Long Term Evolution, LTE or sometimes also referred to as 4G, is the next generation mobile network technology. It promises to bring network speed to the mobile that can beat the current ADSL offerings. In the beginning LTE prices might be high but competition especially from new entrants – “the Ryanairs of telecom” / “4G Bitpipes” – are likely to bring affordable pricing plans soon. The US already has the first “4G Bitpipe players”: Clearwire and Lightsquared.
So what does it mean if tomorrow you can have ADSL-like speeds for an (almost) flat-rate. In practice, end-users would be crazy to still pay €0,15 for minute for a call or per SMS. Skype with its optimized codecs (e.g. SILK) will offer better voice quality and will throw in video for free. Instant messaging, Twitter and Facebook chat will completely substitute SMS. This will be the end of the telecom cash-cows: calls and SMS…
What will be the next cash-calf? For those operators that are still looking for the “Killer App” – that single technology that only telecom operators can offer and is extremely successful – I have some news. Postal services are still looking for their killer app after the stamp was substituted by email. So is the music industry. There is no economic law that says that a former monopolist has the right to pick its next monopoly.
So if there is no “Killer App” does it mean that all telecom operators are doomed to become bit-pipes tomorrow? Over time several will but not necessarily all. Although dotcoms have the sexiest solutions, large corporations are unlikely to massively shift their communication services to a heavily indebted 25 people company close to a surf-paradise beach. So due to inertia the abyss is still some years away. However should you just give up and let consumer ARPU drop year by year?
I believe there is still a window of opportunity for telecom operators to bring new appealing services. However they must be willing to abandon some important historical laws of telecom.
1) Standards slow innovation
Collectively negotiate a standard that is more a political compromise then the simplest, most effective way of doing things is not helping innovation. In the Web 2.0 era, dotcoms launch new ideas all the time. Most of the time it is a “winner takes it all or at least most” market. So the winner sets the standard. How many Twitter competitors do you use?
By designing an architecture around obscure standards, few operators have employees that can explain their company’s architecture. Google and others have invested heavily in their architecture. They constantly update it. But on a blackboard a Google architect can draw you exactly why they choose Bigtable, GFS, etc.
2) Don’t talk about subscribers, call them users
A subscriber is an entity that signs a monthly contract with a telecom operator. By doing so a subscriber seems to subscribe to a list of applications that the marketing department of the telecom operator has preselected as the most adequate for him or her. The operators seems to know what is best for their subscribers. WRONG!!!!!!!!
Call them users and give them the tools to select/create/design/customize/configure the services they want. Let the community vote about which feature is needed. Ask users why they stop using a new service after a week. Let users define the price they are willing to pay by offering multiple alternative solutions in different price ranges with different feature sets.
3) Go from a catalog of few to an infinite catalog
If Telecom can no longer survive based on a few hit services, then they could go to the other extreme: the long tail telco. A long tail telco offers an almost infinite catalog of solutions that combine communication assets with other solutions in order to solve user’s problems, to make them more productive or to entertain them.
Users should be able to combine products to resolve their needs. A good example is what is offered by Invox. Via wizards, templates or a Yahoo Pipes drag-and-drop configuration, small to large enterprises can configure their own telecom services like call centers, PBX, etc. They can easily integrate the best of the Internet (Salesforce, Google, Yahoo, etc.) with IP-based communication. You use what you need. You configured it the way you want it.
What is missing is a market in which those users that don’t want to do it themselves or who need specific support (e.g. custom integrations), can go and find the right help.
Telecom operators should no longer focus on end-user services but on enabling the end-user and an eco-system of independent third-parties to be able to create and sell solutions and services to one another. As long as it is easier, faster and cheaper for a third-party to use an operator’s tools and assets they will see no need to design an alternative solution. This brings us to the next point…
4) Monopolists die because of greediness
Revenue shares of 40-95% are often not in line with the value and risk the operator takes in the value chain. Those operators that think that “squeezing partners until the last drop” is a good long-term strategy, will be the first to die. Innovation needs out-of-the-box thinking. People don’t take risks if they don’t see rewards.
You will need to do more than to just blindly follow these four rules. But by applying them and listening to users, you are on your way to create new cash-calfs…
At the end of the nineties Sillicon Valley was nerd paradise. Every technically skilled person could have a chance on getting excellent working conditions and maybe become rich. The bubble burst. No more unprofitable dotcoms and the end of telecom innovation paradise. Shorts in the office were replaced by ties.
The new ruler of the world was the CFO, who was first promoted to COO and afterwards to CEO, shortly CFEO. Shareholder value, CAPEX and OPEX were the new buzzwords. Creative accounting the solution to revenue problems. The current crisis is showing the limitations of focusing only on cost reductions and not on growing the business via innovative products and services.
It is time for a new class of rulers, the CBIO. The ideal profile is a generalist with a technical background, knowledge of financials, operating experience and an innovative strategist. This person does not have to be an expert in all domains but have at least a good understanding of each and be able to surround him/herself with experts in these areas. The CCO will understand that there are two types of technical projects: routine and innovative. The routine projects should be executed in the cheapest fashion possible: Cloud Computing, Off-shoring, Open Source, etc. The innovative projects will make the difference between global leadership and bitpipe doom in the next 12-36 months. No single RFQ process has brought innovative results to any operator that got front-page news coverage. So innovative projects should not be handled by an RFQ. The telecom operator should be split in two units: “Business as Usual” and “New Business”. The “Business as Usual” should continue to focus on shareholder value, CAPEX and OPEX and become a best-in-class bitpipe. The “New Business” should launch on a weekly basis new services and features to quickly understand what works and kill those things that do not. If the “Business as Usual” systems are not delivering the results the “New Business” needs then they should be allowed to shop elsewhere, even shop with competitors! The “New Business” should focus both on hits as well as long tail services. Giving end-users the choice between millions of services instead of only Voice and SMS. Focusing on the why people communicate and not the how.
Failure to recruit a CBIO will result in the “Business as Usual” becoming a bitpipe but the “New Business” being called Google Voice, Facebook Seamless Messaging, Apple App Store, etc.
CBIO stands for Chief Bitpipe and Innovations Officer…