I had an interesting late-night Twitter spat with Keith McMahon last night, about the appropriate future model for telecoms operator strategy. He disagrees with my stance on Telco-OTT (operators launching their own pan-Internet services) and reckons that it will accelerate "value destruction". I'm adamant it's inevitable even if it does imply cannibalisation and revenue decline taken at a macro industry level.
Thinking about this more today, I've realised that my view can be explained quite simply. The telecom industry is (as far as I can tell) the first to face two classical "dilemmas" simultaneously:
However, there are differences here which make the situation even more painful for the telecoms industry.
On the disruptive innovation front, the telcos' response has been made even more lethargic by the distraction of slow-moving, expensive and inappropriate solutions like IMS. And rather than just having scrappy startups driving the disruption, we have the force of behemoths like Google, Facebook, Apple and Skype. Add in the fact that ordinary telephony and SMS seems to be "going out of fashion" and that LTE represents a "market transition" forcing a change from the incumbents at precisely the wrong time, and you see the problem. I don't disagree with Keith's view that telco bundling is important - but it implicitly requires having valuable things to bundle.
And the prisoner's dilemma is skewed by the addition of time as a critical factor. First-mover advantage for the "traitors" might be sustainable, albeit at the likely cost of the unfortunates who stay quiet - or who procrastinate for too long. This is why the argument I've heard in the last few days, that Telefonica's TU Me launch might spawn another 50 Telco-OTT Me-TU's is fallacious. Most of those will be TU Late. (ahem, sorry...)
The collaboration option is also subject to regulatory intervention, as well as even more delay - witness the push-back of VoLTE launch by Verizon to late 2013, and the ongoing farce of RCSe's supposed arrival. It's certainly not "just there" and as I wrote last week, it's doubtful that it will ever "just work" in a way that users actually want.
Extensions of these dilemmas apply in other telecom areas too - content and TV, commerce and payments, identity, cloud services and so forth. The details differ somewhat, but the story is the same.
Keith suggested that the #TelcoOTT approach was likely to lead to "value destruction" and "Dante's Inferno". I see his point, although I'd choose another example from more recent popular culture. If you're going to risk everything, then Fight Club's Tyler Durden isn't a bad role model "I say never be complete, I say stop being perfect, I say let... lets evolve, let the chips fall where they may." (And yes, I do remember the movie's ending. And there are plenty of other quotes I like, that are unprintable on this blog, but help yourself).
I'm not anti-telco. But I am realistic that solving those two dilemmas, simultaneously, needs some pretty radical moves. The industry en masse hasn't taken those moves. It's largely paralysed, shackled to the walls of its cell, by the manacles of legacy and interoperability. And now individual members can hear the executioner approaching, and some of them want freedom, rather than going to the gallows together.
Yes, Telefonica's TU Me - or its OTT mobile wallet solution or WiFi "onload" service - might not succeed. But they're all better than sitting and moaning about one's dilemmas in a support group, while the world collapses around you.
If you haven't yet bought the Telco-OTT report - details are here . Or inquire about a private workshop / advisory engagement.
Thinking about this more today, I've realised that my view can be explained quite simply. The telecom industry is (as far as I can tell) the first to face two classical "dilemmas" simultaneously:
- The Innovator's Dilemma: The title of Clayton Christensen's seminal book on disruptive innovation (from which I take a great deal of inspiration, including my company name). It refers to well-managed, profitable companies watching disaster unfold, as they ignore a low-cost / low-profit new technology because it targets only adjacent markets, and would threaten cannibalisation if applied to their own. But it improves over time, gaining strength and scale, and eventually kills them anyway, as it expands from adjacencies to core.
- The Prisoner's Dilemma: This is a famous thought-experiment applying "game theory" to collaboration and cooperation. Do two prisoners remain silent & complicit - both receiving short sentences - or does one frame the other, going free while the other languishes in jail? Or, if both try to betray each other, they both get long sentences. (Edit: Martin Geddes has pointed out the different game if you change the apostophe to prisoners' dilemma)
However, there are differences here which make the situation even more painful for the telecoms industry.
On the disruptive innovation front, the telcos' response has been made even more lethargic by the distraction of slow-moving, expensive and inappropriate solutions like IMS. And rather than just having scrappy startups driving the disruption, we have the force of behemoths like Google, Facebook, Apple and Skype. Add in the fact that ordinary telephony and SMS seems to be "going out of fashion" and that LTE represents a "market transition" forcing a change from the incumbents at precisely the wrong time, and you see the problem. I don't disagree with Keith's view that telco bundling is important - but it implicitly requires having valuable things to bundle.
And the prisoner's dilemma is skewed by the addition of time as a critical factor. First-mover advantage for the "traitors" might be sustainable, albeit at the likely cost of the unfortunates who stay quiet - or who procrastinate for too long. This is why the argument I've heard in the last few days, that Telefonica's TU Me launch might spawn another 50 Telco-OTT Me-TU's is fallacious. Most of those will be TU Late. (ahem, sorry...)
The collaboration option is also subject to regulatory intervention, as well as even more delay - witness the push-back of VoLTE launch by Verizon to late 2013, and the ongoing farce of RCSe's supposed arrival. It's certainly not "just there" and as I wrote last week, it's doubtful that it will ever "just work" in a way that users actually want.
Extensions of these dilemmas apply in other telecom areas too - content and TV, commerce and payments, identity, cloud services and so forth. The details differ somewhat, but the story is the same.
Keith suggested that the #TelcoOTT approach was likely to lead to "value destruction" and "Dante's Inferno". I see his point, although I'd choose another example from more recent popular culture. If you're going to risk everything, then Fight Club's Tyler Durden isn't a bad role model "I say never be complete, I say stop being perfect, I say let... lets evolve, let the chips fall where they may." (And yes, I do remember the movie's ending. And there are plenty of other quotes I like, that are unprintable on this blog, but help yourself).
I'm not anti-telco. But I am realistic that solving those two dilemmas, simultaneously, needs some pretty radical moves. The industry en masse hasn't taken those moves. It's largely paralysed, shackled to the walls of its cell, by the manacles of legacy and interoperability. And now individual members can hear the executioner approaching, and some of them want freedom, rather than going to the gallows together.
Yes, Telefonica's TU Me - or its OTT mobile wallet solution or WiFi "onload" service - might not succeed. But they're all better than sitting and moaning about one's dilemmas in a support group, while the world collapses around you.
If you haven't yet bought the Telco-OTT report - details are here . Or inquire about a private workshop / advisory engagement.
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