Metaverse Again Raises the Issue: Role is Not Revenue

José María Álvarez-Pallete, When Telefónica chairman says “the metaverse will be the most profound change the internet has undergone since its birth,” and that that “Telefónica will continue to play an essential role in this evolution of the Internet towards the Metaverse because new experiences will be possible thanks to the telcos’ networks,” he is right. 

Without internet access, provided by internet service providers, internet-delivered apps and experiences cannot be delivered. 

But Álvarez-Pallete is right mostly in the sense that, in a loosely-coupled internet ecosystem, apps can run on any compliant network. As has been true with the prior development of the internet, when the architecture is separated into layers, app access is “permissionless.”

source: Wikimedia 

Loosely-coupled architectures have important business ramifications. Among the most important implications is that organizations can participate in value chains without having direct business relationships with other key participants. 

Any lawful app can be accessed by any user with internet access, without the permission of any intermediate participant in the value chain, including specifically any provider of the internet connectivity. That business architecture mirrors the technology architecture of the internet.  

What remains to be seen is whether access providers will be passive or active participants in the metaverse. By design, they will be passive conduits, providing the connectivity all internet apps require. By aspiration, they might do other things; assume other roles; provide other value. 

Still, in a layered, disaggregated, permissionless ecosystem, metaverses can be created and accessed without formal business relationships. How much--beyond connectivity--is possible is an open question for access providers.

Can Telcos Become "Techcos?" And What Does that Mean?

Many telcos--or those who advise and sell to them--say telcos need to become techcos. So what does that mean?

At least as outlined by Mark Newman, Technotree chief analyst and Dean Ramsay, principal analyst, there are two key implications: a culture shift and a business model.

The former is more subjective: telco organizations need to operate “digitally.” The latter is harder: can telcos really change their business models; the ways they earn revenue; their customers and value propositions?

source: TM Forum

It might be easier to describe the desired cultural or technology changes, even without a change in business model. Digital touchpoints; higher research and development spending; use of native cloud computing; a developer mindset and data-driven product development.

Most of us might agree that doing such things is good, but does not necessarily mean telcos become something else. 

The key to possible business model changes comes specifically with the notion that telcos can become “platforms.” And even that overused term is subject to huge differences of meaning. Some use the classic “computing” definition that a platform is “hardware or software that other software can run on.”

Think “operating system” or even containers, program application interfaces, languages or X as a service as examples. In that sense, telcos might hope to become “techcos” by advancing their capabilities as application enablers. 

There is a tougher definition, though. A platform business model essentially involves becoming an exchange or marketplace, more than remaining a direct supplier of some essential input in the value chain. It is, in short, to function as a matchmaker. That is a different business model entirely.

For most of history, most businesses have used a pipe model, creating and then selling products to buyers. 

The platform facilitates selling and buying. A pipe business focuses more on efficiency in its value chain, where a platform focuses more on orchestrating interactions between members. 

The platform allows participants in the exchange to find each other. 

Platforms are built on resource orchestration; pipes are built on resource control. Value quite often comes from the contributions made by community members rather than ownership or control of scarce inputs vertically integrated by a supplier. 

In other words, using a “computer function” definition of “platform” implies one set of changes; using the “business model” definition is something else entirely. 

The point is that as useful as the phrase “we are not a telco; we are a techco” might be, it is marketing jargon. “Being digital” or “moving fast” or “being cloud native” or “boosting research and development” arguably are cultural changes many businesses can benefit from. 

It is not so clear that such changes (equivalent perhaps to the change from analog to digital) necessarily change a business model, though they might often improve the existing model. 

As helpful as it should be to adapt to native cloud, developer-friendly applications and networks, use data effectively or boost research or development, none of those attributes or activities necessarily changes the business model. 

If “becoming a techco” means lower operating costs; lower capital investment; faster product development or happier customers, that is a good thing, to be sure. Such changes can help ensure that a business or industry is sustainable. 

The change to “techco” does not necessarily boost the equity valuation of a “telco,” however. To accomplish that, a “telco” would have to structurally boost its revenue growth rates to gain a higher valuation; become a supplier of products with a higher price-to-earnings profile, higher profit margins or business moats. 

What would be more relevant, then, is the ability of the “change from telco to techco” to serve new types of customers; create new and different revenue models; develop higher-value roles and products or add new roles  “telcos” can perform in the value chain or ecosystem. 

That is the profound meaning some of us would say “techco” represents, if it can be achieved. To what extent can “telcos” earn lots of money--perhaps most of their money--from acting as a marketplace, rather than as creators and sellers of products built around connectivity?

To be sure, if “becoming a techco” has other intermediate value, such as boosting revenues and profits while reducing costs and speeding new product creation, the process would still have value. 

It would perhaps be the business model equivalent of the transition from analog to digital processes overall. That is important, but does not transform a telco into something else, which is what all the verbiage about “techco” implies. 

It is too early to assess whether “techco” is simply a change in marketing hype or something more profound. 

Fixed Network Revenue in Singapore Declining to 2026

Fixed communication services revenue in Singapore is expected to decline at a compounded annual growth rate (CAGR) of 2.2 percent from US$765 million in 2021 to US$683 million in 2026, GlobalData predicts.

In part, the decline will be caused by a steady drop in circuit switched subscriber lines and slower growth in fixed broadband subscriptions. 

source: GlobalData 

Circuit switched subscriptions are expected to drop at a cumulative average growth rate of -0.4 percent over 2021-2026 as users continue to shift towards mobile and internet-based communication services, the company says. 

Voice revenue, in the past the chief driver of connectivity provider service revenue, peaked between 2000 and 2003 globally, so the Singapore trend is not at all unusual. 

Mobility services have driven global revenue growth in the telecom industry for a few decades.  

source: Analysys Mason

Surveys are Difficult to Create and Interpret

Getting meaningful data from customer or user surveys are not as easy as many believe. Samples sizes, survey instruments, poorly-designed questions and research assumptions all affect the validity of results. Word chioce is another common source of error. 

Rank order questions sometimes help to discover relative priorities. Consider information technology professional responses to a survey on endpoint management. This set of responses does show some differentiation of “ability to manage” various elements of the IT environment. 

source: Automox 

Those results are not a normal probability distribution. As often is the case with self reporting, all the organizations perform “above average.” If capabilities really are described by a normal probability distribution, that cannot be correct. 

Sometimes researchers are looking for indicators of “most important/least important” opinions. In such cases, forcing respondents to choose can better highlight opinions about what is  “most important.” 

 

source: Automox 

Harder to control are researcher frames of reference. Any multiple-choice survey must necessarily embed assumptions about a few variables researchers believe are relevant. That bias is among the most-common I encounter as someone who gets asked to take surveys.

Disintermediation is at Heart of Many Telco Worries

When the global connectivity industry chose TCP/IP (Transmission Control Protocol/Internet Protocol) as its next-generation protocol, it opened Pandora’s Box. The industry does not presently like the business changes IP was wrought, but can hardly deny that it chose the platform willingly. 

The key problem is disintermediation, the removal of distributors and “middle men” from value chains. In a loosely-coupled ecosystem, participants operate in “layers” or disaggregated roles, much as software can run on a compliant platform without a formal business relationship with the platform or operating system. 

Think of the way modern software runs on compliant hardware, operating systems or networks: so long as the agree-upon interfaces are in place, software, hardware and networks can work seamlessly, without formal business relationships. 

Disintermediation is at the heart of the promise and period of a wide range of potentially-huge new enablers of business and economic life, including blockchain, cryptocurrencies, distributed finance and distributed autonomous organizations. 

source: GSMA 

One example of this is the direct supply of services to enterprises that otherwise might have been provided by a connectivity provider. A recent survey by TelecomTV illustrates the concern. Some 44 percent of respondents believe an inability to compete with the major cloud firms in the enterprise services sector is a major issue.

 

source: TelecomTV 

That’s a classic example of disintermediation.

A Good Definition of Initiative

Omaha Beach was the toughest of all the beaches targeted by the allies on June 6, 1944, on D-Day. "On this two-division front landing, only six rifle companies were relatively effective as units," says S.L.A. Marshall, who was there.

To put that in perspective, a U.S. Army division contains between 10,000 and 15,000 soldiers. So two divisions means 20,000 to 30,000 soldiers. A company contains between 60 and 200 soldiers. So six rifle companies functioning effectively implies somewhere between 360 and 1200 men in organized units that are "combat effective."

On Omaha Beach, "relatively effective" likely is the better description. 

Somehow, individual soldiers, on their own initiative, managed to climb the bluffs and secure the beachhead. A better example of initiative I am hard pressed to provide. 


source: taskandpurpose

source: Thirteen 

My nephew, who serves with the 101st Airborne, (82nd Airborne was the other) who dropped behind German lines) brought me back some sand from both Utah and Omaha beaches he picked up while representing the 101st Airborne at the 75th anniversary of D-Day. Sacred soil, indeed. 

source: National Archives

Supply Chains are Where Either Digital Transformation or Digitization Could be Seen Early in Most Industries

Digital transformation and digitalization (applying new technology to business models, in the former case; to business processes, in the latter case) are perceived as having the greatest benefits for product creation. 

Applied digital technology seems to be seen as a threat to supply chains and distribution mechanisms. 

That would be in keeping with the general impact of internet technologies generally, which have had an impact of varying degrees in product creation, but arguably the greatest impact in changing distribution costs and roles. 

source: McKinsey 

In other words, it is possible that digital transformation and digitization (changing business models and operating costs) will have the greatest business impact as a way of collapsing the distribution portion of all value chains. “Cutting out the middleman,” or disintermediation, could be the area of greatest immediate change in many industries.