The Future For Telcos

After two decades of failure to transform their businesses from marginised voice services to content media providers, many Telcos are now trying again. The only value-added' services that have had any great mass market success for incumbent carriers over the past two decades are Directories and RingTones.

The value-added service market is customer/marketing driven. This is totally different from the Telcos' core engineering-driven network business. The two do not mix well, yet Telcos attempt to bundle solutions that draw on both service lines.

Each revenue stream should be looked at independently. And both need to be separate from the slow-moving and bureaucratic core company.
Only in this way will Telcos hope to compete with the thousands of existing and new e-services companies that operating and entering this market.

Most incumbents still retained the majority market share in their core voice business. But further up the value chain, they are competing for only 1%-2% market share – this is a major culture shock for most, requiring different strategies, business structures, staffing, marketing etc .

Since others may already have the customers, the marketing expertise, and the background in a particular market segment, the Telcos are having to play a new game, for the first time. Telco CEO's will need to either embrace or take on non-traditional rivals in cable, content, media and converged servcies.

Large Telcos are not known for supporting new developments – in spite of the lip service they pay to ‘innovation’ and ‘rapid product development’. Their processes and cultures are too entangled in overbearing cost that new products either get strangled in politics or they get subjected to outdated pricing models used for network service pricing and are not competitive.

Telcos seem to struggle to let go of the capital cost invested in their networks, and zero base new services from a cost of delivery perspective.
Innovative employees lose heart, and tire of being seen as free spirits that don’t fit into the old world team structure. Eventually most leave to either work for new media companies or start their own ventures. Inevitably however, they need to connect back with the Telcos to deliver their products. And the outdated attitudes strike them down again with all the force of Thors hammer.

Telcos need to morph from a telecommunications service company to a media communications enterprise. They are well poised to act as the hub in the media market – providing the underlying carrier service to new media. With broadcasting converging into the telecommunications space, the latency issues of corporate culture are about to come under another wave of demand.

The underlying structure – both business and technical needs to change, and it needs to happen at a much greater rate than it is at present.
The new NGN technologies will provide better marketing platforms for the media products and services - educational, entertainment and financial.

Telcos should stay focused on being the delivery platform and marketer of such media, and leave content development to strategic partners. These services should not be rebranded and launched as Telco brands.

Media content companies should retain their own identity and their own product brand names. Content engineering into e-services is not a technical issue, it’s a marketing one, and providers understand how best to position these offerings in the market. They should stay in control of that capability.
Each business should stick with what they do best.

This will not constain the development of Telcos, it will just take them in a different direction. Instead of involving themselves as media and content service providers, they should expand their capability to host and provide access to a wider range of capabilities, for example:

• Service delivery platforms - mobile devices, VoIP systems
• Revenue Assurance Systems
• Information services – www, email, location based services, gps navigation
• Mass market media – music, video, VoIP
• Broadcasting – IPTV
• SaaS – software as a service

Instead of the current model where Telcos are attempting to take over content providers, they should instead be focusing on forming tighter relationships with IT companies such EDS, IBM Unisys and HP to integrate application platforms with access services.

Many niche players in this arena will fail under the current economic downturn – these are the ones Telcos should be focussing on.

Telcos should simply focus on being the best communications company for the delivery of services.

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