OK, if telecom innovation is dead, as both the Financial Times and my recent blog agreed it was, what would “innovation” have to look like to restore things? Can public cloud providers play a role in helping telcos innovate, or would the reliance on them just create another form of “disintermediation”? Let’s look at these questions, re-making some past points with some fresh insights, and making some new ones.
People have been telling me for decades that the telcos are motivated by competition and not by opportunity. Given the nature of their business, which has enormous capital costs and relatively low return on capital, most competitive threats emerge from other telcos. At least, if one considers “competition” to mean competing with telcos’ current businesses. This simple point may help explain why telcos have been so reluctant to branch out to better and more innovative services; they don’t value the opportunity those services might generate, and they fear a new host of competitors.
After posting the blog I reference above, I got some pushback from people who believed that telcos could innovate by reselling what are effectively OTT forms of communications services. I don’t believe that the revenue opportunities for telcos here are sufficient to create a bump on their profit-per-bit decline, but that’s not the only problem with the notion. Being a reseller exposes telcos to all the new skills required for retail service promotion, and their reluctance to compete in the OTT space is partly due to their desire to avoid proactive selling at the retail level, when they’re used to simply taking orders.
Some OTT position is essential, given that all the credible opportunities that have emerged or seem likely to emerge are related not to connectivity but to how connectivity can be used to deliver new services. In short, the connectivity that’s the product of the telcos is simply a growth medium supporting what could (inelegantly, to be sure) OTT bacteria. The telcos have been not only reluctant to embrace OTT services, there are positive reasons they can’t. The biggest such reason is that you can’t compete with OTT players when your own competing services have to contribute to cover connectivity service profit shortfalls those OTTs don’t have to worry about.
The solution to this problem seems clear to me. If your original product (connectivity) has commoditized, you need a new product. If you don’t want to field an OTT offering, or don’t believe it would work for the reason I just cited, then you need to field another wholesale offering, something beyond connectivity, where you can establish a viable wholesale business before disintermediation takes hold. What? I think there’s only one answer, and that is information.
OTT services are typically experiences of some sort, and experiences are valuable to the extent that they’re personalized. You can’t just shove video at people, you have to give them something they want to watch. Weather isn’t interesting if it’s for somewhere far from where you are and where you might be heading. These are simple examples, but they prove that people want stuff in the context of their lives, which is why I’ve called the sum of the stuff that personalizes experiences contextual services.
There are a lot of things that create contextual services, the most obvious these days being tracking web activity. Ads are personalized by drawing on what you buy and what you search for or visit. This sort of contextual service isn’t easily available to telcos because it relies on information gathered from OTT relationships, the very area telcos don’t want to get into. Telcos need a kind of personalization that OTTs don’t already have an inside track with, and the best place to find it might be location and location-related information.
Anyone who watches crime TV knows that mobile operators can pin down your location from cell tower access, not perhaps to a specific point in space but to a general area. They know when you move and when you’re largely stationary, and they could know when you are following a regular pattern of movement and when you’re not. Best of all, all the stuff they know about you can be combined with what they know about others, and what they know about the static elements of your environment, like buildings, shops, sports venues, and so forth.
Obviously, using data from other people poses privacy issues, but there are plenty of examples of services based on even individual locations already, and an opt-in approach would be acceptable by prevailing industry standards. When we generalize to communities of people, there’s no issue. For example, mass movement of mobile users associated with things like a venue letting out would signal a likely change in traffic conditions on egress routes. That movement can be tracked by cell changes by the users, something that’s already managed by telcos.
Is a shopping area crowded, or relatively open? Are there a lot of people in the park? Those are questions that analysis of current mobile network data could answer, though obviously you’d need to aggregate information from multiple providers. That’s OK, because what we’re looking for, recall, is a wholesale information offering. Telcos could offer an API through which retail providers could gather their information, and aggregate it as needed with information from other telcos.
They could also aggregate it with IoT data. One of the big problems with the classic IoT public-sensor model is that nobody has any real incentive to deploy public sensors; there’s no ROI because their use isn’t confined to the organization who paid for deployment. Suppose that IoT sensors were deployed by telcos, and that rather than their being public, they were information resources for the telcos to use in constructing other wholesale contextual services. Whatever we believe IoT could tell us could be converted into a service that digests the sensor data and presents it as information, which is what it is.
There’s more that could be done with all this data. Recall from my previous blogs that many advanced IoT opportunities involve creating a “digital twin” of a real-world system. The “real world” here could be the real world in the local sense of a given user. We already have sophisticated mapping and imaging software that can construct a 3D reality of places, and that could be used to provide augmented-reality views of surroundings, with place labels and even advertising notices appended.
The notion of a real-world digital twin is the ultimate piece of the contextual-service puzzle. A telco could obtain, or even contract for, the basic software needed, and of course there’s likely no organization more used to large capital expenditures than a telco, so they could also fund a significant IoT deployment to feed sensor-based services. The sale of wholesale services obtained from these systems could then be a revenue kicker, and it would still allow telcos to stay out of the retail application business for as long as it took for them to gain comfort with that space, which might never happen, of course.
I don’t think it’s likely that telcos will do this sort of thing. I think public cloud providers might well consider it, and might form relationships with telcos to obtain information from mobile software to feed the information services and real-world digital twin. It’s hard to imagine this kind of thinking from a telco who hasn’t been able to come to grips with cloud-hosting even elements of critical 5G infrastructure, and are seeking public cloud providers instead.
I think this is an example of an opportunity that telcos will be so slow to recognize that they’ll end up losing it to another player. Likely, to their own public cloud “partners”. Instead, they’ll try to convince themselves that some different form of connection services is innovation. They’ll succeed in the convincing part, but what they’ll get won’t be innovative at all, it will be another form of telco business as usual.
