The traditional industry view is that “telcos” are a well-defined and fairly cohesive group. Industry associations like GSMA, ETNO, CTIA and others have typically been fairly homogeneous collections of fixed or mobile operators, only really varying in size. The third-ranked mobile operator in Bolivia has not really been that different from AT&T or Vodafone in terms of technology, business model or vendor relationships.
Our own company, STL Partners used to have the brand “Telco 2.0”. However, our main baseline assumption then was that the industry was mostly made up the same network operators, but using a new 2.0 set of business models.
This situation is now changing. Telecom service providers – telcos – are starting to emerge in a huge variety of new shapes, sizes and backgrounds. There is fragmentation in technology strategy, target audiences, go-to-market and regional/national/international scope.
This report is not a full explanation of all the different strategies, services and technological architecture. Instead of analysing all of the “metabolic” functions and “evolutionary mechanisms”, this is more of a field-guide to all the new species of telco that the industry is starting to see. More detail on the enablers – such as fibre, 5G and cloud-based infrastructure – and the demand-side (such as vertical industries’ communications needs and applications) can be found in our other output.
The report provides descriptions with broad contours of motivation, service-offerings and implications for incumbents. We are not “taking sides” here. If new telcos push out the older species, that’s just evolution of those “red in tooth and claw”. We’re taking the role of field zoologists, not conservationists.
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The historical landscape
The term “telco” is a little slippery to define, but most observers would likely agree that the “traditional” telecoms industry has mostly been made up of the following groups of CSPs:
MNOs: Countries usually have a few major mobile network operators (MNOs) that are typically national, or sometimes regional.
Fixed operators: Markets also have infrastructure-based fixed telcos, usually with one (or a small number) that were originally national state-owned monopolies, plus a select number of other licensed providers, often with greenfield FTTX fibre. Some countries have a vibrant array of smaller “AltNets”, or competitive carriers (originally known as CLECs in the US).
Converged operators: These combine fixed and mobile operations in the same business or group. Sometimes they are arms-length (or even in different countries), but many try to offer combined or converged service propositions.
Wholesale telcos: There is a tier of a few major international operators that provide interconnect services and other capabilities. Often these have been subsidiaries (or joint ventures) of national telcos.
In addition to these, the communications industry in each market has also often had an array of secondary connectivity or telecom service providers as a kind “supporting cast”, which generally have not been viewed as “telecom operators”. This is either because they fall into different regulatory buckets, only target niche markets, or tend to use different technologies. These have included:
Some of these have had a strong overlap with telcos, or have been spun-out or acquired at various times, but they have broadly remained as independent organisations. Importantly, many of these now look much more like “proper telcos” than they did in the past.
Why are “new telcos” emerging now?
To some extent, many of the classes of new telco have been “hiding in plain sight” for some time. MVNOs, towercos and numerous other SPs have been “telcos in all but name”, even if the industry has often ignored them. There has sometimes been a divisive “them and us” categorisation, especially applied when comparing older operators with cloud-based communications companies, or what STL has previously referred to as “under the floor” infrastructure owners. This attitude has been fairly common within governments and regulators, as well as among operator executives and staff.
However, there are now two groups of trends which are leading to the blurring of lines between “proper telcos” and other players:
Supply-side trends: The growing availability of the key building blocks of telcos – core networks, spectrum, fibre, equipment, locations and so on – is leading to democratisation. Virtualisation and openness, as well as a push for vendor diversification, is helping make it easier for new entrants, or adjacent players, to build telecom-style networks
Demand-side trends: A far richer range of telecom use-cases and customer types is pulling through specialist network builders and operators. These can start with specific geographies, or industry verticals, and then expand from there to other domains. Private 4G/5G networks and remote/underserved locations are good examples which need customisation and specialisation, but there are numerous other demand drivers for new types of service (and service provider), as well as alternative business models.
Taken together, the supply and demand factors are leading to the creation of new types of telcos (sometimes from established SPs, and sometimes greenfield) which are often competing with the incumbents.
While there is a stereotypical lobbying complaint about “level playing fields”, the reality is that there are now a whole range of different telecom “sports” emerging, with competitors arranged on courses, tracks, fields and hills, many of which are inherently not “level”. It’s down to the participants – whether old or new – to train appropriately and use suitable gear for each contest.
Virtualisation & cloudification of networks helps newcomers as well as existing operators
Source: STL Partners
Where are new telcos likeliest to emerge?
Most new telcos tend to focus initially on specific niche markets. Only a handful of recent entrants have raised enough capital to build out entire national networks, either with fixed or mobile networks. Jio, Rakuten Mobile and Dish are all exceptions – and ones which came with a significant industrial heritage and regulatory impetus that enabled them to scale broadly.
Instead, most new service providers have focused on specific domains, with some expanding more broadly at a later point. Examples of the geographic / customer niches for new operators include:
Enterprise private 4G/5G networks
Rural network services (or other isolated areas like mountains, offshore areas or islands)
..to through each of the new “species” of telcos in turn. There is a certain level of overlap between the categories, as some organisations are developing networking offers in various domains in parallel (for instance, Cellnex offering towers, private networks, neutral host and RAN outsourcing).
The new telcos have been grouped into categories, based on some broad similarities:
“Evolved” traditional telcos: operators, or units of operators, that are recognisable from today’s companies and brands, or are new-entrant “peers” of these.
Adjacent wireless providers: these are service provider categories that have been established for many years, but which are now overlapping ever more closely with “traditional” telcos.
Enterprise and government telcos: these are other large organisations that are shifting from being “users” of telecoms, or building internal network assets, towards offering public telecom-type services.
Others: this is a catch-all category that spans various niche innovation models. One particular group here, decentralised/blockchain-based telcos, is analysed in more detail.
In each case, the category is examined briefly on the basis of:
Background and motivation of operators
Typical services and infrastructure being deployed
Examples (approx. 3-4 of each type)
Implications for mainstream telcos
Table of contents
New telco categories and service areas
Recommendations for traditional fixed/mobile operators
Recommendations for vendors and suppliers
Recommendations for regulators, governments & advisors
This report is a follow-up from our first report Telcos in health – Part 1: Where is the opportunity? which looked at overarching trends in digital health and how telcos, global internet players, and health focused software and hardware vendors are positioning themselves to address the needs of resource-strained healthcare providers.
NB A full PDF copy of this briefing can be downloaded here.
This special Executive Briefing report summarises the brainstorming output from the Pilot 2.0 section of the 6th Telco 2.0 Executive Brainstorm, held on 6-7 May in Nice, France, with over 200 senior participants from across the Telecoms, Media and Technology sectors. See: www.telco2.net/event/may2009.
It forms part of our effort to stimulate a structured, ongoing debate within the context of our ‘Telco 2.0′ business model framework (see www.telco2research.com).
Each section of the Executive Brainstorm involved short stimulus presentations from leading figures in the industry, group brainstorming using our ‘Mindshare’ interactive technology and method, a panel discussion, and a vote on the best industry strategy for moving forward.
There are 5 other reports in this post-event series, covering the other sections of the event: Retail Services 2.0, Content Distribution 2.0, Enterprise Services 2.0, Open APIs, Technical Architecture 2.0, and Devices 2.0. In addition there is an overall ‘Executive Summary’ report highlighting the overall messages from the event.
Each report contains:
Our independent summary of some of the key points from the stimulus presentations
An analysis of the brainstorming output, including a large selection of verbatim comments
The ‘next steps’ vote by the participants
Our conclusions of the key lessons learnt and our suggestions for industry next steps.
The brainstorm method generated many questions in real-time. Some were covered at the event itself and others we have responded to in each report. In addition we have asked the presenters and other experts to respond to some more specific points.
Background to this report
Sometimes new business models feel too complicated to undertake. However, new methods and technologies are enabling operators to trial new business models without having to change their existing systems or processes. This session takes, as an example, a key Telco 2.0 ‘use case’ that combines video distribution, advertising and customer data, and shows how operators could activate it fast.
Where to start with Telco 2.0?
How to minimise the cost and disruption of entering the Telco 2.0 market?
Andrew Thomson, VP Global Solutions, Infonova
Simon Torrance, CEO, Telco 2.0 Initiative
Chris Barraclough, Managing Director, Telco 2.0 Initiative
Dean Bubley, Senior Associate, Telco 2.0 Initiative
Andrew Thomson, VP Solutions, Infonova said that Telcos have a huge diversity of legacy networks which they are now transitioning to common IP systems, and also a huge investment in associated BSS-OSS and MIS. At the same time, the BSS-OSS processes are moving from batch-processing to real-time working. With this complexity, transformation can only really be done in stages resulting in new and old systems coexisting. Managing this is a serious challenge.
So where do we start? There are a number of possible entry points: New bundles; a new app store; order-to-cash; new channels:
A non-intrusive approach to bundling; this means that an aggregator handles the interfaces to both wholesale customers and to the retail side, fixed and mobile; it can also drive the Business Intelligence and reporting processes.
In the app store example, the aggregator is a platform acting as a proxy for multiple sources of APIs in order to drive a multi-operator, or operator multi-network, app store. It wraps the operator, or primary operating entity, and other operators in order to provide a single virtual interface for developers and multiple virtual operators for end users.
Order to Cash 2.0
Operators could create a new revenue source by using the capabilities enabled by the BONDI initiative to let customers choose services from other carriers directly from the handset. This sounds like a threat, but by the same token you could include many other services and businesses in your own bundles. Aggregation, again, is a crucial enabler for this – someone needs to aggregate services from multiple operators
Why not use car dealers? Bundling navigation, commications, or security tracking with the vehicle would be tremendously attractive to car dealers and end users. This then opens up a lot of other possibilities – advanced advertising and marketing, and you could deploy the full range of Telco 2.0 features in order to provide extensive customer feedback.
In summary, the latest technology applied as an external aggregator bureau is actually cheaper and quicker than legacy. This makes a wide range of new business models possible. We think this will lead to a crisis for the systems integrators.
A question from the floor: This bureau model may further commoditise the network. How should we deal with this risk?
Andrew Thomson replied that it might have that effect. New technologies have a big effect on these things – as the presenter from Oracle said, anyone can do those complex call centre-CRM installations now.
One of the recurring themes at the event was ‘where to start?’ with Telco 2.0 business models. Although many participants could perceive where operators would like to be eventually, there was much less belief or consistency in working out how to get there.
Most recognise the need for caution. C-level executives will, quite rightly, take time to buy into the idea, as will investors: proof points will be needed. And Telco 2.0 projects will need to be aligned with various other transformation initiatives, such as more moves to new OSS/BSS stacks or outsourcing of important functions. In addition, any major new programme of investment (for example in new hardware platforms, or extensive developer-centric marketing and support) is likely to be burdened by delays and much closer business case scrutiny in the current economic climate.
So, Telco 2.0 believes that quick and influential wins might be achieved via pilot projects – illustrating the power and vision of two-sided models without needing complete reinvention of overall company strategy first. As the economy picks up and executives are more inclined to take risks again, these proof-points can then be used to accelerate much larger programmes of change. Clearly, the appetite for risk will vary by operator – as will the most accessible ‘low hanging fruit’.
Audience input around piloting spanned a wide range of themes – from the technical to the organisational, and from attitudinal shifts to more specific early niches. Overall, all these elements will be important to align.
Some of the participants took a technical view on piloting options, looking at easing platform deployment
· [Do pilot projects] In the cloud. [#3]
· Had similar thoughts about combining different SDPs into one coherent system. [#9]
· Focus on an incubator approach utilizing NGOSS and state of the art SW technology (clouds, virtualization, SOA, Web Services, open source wherever possible) so that the cost basis allows/fosters lower risk and new biz models. [#12]
o Re 12. Encourage unconventional thought and development — break the old Telco mindset. Must use open source yes, but more than just for cost — because OS pushes the technology innovation envelope forward. [#42]
· Expose current Telco APIs to developers through a developer portal. [#13]
· Need OSS/BSS standards in this area to create reusable industry fabric. [#17]
· Go to the more agile parts of your business, e.g. ISP, leverage their SDP and / if existing / their billing engine. [#20]
· Involve third-party developer with an own market to add new features coming from network capability mash up. [#32]
· In the cloud by not impacting own IT. [#34]
· Define clear and normalized system boundaries. [#41]
· Connect web scale platforms with APIs to Telco backend services and data to enable new services. Easy useful example around user location: connect Telco current user location information to Yahoo!’s Fire Eagle platform to enable mobile and PC location-based services now. [#95]
· OSS/BSS platforms are largely the bottlenecks and can’t be used for Telco 2.0 — they are largely 2-3 generations old and take to long to rollout. [#96]
· Biggest issue at Telco’s is cost of rolling out a service, lots of people have to be involved, and cost of failure is very high. This stymies innovation. Doing this on a low-cost platform reduces cost of trialling a service before then fully rolling out the service. [#92]
· Build it on android. [#84]
· Need some open APIs to attract the VAS. [#47]
· Build a hosting environment where 3rd parties can deploy new service candidates, and provide the community tools environment for collecting feed
· Open the API to a large amount of developer (crowd sourcing). [#50]
· Expose Telco network capabilities in a secure and simple way to 3rd party application providers; start with essential values first, e.g. identity management and authentication. [#90]
· See the benefit of one API and BONDI to deliver new models. [#69]
· Normalize the data set generated by collecting wide variety of data source. [#71]
· Use development environments which allow reuse (SOA). [#77]
· Telcos have 100s of product catalogues holding their existing products; make sure that the product on the other side of the business models is built the same way. [#79]
Feedback: Organisation and structure
Many comments focused on structural suggestions and solutions – which parts of the Telco organisation are best-placed to work on new business models. Telco 2.0 believes that this may vary by operator – but that there is also a risk that new turf battles might emerge as separate teams claim ownership independently. A significant proportion of respondents seem to believe that external companies or cross-industry collaborations have a greater chance of success than in-house teams.
· Don’t do it inside the Telco, create a small JV or group. [#2]
· Create an open source community. [#4]
· One of two approaches: New-org or New-co. But certainly not business as usual. [#5]
· Use MVNO’s. [#6]
· Via MVNO. [#49]
· Use a bureau model to aggregate and provide new services. [#7]
· Get clear on the financial model(s). [#10]
· Clubbing together with other Telcos to make a global community to compete with global OTT. [#15]
· Create a new breed of service providers rather than the traditional Telco ones. [#23]
· Get going outside of the organisation in a separate project with incentives. [#27]
· Create an independent organisation. [#30]
· Work with a number of partners to develop a cross industry proposition that adds customer value and that is sustainable given future innovation and running costs, and then open it to industry. [#25]
· Form a small strategic group and leave them alone for 6-12 month. [#37]
· Set up an internal VC company. [#72]
· Use your labs/R&D to start in stealth mode – its just innovation. [#73]
· Do skunk projects. [#75]
· Get an industry body e.g. GSMA to launch a cross-operator commercial trial of simple web-based developer APIs and design detailed metrics to measure its success. [#58]
· Form partnership with 2-3 operators and build a solution together … shared ideas, expenses and solution. [#59]
· Has to be done ‘outside’ the Telco or it won’t move fast enough and will be constrained by legacy. [#83]
· Enlist support from executive champion to empower a separate internal group. Ensure open access to resources/databases and allow team to innovate without partisan or corporate boundaries. Launch service to target demographic. [#85]
· Incubators. [#63]
· Don’t go to a big SI or consulting company, this is the old model. Go small, innovative, quick companies spend < 10k and three months to see what is possible. Be willing to move fast means breaking down the barriers which will require top down support. Kind of like BT buying Ribbit without having to acquire if you don’t have the money. [#64]
· Create an ecosystem environment. [#67]
· Start it inside Telcos, with Telco resources or community education projects. It’s the only way to put Telcos sharing information. Show value gained of this and it’s easier to convince them on what they have to gain. [#80]
· Implement business models (not just advertising) based on behavioural analysis of actual use of the broadband pipe – otherwise we will always be “dumb fat pipe” Co. [#86]
· There are several service bureaus out there but their business models foster bad technology so that you have to pay for changes. [#91]
Feedback: People and culture
It is also already clear that human factors and behaviours will play as important a role in the early Telco 2.0 days. Changing corporate attitudes and philosophies clearly cannot happen overnight, but it appears that psychology may be as important as technology in getting the ball rolling.
· Integrate creativity and playfulness. [#8]
· Stop talking about it and just get on and try it. Find a simple idea and/or a small innovative to company to work with and give it a go. When you consider the business case think about how much you lose on mobile data today :). [#11]
· Just do and get out fast if no go. [#28]
· step1: need a strong commitment at Board level. [#24]
o step2: work on ecosystem for trials. [#48]
§ step3: define an ‘easy to use’ app offering. [#61]
· Being finally bold and give it a try. [#29]
· Sidestep the AIB (a**holes in the boardroom) problem. [#38]
· I think the perceived risk of cannibalisation is stymieing change. Education still needed. [#40]
· Don’t be afraid to try something and get negative feedback. Be prepared to react quickly to customer feedback. [#56]
· Ask your retail group what they fear most THEN DO IT! [#89]
· Forget about structural limits focus on making customers passionate about you. [#54]
· Have to develop/create environments which allow the operator to take risks (allow failure). [#88]
· Strange how during this conference we have hardly focused on the customer, maybe time to engage with these individuals. [#74]
· Surprise the core business. [#82]
· How about polling the customers? [#65]
· Need to convert business model from platform segmented to a total audience value model. [#39]
· Invite upstream customers into a working forum with selected vendors and carriers in an open trial which publishes its findings and encourages participation from the developer community – pose a problem for the upstream customers to the developers and incentivise them to solve it in the framework. [#57]
Feedback: Go to Market
The concept of piloting Telco 2.0 projects quickly, but on a small scale seems to have resonated well. But there was much less consistency in the precise approach to follow. Some will be cautious and find a suitable small but homogeneous marketplace, while others are looking at other ways to segment their targets or just find a set of “tame clients” to pursue first.
· Small representative market. [#14]
· Step by step with clear and beneficial use cases. [#18]
· Do some very profitable cases with large companies re-engineering some processes. [#19]
· Do a limited pilot with one pilot partner. E.g. suitable for sender pays for data models. [#21]
· Experiment in a new geographic market, maybe in conjunction with a local tier 2/3 player. [#22]
· Partner with IBM or Accenture & target a specific vertical enterprise market. [#31]
· A service at a time using a bureau model. [#43]
· Do the proof of concept first. [#44]
· Work with selected companies and trial, then develop a case study and show the value to other industry sectors. [#45]
· Focus on a vertical; build on use cases and then move on to the next. [#55]
· Conduct a small-scale pilot with a key strategic customer to understand the benefits and consequences of the new business model. Make sure that the business model experiment is aligned with a new customer business model. I’m specifically talking about Enterprise customers here which will use telecom services as a fundamental enabler for deliver their own industry sector-specific services. [#51]
· Find ‘tame’ customers, e.g. universities with telecoms expertise. [#93]
· Build a service with some friendly ‘captive’ internal customers e.g. your own employees or small subsidiaries or departments. [#78]
· Identify a customer / segment and work with them / it to generate the solution. Be prepared that some of the solution can be provided outside of the Telco. [#76]
· Do a small user experience pilot and ask your kid to trial it. [#81]
· Same approach as piloting new radio technologies – find somewhere small & isolated to try first, e.g. like an island territory or similar, with ring fenced local operations. [#60]
· Focus on how Telco can add value in new verticals like healthcare or auto. [#87]
· Create an option play in an adjacent market and test the model in that domain. Do it with non Telco people. [#66]
· [Get] feedback from early users. [#62]
· We already do a pilot with tom-tom. They get our anonymized mobile location data and are able to derive traffic density and jam information from that. Tom-tom paid for the platform and a recurring fee. [#70]
Feedback: We’re all doomed, doomed!
Although there were also some defeatists (or at least, humorists) who talked about Internet players and suggested that if you can’t beat ’em, then why not join ’em?
· Just wait, and let Apple do it for you :). [#26]
· Acquire Amazon. [#36]
· Turn outside like BT buying Ribbit. [#46]
o Yeah but BT will destroy Ribbit. [#52]
· Talk to Google. [#68]
Lessons learnt & next steps
The main take-out from this session is that there is no single clear path. The feedback yielded dozens of suggestions, many of which make sense on a standalone basis. The appropriate options for any given operator will clearly depend on its specific circumstances – fixed vs. mobile, tier 1 vs. tier 2, national vs. international, age & capability of OSS, maturity of existing API and Telco 2.0 programmes, and numerous other criteria.
However, one theme came out strongly throughout the event: do something quickly. There is insufficient time to pursue the usual protracted Telco timescales for research and deliberation. This means that areas with long lead times – such as government projects – are typically unsuitable. Some target industries are also experiencing lengthening sales/decision cycles in the recession – these are also not optimal for pilots.
Instead, focusing on sectors or groups capable of making quick turnarounds – with easy measurement of success/failure – are paramount. Web-based companies are often the most flexible, as are some academic institutions. There may also be a geographic dimension to this – countries with low regulatory burdens, or where it is unusual to have projects stuck for months with lawyers, are attractive for piloting purposes.
Working alone may be fastest, but collaborating with other operators is likely to be more effective in demonstrating validity to the Telco 2.0 concept. Balancing this natural tension will be important in the near-term. Gathering a small collection of operators together to work on tightly defined projects seems sensible as these can morph, over time, into larger scale activities with a larger ecosystem.
The Telco 2.0 Initiative is happy to work with any individual operators looking to identify early options. But some general short-term guidelines include:
Get a credible senior (board member) executive to sponsor activities in this area – preferably the CEO. Don’t try and build something without this support as a new business model will never succeed with the will to change at the top;
Realistically assess the likelihood that the corporate culture and systems will sustain ‘maverick’ Telco 2.0 operations. If it can, it is probably worth setting up an in-house group to work closely with relevant IT and operational units to select pilot areas and capabilities. But be honest with yourselves – if this will get mired in bureaucracy and politics, first seek an alternative approach outside the main business;
Where possible, avoid trials which need software or devices to be ‘hard-coded’ as making changes to beta versions is difficult and distribution issues will limit adoption. Instead, using the web or browsers as an interface enables any changes to be made on the server-side, on an ongoing basis;
Web-based trials have another advantage – multiple versions of the same underlying service can be developed in parallel, enabling project managers to see immediately what works and what doesn’t, by comparing feedback from separate groups of customers;
Perform an audit of current Telco 2.0-type initiatives across the whole company. Highlight any apparent duplication of effort, and predict any likely areas of tension or internal competition as early as possible. This is not trivial – in-fighting can kill projects quickly;
Assess and contribute to relevant industry-wide collaboration projects- GSMA OneAPI, OMTP BONDI, etc. Send representatives to developer meetings of competitors or peers elsewhere in the world, or in adjacent technology markets;
Look for any internal groups that could themselves act as early clients for new service propositions. It is easy to be blind to the obvious: if communications-enabled business processes are valuable, why not communications-enable your own processes first?
In this case, it is difficult for Telco 2.0 to suggest long term actions – these are obviously dependent on the results of the earlier pilot projects!