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MWC14: What Are Telcos For?

Graham Finnie
Heavy Lifting Analyst Notes
Graham Finnie, Consulting Analyst
3/5/2014
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Frustratingly confined to my sick-bed throughout this year's Mobile World Congress, there were one or two small consolations to be taken from missing the greatest telecom show on earth: I could get a cup of tea whenever I wanted one; and I could switch off the media noise and watch the garden birds preparing for spring.

But most of all, I could, for once, see the show from the outside looking in. Instead of burrowing my own topic-specific tunnels through the forest of booths and their caffeinated sales folk, I could see what matters to Joe and Jane Public.

And from that perspective, nothing, really, could be plainer. To the world at large, it's all about apps and devices. The big stories as viewed from my sick-bed were, in no particular order:

  • Samsung Galaxy 5
  • Connected watches
  • Mirrorlink
  • Connected automobiles
  • Windroid
  • E-ink device displays
  • iPro smartphone lenses
  • Smartphones for seniors
  • $25 smartphones
  • Connected fitness bands
  • Smartgloves
  • Smartfabrics
  • And, on the apps side, Facebook, WhatsApp, Openchat, Mastercard's Masterpass in-app payment scheme, surgeons using Google Glass, Opera Max data compression, and so on and on.

From this point of view, the network (and its supply chain) is little more than an afterthought: annoying when it fails, but otherwise invisible. SDN, NFV, NG-OSS and all the acronyms that keep those inside the network industry awake at night are of no more interest to the world outside than, say, new kinds of road surfaces, or the latest gas turbine.

No doubt that sounds a little unfair to those who toil heroically to keep their networks relevant in an end-user environment that is changing at frightening speed. The fact that telcos have been able to cope (just) in an environment where they control less and less of the device (and app) value chain is little short of miraculous.

But the world can be an ungrateful place, and viewing MWC from the outside in raises a larger and even more uncomfortable question in my mind. If telcos over the past 20 years have steadily lost control over the devices connected to their network, as well as most of the applications that run on them, what will they be selling to Joe and Jane Public in, say, 10 years' time?

It's hard not to follow the logic of the past ten years and answer: nothing but a connection and the bandwidth that goes with it. TV, telephony, messaging, and all the rest, on this reading, will have gone the way of every other app -- disappeared into Whats App, Facebook, Amazon Prime, Netflix, and other start-ups yet to be born. No longer will these apps and services be called, absurdly, "over the top" -- they will constitute 100% of what customers value.

There are, of course, no sure bets about the future. Many telcos are still deeply embedded in the business of providing services, and won't easily abandon a core source of value and stickiness. In fixed networks, triple play is still the default package in many countries. In mobile networks, a different kind of triple play (voice, messaging, bandwidth) rules. But for how much longer?

The question then will be whether telcos can develop enough ancillary capability to earn more money from their consumer customers, not just directly but indirectly. Ancillary capability means not only the services themselves, but the service enablers, perhaps paid for not by the users but by content and applications providers, or by enterprises. Things like security & parental control, guaranteed delivery, QoE, analytics, and other goods that network operators are well positioned to provide.

Small wonder, in light of that list, that network neutrality -- or rather, its absence -- matters so much to the telcos. With so much at stake, we have not, I think, heard the last of that debate.

Whatever the outcome, a great deal is at stake. If telcos can't uncover new sources of revenue (or persuade regulators to give them special breaks) the relentless focus on cost-cutting will continue. But if they can, new vistas will open up for both them and their suppliers. One way or another, service innovation -- or its absence -- will be the key to the future.

Graham Finnie, Chief Analyst, Heavy Reading

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MordyK
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MordyK,
User Rank: Light Sabre
3/6/2014 | 11:19:43 AM
Re: The future of Telcos
All this pessimism in regard to the carrier's future is disheartening. The carrier's have so much unique value ot offer, but they simply have to change their culture and start thinking like webco's instead of their old telco ways.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/6/2014 | 12:36:49 AM
Just because
Just because we didn't hear much about networking doesn't mean it's unimportant. When service providers are doing their jobs, the network is invisible, and consumers and businesses can access it without having to think about it.
nasimson
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nasimson,
User Rank: Light Sabre
3/5/2014 | 9:46:20 PM
The future of Telcos
What an insightful article! The future of telcos is an often discussed subject. There are no easy answers to how telcos will win back the OTT market that they very stubbornly & unwisely left to the internet space. First it was other services, now it is messaging, pretty soon it will be voice. Telcos will find their bread and butter going to OTT. Perhaps Telcos only utility will be outdoor and the non-WiFi spots in indoor.
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
3/5/2014 | 10:02:22 AM
Re: Telcos
Yes, probably. Maybe. It's hard to say for sure because WiFi is fundamental to the smartphone market. It has helped to grow the overall market for mobile data. In that sense, it has been very useful to MNOs.

Whatsapp has, arguably, destroyed value for mobile operators. But it provides a lot of value to end-users and that encourages people to get smartphones and data plans. WiFi is a little the same.
mendyk
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mendyk,
User Rank: Light Sabre
3/5/2014 | 9:54:02 AM
Re: Telcos
Won't wi-fi turn out to be more of a revenue reducer for mobile operators as it is currently constituted? If free or low-cost wi-fi does become ubiquitous, fewer users will need pricer data plans.
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
3/5/2014 | 9:43:06 AM
Re: Telcos
I'm also skeptical about the $33 billion Whatsapp figure. But pretty obviously mobile operators have been outwitted and outmaneuvered in the provision of what at one point was expected to be a core service: sending messages and pictures.

I also doubt WiFi roaming will make much overall difference to operator revenues. But there are some parallels in that mobile operators are, largely, ignoring what is obviously a useful and well-used technology. I've argued that mobile operators should engage with WiFi. The difficulty is to figure out how they can better exploit the technology. That part isn't obvious.
mendyk
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mendyk,
User Rank: Light Sabre
3/5/2014 | 8:28:40 AM
Re: Telcos
Colleen -- It's not obvious how mobile network operators are losing revenue without wi-fi roaming. I'm also curious (skeptical?) about that $33 billion Whatsapp figure.
clleenl-2
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clleenl-2,
User Rank: Light Beer
3/5/2014 | 5:28:21 AM
Telcos
Hi Graham,

Isn't roaming WiFi the shimmering star for the telcos, and that's why they've been working so hard on developing Next Generation Hotspot aka Hotspot 2.0 with Passpoint certification? They can see there's a lot of money that's been left on the table - I read somewhere that Whatsapp accounted for $33 billion in less telco sales last year. Roaming WiFi would certainly recoup that and, at the same time, make connecting to hotspots easy.

 

Colleen O'Shea
http://wifitrends.blogspot.com

 
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