When I originally met the CEO of Telefonica Research and Development David Del Val, he asked what I thought of the direction the industry was taking. I have not been shy on this blog and other public forums about my opinion on operators’ lack of innovation and transformation. My comments went something like that:
“I think that in a time very soon – I don’t know if it’s going to be in 3 years, 5 or 10 – voice will be free, texts will be free, data will be free or as close to a monthly utility price as you can think. Already, countries are writing access to broadband into their citizens’ fundamental rights.”
“Most operators are talking about innovation and new services, but let’s face it, they’ve had a pretty poor track record. MMS was to be the killer app for GPRS/EDGE, push to talk for 3G, video calling for HSPA, VoLTE for 4G… There is no shame in being an operator of a very good, solid, inexpensive connectivity service. Some companies are very successful doing that and there will be more in the future. But you don’t need hundreds of thousands of people for that. If operators’ ambition is to “monetize”, “launch new services”, “open new revenue streams”, “innovate”, they have to transform first. And it’s gonna hurt.”
At that point, I wasn’t sure I had made the best first impression, but as it turned out, that discussion ended up turning into a full time collaboration.
The industry is undergoing changes that will accelerate and break companies that are not adaptable or capable of rethinking their approach.
4G wasn’t designed as a video network capable of doing other things like browsing and voice; the telecoms industry designed 4G to be a multipurpose mobile broadband network, capable of carrying VoIP, browsing, messaging, … but really, it wasn’t so hard to see that video would be the dominant part of traffic and cost and growing. I don’t have a crystal ball but I had publicly identified the problem more than 7 years ago.
The industry’s failure to realize this has led us to a situation where we have not engaged video providers early enough to create a mutually profitable business model. The result is traffic is increasing dramatically across all networks, while revenues are stagnating or decreasing because video services are mostly encrypted. At the same time, our traditional revenues from voice and messaging are eroded by other providers.
As the industry is gearing up towards 5G and we start swimming in massive MIMO, beam-forming, edge computing, millimeter wave, IoT, drone and autonomous vehicles, I think it is wise to understand what it will take to really deliver on these promises.
Agile, lean, smart, open, software-defined, self-organizing, auto scalable, virtualized, deep learning, DevOps, orchestrated, open-source… my head hurts from all the trappings of 2016´s trendy telco hipster lingo.
This is not going to get better in 2017.
The pressure to generate new revenues and to decrease costs drastically will dramatically increase on operators. There are opportunities to create new revenue streams (fintech, premium video, IoT…) or reduce costs (SDN, NFV, DevOps, Open source…) but they require initial investments that are unsure from a business case perspective because they are unproven. We are only starting to see operators who have made these investments over the last 3 years announcing results now. These investments are hard to make for any operator, because they are not following our traditional model. Operators for the last 20 years have been conditioned to work in standards to invent the future collectively and then buy technology solutions from large vendors. The key for that model was not innovation, it was sustainability, interoperability.
The internet has broken that model.
I think that operators who want to be more than a bit pipe provider need to create unique experiences for consumers, enterprises, verticals and things. Unique experiences can only be generated from context (understanding the customer, his desire, intent, capacity, limitations…), adaptation (we don´t need slices, we need strands) and control (end to end performance, QoS and QoE per strand). Micro segmentation has technical, but more importantly operational and organizational impacts.
Operators can’t hope to control, adapt, contextualized and innovate if they can’t control their network. Today, many have progressively vacated the field of engineering to be network administrators, Writing RFPs to select vendors, or better, mandate integrators to select and deploy solutions. The result is networks that are very undifferentiated, where a potential “innovation” from one can be rolled out by another with a purchase order. Where a change in a tariff, a new enterprise customer on-boarding, a new service takes years to deploy, hundreds of people, and millions of euros. Most operators can´t launch a service that doesn’t have less than 10 million people addressable market, or it won’t make the business case, right off the bat.
There are solutions, though, but they are tough medicine. You can´t really rip the rewards of SDN or NFV if you don´t control their implementation. It’s useless to have a programmable network, if you can’t program. Large integrators and vendors have made the effort to retool, hire and train. Operators must do the same unless they want to be MVNOs on their own networks.
Innovation is trying. Projects can fail, technology evolves, but transformation is sustainable.