How to Move Up the Stack, How Not To
Telcos have been trying to “move up the stack” into application layer businesses for quite some time, with very mixed success. Computing firm NCR was acquired by AT&T in 1991, for example, in an effort to create a vertically-integrated computing capability. That effort failed, and NCR was eventually spun off.
That might be one key to how at least some tier-one telcos might look at their moves up the stack. Consider the different way Comcast has used its NBC Universal assets, and how AT&T must use its Time Warner assets.
Comcast did not try to make NBCUniversal (could not, for legal reasons) an “exclusive” or “vertically-integrated” asset available only to its owned cable TV systems. In other words, NBCUniversal was not about vertically integrating the content and making it proprietary to Comcast.
Instead, the value of NBCUniversal content is that it is sold to all other U.S. linear video subscription providers, even if some of that content is used in a proprietary way at the theme parks.
Likewise, AT&T will find its Time Warner content being sold (by law) to all other linear subscription providers, and eventually, in other ways, to over the top services. Likewise, AT&T would have little to no interest in restricting distribution of its studio content (movies) only through AT&T distribution assets. Instead, it would want continued distribution as widely as possible.
The point is that what has worked in the linear video space is not vertical integration, but rather broad sales to direct competitors, who serve customers that want the content.
In other words, instead of vertical integration that seeks uniqueness, content assets are broadly attractive to all suppliers in the linear video business, though also used in a vertical way--as an input--to support AT&T’s own linear video and OTT video operations.
In the internet of things area, a similar approach might be the right way to operate as well. Instead of acquiring or growing assets that are “captive” to AT&T, a better approach might be to create or acquire assets of broad value to customers and competitors.
The other approach--capturing the benefits internally and uniquely within AT&T--might not prove as successful, ultimately.
Most telco VoIP or OTT messaging efforts have failed. One commonality: those efforts were “branded” alternatives to other OTT or VoIP services. In other words, those were attempts to vertically integrate and restrict use of the services only to customers of telco access services.
The opposite approach is taken by wildly-successful consumer apps and appliances such as Google, Facebook, Amazon, Netflix or Apple. Those apps and devices work on all networks, and are not captive to any single access provider.
All that suggests the fruitfulness of seeking assets in IoT that are valuable using any access network, not specific features of a single provider’s access service.