and I’m hoping to confirm a senior corporate France Telecom panellist as well) :

- Is there really a growth business in IPTV (as currently conceived). Speaking with those who’ve spent most time testing this (FastWeb in Italy is a good example - Signor Petazzi will be covering this in his presentation later in the day), we don’t see it. However, there are some interesting developments in P2P TV and more creative models of content distribution which we’ll be hearing about in the Content Workstream on Day Two.

- Is there really a growth business in ‘Retail’ at all in mature markets? (heresy!)

- How does the value chain need to be supported in a very different way to make ‘Mobile Internet’ economically sustainable? (Again, we’ll be probing this in a lot more detail on Day Two in the Broadband Connectivity session where we look at the current economics and what needs to change.)

- ‘Top 3 market position across all European market segments’? Top 3 versus who? Other telcos? Versus Internet players? Versus Systems Integrators? Who are the players in your markets in 2010 that you’ll measure yourself against?!

- How ‘Telco 2.0-compliant’ is this strategy?

Of course, the participants at the Brainstorm can put forward their own comments and questions via the event’s Mindshare process. In the meantime, we’re helping the panellists prepare for these questions in advance, so that we can create some constructive industry next steps from the debate…

If anyone would like to suggest some ‘probing questions’ in advance, please let us know in comments box below.

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August 29, 2006

Telco 2.0-Compliant

Some people who’ve read the Telco 2.0 Report have asked us for a snappy way of testing if their company is ‘Telco 2.0-compliant’. The manifesto’s a bit wordy, so here’s a shorter suggestion, followed by even more disgested ones:

“A ‘Telco 2.0 Compliant’ operator acknowledges the decreasing market power that owning network distribution offers, the increasing loss of innovation that walled gardens cause, and the threat of disintermediation of service revenue by Internet-based players.

It accepts the inexorable trend towards more horizontal market structures, the unbundling of value chains, specialisation and partnership.

A compliant operator will:
- empower users and partners with a platform to access to non-network assets such as billing, retail, identity, distribution and payments.
- vertically integrate services, access and devices only where there is a clear technical or user need.
- provide end-user services only where there is a defensible advantage over Internet players, based on costs, scale, security, flexibility, trust, standardisation or integration.
- seek new ways of funding and pricing network access that reduce operational cost and wasteful infrastructure duplication.”

…One-sentence version:

“A ‘Telco 2.0 compliant’ operator specialises in those elementary functions it has an advantage in compared to Internet-based players, and avoids vertical integration of access and services unless there is a compelling technical or user need.”

…Or, in summary:
“T2-compliant operator = the stock market believes it has long-term sustainable basis for growth in an IP-based world”

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August 22, 2006

Illustrating business model change

On the dawn flight to London this morning, I was busy enjoying my complimentary sausage, egg and bacon breakfast and pondering how British Airways manages to eke out a profit from my £36.50 fare. Airlines and telecom can often serve as examples for each other. Both involve capturing as much value as possible from sunk network capital whose momentary value is lost forever if not filled with people or packets.

I’m a regular traveller between Scotland and London. Each time I book I check the relative merits of the train as well as BA, bmi, and EasyJet. I’m quite good at avoiding handing over much money. After all, I am a bit Scottish. Yet by bundling and selling its product differently, BA could make more out of me.

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August 9, 2006

BT as Telco 2.0 poster child?

Om Malik has a profile of BT over at Business 2.0 magazine. Although the essence of the story is well known, and BT’s “new wave” products have been gathering pace for a long time, it’s worth a read.

Nobody’s perfect, but BT is one of a handful of operators that have fully embraced the new reality. In BT’s case, this has involved:

  • Isolating itself from voice revenues, which now only make a small part of the business.
  • Building a cost base compatible with a lean access provider, not a bloated former PTT.
  • Re-structuring itself horizontally into retail and access/wholesale. (How voluntary this was is a matter of debate.)
  • Diversifying, in BT’s case into enterprise services.
  • Adopting a “platform” play with all the IT and customer/channel components to build commercial networked applications.
  • Modernising the network to eliminate obsolete equipment, and adopting a consolidated low-cost infrastructure (i.e. 21CN).
  • Playing the regulatory game with just the right level of aggression.

They got out of mobile telephony, and got a good price for Cellnet as it became O2. It remains to be seen how well their “asset-light” approach to wireless will play out. They’ve avoided the worst of the 3G fallout, and have opportunities to skip a generation to very IP-friendly networks, particularly as the analog TV spectrum comes up for sale. In the meantime, strong competition between five UK networks means getting a good wholesale price for your MVNO isn’t that hard.

Not everything is sweetness and light, however. Early experiements in FMC were half-baked. They’ve not quite worked out how best to interact with Internet players, and the seams in products like the BT Yahoo Communicator are all to obvious. The click-to-pay products haven’t really taken off, and without the prepaid wireless market your payment and distribution channels are limited. The amount of mindshare for their platform among IT developers seems small. You don’t detect any buzz among the geek folk. Nobody seems to be thinking: if I build my app on BT’s 21CN, and learn about their APIs, my career will be more secure and my business more profitable. “Build it and they will come” isn’t good enough. BT’s still being slow in opening up their business and technology platforms. This will become more of an issue as the broadband boom slows, and unbundling plus price wars takes some of the easy money off the table.

They’ve got a lot of focus on sweating the copper assets. You have to wonder if they’ll manage the ultimately inevitible move to fibre, particularly if it demands a different asset ownership model than the traditional telco networks. The conundrum is that everyone wants to own some kind of monopoly or differentiated distribution asset. Yet any measure of success in such a capital-intensive business invites regulatory confiscation of those profits, or requires you to win spectrum auctions designed to transfer the profit base to the government before you even start. Networks are almost liabilities, not assets; deploying, servicing and operating them is where the money is. Just like with the roads, nobody makes a profit from the road itself but being a road builder, whilst hard work, can be a lucrative occupation.

Despite these snags, BT remains one of the ones to watch and learn from. They’ve certainly bought themselves a lot of time to consider the economic problems of transport of information goods.

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August 7, 2006

SIM cards and identity in Telco 2.0

The Telco 2.0 team came across this news item on SIM cards today from MEX. It describes how SIM card providers are incorporating more memory, processing power and secure storage into SIM cards. They are also providing the back-office tools to distribute data to those cards and manage their content.

Dean Bubley recently wrote an incisive analysis on The Tyranny of the SIM card. Whilst not quite time to call a priest and perform last rites, he notes that it has many deficiencies in a converged world.

So what is the Telco 2.0 approach to subscriber identity?

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August 4, 2006

BT’s new price plan - Cuts or Increases to real prices?

Great in-depth analysis here of BT’s new price announcement, by our good friend Jeremy Penston. He says: “The headline was “Millions to benefit from BT’s cheaper simpler packages”, but it could well have been “BT doubles call prices”. Either way, the headlines miss the point.

The new price structure shows clearly that BT is going to take on competitors at their own game - with headline loss leaders, recovering margin from premium pricing in second level products. BT was not allowed to bundle under the previous regulation, now they are. Where’s this going?”

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July 28, 2006

More on Telco 2.0 Metrics

Having got back from hols on Monday, I have been musing about Telco metrics and KPI’s in light of the great postings in the blogosphere that we referred to yesterday.

The more I think about this, the more it is clear there are 3 types of metrics:

  1. Investment
  2. Operational
  3. Financial

Investment metrics are the early warning signals that ensure the company is aligning execution with strategy and investing in the right areas. These are the long-term leading indicators of where an operator is seeking to position itself in 3-5 years time (and how well an operator might perform then). An example of this might be investment in NGN technologies that support the stated strategy - e.g. in 21CN in BT’s case which supports its move to being an ‘open platform’ IP company.

Operational KPI’s are the immediate lead indicators for the financial ones. In today’s current world, Subscribers (especially active ones) are used as a lead indicator for revenue growth (rationale being that if you add incremental subs this quarter you will see increased revenue in subsequent ones). ARPU falls somewhere between an operational and financial metric because, although higher ARPU should equate to higher overall revenue (therefore financial measure), it can also be manipulated by promotions, discounts etc. and therefore is an operational tool.

True Financial measures reflect the financial performance of the company - cashflow, ROI etc. These are the backward looking measures that tell you how well the company has performed over the preceding financial period.

I think the long- and short-term leading-indicator Investment and Operational measures are the interesting ones for (a) management and (b) the investment community seeking to see if companies are on the right track in an industry that is in the throes of disruptive change.

There are 2 separate issues relating to current Operational & Financial metrics (I haven’t really thought through the issues with Investment ones yet):

Continue reading "More on Telco 2.0 Metrics" »

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July 25, 2006

Vodafone KPI’s and Telco 2.0 metrics

The Telco 2.0 team were on holiday when Vodafone announced its latest set of KPIs, so we’ve missed our chance to be first to comment (in depth).

Here are the best analyses, which (as normal) are on the blogosphere from James Enck, Telebullis and Dean Bubley

We’ll be looking at ‘New Telco 2.0 Metrics’ further over the summer and releasing some new ideas at the Telco 2.0 brainstorm, where both James and Dean are also speaking.

More on this to follow…

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July 20, 2006

Investment criteria to fight Internet players

The Associated Press reports:

Online Age Verification May Prove Complex

At and many other popular online hangouts, a 30-something woman can celebrate her Sweet 16 over and over with just a click of the mouse. A 12-year-old can quickly mature to meet the sites’ minimum age requirements, generally 14, while an adult looking to chat with teens can virtually shed several years.

It’s no secret that many of the Internet companies struggle to contain fraud and misuse of services. This story highlights three things important to developing a Telco 2.0 business.

Firstly, user identity is a critical component. There is a wealth of literature on the subject of self-issued and conferred identifiers. Readers interested in the details should make themselves familiar with the Laws of Identity created by Microsoft identity guru Kim Cameron. What matters in terms of dollars and cents is:

  • What do we know about this customer that they might find difficult to express themselves? An example might be the nature of their social network, culled from call detail records.
  • What data has the customer given us that, even if it turns out to be false, is at least valid in the sense of being entered correctly and makes sense (no “30th February” birth dates)?
  • What do we know about this customer that can be proven to be true to some degree? Think: credit checks, copper cables into their premises validating their address, email addresses that have been clicked on.

Services which employ stronger forms of identity are harder for Internet players to replicate. When a customer engages in an operator-provided service, they are effectively putting some identity collateral at risk: get your device or service terminated, or even in the worst case go to court or jail.

Just ask eBay or Verisign if you want to know how profitable building a strong identity business can be. “This person is a child” or “this person is an adult” are simple to state, but expensive to verify.

Today, operators have trouble husbanding these assets. Internal revenue protection needs ensure a reasonably high degree of data quality, but active management is often weak.

Secondly, operators have suites of assets for collecting and managing these identity assets. Call centres, ATMs outlets, retail stores, partners, and so on. A father can come into a store to provision a service for his children and proffer identity of his and their age. For, that’s a serious competitive challenge if you can make your environment safer and more trustworthy. Nothing will be entirely safe — adults will use phones provisioned to children — but there’s clearly a comparative advantage.

Finally, the criteria needed for product and project go-ahead need to reflect the new reality. Voice and messaging revenues are still fat and happy, but the amount of attention and traffic given to Internet-based alternatives grows all the time. Every project and product needs to be scored against its “Internet sustainability”, using criteria such as “Does this product leverage our advantage in valid and verifiable customer identity assets?”.

Where products are lacking, they need to be reinforced. For example, accumulating data about customer behaviour that in turn improves service helps to reduce churn. If you throw the data away, you can’t go back and get it. When someone dials for directory assistance, don’t just send them an SMS; offer to add the address to their network address book. Allow them to easily keep, browse and search their full message and call history. And so on.

Rather than asking “how much cash can we subtract from the user by identifying the value of the bits flowing through the pipe”, the real question is “how much value can we add to the traffic on our network from our non-network assets?”

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July 5, 2006

Great reading on business model change

If you’re suffering from the heat in the office and are looking for some telco-related reading material to take down to the lake or beach, we can recommend the following two articles go straight to your printer.

John Hagel revisits his 1999 Harvard Business Review article on “Unbundling the Corporation” at his blog, Edge Perspectives. (If you didn’t know before that it makes sense to read blogs, you do now.) Some choice quotes:

Like the stock buybacks that I discussed in an earlier posting, these initiatives may reflect a more serious shortcoming: an institutional inability to internally generate profitable sources of growth. In fact, these initiatives may significantly distract executive (and investor) attention from the pressing need to restructure enterprises to create sustainable growth platforms.

When you compare R&D expenses of telcos against Internet players, they look very paltry; yet we’re assured that IMS will be deployed to deliver advanced integrated services for which the operators themselves (as opposed to brand or technology partners) will capture significant revenue. What gives? He continues…

In a nutshell, the article argued that most enterprises today are an unnatural bundle of three very different kinds of businesses - infrastructure management businesses, product innovation and commercialization businesses and customer relationship businesses. By trying to manage the inherently conflicting demands of these three businesses within a single enterprise, executives undermine the potential for profitable growth.

This completely aligns with our message here at Telco 2.0 and our manifesto, where we describe the likely layered model we believe the industry is going to be forced to adopt over time.

In a somewhat self-referential circle, TelecomVistas describes in some detail what that unbundling might look like, giving Nokia as an example of a master player of the game of anticipating industry modularisation. The same article glowingly refers back to our manifesto, which if you haven’t read it yet probably means you’ve just earned yourself another printout and 30 extra minutes down by the poolside.

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July 4, 2006

Are your values getting in the way of profit?

We have previously written about how retailer Tesco squeezes premium margins out of a humble sponge cake, and the potential lessons for telcos. We suggested that operators “draw inspiration from outside the industry, and benchmarking against best practice”.

One such success story is Ryanair, the discount airline. There are three important lessons to take away from their business.

The first is that they baked-in a completely different set of values amongst their workforce. Many of their actions would have been heresy to a traditional airline operator: removing pre-allocated seats, breaking down labour divisions, placing adverts on seat backs, charging for using credit cards, and so on. As an operator, now is the time to ask yourself what are the parallel issues in your business, particularly as an increasing proportion of the industry becomes focused on price.

Secondly, they give away over a quarter of their seats. Yet most telcos won’t launch a new service without a revenue model, and will always attempt to charge for all traffic (if only as part of a metered bundle creating breakage or overage). Like a telco, the airline business is largely about squeezing revenue out of a fixed-cost asset base. Consider what would happen if data charges were waived to a selection of innovative new applications. How much faster would the mobile ecosystem grow?

You could imagine this being taken further. It’s a challenge to get people to switch operators, so why not make it easy to “try before you buy”? Offer targeted SIMs to students, housewives, etc., and include unlimited free off-peak calls, no contract required. (Feel uncomfortable? Why?) Once they start to get used to putting your SIM into their handset, you’ve got a chance to SMS them each time with an offer to pre-pay for peak minutes, or adopt a post-paid plan that fits the calling patterns you’ve observed. A customer relationship can precede a billing relationship.

Again, your values may stand between you and profit.

Finally, consider what would happen if Ryanair solely used ARPU as its guiding metric. Their “ARPU” is one of the worst in their industry, yet they have among the highest margins and stock valuations. A rational ARPU-driven decision would be to eliminate that marginal last free ticket. This would clearly be wrong for Ryanair. They need subtler metrics — “ARPU per business passenger booked within 7 days of departure”, or “Concession revenue per free ticket”.

Your best call might be simply to give your product away. After all, it won’t cost you anything but your values.

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The Stifling Effect of the Vertically Integrated Operator

The Wall Street Journal has a very interesting article this week by Jason Fry looking at how mobile phones could be used to provide local information to users on a real-time basis. Armed with GPS, a compass and some nifty software from GeoVector, a mobile phone could be pointed at an object and:

  • Show a map of it and its surroundings.
  • Show information about it that is contextually relevant to the user (especially if the user’s preferences are already known.
  • Allow the user to play games in a real-virtual world based on local surroundings.
  • etc, etc.

The possibilities are limited only by the quality of the service provider’s information database (which presumably would be the web + some proprietary providers) and the quality of their CRM system.

Sounds like a dream? Well, it’s available in Japan.

So why not Europe and the US?

The Director of New Media at Geo Vector, Peter Ellenby, blames it on the vertically integrated business model of the operators which prevents applications and services like Geo Vector from being made available on US devices:

“the carriers need to be a lot more creative in how they deal with content and application makers in the U.S., I think, for things to take off over here.”

Now wouldn’t a service like this stimulate more calls…?

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June 26, 2006

A SIM-only approach to Mobile Contract Negotiations

Further to my recent post about buying a phone on Ebay without a contract, I have now renegotiated my contract with my service provider T-Mobile.

They have given me 400 minutes a month + unlimited data for £22.50 per month. I am rather pleased with this because, assuming I get close to the 400 mins each month, my average cost per minute will be under 6p to all UK mobiles and landlines (they will still sting me on international calls but that is another story). This price is £10 per month less than they normally charge because I have not asked for an upgrade (I bought a Treo 650 on Ebay for £230 because I like the phone). Thus, over the 18 month contract they have tied me into, I will nearly claw back the price of the phone (18 x £10 = £180).

Overall, this also compares very favourably with other providers in the UK. Take Vodafone who would charge me nearly double the price for a comparable package (without the unlimited data but with mobile TV and other frills). They would also limit me to a very small selection of handsets - a result of their desire to remain vertically integrated and control my experience.

Now we are not here to push particular operators, but hats off to T-Mobile for starting to embrace Telco 2.0! Their Flext and Web ‘n’ Walk packages are a clear indication of their willingness to decouple connectivity, services and handsets and give customers the flexibility and control they want.

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June 20, 2006

Mobile Phones Tied to Contracts?: How Passé

I don’t want to harp on about it, but I recently bought a Treo 650 (an upgrade for my my broken 600) and I love it dearly. I got it on Ebay because my service provider, T-Mobile, doesn’t offer the Treo in the UK.

I was staggered by the number of phones being sold without a contract each week on Ebay in the UK - over 30,000 versus 500 with a contract (I have assumed an average 5-day listing).

Assuming most of these sell, this equates to around 120,000 mobiles sold a month or nearly 1.5 million a year. All of these are sold without a contract and most have been unlocked or can easily be unlocked (I unlocked my Treo from Orange for £12).

Historically, the great cry from operators has been that people want cheap or free subsidised phones (which they pay for over the life of the 12 or 18 month contract that they are locked into).

The massive growth in phones being bought at much higher prices on Ebay (I paid £230 for my Treo) without a contract indicates that consumers are voting with their feet. 1.5 million phones is 7.5% of all mobile phone sales in the UK and this number is rising fast.

It seems to me that consumers are saying that they are very willing to pay a higher up-front charge for the phone OF THEIR CHOICE and then search around for a sim-only contract package that suits them.

Telco 2.0 is all about changes like this. The vertically integrated business model that operators have adopted so successfully is slowly being unpicked. Operators are working hard to defend their integrated model in the UK. One example of this has been their move into the high-street to ensure that the independent retail channel does not exert too much control over devices and service plan sales. Just this week, we hear that O2 is apparently looking to buy out The Link.

However, that Ebay number makes a move like this sound like a rear-guard action. I wonder just how long the operators can hold back the tidal wave?

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June 15, 2006

The BBC: New media masters of edge competence

There are so many ways in which the BBC is leading the pack in terms of recasting its own business model and delivery platforms. Here’s one example that every telco startegy planner needs to understand.

Umair Haque for a long time has (co-)written an extremely insightful blog on new media, Bubble Generation. He coined the term “edge competence” to describe organisations that are able to leverage value creation by their own customers/users.

The BBC News website now has a section of “most popular” stories at the side. You can easily imagine the collective efforts of users slowly displacing basic editorial efforts. Editors will still be required, but will evolve into new more value-adding roles. Assuming the editor knows which stories are “most important” is a top-down centralised approach to information whose days are numbered.

We already see this evolution elsewhere. Yahoo News (human editors) is challenged by Google News (computer algorithm based off links, among other things). In turn, both start to lose traffic to services like Digg, which is entirely about the collective “hive” intelligence of users both submitting and selecting important news. (What do you mean you haven’t heard of them?! Ah, that’s why we call it Telco 2.0 — new competencies, value chains and profit centres.)

One last example today from The Guardian:

Gamers don’t want any more grief

Players who abuse others in online games may soon be ostracised as virtual communities start to police their own environments.

A traditional telco product development approach would also have “prevent abuse” as a requirement. The solution would have been to eliminate abusable functionality, insert expensive human intervention under the ever-expanding customer service remit, or implement some heavy-handed identity scheme. All are valid, but none are likely to generate the same profit as letting the users create and exchange value themselves.

A telco with ambitions to remain in the service/application space needs to learn how to establish the hub or market place for them to come and meet, or to contribute and participate in other peoples’ hubs by extending your distribution, service, billing and support assets into their world.

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June 14, 2006

Vodafone New Strategy - Convincing?

On the IMS Insider blog we captured 5 of the best analyses of Vodafone’s new strategy (which is already prompting a shareholder mini-revolt). All look at it from different angles, but all are aligned in their macro analysis of the ‘sustainability’ of the strategy (as it has been presented publically, at least). Four of these analyst-bloggers have been involved in the design of the Telco 2.0 Industry Brainstorm (co-located with an IMS Services Brainstorm) on 4-5 Oct in London, and will be participating as ‘Analysts-in-residence’.

“Bumps in the long road to Vodafone 2.0”:

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Telco 2.0 Strategy Report Out Now: Telco Strategy in the Cloud

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