I’ll start this article with an apology – for crossing into the world of politics. An important basis of the discussion comes from the concept of creative destruction of capital and references quotes from Karl Marx. I have no interest in politics, especially historical politics, so I have little awareness of what the groundswell of feeling might be around this famous figure in human history. I know he has links to socialism and communism, but am otherwise oblivious to his biases, strengths and weaknesses. However, I did stumble across one of his quotes and it really resonated with my feelings about today’s telco industry.
Let me sum up those feelings in a simple quote – “Communications services have never been more important, but telco business models have never been less relevant.”
Communications services aren’t going away. Therefore current telco business models seem destined to undergo creative destruction. Perhaps not surprisingly, it seems I’m not the only one feeling this momentum building.
It’s into this maelstrom that Marx’s quote resonated, “What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. … A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.”
Are the sell-off of assets like towers a case of financial engineering, a process of monetising non-monetary capital, a harbinger of the destruction of capital within the telcos?
There is simply too much inefficiency in many of the large telcos (and large OSS/BSS stacks for that matter), for the large telco business model to survive in its current form. Is it possible for these business models to drastically transform, or do we actually need their destruction to expedite a new world of telco (and systems that support these telcos)?
Via COVID, the entire world has just experienced a period of drastic change and telco services played an essential part in this transformation. Entire telco traffic models changed (day-time traffic flipped to the residential edge of the network in ways that the network was never designed to cope with). Entire ways-of-working changed (network management teams like NOCs needed to find a way to work remotely, outside the highly protected security trust zones that have always enveloped the active network). In crises such as the fire at Telstra’s Warrnambool Exchange, telcos can mobilise and achieve amazing feats of transformation in days / months that would normally take years to perform when operating at business as usual cadence.
Telcos have demonstrated that they’re amazing organisations, staffed by amazingly talented people, and have proven that they can drastically transform at short notice. But there’s one thing you’ll notice about those changes mentioned above – They were all forced changes. There was no choice given. However, I’m not sure that we’re so adept at choosing to change. Incremental change, sure, but not “burn the exchanges” change.
Well, half the CEOs of European telcos, iconic-brand telcos that we’ve all heard of, are saying we’re experiencing a burning platform or Schumpeterian moment – what I’ll call our burning exchange moment.
Do they, do we, choose to embrace destructive change or just wait for destructive forces to destroy capital that expedites reproduction of the telco industry in the hands of others?
If the telco CEOs are unable to choose to make such drastic change, what can we do about it? We can’t just wait for the net-neutrality / profit-sharing arguments to play out within regulators around the world.
Many of you might not realise it, but the OSS/BSS stacks we design and build are not just cost-centres. They’re arguably the biggest single technical influence on telco business models:
Through our OSS/BSS, we have the vehicles to design entirely new telco business models and show telcos how to transform. This is not just a burning exchange moment for our telco clients, but also a burning exchange moment for us in the OSS/BSS industry. We’re linked to their success (although I should point out that we’re not inextricably linked). It’s time for us to lead the way and not just submit to being called cost centres. Perhaps OSS/BSS are the Trojan Horse that changes the industry’s trajectory?
However, to do so, we’re going to have to look outwards, not inwards, and consider entirely new go-to-market models for ourselves, our clients and even their customers.
PS. Declining profitability is arguably the primary source of the problem. When telcos sold scarce resources, they could charge a premium. But as Kevin Kelly suggested back in 2008, “free is deeply entwined into the very foundation of technology.” If his predictions play out, as it seems to be doing, then telco services will continue to track ever-closer to free.
Kelly also followed up with another seminal article citing 8 (plus one) ways to thrive in a world of free. They are:
He says, “In short, the money in this networked economy does not follow the path of the copies. Rather it follows the path of attention, and attention has its own circuits.”
What can the telco and OSS worlds learn from KK?
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3 Responses
Hi Ryan, respectfully I will provoke a new perspective that I may agree with TELCO CEOs that the current TELCO industry may not generate value as it has done so far.
I will get the old “bit pipe” expression to express the provocation.
Making an analogy of good physical transport, what does the final consumer buy and consume? Does the final consumer consume the good, or do they consume the good get up to them?
So, does the final customer see value in the good or in the form of the way the good was transported, packaged, stored, and delivered?
Mostly we see value in the good, not in how it was transported to us.
So, if we replace the goods with digital content, we can see why CEOs are saying that in the future CSPs do not add as much value as they were in the past.
Getting an example of voice calls in the past, the CSPs delivered the final product which was the talk, using communication technology as an enabler or a way to deliver the final product called talk between 2 persons.
Nowadays what is the final service that CSPs are delivering? Instant Messenger? Videos? Games? Taxi services? NBA/NFL matches? Etc?
So, as the only final service that one day CSPs delivered was the talk between 2 people, nowadays CSPs are not delivering it anymore. We know that this service is free nowadays and being delivered to other companies OTT such as Skype / Whats up / ETC.
CSPs can deliver the final consumed service. For sure, but they have natural barriers, one of them is that the CSP will always have a restricted addressable market, I mean, it always will be for the region they act, and for the customer basis that they have, OTTs have not this limitation, the addressable market for OTT generally are universal. In case the service that CSPs are naturally vocation is communication, then CSPs have the challenge of Net Neutrality. In case Net Neutrality can be addressed for different types of SLAs using slicing, then there is a light at the end of the tunnel.
The Slice will allow CSPs to offer different levels of communications, but it is still communication, and not the final consumer services itself, and as we know there are options in the market for different levels of communications, NTN, satellites, Optical, WI-FI, private spectrum, etc. So, in the end, the most valuable portion of the chain is still the digital content with always more potential to monetize.
We can think that the CSPs are the owners of the roads in terms of good delivery, but the customer does not care if the product is transported on the road, by train, by drone, etc.
And looking at this sense network sharing proves it, it is the same to think that we should have 3 roads between points A to B, generally it is not necessary, generally it is necessary to have just one road.
Also, if we think of basic human services such as transport, water, electricity, sanitation, garbage collection, etc the famous utilities, we can consider communications as a utility, and the same way that a utility has generally one supplier, or a maximum 2, and constant and reduced profit due the nature of the service, CSPs may happen the same.
So, Maybe OSS and BSS may offer new ways to offer the same type of services, but will not, unfortunately, help CSPs in the main dilemma explained above.
Warm Regards, Vinicius Fiorese
Hi Ryan, respectfully I will provoke a new perspective that I may agree with TELCO CEOs that the current TELCO industry may not generate value as it has done so far.
I will get the old “bit pipe” expression to express the provocation.
Making an analogy of good physical transport, what does the final consumer buy and consume? Does the final consumer consume the good, or do they consume the way the good arrives to them?
So, does the final customer see value in the good or in the way the good was transported, packaged, stored, and delivered?
Mostly we see value in the good, not in how it was transported to us.
So, if we replace the goods with digital content, we can see why TELCO CEOs are saying that in the future CSPs will not add as much value as they were in the past.
Getting an example of voice calls in the past, the CSPs delivered the final product which was the talk, using communication technology as an enabler or a way to deliver the final product called talk between 2 persons.
Nowadays what is the final service that CSPs are delivering? Instant Messenger? Videos? Games? Taxi services? NBA/NFL matches? Etc.? (We know that they are enablers for these final services.
So, as the only final service that one day CSPs delivered was the talk between 2 people, nowadays CSPs are not delivering even this talk service anymore. We know that this service is free nowadays and is being delivered through other companies’ OTT such as Skype / What’s Up / ETC.
Can CSPs deliver the final consumed digital services? For sure, but they have natural barriers, one of them is that the CSP will always have a restricted addressable market, I mean, it always will be for the region that they act, and for the customer basis that they have, OTTs have not this limitation, the addressable market for OTT generally is universal.
If the CSPs´ vocation is communication, then CSPs have the challenge of Net Neutrality, assuming that Net Neutrality can be addressed using types of SLAs through 5g slicing, then there is a light at the end of the tunnel.
The Slice will allow CSPs to offer different levels of communications, but it is still communication, and not the final consumer services itself, and as we know there are options in the market for different levels of communications, NTN, satellites, Optical, WI-FI, private spectrum, etc. So, in the end, the most valuable portion of the chain is still the digital content with always more potential to monetize.
Making an analogy We can think that the CSPs are the owners of the roads in terms of good delivery, but the customer does not care if the product is transported on the road, by train, by drone, etc.
One more argument that points out that customer does not care about the way digital services is delivered is network sharing, also network sharing points to the natural consolidation that the communication is transforming into a utility that generally is attending just to one supplier. It is the same to think that we should have 3 roads between points A to B, generally it is not necessary, generally it is necessary to have just one road.
Also, if we think of basic human services such as transport, water, electricity, sanitation, and garbage collection known as common utilities, we can consider communications as a utility. And consequently, in the same way, that a utility has generally one supplier or a maximum of 2, also constant and reduced profit due to the nature of the service, CSPs may happen the same.
So, Maybe OSS and BSS may offer new ways to offer the same type of services, but this will not, unfortunately, help CSPs in the main dilemma explained above.
Warm regards, Vinicius Fiorese
Thanks for the wonderful, elaborate analysis Vinicius.
You brilliantly summarised the intent of your article and mine in your final sentence, “So, Maybe OSS and BSS may offer new ways to offer the same type of services, but this will not, unfortunately, help CSPs in the main dilemma…”
That’s the exact reason I’m proposing the need for us to think more laterally. A business model built around the same type of services will not help.
CSPs retain many strengths that new business models can be built around:
– It’s not a lack of revenue ($1.55 trillion annually), but a lack of profitability
– They have billions of customers willing to pay for services each month, and perhaps more importantly, they are trusted to issue bills each month (as well as having strong collections pipelines)
– They have billions of companies that rely on 1s & 0s delivered by CSPs (but could also benefit from connections, partnerships and supply chains directly facilitated by CSPs)
– They have masses of data (the new oil)
– They have vast technical workforces that have honed their delivery skills to accommodate regulatory challenges in the countries / regions / jurisdictions where they operate
– They also have vast technical sales machines that have an empathy for local needs, conditions and regulations
– They have real-estate in highly valuable locations (sites that often have advanced, resilient power and comms that are suited to many other partnership purposes)
– Many have semi-monopolies in their access networks (but they’re not constrained to only offer services in those areas and they have the option of considering business models that are more global in nature)
– etc
As OSS/BSS providers, I believe we have a responsibility to look deeper into new offerings that could help leverage these strengths and/or show CSPs that there are alternate approaches. If we can de-risk the decision-making process for the CSP execs (eg if they can clip the ticket on partner offerings that cost the CSPs nothing), if we show new ways that CSPs can add value to their customers (not just traditional telco services), then we have to be more persuasive!