Let’s just think about all these over-the-top services in terms of their strategic fit for telcos. (And it’s not just content and media services. We should include voice/video calling too, because these are just applications, after all.) Do these services provide telcos with any unique competitive differentiation or edge? No, because lots of companies are already in these businesses. Are telcos best placed to resist competition because of a high barrier to entry? No. Are these services likely to command premium margins well into the foreseeable future? Mostly, no. Do telcos have special skills that make them especially well-equipped to deliver these services?
Let’s ask the same questions about the traditional core business of telcos: bit-carrying. As a reminder, the core business of airlines is
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Do telcos have special skills that make them especially well-equipped to deliver these services? |
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What would be our reaction to an airline executive who suggested that, since oil company executives use planes a lot, it would be logical for the airline to get into the oil business? Or, absent the skills and knowledge to actually become an oil company, charge the oil companies more for their seats?
I talk to airline people now and then. (“Yes please. A refill on the Bloody Mary please. And just what do you think your airline should do to increase profitability and customer loyalty?”) Airline people at all levels still understand that
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cramming bits into glass, copper and electronics that then hurl the bits from A to B so that the bits can be transported safely from where they are (A) to where they people who asked for the bits are waiting for them (hopefully, at point B). For this, the people pay the telcos money. That’s the essential business the telcos are in, perhaps a little over-simplified.
So, what would our answers to those five questions be in relation to the strategic fit of bit-carrying? Yes, yes, yes, yes, yes. Not a crowded market, with a high barrier to entry, should allow decent margins to be maintained for a while to come. Last but not least, telcos are actually pretty good at bit-carrying. They’ve been doing it successfully for some time.
In summary, telcos are very well placed to continue to dominate the market in access and transport, as bit-carriers. However they are not in a particularly good position to lead the market in any of these new over-the-top areas. They can run alongside the rest of the field, but there is really no sense in which telcos necessarily must play, and there is no sense in which they deserve any special position in these markets by virtue of their responsibility for carrying the bits.
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carrying people is at the core of their business, and they spend most of their working time focusing on that core: delivering service, building the infrastructure, managing the schedules, selling and marketing seats. Some do it well, some not so well, but they don’t often forget what their core activities should be.
In the telecom industry, the past few years have been characterized by the phenomenon of a proportion (not all, but a lot) of telco executives spending their days plotting, planning, lobbying, holding meetings and giving speeches about everything other than their core business: how not to be a mere bit-carrier; how to reach into the content layer; how to get a slice of Google’s business. (Only occasionally do we hear smart telco people wondering out loud how they can collaborate with over-the-top service providers to mutual benefit. And last time I heard one do that, with insight and real passion, his company wouldn’t release the slide pack.)
So here’s the suggestion. If you, the telcos, think you can do some of that fun stuff - content, cloud services, social networks, storage - better than the others in the market, by all means give it a try. But don’t give up the day job: please keep carrying the bits.
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