Tag: telco

Zuckerberg meets the telcos

What do telco executives hope to learn from Facebook’s Mark Zuckerberg?

One of the fascinations of this blog is how telecommunications executives desperately fight against the idea of their service being a basic utility.

Should you scratch a tough, hardbitten telco executive; you’ll find a sensitive soul who desperately wants to be seen as a swashbuckling media tycoon or cool startup wunderkind rather than the manager of a staid old telephone company.

Once you understand the buried desired of telco executives, it’s not surprising that Facebook founder Mark Zuckerberg was invited to give the opening keynote of the 2014 Mobile World Congress.

Sadly for the Telcos it wasn’t good news as the real life tycoon and wunderkind described how Whatsapp, the startup he acquired for $16 billion last week, is going to introduce voice services in the near future.

Having seen messaging services like Whatsapp slowly strangle the telecommunications industry golden goose that was SMS, the telcos now face lucrative voice services being further eroded by these Over The Top smartphone apps.

Which leaves them with data, the lowest margin service in the telco stable.

Far from being the bravest man in Silicon Valley, Mark Zuckerberg is the telco industry’s future. Which is why the industry’s executives want to find ways to profit from developments like machine to machine (M2M) communications and media ventures.

The worry though is most of the new telco opportunities don’t appear to anywhere near as profitable as now declining or stagnant services that have been so lucrative in the past.

Which makes Ericsson’s partnership with Facebook in developing an Innovation Lab for the internet.com initiative intruiging.

The objective of Internet.com is to make the internet more accessible to more of the world, which again threatens incumbent telco models.

Transmitting data—even a text message or a simple web page—requires bandwidth, something that’s scarce in many parts of the world. Partners will invest in tools and software to improve data compression capabilities and make data networks and services run more efficiently.

Efficient, compressed data means even less revenue for the operators so it’s no wonder they’re looking at those alternate revenue streams.

No telco executive is likely to starve in the near future, but as revenues stagnate in their established markets it’s no wonder the industry’s leaders are wondering whether it’s worthwhile hitching their fortunes to Facebook’s success.

Similar posts:

  • No Related Posts

People are the key to doing business in Asia

Pacnet’s CEO sees people as key to the future of Asian business

The first Decoding the New Economy for 2014 is an interview with Carl Grivner, CEO of Asian data center and communication company Pacnet.

Pacnet is unique in having an extensive Asian network of fibre links and data centres as well as having head offices in both Singapore and Hong Kong.

Having two head offices in cities as different as Singapore and Hong Kong presents a number of challenges along with some advantages as Carl explains.

The company’s combination of data centres and data links gives Pacnet an opportunity to offer some unique services in software defined networks, which Grivner describes as “the Pacnet Enabled Network”, that allows customers to create their own virtual networks.

What differentiates Pacnet in Grivner’s view are the company’s people – an asset essential in diverse Asian markets.

“What differentiates us are the people that we have in those locations,” says Grivner. “when you do business in Asia; doing business in Singapore versus Sydney versus Hong Kong everything is a little bit different, or a lot different for that matter.

“The physical assets are the physical assets but the people that get know how to get things done in each of those markets is what makes us unique.”

Grivner also explores the differences between Singapore and Hong Kong’s business cultures along with the diversity of the Chinese economy.

Similar posts:

  • No Related Posts

Network neutrality and the internet of things

Yesterday’s US Supreme Court decision ruling against network neutrality is a mixed bag for the Internet of Things industry.

Yesterday’s US Supreme Court decision ruling against the Federal Communication Commission’s regulations on network neutrality is a mixed bag for the Internet of Things industry.

Network neutrality is the principle that all internet traffic is treated the same, regardless of its nature or destination.

The FCC rules meant US based Internet Service Providers weren’t allowed to discriminate between different types of services, for instance blocking Netflicks or allowing faster downloads from Amazon.

In the United States network neutrality has been a bone of contention between consumer groups, government regulators and ISPs for over a decade, although it hasn’t been much of an issue outside North America.

For Machine to Machine (M2M) or Internet of Things (IoT) vendors and services there is some attraction in Telcos being able to offer prioritised traffic for mission critical systems.

In applications like supply chain management and public safety, reliability of the connection is essential and something the ‘best effort’ services offered by ISPs are not well suited to.

When networks are overcapacity, say at sporting events or during disasters, being able to shed non critical traffic may be important for emergency services and the devices they may depend upon.

So for IoT and M2M services, network neutrality is not necessarily a good thing.

However there is a downside should network neutrality be overturned, the risk of vendor lock in is high and it’s quite possible to see as situation where, for instance, AT&T enter into an agreement with Google to provide the public network capabilities for Nest home automation devices.

This could see Nest customers suffering a substandard service if they choose another provider.

Internationally the attitude towards network neutrality has been that competition will sort things out, however the IT and telco industries do have a habit of trying to enforce their own monopolies on customers – something we’re currently seeing in the Apple-Google battles over smartphones and connected vehicles.

So it isn’t clear whether network neutrality isn’t a good thing for the M2M sector, however it’s something that’s going to play out as these technologies become more ubiquitous across the economy.

Similar posts:

  • No Related Posts

A triumph over orthodoxy – Seven years of the iPhone

The Apple iPhone reinvented the smartphone and mobile internet industries. Can it also define the internet of things?

“Once in a while a revolutionary product comes along that changes everything.”

Those were Steve Jobs’ words when he launched the iPhone seven years ago.

It was a strong opening that was reinforced by the event’s tag line, “Today Apple reinvents the phone.”

It wasn’t an idle boast, the iPhone was a leapfrog development – using Jobs’ words – over the existing clunky smartphones and it changed the entire industry and spawned some new ones.

Smart Company’s Yolanda Redrup asked me for a few comments on her story on the iPhone’s birthday and her questions triggered some thoughts on just how the iPhone changed the mobile phone and telco industries.

A triumph over orthodoxy

Apple’s iPhone triumph was born out of the established players’ orthodoxy; companies like Nokia, Blackberry and Palm were wedded to the idea that a tactile QWERTY keyboard was essential for a smartphone.

Those keyboards took away nearly half the real estate on the phone, Jobs called it “the lower forty”, and it made surfing the net a painful task, let alone watching videos or movies.

Full featured keyboards made making calls difficult as well. One of the barriers of adopting smartphones was that using the things as phones was quite difficult.

By having software keyboard and dialling pads that only appeared when needed, Apple solved the problems that faced smartphone users.

Disrupting the telcos

The other orthodoxy in the smartphone industry was that the telcos were essential gatekeepers. Nokia and the other incumbents put the needs of telecommunications companies over users of their phones.

As a consequence email and web browsing capabilities of the existing smartphones were crippled as the telcos tried to lock their customers into their own proprietary networks rather that giving them access to the public internet.

With the iPhone, Apple broke out of that telco dominance and started to dictate terms to the phone companies. This wouldn’t have been possible if the iPhone hadn’t been a far better, and much more popular, product.

Building the app store

Another area where the iPhone disrupted the phone companies’ business was with the App Store. Every smartphone had its own add-on programs but they were expensive with poor functionality and developers had to build versions for every company’s operating system.

Both the telcos and the phone vendors could see that app stores were a potentially lucrative area but systemically failed to execute on the idea with clunky and expensive software.

The App Store showed how smartphones should work and coupled with music, another area where the handset vendors dismally failed, Apple is now earning over a billion dollars a month from iTunes.

Technological change

Some of the iPhone’s success was due to technologies maturing; earlier smartphones were crippled by slow data connections over 2G or CDMA networks and cloud computing, or software-as-a-service as it was then called, was just beginning to mature as a technology.

Cloud services and 3G connectivity meant the iPhone could hand off most apps’ processing needs to the service provider, something that the earlier smartphones couldn’t do because the technology wasn’t there.

That connectivity did come at a cost, the iPhone and its competitors created huge challenges for telcos as they struggled to meet the data demands of their enthusiastic web surfing customers.

Looking at the future

While the iPhone came to dominate the smartphone market, that dominance didn’t last as Google Android devices started to flood the marketplace. Now Samsung is as big a player as Apple and a wave of cheap Chinese products are now flooding the industry.

For Apple and the other smartphone vendors the opportunities now lie in the internet of things (IoT) as connected cars, workplaces and homes require a device to control them. That device is often the smartphone.

In the next few years the market battleground is going to be creating the applications, platforms and ecosystems around these IoT technologies and its no coincidence that Apple has partnered with BMW on providing software for their smartcar.

Jobs finished his iPhone presentation with the Wayne Gretzky quote, “I skate to where the puck is going to be, not where it has been” and committed Apple to always being where the market is going to be.

Where the market is going to be in the next seven years is anyone’s guess, but it would be dangerous to count Apple out.

Similar posts:

  • No Related Posts

Who pays for the internet of things?

Our assumptions about where the money will be made from the internet of things may turn out not be so.

“If there’s one number I’d like you to remember, it’s 19 trillion.” Cisco CEO John Chambers told the 2014 International CES during his keynote speech earlier this week.

Chambers was referring to the economic value of the Internet of Things or machine to machine technologies as they get rolled out across society, but who pays for the connectivity?

In the case of the smart home, office, factory or farm the data costs go onto the existing internet bill, but once you get out of the office or on the road then the bills start mounting up as systems start connecting to a cellular or satellite network.

Certainly the telcos see the opportunity with Ovum Research predicting telco’s M2M revenues will grow to reach US$44.8bn over the next five years.

While for logistics companies and similar businesses this will be just another cost of doing business, for many consumers being stuck with an expensive mobile data plan with their smart car might not be attractive.

As car manufacturers start to push their vehicles as being more like smartphones, suddenly the choice of network provider, compatibility with apps and operating systems starts to become a valid concern.

In that world, choosing a car on the basis of which telco it connects to is a sensible idea.

Of course it may be that consumers may not own cars by the end of the decade. The vision of companies like Zip Car and Uber is that we just call for a towncar or pick up a share car when we need one.

Certainly that vision makes sense from an economic perspective and the trends right now show that millennials are nowhere near as interested in cars as their parents and grandparents were.

As with every technological change, it’s not always obvious in the early days how things will pan out. In 1977 the founder of Digital Equipment Corporation Ken Olsen said, “there is no reason anyone would want a computer in their home.” Within 15 years he was proved very wrong.

The motor car drove western society during the Twentieth Century and to assume we’ll continue to use it the same way in the 21st is as flawed as believing a hundred years ago that we’d continue to use horse carriages the same way as previously.

So the assumptions about where money is to be made with the Internet of Things may turn out to surprise us all.

 

Similar posts:

Door to door blues

How short term management thinking caught energy suppliers and telecommunications providers short.

The news that energy companies have decided to drop direct door to door selling in the face of prosecution is the latest example of poor thought out performance metrics and managers unsuccessfully trying to shift risks out of their business.

Electricity and gas distributors Energy Australia and AGL embarked on a door-to-door sales campaign to gain more customers. Like most modern corporations, they don’t do this stuff themselves and engaged outsourcing companies who in turn took on commission salespeople to do the ground level selling selling.

It didn’t work well and in face of complaints, both companies had to back away from their campaigns after suffering legal and reputational damage.

The sad thing this has happened before, at the time of telecoms deregulation in the 1990s telcos did the same thing to grow their market share. Door to door sales teams fanned out across the suburbs to sign households up to telephone plans.

In one example, a company hired dozens of backpackers, bussed them to outlying suburbs and sent them out on the streets to sign up as many households as possible.

Initially the campaigns were a success with providers reporting increased signups, greater market share, fat executive bonuses and happy commission earning salespeople.

Then the complaints began.

Customers discovered they’d been lied to, or in some cases falsely signed up, as hungry salespeople did everything they could to get a commission.

At first the telcos thought they could throw the problem over the fence so they blamed the contractors. Eventually the damage became so great the telcos had to back down on their door to door selling as problems multiplied and consumer protection agencies expressed their irritation.

At the heart of the problems with this type of door to door selling is the mismatch of incentives – for managers, contractors and the teams going door to door in the suburbs.

Door to Door Blues

At the coalface are the salesteams trudging around suburbs. In the 1990s telco boom they were largely made up of backpackers whose interests were to sign up as many customers as possible in order to fund the next stage of their travels.

Often, the telco or its contractor would only discover a sign up was the family dog or toddler long after the traveller was sunning themselves at Koh Phi Phi.

Using Indian students as the energy contractors were doing largely fixed some of the worst excesses of the 1990s but it didn’t address all of the problems

Management misalignment

Driving the rush for sign ups are usually poorly designed  management Key Perfomance Indicators – a dumb set of executive benchmarks rewards poor  behaviour and creates unforeseen risks. Particularly when those KPIs are focused on short term metrics.

Very quickly the risks in the short term focus become apparent and managers back off from these programs.

In this case it appears Energy Australia’s managers heeded the early warnings and backed off before the problem became too great, unlike the telcos who let the sales teams run rampant before reigning them.

What’s saddening about Energy Australia’s and AGL’s problems is they were totally forseeable and those who warned of the risks in a door-to-door customers acquisition strategy – and there were almost certainly some in these organisations – were overuled by enthusiastic executives aiming to bust their sales and market share metrics.

Sometimes we are condemned to repeat history repeatedly in business.

Similar posts:

Explaining the NBN on 702 Sydney ABC Radio

The myths and challenges for the NBN in 2013 as the project to roll out fibre optics to most Australians begins to struggle

I’ve covered what the NBN is previously on the ABC for Tony Delroy’s Nightlife and on Technology Spectator last year looked at the challenges ahead for the project in 2013.

The National Broadband Network was always going to be one of the key issues in the 2013 Federal election, The Liberal Party’s policy launch on Sunday and Malcolm Turnbull’s comments on ABC Radio station 702 Sydney on Friday illustrated how critical it will be.

His assertion that wireless should be affordable is laudable, but the indications are that it is increasingly going to become less affordable.

It also puts the coalition in a bad position, losing the three to four billion dollars expected from the spectrum auction wouldn’t help their budget position.

One comment from Malcolm that particularly sticks out is on subsidies;

If I could just make one other point Linda, possibly the most important. The government as we know is spending a stupendous amount of money on building a national fibre to the premises broadband network. And the subsidies there run into the tens of billions of dollars –

The member for Wentworth is facturally wrong; there are no subsidies for the NBN, the government is providing the capital for the project which they hope will be paid back by 2018.

the value of the network once completed will be a fraction of what the government is spending on it.

On what basis? Certainly fibre has a 25 to 40 year expected life cycle, but that’s true of a roadway or an office building; does Malcolm suggest we don’t spend on that as well.

you could make a very powerful argument that the form, the channel of broadband communication which adds the most to productivity is in fact wireless broadband.

Possibly, but let’s see that argument. Currently data downloads to fixed lines still dwarfs mobile, both are growing exponentially.

Malcolm actually touches on the problem we’re facing with wireless — the shortage of bandwidth.

The government has been very slow at getting it out. As of the last report there was only about eight and a half thousand premises connected to the fibre optic network that they’re building throughout all of Australia

This is true, the rollout so far of the NBN has been disappointing. This is what observers are watching closely on this.

The Fibre to the Node setup also creates another problem – that of ownership. If Telstra retain ownership of the copper cable from the node to the premises, it means providers have to deal with two wholesalers one of whom is their competitor.

In fact it creates a whole rabbit’s nest of problems for retailers and could very quickly find us in a situation where telco access requires dealing with two monopolies — Telstra and NBNCo.

One the disappointing things about the National Broadband Network has been the poor debate around the topic, indeed the whole debate at times has been wrong headed. Any hope it’s going to improve during the election campaign isn’t likely

Similar posts: