Telco Business Model Transformation? Been There; Done That

Some people think the global telecom industry is not lead by people capable of fundamental business model transformation. Nobody can say for sure whether that opinion is correct.

What might be useful to reflect on, though, is the fact that the global already has managed several fundamental shifts in its revenue. 

In 1995, for example, U.S. telcos earned about $19.49 a month selling consumers basic dial tone. But telcos earned $42 a month selling enhanced services and long distance. 

In other words, 68 percent of consumer revenue was generated not from the basic dial-tone product but from other services and applications. For an industry generally considered at that time to be an "access lines" business, the appellation already was inaccurate. 

In 1997, nearly half of all local telco revenue came from long distance alone. By 2007, long distance represented just 18 percent of total revenue.  So a business once based on "lines" then became a business based on long distance and enhanced services, only to be replaced by a business where half of all revenue was generated from wireless services.

Also, consider that over the last decade we have seen the broadband access business grow from single digits to "near saturation" levels. 

The point is that business model transformations have happened several times in industry history, sucessfully. The next transformation likely will involve wholesale and business partner services of various types, augmented by content services. 

One can argue telco executives can't make this next change, even if they have transformed themselves before. I would not bet on that. 

Life throws curve balls.

Life throws curve balls.  Patriots don't get the perfect season. Red Sox come from behind to keep their title hopes alive. It happens. 

Enterprise Mobility Demand Still Growing

Roughly half of all  business and consumer communications spending goes to wireless services. But there appear to be relatively-distinct niches within the enterprise mobile user base. The "information worker" segment, including sales, information technology and managers use real-time data, email, calendar and portal accessed applications, say reserachers at Forrester Research. There are lots of devices used and IT staff tends to have limited control over them.

"Task workers" such as supply chain personnel, medical personnel, manufacturers and others using line-of-business applications on a single device such as inventory scanners, data entry tablets. IT tends to have significant control over the limited range of supported devices. 

But there is an emerging demand from "wannabes," including just about any worker not represented in one of the two other segments. Wannabees likely will use a wide range of devices for email, calendar, product information management and basic portal access, for work and personal uses. IT will have to support a wide range of devices and will have limited control over them, Forrester argues.

So far, though 57 percent of smart phone users engage in work--related phone calls, 

48 percent check email and 42 percent acess the Internet or a company Intranet for work related information. Some 35 percent of users say they use their smart phones "only for personal purposes." Keep in mind that nearly seven out of 10 enterprise mobility users pay for their own service. 

At the moment, 69 percent of employees pay for their voice service, while 23 percent have mobile paid for by the employer, Forrester says. About eight percent of workers cost share with their employers. 

About 59 percent of employees pay for their own mobile data services. About 34 percent have their mobile data service paid for by their employers. About seven percent of workers have a cost share agreement with their employer. 

What Does AT&T Do For An Encore?

Executives at AT&T have to be spending time thinking about what to do when the Apple iPhone ceases to be an AT&T-only product. 

In October 2006, before potential customers were aware that AT&T would have exclusive rights to market the iPhone, Verizon Wireless was getting twice as much upside from "churners" as AT&T was. 

About 28 percent of poll respondents surveyed by ChangeWave indicated they would be switching to Verizon for mobile service. About 14 percent indicated they would be switching to AT&T. 

After the deal was announced, the churn gap closed. And AT&T has had a net advantage in customer switching behavior since very-early 2008. Many would say this is an "iPhone effect." Some might argue it also is the result of other activities, including AT&T promotional activity. 

We won't really know until the iPhone exclusivity deal ends. In the meantime, AT&T marketing staffs have to be working on the next game-changer. 

Sylantro in the Amazon Cloud

Sylantro Systems has announced compatibility of its Synergy platform with the Amazon Web Services’ Elastic Compute Cloud (EC2).  By doing so, Sylantro makes its voice and Web applications available in a cloud computing environment.  

Amazon EC2 from Amazon Web Services is a Web service providing hosted, resizable compute capacity on a pay-as-you-go basis. It is designed to make Web-scale computing easier and cheaper.

So look at it this way: applications developed for Web delivery, using the Amazon infrastructure, now can be configured to work with Sylantro calling and communication features. In principle, this allows more applications or services to provide a range of communication features one normally would expect from a business phone system. 

Service providers can use the capability to test demand for services provided on a hosted basis, especially on a "sample this" basis, or as a way to provide hosted business or consumer communications services with a disaster recovery angle.

Sometimes Demand, Not Supply, is the Issue

SureWest Communications has expanded television, Internet and telephone service to some 3,500 Kansas City area homes and remains on track to reach 10,000 by the end of the year.

In the broadband services area, SureWest customers and prospects have something like an embarassment of riches, though some will argue the prices are too high.

Customers can buy 20-megabits-per-second connections for about $92 when purchased as part of a bundle, and can get 50 Mbps service for about $192 when when bundled with one other service.

Business customers can buy 100 Mbps service. So the issue, at least where SureWest operates, is demand, not supply. 

The argument can, and probably will be made, that prices for the higher bandwidths are too high. Observers should keep in mind that commercial prices for T1 lines offering 1.544 Mbps service cost as much as the 50 Mbps service, if not more. Perhaps that will not be enough to sway some opinion on the pricing front. 

But in this case, at least, broadband supply is not a problem. Demand is the issue.  One can argue that prices should be lower. It is harder to argue that SureWest's ability to remain in business requires that level of prices at its forecast penetration levels. If SureWest does a lot better than it now forecasts, lower prices are possible. But this now is a demand generation exercise. 

"Hyperconnection" Driving Wireless Broadband?

Some 16 percent of Internet users live a “hyperconnected” life, meaning they regularly use more than seven devices and more than nine applications, says Scott Wickware, Nortel general manager.

Some 36 percent are “increasingly connected,” meaning they use four devices and nine applications, he adds. About 20 percent are passive online users and 28 percent are "not very connected," he says.

So although about half of Internet users might not agree they are living in "a hyperconnected world” that requires or benefits from mobile broadband access, Wickware suggests 52 percent are candidates for mobile broadband.

The logic is simple enough: as users got comfortable with email and then wanted to have email available in their pockets and purses, so they increasingly will want access to their social networks, video and audio entertainment in the same way.

As voice once was a service delivered to "places" and now is delivered to "people," so email used to be delivered to "PCs" and now is delivered to mobiles. Roughly the same process will unfold with broadband as well, most argue. Where broadband used to be delivered to a place, it increasingly will be delivered to people; where applications are used on PCs, they in the future will be used by people on a number of mobile devices in their purses and pockets.