Business Transformation

What Carriers Can Learn From Shipping

CHICAGO -- Light Reading's Big Telecom Event 2014 -- Carriers need to understand they're in the service delivery business, not just the network operations business, Heavy Reading Chief Analyst Graham Finnie said here on Tuesday.

Finnie compared the Internet and information networks today to the shipping industry in the 20th century. Shipping and trucking entrepreneur Malcolm McLean pioneered the use of the shipping container, thereby revolutionizing supply chains by automating transportation.

"Malcolm McLean's fundamental insight, commonplace today but radical in the 1950s, was that the shipping industry's business was really cargo, not sailing ships," Finnie said, quoting from the book, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.

Malcolm McLean at Port Newark, 1957. Source: russavia
Malcolm McLean at Port Newark, 1957. Source: russavia

Similarly, today's carriers need to think of themselves as being in the business of delivering services to end-users, not operating networks, Finnie said.

Applying that insight, there should be no distinction between over-the-top services and telco services, Finnie said.

Fortunately, the industry is shifting. More and more decisions are being re-cast as business decisions for the purpose of delivering services that can be monetized, rather than running efficient networks (though those goals are not mutually exclusive). But there's still a long way to go, Finnie said.

Nearly half -- 46% -- of network operators say failure to adapt to new business and market conditions is the biggest problem they now face regarding their long-term business outlook, according to a Heavy Reading survey ahead of BTE. Only 9.5% identified failure to cope with or take advantage of technology changes as the biggest problem.

Heavy Reading's Graham Finnie brings his shipping news to BTE.
Heavy Reading's Graham Finnie brings his shipping news to BTE.

"So it's really about business as the issue, rather than the underlying technology," Finnie said.

As an example of the diminishing importance of technology compared with business, survey respondents said SDN and NFV will not have a transformative effect on network operators in terms of efficiency and profitability. Some 51% said the effect would be slightly positive. "Not exactly a ringing endorsement," Finnie quipped. About 30% said the technologies would have no impact or a negative impact. Only 22% said they would have a very positive impact.

"Delivering services that people actually want and are willing to pay for is really at the heart of the issue here," Finnie said.

We've turned the corner, and carriers are finally looking at things from more of a business and services point of view rather than simply a technology point of view, Finnie said. As an example, carriers are rolling out new service plans based on policy management, such as shared usage, application specific packages, packages supporting gaming, add-ons like particular services for Spotify, and sponsored data.

Carriers are more willing to work with third-party OTT providers, particularly in emerging markets, too. That's particularly encouraging because OTT providers deliver the services and value to end-users. And, Finnie said, the gap is diminishing inside telcos between network, IT, and product marketing teams.

"I'm far from downplaying technology. Technology is absolutely critical, but it has to be properly applied, with services in mind," he said. More importantly, technology has to be at the service of improving customer experience.

The Internet "was founded on delivering services. The technology as really incidental," Finnie said. "Tim Berners-Lee certainly didn't want to be known as the man who invented HyperText Transfer Protocol. He wanted to be known as a man who created a new means of collaborative working and information exchange," Finnie said.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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Infostack 6/20/2014 | 6:15:41 AM
Re: Shipping Whatever Steve, you are right on.  The failure of the balkanized edge providers is that they have not been able to come up with new service delivery platforms that embraced the fundamentals of the new digital technology era, namely moore's, metcalfe's and zipfs laws.

As balkanized, edge access providers, ISPs and MNOs are incapable of waking up every day and asking,  "how do we provide more for less to more people across more contexts?"  Principally, that's because they have a narrow and uneven view of demand, as opposed to those at the core (OTT).  Netflix has a tremendous advantage in pricing and service delivery of VoD from its vantage point.  Today they are constrained only by their flat-rate pricing model, but have you seen that it costs them only 4 cents to store and deliver an hour of video on average?  And that number is declining by 30% annually.

Until the edge access providers restructure and get out from under their siege mentality they are doomed.  They are, quite literally, the city states and small kingdoms who hid in their fortified castles in the early to mid part of the last millenium and failed to adapt to the cannon and understand that power lay in mobile armies with great supply chains.

thebulk 6/18/2014 | 10:13:57 PM
Re: Getting there That would be great, I think the best way would be to reach me on twitter @danablouin 
MordyK 6/18/2014 | 9:46:30 PM
Re: Getting there mainly because the carrier management focus is telco and they ignore opportunities that are not telco. I am drafting a more detailed blog post and if you give me your details, i'll send you the link when I post it.
thebulk 6/18/2014 | 9:38:01 PM
Re: Getting there So I have to ask now, did they ignor the market because they just didnt care or they just didnt care to see the opportunity? 
MordyK 6/18/2014 | 7:54:25 PM
Re: Getting there The problem is less the time rather than the approach. Simply copying anothe rappproach will not work, but bringing a new dynamic approach would work well.

I was doing a consulting gig for a fraud company and every client required the same set of data which is only even possible from the carriers, but the carriers simply ignore the market.
thebulk 6/18/2014 | 7:47:45 PM
Re: Getting there I dont know, they always seem to catch up about 5 years or more behind everyone else, and many times that is just too late. you would be talking about a major shift for that to change. 
MordyK 6/18/2014 | 7:42:59 PM
Re: Getting there If carriers ever get their act together, I believe that its never too late as they bring some real benefits to the table that their competitors simply can't.
thebulk 6/18/2014 | 7:36:50 PM
Re: Getting there no doubt its not something we can hold our breath for, carriers are not quick and nimble, the are large, goofy and move slow. lets not wait around, but it will happen, just when its too late. 
MordyK 6/18/2014 | 7:34:02 PM
Re: Getting there That's been my argument since somewhere around 2003, so while I welcome it I no longer hold my breath for it :)
thebulk 6/18/2014 | 6:22:50 PM
Re: Getting there As networks begin to see their network as the service that may very well change. 
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