I’ve been in the telco industry in various guises for the last 22 years and attended mobile world congress since 2011 and usually I have left vaguely disappointed – this year I left hopeful for the industry – interestingly none of it had anything to do with the major announcements around 5G. Instead, there were several extremely promising smaller signs that there is a lot more life in the mobile industry yet. In Part I of this series, I look at the industry structure, while in Part II, I look at the technologies.
Signs of real transition: An industrial structure on the move
As I moved around congress this year, two glaring thoughts hit me repeatedly:
- This industry is in a period of transition from one structure to another – when it tips to a new way of organising itself, the process will be fast and brutal
- Have any of the traditional big telco operators actually understood that yet?
What was interesting this year was not the technology but the way in which operators and the rest of the ecosystem are approaching how industry boundaries are being redrawn.
In short, the potential for new relationships and the ability to create new opportunities with broader market appeal abounds. But not getting lost requires careful examination of the dynamics underpinning the industry. For me, MWC19 shone a spotlight on three important areas of focus, with some hard hitting messages that will not be to every readers liking. That said, the positives are there for all to enjoy.
1. Operators get real about their revenues
This year we saw the gloves come off as operators started to openly admit that the industry is effectively deflationary, and they are not really recouping their investments in the same way that companies such as Google and Apple are – at the same time as data traffic grows by up to 50% a year. It is becoming clear that a decade of price pressure has meant that operators are in fact victims of the digitalisation they have helped fuel – while many spoke of the hope of 5G, others expressed a concern that it does not really hold the answer. It is the first time I have seen the industry so divided about whether the next “G” will save them or not.
Interestingly, some of the larger guys have realised parts of this and seem attempting to understand how to engage in a broader array of partnerships – Nokia’s CTO Marcus Weldon spoke about the need to recognise the industry is about to undergo a shift and that 5G demanded new types of partnerships – ones that had not been seen before in the telecom industry. He also spoke of the need to focus on a new type of customer – those affected by industry 4.0 and not the end-user consumer. The question remains, however, how can operators effectively do both? This will require some innovative thinking in organisational structure internally as well as with external partners.
2. What role does the 3GPP roadmap play?
This runs much deeper than just working out ‘how to compete with the over the top (OTT) media services’ and ‘how to harness the hyperscaler technologies for telecom’ – operators will save themselves only if they start to dramatically rethink their role in the economy – and start to question their deep-seated dependence on the 3GPP roadmap for delivery of products and services. The days of driving the next ‘G’ just so there is a new system to sell are over. Digitalisation is often viewed as creating threats to some companies – but in this case it may very well threaten the entire industrial structure – this isn’t your grandad’s mobile network, guys, and you need to start thinking very differently. How 3GPP evolves over the next few years will be critical to the future of the industry.
3. Supply Chain Concentration – too much of a good thing?
This year saw lots of discussion about concentrated supply chains and only having 3 network vendors to select from – but it is the operators themselves that have gotten themselves into that mess with a single-minded focus on cascading the costs of overpriced spectrum auctions onto their suppliers. Operators’ obsession with price has left them with vendors that no longer can afford to innovate in the way the operators themselves need them to. If the cascade effect of supply chain management hasn’t quite bitten them on the backside yet, it is certainly nibbling at their ankles. Now they are left struggling to understand how to work with small to medium sized companies that are not necessarily able to provide the technical, nor the economic scale they require. The small to medium companies are those providing the real innovation – this alone may cause a shift in industrial structure if some of them were to start being acquired.
Meanwhile vendors’ reliance on building networks the ‘way their dads built the networks’ seems to have really hit the end of the road. Augmenting their existing conceptualisation of the industry with Artificial Intelligence (AI) or Edge computing will not get them far enough in a dramatically shifting industry. If the level of innovation continues to be hampered by the customer base they currently engage with, then it is perhaps time to expand that customer base – both to expand revenues but also to open their minds to some of the upcoming innovations that will affect them.
Holding out for the upside
If that all sounds rather dire for the industry, there were some extremely positive signs as well – ones that were completely unexpected. The industry has started to create some extremely exciting partnerships around the Internet of Things (IoT) and there are a number of equally exciting technical developments – not all of them related to 5G. I cover these in Part II.