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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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