When the DWT23 event kicked off in Copenhagen, the CEO of the TM Forum laid out a key message, that telecom has “reached a crisis point… the clock is ticking… there is no silver bullet. This industry has three years at the most to turn itself around.” The story I referenced above, though, describes an event that appears to stick the collective telco heads deeper into the sand of “back to basics.” So did the TMF paper I blogged about.
I find that the telecom industry consists of two very distinct camps. The first camp, which is inhabited by almost all the major telco equipment vendors, the senior executives of over 85% of telcos I talk with, and the heads of the various telecom standards and industry groups, is of the view that telecom has to remain what it’s always been, but be better at it. The second camp, inhabited by startups in the telecom space, three-quarters of service planners in the telco community, and cloud and software groups, believes that telecom indeed has three years maximum to come up with a different business model.
You can’t average out politics, nor can you create consensus by averaging out the recommendations of these two positions. There is, in fact, no assurance that either of the two would work, there’s a growing movement among network operators worldwide to ask for subsidies to carry Big Tech traffic, suggesting there’s no way to make network services profitable. You also can’t prove out theories on telco evolution by looking at what’s said in tech conferences. Public utterances are often for show, and not always uttered by people in the know. Let’s look at some of the points the article makes and see if we can use what telcos tell me directly to make some sense and perhaps even draw a conclusion.
Let me start with a statement I’ve been making for a decade or more, and that well over 80% of both telco executives and telco planner up-and-comings agree with. Telcos cannot succeed if they are required to offer connection services at a loss and make that up with profit on other services. Whatever those other services are, it’s a certainty that there will be competition for them from other market sectors who don’t have a connection service loss to make up.
I’m starting with this because it frames a reality that may be the strongest argument for the stay-your-course picture of telco evolution. If connection services are the core service set for the telcos, it has to be made at least marginally profitable or it creates a fatal drag on the industry. My stay-the-course advocates would say that means that it would be possible to…well…stay the course, because it has to be. Actions to make that option viable will be taken, period.
The telco planners who are inhabiting the second, different-business-model, camp respond to that point with some variation on another quote from the TMF cited in the article: “the network operator sector has invested $1tn over the past five years and generated a 1% return from that massive capital outlay.” OK, that sounds terrible, but a 1% return shows that the connection business is marginally profitable. It also shows that, given the enormous time and energy put into finding more profitable connection service opportunities, we’re stuck in almost-neutral there, and there is nothing to be gained by throwing more good effort after wasted effort.
At the DTW23 conference, the article says that Telia’s CEO recommended a main focus of “delivering optimal fixed and wireless connectivity, developing services that could be offered on top of that connectivity, investing in digital support systems that enabled easier customer interactions and delivering everything in a sustainable way.” This fits the only approach that my telco executive contacts and planner contacts seemed to agree might be worthwhile. You launch two tracks. One is designed to optimize connection service agility and ROI, and the other to identify and capitalize on new retail services in which telcos could play a profitable role.
So with this apparent consensus, what’s the problem? According to all my own telco contacts, the problem is a lack of a specific approach to either of the two tracks. With regard to current services, telcos can’t get behind significant further steps they could take to optimizing connection service agility and ROI. With regard to new retail services, they can’t get behind any that promise significant ROI, in large part because the service areas they come up with are already very competitive.
Well, maybe there is one approach that gets a lot of attention, and is also mentioned in the article. AI has caught the imagination of telco executives, a group that had previously been captivated by the notion that “business intelligence” or “analytics” could uncover hidden insights that would sweep in like a deus ex machina (literally “god from the machine”) and solve their problems. Planners agree that there is considerable value in and hope for AI in both areas, but they’re uncertain as to whether their organization can run projects to harness that value and realize that hope.
Take those “digital support systems” that enable better customer interaction. I’ve sat in on OSS/BSS debates at telcos for over a decade, where the room was divided between those who wanted to “modernize” the systems and those who wanted to toss them and start over. Neither approach gained broad support, but to fail to act was to accept the present structure, and so we are still facing that choice in 2023. The problem here is that telcos have two immovable objects and probably no irresistible forces.
The first immovable object is the telco CIO’s domain. OSS/BSS systems are about as legacy as you can get. Those who worked on them in the 1970s wouldn’t be horribly uncomfortable reading through their descriptions and features today. The TMF, who I’ve cited above, is seen by most (including me) as an instrument of OSS/BSS inertia. They have published reams of documentation on a model, and that model has guided vendors and telcos alike. It’s taken years to get all this stuff together and it’s difficult to see how you could change things without building and documenting a competing model. Given how integral OSS/BSS is to telco business processes and line organizations, it’s hard to see how a major change could be managed.
The second immovable object is the network infrastructure itself, the domain of the head of operations and perhaps also the office of the CTO. The gear involved has expectations of useful life ranging from a minimum of three years to as much as twenty-five years. It’s installed in physical facilities that constitute a major real estate commitment, and its installation process may (for outside plant) involve rights of way and physical trenching and general disruption of property. It’s also a complex cooperative system of devices whose collective behavior depends on conformance to a set of specifications, which are also set by standards bodies made up of standards professionals.
The “probably” qualifier on my irresistible forces comment must now be considered. Financial stability would surely be such a force, but indications from past actions are that telcos would appeal to governments for relief as their first response. Australia adopted a not-for-profit network entity to absorb costly broadband deployments (which most say has been ineffective), and a group of EU telcos has appealed to regulators for subsidies, which it appears is being viewed favorably. I don’t think that the telcos are at the point where they’d take radical action moving their immovable objects until they’d given up on regulatory-driven relief. Eventually, that may be the only option. The question is whether, by the time telcos accept that, it could already be too late to frame out the business and technical model needed. We may answer that in 2024.
