Every fast-growing or large company, in any industry, might well aspire to become a platform, it seems. How widely platforms might be adopted, or “who can become a platform” seems less clear. Perhaps the clearest examples are provided by software or application companies such as Facebook.
Increasingly, many of the biggest businesses are software companies with platform business models. In a platform business, creators and suppliers add content and services to the platform, which draws users, which creates various monetization models.
It is not so clear that any connectivity provider has an easy road, in that regard. Operating as a platform means becoming the gravitational center of a broad ecosystem of consumers, suppliers and developers.
The problem for any connectivity services provider is that, in the internet protocol ecosystem, which now virtually underpins all digital services and products, there is a logical separation between physical networks and devices and the apps or services people and businesses want to use.
Under such conditions, by definition, ecosystems are built in the disarticulated apps sphere, and are not inherently dependent on the physical networks that supply connectivity. The best analogy I can think of is electricity. Think of all the businesses and revenue streams and products that are built on the assumption that electricity is available.
Then ask yourself whether a direct business relationship must exist between any supplier of a product and the supplier of electricity. The answer, of course, is “no.” Electricity has to be provided, but there is no essential business relationship required by any others in the ecosystem who supply products using electricity.
And that, fundamentally, is the problem connectivity providers face when looking to become platforms. They simply have no actual advantages in the device, applications or value-creation roles that are not directly related to the core business of supplying connectivity.
To be sure, that is not an inherent problem for some suppliers of infrastructure, including roads, electricity, waste water or drinking water or natural gas. Growth rates might be nil, but there is modest, if any competition, which means profits, if not high, are steady.
Telecom, in contrast, is in what might be termed the worst of all possible worlds. Once a formal monopoly with low but guaranteed rates of return, it now is It a competitive business with high capital intensity, significant regulation and changing consumer preferences.
It is as if an electrical energy supplier discovered that its customers were, in large numbers, disconnecting from the grid and creating their own energy. Think of voice or text messaging services and you’ll get the analogy.
That would create incentives to “find something else to sell.” And that is where the obstacles begin. To be sure, many platform suppliers created themselves from nothing. In principle, any firm can hope too become a major platform, early on. But that is key: a firm has to move “early on.”
Established platforms beat others to market. A decade headstart often is insurmountable, once
network effects are obtained. Once a firm becomes a platform, aggregating value, the scale advantages become moats.
So is 5G a platform? Mobile operators can hope that will become true, to some extent, perhaps as Amazon Web Services might be considered a platform. Most might tend to prefer the term “enabler,” even if some platform characteristics have developed.
Skeptics might well conclude that connectivity providers selling services directly to retail end users have little chance to become major platforms on their own. Additionally, connectivity providers might have precious little ability even to leverage a growth path others have employed, namely, working with other key app providers.
Perhaps a good example is the way Uber and Lyft leverage other existing platforms such as iOS, Android, and Google Maps. It is not so clear how a connectivity provider can create a platform role when, by definition, other potential partners can simply assume connectivity exists, with no business relationships required.
The trick is finding use cases where a direct business relationship, though not formally required, adds value and speeds market adoption by the other partners. Among the advantages large connectivity providers always tend to cite are scale, customer relationships and brand awareness (perhaps trust, as well).
Those assets might lend themselves to marketing and distribution roles. That is why many firms believe they can be suppliers and creators of linear and over the top video entertainment services; home security; banking or payment services.
