Tag Archives: clouds and pipes

Why as a consumer you prefer OTT

DigitalConsumerSpending

Digital Consumer Spending for a cord-cutter.

I spend $40 a month on fixed broadband. That includes a bundle for voice minutes that you can’t opt out of.

On mobile I pay another $40 a month. You get a bundle of 500 minutes and mobile broadband for 500MB. I’d like to opt out voice, but I do not dare to because mobile networks coverage is far more reliable for voice than for data, and because of the cap in mobile data. That might change one day with LTE.

But I digress, let me go to he point. At $80 a month, you pay almost $1000 a year to a telco for connectivity —although that includes voice too.

How much do you pay for the services that connect you to friends, store your files, let you share your photos, videos, ideas? In other words, how much do you pay for Gmail, Dropbox, Google Drive, YouTube, Maps, iCloud, Whatsapp, Instagram, Skype, Twitter, Facebook and Linkedin? Most likely you pay zero, unless you are one of the few paying premium upgrades.

And the best part about all these Internet Services from the cloud, is that no matter what telco you choose to churn into, all those services follow you. Without any migration, without you noticing any impact.

Why would you want any of these services to be attached to a telco? Why would you want to hinder your bargaining power for the bulk of your digital expense, connectivity?

If your services are over-the-top (OTT), decoupled from any telco, you are free to bargain for a lower price for those $1000 a year you pay them. As a consumer, you prefer the telco to be a commodity. That gives you buying power.

Add to that a history of telcos abusing on roaming fees or with the expensive mobile data packages of early days. For many people, the perception is that telcos charge you for what Internet players give you for free. Leave aside that Internet startups have beaten corporate R&D departments on innovation, seen from the consumer angle.

Consumers see OTTs as a way to counter balance the historical telco power. Same goes for Cable.

This is bad news for telcos, in the long run. As of today, telcos still grab the biggest piece of consumer spending in Digital. The problem in the long run is that as connectivity gets commoditized, all the new services with their promising revenue will be OTT.  For a telco there are two options, either playing the OTT game too, or prepare to run the business as a pure utility.

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Clouds and Pipes

Telefónica Distrito C Madrid España - Spain

Telefónica – Spain (Photo credit: Wikipedia)

Clouds and Pipes. That’s what telecom has become. Services go over-the-top (OTT) and telcos provide connectivity. Telcos have fought a battle for more than a decade to retain Services and they lost. Only Voice and IPTV represent significant business other than connectivity.

Not even the assets they had at the time of the first cloud and pipes post are an advantage anymore:

  • Telcos do not have a billing relationship any better than iTunes/App Store, Google Play, Skype and many other OTT.
  • Telcos brand is perceived by consumers as ‘you-pay-for-all’ vs Internet freemium everywhere.
  • The only reason voice is still with telcos is because of clever bundles of minute plans. And IPTV in most markets resulted in a must-have bundle just to sell broadband.

Telefonica does well to try and play the OTT game too with a separate entity, Telefonica Digital. It’s the only chance to be anything other than a pipe.

As per RCS, forget about it. This was invented when Nokia ruled. In a post-iPhone world with Facebook and Twitter native support, what does RCS has to offer to a user?

Update: Check out Telefonica Digital Tu Go. That’s a good example of making OTT work for a carrier.
This app enables you to have OTT voice with your phone number when on Wifi. That is a far simpler and lower cost approach to poor 3G indoor coverage than deploying femto-cells.

Coming soon:
Clouds and Pipes: The End of Telecom as we knew it.
You can get an early copy of the book and contribute with comments by subscribing to the blog by email.

 

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M2M: What is the threat for telcos?

ntt-docomo-logo-crop-1

M2M is not taking off as fast as operators would like.
But the threat for them is not about failing to reach billions of devices talking to each other, as M2M promises. That will surely happen. The threat for telcos is that they might not be the ones to control and manage them.

Cheap WiFi modules combined with the nature of IP make Over-the-Top solutions as effective as any other, if not more. For customers, OTT has the advantage not to lock them to a single connectivity service provider.

Telcos know it. More and more, they will have to do as DoCoMo just did, and aim to play over-the-top. It is the right move. Telefonica has done it in other domains with Telefonica Digital by creating a new umbrella brand called Tu, for over-the-top communications services.

The point is not that telcos cannot rule in M2M. The point is that it is unlikely you do, if you just focus on locking M2M Service with Connectivity, as telcos did in the days of voice and VAS.

 

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Converging into Clouds

Online players, such as Google and Amazon cope all bets to reign over the Clouds, benefiting from their global reach and huge experience on web scalability. Others foresee IBM -talking about utility computing for decades- or HP, after acquiring EDS, as strong contenders to put IT systems on the clouds.

But what about Telcos? Wouldn’t they want to play too? At then end, operation of network services is what they have been doing for ages. Telcos own the connectivity, which is a key element in cloud computing. They can promise their business customers a guaranteed bandwidth and latency, that other on-line Internet players, simply can not commit. And they are close to their corporate and SME customers, to whom they already sell PABXs, internet access, leased lines and mobile phones. So telcos know their market in their local countries better than Google. Do not underestimate the power of the Operators. They have the strength to being able to gather an ecosystem of partners they can bring to their enterprise customers.

Internet giants, IT players and telcos, they all want a place in the cloudy sky.

SingTel to package SaaS offerings
IBM launches four new cloud computing centers

Telcos in a Clouds & Pipes World

The previous post might have look pessimistic about telcos when defining the future of telecom as “Clouds and Pipes (and Toys)”. In reality, it is just an analogy to describe what is already happening with “Over-The-Top” players delivering applications and services through Internet telco’s infrastructure with more and more intelligent devices.

How can Telcos find new opportunities in the new model? Telcos have some assets that could be valuable to Clouds and the end-users :

– Trusted billing relationship with users

– Customer profile: location, travel habits (roaming statistics), spending habits, response to promotions, home address

– Trusted brand to deliver a reliable service

All these assets can also be easily bypassed and ignored by over-the-top players. One example is Skype. Millions of users have a direct billing relationship with Skype for SpypeOut and SkypeIN. Skype has a customer profile no second to telco’s, including credit card information, billing address, Paypal behavior, country and contact list.

But a more profitable approach for the operator has been taken by Apple with iPhone. Apple is also an over-the-top player with a direct billing relationship with customers for iTunes, including its App Store, that sells more over-the-top applications. Still by partnering with telcos to sell the iPhone through them with mandatory flat fee plans for voice and data, Apple has help telcos to retain at least voice as a telco service and give users a reason to subscribe to unlimited data plans, that will support Apple apps.

Even if iPhone ever supports Skype, why would anybody use it if you already have voice as a flat fee?

The video clip is an interview from Om Malik to Josh Silverman of Skype

The Future of Telecom: Clouds and Pipes

Internet is the paradigm of next generation communications. One of the wonders of Internet is that it allows to de-couple Services/Applications from the access network. e.g. Anyone still uses the email or hosting services from your broadband access supplier? Most people prefer these Services independent from the broadband provider. One may need to move to a new house or a new city, and it is better to change only your ISP if needed, than migrating your web page and your email account.

Most communication applications in the Internet world are global and independent of the access network. Social networks such as Facebook, photo sharing as Flickr, video sharing as YouTube, blogging as WordPress, and VoIP, such as Skype are global services we use to communicate with others, regardless their network access. Most of these applications reside in clouds accessible by any Internet Service Provider. The ISP just provides the pipes.

And services such as Skype or Fling post a threat to the voice business that telcos have (so far) managed to bundle with the pipe access. As Wireless Broadband becomes more and more available with EVDO, HSDPA and WiMAX, Mobile telcos will need to keep being imaginative to bundle voice minutes, as well as SMS before it is cannibalized by Instant Messaging over their own pipes.

The broadband pipes are also used today by iTunes, Amazon Unbox or Hulu to distribute music, movies and TV shows. 

Tier 1 telcos, such as Telefonica, AT&T, Orange or SingTel have built an IPTV infrastructure allowing them to bundle Pay-TV, Voice and Broadband in a single offer. These telcos are capitalizing on current constraints such as content rights negotiated by country, high bandwidth required by TV and HDTV, and a complex Home Network environment, to provide a complete Service entirely managed by the telco.

As global players (such as iTunes or Google) start to negotiate contents for worldwide distribution, as pipes become more powerful, and as open devices get easier to manage by users, Telcos will need to re-think themselves to stop global players in clouds to relegate them to pure Pipes suppliers.

In a Telecom world of Clouds, Pipes and Toys (user devices), telcos will need to be smart and learn to play the Cloud game as well as allying with Toy makers to make their services more valuable than just Pipes.