Chorus to Outsource Network Management to Alcatel-Lucent

New Zealand wholesale network operator Chorus has awarded Alcatel-Lucent a five-year managed services contract covering 24/7 monitoring of the operator's nationwide wholesale copper network.

Under the agreement, Alcatel-Lucent will provide real-time monitoring and analysis services from a new network operation center in Hamilton working with an additional NOC in Bangalore, India to provide monitoring aimed at preventing faults, improving network availability and ensuring continuous service quality of the copper network.

The contract is part of a long-standing trend in telecommunications, where service providers outsource network management functions to third parties, or actually divest assets such as networks of cell towers, or, in the case of Telecom New Zealand, the entire network.

That throws light on an old question (largely rhetorical) about what the typical telecom operator’s core competence might be. It remains hard to answer with precision. The question concerns not merely “what things do you believe you are good at” but ideally “what is the distinguishing core competence, not possessed by those who compete against you?”

Few are able to boil the answer down to a single, unitary and fundamental core competence. Perhaps there is not a unitary answer, in most cases. But few executives historically would have omitted “we know how to build and run big communications networks” from a short list of “things we are really good at.”

Telcos historically might be deemed to be good at such functions. But the issue is whether such skills constitute a “uniquely important” competence that other competitors cannot match. Perhaps it is too difficult for any firm to say there actually is one single “core” advantage others cannot duplicate.

Some might indeed say it has been “we can run a network” that is core. Others might say it is “ownership of spectrum licenses,” scale or capital resources that are close to being the unique assets. Some might argue it is knowledge and scale of the regulatory apparatus.

But that’s the difficulty of the exercise: not listing many attributes that are helpful, but the salient and distinguishing advantage others cannot copy. Perhaps nothing, anymore, provides that sort of a “moat” against competitors.

Recent history, with massive global adoption of Internet Protocol, encouragement of competition and growing access to spectrum, might suggest any historic advantages are systematically being stripped away. That, after all, is what the goal of competitive policies has been.

Perhaps about all one can say is that there is one attribute some members of a class tend to possess. In the U.S. market, perhaps only AT&T and Verizon might be said to possess a sometimes overwhelming regulatory apparatus. That is not to say Comcast, Sprint, T-Mobile US and Charter Communications do not have such an apparatus, simply that it might not be a distinguishing and unique advantage.

In fact, recent developments suggest even that advantage, if it can be said to be a core competence, is as much an advantage as it once was. In recent days, it can be noted that few key policy battles have actually been won by “telcos,” when opposed by “Internet app providers.”

That might not be the case elsewhere. In Europe, India and elsewhere, for example, telcos seem to retain the old advantages.

So the frightening prospect for most telcos, strategically, is that they are moving to a business environment where every believed source of advantage diminishes to the point where there might someday be no core competence; no characteristic that is unique.

Firms operating without such characteristics will nearly always fail. One different way of asking the core competence question is to ask “what do customers believe you are uniquely good at?”

The ability to answer clearly will be an important test of how things are going, in the future.
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