Telco carriers have since long fought not to become just 'dumb pipes'. For this, they came up, back in 2012, with the term ' digital telco' meaning the one telco operator wishing to deliver services beyond pure good old commoditised connectivity, at some point time adding up a security component (hence the past success with MPLS and VPNs).
During my professional career, I assisted in the birth of many of the first digital telcos globally, and worked with, probably, one of the very firsts: Telefónica Digital. Indeed, the Spanish telco giant started offering cloud services back in 2010, only to clash with planetary cloud service providers, and realise that telcos simply don't have the scale to compete with the AWS, Azure, Google Cloud... Sometimes, these digital telcos even experimented with 'industrialised' services and new marketplace-based organisations aimed at SMBs, as a way to become more agile, and come closer to these hyperscalers; the experiments were short-lived though. In the end, the digital telcos capitulated and opted for a co-opetition model with the cloud hyperscalers (in between, Huawei-based white label clouds became a very interesting subject, but this is far out of the scope of this short article).
Digital telcos soon also started experimenting with M2M (now part of their broader IoT portfolio), initially more a product than a service (later, the cloud hyperscalers again were much more successful in converting IoT into services). Soon, more industry-specific value propositions were added to their portfolios. So even if telcos had issues monetising their M2M propositions at large scale, at least the effort allowed digital telcos to start experimenting with vertical portfolios, ending up in the creation of industry verticals e.g. in healthcare (I directly witnessed the birth of Telefónica's Competence Centres), an organisational structure that still essentially lives up to this day.
Even with individual enterprise vertical propositions though, these digital telcos had limited success, mainly because their sales and marketing organisations were not prepared to manage a series of new services which weighed so much less than the long-lived traditional connectivity services in the variable OTE of their connectivity-savvy account managers, resulting in meagre 'digital' corporate financial results.
As a result of the portfolio verticalization, telcos gladly embraced the 'digital transformation' wave, as an extra source of revenues in the B2B segment. But ' digital transformation' still relegated telcos to the role of mere technology providers, and not even a really differentiating one as they faced themselves competing with Cloud Service Providers and Global System Integrators (GSIs). True, telcos still had strategic assets that others didn't: their networks and wireless spectrum; but telcos have been in a rush for outsourcing the management and even the ownership of their mobile masts to third parties (either independent 'towercos' like Cellnex, or creating new ad hoc companies, like Telxius) in an effort to reduce OPEX, and even the telcos' exclusivity in buying and managing spectrum could be at stake now, with the advent of private spectrum auctions directly to enterprises.
In the consumer segment (B2C), Telco’s are also starting to capitulate in favour of Over-The-Top (OTT) providers like Netflix or Apple (which is betting big time on services), and are betting on becoming service platforms, rather than 'inventing' these services.
So despite some success, telco service providers have still not been able to woo away the threat of the 'dump pipe' — a digital one, but a 'dumb pipe' nevertheless — and the question about their future remains a valid one. But Telco’s still keep another asset: the access to customers, and therefore to their data, even if they face, again, dark clouds, with the increasing adoption of eSIMs. And I believe that the management of this customer touchpoint is one that telcos should be able to effectively leverage in order to woo away the threat of the ' digital dump pipe' and to elevate their role as a peer, and not just a supplier, to other industries.
Take the example of the Automotive industry. Of all the novelties in the horizon of the legacy automakers (electric batteries, self-driving, mobility services ...), it is the connected car which has the key for their survivability.
Indeed, automakers know (or should know) that their traditional industry business model will have to transform from one based on the one-off sale of an asset (the car) to the future owner to one based on a new, continuous relationship with the driver and with all the vehicle occupants. This means that, if automakers want to survive, they will need to transform into service providers. That is the same type of relationship that the telco service providers have with their subscribers. Therefore, we find ourselves with a scenario in which two service providers confront, compete with each other for the relationship with the end customer, a relationship which is somehow reminiscent of the clash between telco service providers and the over-the-top service providers.
But automakers have limited the role of telcos as mere suppliers of analytics solutions (the big data hype). I argue that this is a conscious, defensive yet legitimate move by automakers, aimed at protecting their role in their own industry by neutralising the telco service providers and relegating the later to another ' digital transformation' brick. Indeed, it should not be taken for granted that automakers are the owners of the data generated in the cars (and even MEPs at the European Commission have pronounced themselves in this respect). Telco service providers should fight back such attempted irrelevance and defend their 'share' of in-car consumer data (eventually, auto and telco service providers would also have to deal with other actors for the control of the user, e.g. fleet management companies).
Smart cities are yet another example worth examining. And, as the case of the Toronto Quayside and Hudson Yards in New York projects has shown over and over, for the sake of this article, smart cities are a more evolved and clearer example than automakers. Indeed, if these projects have shown us that it's about the battle for the data that is generated by citizens. It's a more complex example of the connected car with a higher number of third parties involved, mainly the municipalities. In this case, though, the collective nature of smart cities offers a new set of problems when it comes to data ownership and protections, the local public administration seemingly emerges as the natural option for city dwellers would subsidise the management of their data. Beyond automotive and smart cities, telecom service providers can position themselves as equals to every other industry, not just ' digital transformation' suppliers: it is not that much about technology, as about the customer. And they should do so by analysing the evolution of the type and source of the data that those other industries generate as of today, compared to their future possibilities as service providers.
More than playing the digital transformation hand, telco service providers should have a very active role in all those industries where incumbents face themselves to their transformation into service providers. But more than fighting for these new alternate service providers, such a role should be about jointly facilitating the governance of the data. Think city data governance frameworks, Sidewalk Labs' Digital Transparency in the Public Realm (DTPR) language, and Tim Berners-Lee's very recent Contract for the Web. This is the league where telco service providers should be playing in, to woo away the 'dump pipe' — 'analogue' or 'digital' — ghost.
Author: Carlos Ruiz Gomez, Telecommunications & Emerging Technologies | Madrid, London & Brussels