Telcos : The Consultants Dream Business

Indeed, some of the older theoretical concepts of Lifecycle curves, Porters 5 Force Industry Analysis, Everetts Diffusion of Innovations curves etc are making their strong presence felt and needed in the Telecom industry. This meme of mine has been triggered by the article here, which speaks of the resignation of the SingTel head honcho & the outlook on the global market.

The telecom industry seems quite global indeed & with a smattering of products. The products are in different stages of evolution, each differently in each market. While Landlines are almost universally in the mature/decline state in some, mobile phones are showing widely varing trends. Deutsche Telekoms performance and its marked pessimism on the landline business is noteworthy of the trends to come. Further, even their broadband investments are headed in the direction of VOIP enabled networks rather than the underground variety. The persistence of VOIP & TComs belief is further vindicated in their launch of the bundled Mobile-WiFi telephone. It would also appear from the same article that BT has already embarked on this path & so has the hardware giant Nokia, which has launched instruments capable of seamless transitions between technologies.

And there are other services arising out of convergence, where technological innovations are diffusing through customers in ways unexpected - which brings us to different consumer segments, each in their own state of evolution.

An example of the convergence above is Cable operators offering Triple Play bundles. Given the lower engagement levels that a landline has with respect to television, the playout seems to be interestingly poised. Will IPTV then become a competitive imperative rather than a strategic initiative? Are the telco's our competion or the cable guys? Who reaches the home first and who provides service? Interestingly, Reliance and Tata are indeed probably weaving their models to include entertainment. The continuous assault on the futures of the landline business continue, plagued on the broadband front from WiMax/WiBro & on the IPTV front by the imminent entry of Cable guys... which brings me to my fundamental question, what is it I am upto out here? :-)

Another example of completely new products that are being launched is In Flight Communication. Hopefully though this whole initiative of In Flight service will not be a con job like what Virgin claims to offer. I am not sure of this, but clearly there seems to be a revenue opportunity for this service. Long Distance airlines even in domestic routes (to Kolkatta for example) would be ideal target segments. In fact, like the Public Access WiFi, there probably exists a space for a branded service integrator getting into this field and tieing up with the telcos. As one can see, the ease with which completely new and innovative services are launched and their potential for take-off (bad pun), could radically alter the industry structure giving rise to whole new operating spaces.

The whole debate on Net Neutrality itself throws further light on the need for a considered view on the telecom industry. It raises interesting questions on the nature of the pricing & business models in operation, similar to a previous post of mine on Online Music. The differential taxation/pricing of bandwidth by telcos based on the nature of content also gives rise to probable new industries in the technical and billing software realm.

The complexity of such an industry structure, coupled with the datawarehousing initiatives allows for rigorous complete analyses leading to the probable emergence of new integrated and yes... converged strategic models for both analysis and directionality. It would be interesting to watch the consulting space for its foray into the Telco vertical, as Telcos would soon start scrambling to these outfits for their expertise on the way ahead. In fact discussion on these topics has already begun as the Ovum summit on the impact of convergence on IT Services-Telecom-Software companies demonstrates. I believe that there is an element of hardware manufacturer which is not explicity stated, probably because it is on the hardware that the convergence is actually happening. The case of Skype & iSkoot is a vindication of such trends where the PC address book & VOIP technology are now integrating themselves with the mobile phone. The VOIP phenomenon is also extending with Logitech now providing hardware on this platform

Another such insight from Accenture seems to divide the current situation into 4 key facets : Decelerating growth in wireless/broadband, Capex/Opex/Cost focus by landlines, the IP revolution & increased competition. In fact another such example of blurred boundaries is seen in Bharti & IBM inking their SDP deal worth more than $100Mn. It would assume that going forward, IBM would start to extensively front end discussions with service providers including content-services, a role traditionally played by the telco's themselves. The pressure on costs is not only on the suppliers to the players in the industry, but also on the consumers. Efforts are still going to develop low cost PCs, notwithstanding India's backing out of the OLPC (One Laptop Per Child) initiative. The cost pressure and the IP revolution above are being jointly adopted as a strategic route by the ISPs of Hyderabad, Indias own Cyberabad, where they are demanding unbundling of last mile copper & legalization of VOIP services within the country. Here too the government is probably facing its Citizen versus Consumer struggle, what with the telecom PSU's share in government revenue being threatened to get obliterated with the technological discontinuity arising from VOIP.

The easy availability of money from venture capitalists is another force to reckon with, which will reduce entry barriers into the sector by small players and increase competition with them providing a wide range of services arising out of the above convergence.