The 4 Key fundamentals that are driving the 2010 strategies for the Telco's

As we look back at 2009, the year when the technology sector proved it had learned key lessons from the dotcom bust of 2001, the telco industry is clearly uniting on 4 key fundamental tenants unpon which 2010 strategies will be modelled, these are

• Cost cutting
• Simplicity
• Third Party partnerships
• Devices

Cost Cutting:

In the same week it’s probably no accident that in the UK, both Vodafone and BT announced mammoth sized targets of an order of additional £1bn off their costs bases. While the headline figure reads well in print, achieving this will be no easy matter. To achieve this is size savings means targeting two old favourites, with many functions such as IT already outsources this seems to point at their access networks and headcount being the key targets. It also means that those supplying into the large telco’s will be asked to shoulder even further rate cuts.

The net result: Lower permanent staff in operators, more contract/temporary staff with far less Capital intensive projects such as access network rollouts.

Simplicity:

The reason that Telco’s are having to cut costs is that their margins continue to be eroded, and for Vittoria Colao a key worry is the pressure coming from the developing markets such as India. So across their markets operators are having to give away more minutes, texts and data for less. Therefore it doesn’t take a genius to figure out that all those back-office systems such as billing systems that evolved to manage the countless complex products offerings are out of sync with the market offerings. To compete, operators need to simplify the backend and reduce the cost of customer management.

Net Result: Very simple products made up of huge bundles of combined voice/data and text

Third Party Partnerships:

This is clearly the growth area for Telco’s, the iPhone has shown the way and now the “me too’s” are jumping on the app store bandwagon. While Apple shown the way forward, it also showed the cul-de-sac, it marginalized operators to bit-pipes and high street shops. This has united previous opponents such as Microsoft and Nokia to look at a variant of the App Store that uses the operator’s billing system, a gesture very close to the operators hearts.

Net result: Third party partnerships will be a growth area and Apple can look forward to fierce competition in this arena in 2010.

Devices:

Again Apple showed the way, get a cool device and that’s half the battle. This then gave the impetus for again the previous foes such as Nokia, Microsoft and Google to crystalise around the operators needs. With companies like Motorola adopting Android and talk of Android bypassing the network gone quite, the arrival of the netbook and other Smart phones, 2010 look set to reshape the fundamentals of the Mobile market away from the original GSM 2G phones that were designed around Voice and SMS to finally bring  to life many of the concepts that were touted pre-2000 as on the horizon with 3G. So a decade late, there’s little doubt that it’ll be data driven applications and associated devices that are set to drive a tidal wave of change and finally usher in the world of data.

Net result: The bedding in of a new era of mobile devices where voice is not the main objective

So 2010 is set to see lean operators, simplifying their own portfolios, pushing growth through enabling third party products and delivered through a new generation of devices.

Comments

[Michael O'Gorman]

Hi Niall - interesting observations. One steady growth area that has kept Telco's ticking over (and tech's off the dole queue) with strong performance is IPTV. AT&T, Swisscom, Orange(FT) and PT have quietly spent 09 building strong numbers. Not to mention all the activity in Asia. In the UK, BT will hit the ground with their fiber offering in early 2010 - so 2010 will see the temperature turned up on the battle ground between traditional TV providers like Sky in the UK or Verizon in the US and the Telco's providing as you described simple products of highly bundled voice, data and TV. With the convergence of IP and TV how long before the "dumb" TV disappears and the PC is the new TV? or is this already the case - have you seen the new Apple offerings - the crisp screen puts your plasma in the shade - now thats a TV and a half!

[Debbie]

Hello Niall, My name is Debbie, with Bounce Tel. A newer telco service using SIP and it is cutting the customers telecom monthly charges by 50% or better! POTS, copper, and cat 5 is becoming a thing of the past. By using the internet connection with a bandwidth of 3.1 Mgs or more becomes the actual carrier. Check out www.bouncetel.com, and go the the Q&A tab for an in depth overview of what is becoming the new telco solution. Let me what you think!

[Niall Halpenny]

Hi Debbie,

Thanks for your comment. SIP is nothing new, I first came across SIP in 2001 when Nokia presented their proposed mobile solution to MobilCom. There was extensive GSMA focus on the SIP/IMS/IPX technologies since 2003 ensuring that was a standard SIP implementation availabile. Implementing SIP is relatively inexpensive as it is a simple backend change.

The key issue is that to get the more advanced services like Cloud Computing, large scale VoIP PBX's, IPTV, etc. massive bandwidth is required. Currently there are only 3 real technologies that can deliver this, 1) Fibre, 2) LTE or 3)WiMAX. Each on of these entail very expensive rollouts, therefore while I agree CAT-5 and Copper are becoming "lagacy", theu're set to be around for a longtime yet as with neer technologies is far chaeaper to double the bandwidth of a copper line than to rollout fibre to an area of urban sprawl.

/Niall