| +=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+
The TeleChoice Take
+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+
Ever since Alexander Graham Bell invented the telephone in 1877,
people and businesses have bought their telephone equipment
and services from a telephone company. That truth is at risk of
becoming merely historical if telecom companies don’t change
their ways.
Historical Perspective
In most of the U.S., and similarly around the world, the history of the
industry is largely the history of a monopoly. The Bell System
represented a stable, trusted, and unquestioned part of business
and residential communications. Although the monopoly system
resulted in lack of innovative choices and relatively high pricing,
we didn’t really notice or care until competition arrived on the
scene.
In fact, our perspective of "telecom" was really just "telephone."
In the scope of historical context, computers have been around for
less than half of the history of the telecom industry, and broad use
of networked computers for less than a third of that history. The
PC didn’t begin entering the home until the 1980s (20 years out of
a 125 year telephone era), and most people hadn’t heard of the
Internet until 1995 - a mere seven years ago.
However, over the past 15 years, and especially over the past
seven years, the value derived from the copper and glass and
electromagnetic waves running under our feet and over our
heads is increasingly dominated by the value of connecting
together computers and moving information from here to there
to perform critical tasks and make critical decisions.
When telecom was all about providing a black phone on a wall,
a bedside table, or a desk and making sure that a call could be
completed from that telephone to any other telephone in the
world, our industry excelled. We showed up at the customer’s
office or home, got the solution working. It was easy for anyone
to use, and it could be trusted as a utility to always work.
Somewhere along the way we failed; we lost sight of the vision.
Maybe it was in the heat of the competition that emerged at the
same time that "telephone" was becoming "telecom," that voice
signals were becoming data paths, and that the network was
moving from analog to digital. Don’t get me wrong, all of these
things were good for our industry and good for the society we
serve.
But as we began to introduce telecom services, our view of the
customer changed. Our services lost their "black phone"
simplicity and the demands that we placed on our customers
increased. We started forcing our customers to be technical
experts. We stopped selling solutions and started selling
components.
Back when we were in the black phone business, we may have
called it POTS among ourselves, we may have talked of tip-and-ring,
and as our technology evolved, we may have worked with DMTF
and SS7 and all kinds of technical jargon; but what we sold to our
customers was telephone service: telephone lines and telephone
equipment.
When data hit the scene, we started selling DDS and DS-0s and
T1s and X.25 and Frame Relay and ATM and PVCs and CIRs
and DSL and LMDS and 802.11. And we got religious about the
demarc. "My part works, it must be a problem on your end."
Bottom line, we forced our customers to in-source the solving of
the real problems. We forced them to hire expensive technical
experts who could figure out how to integrate all of the piece
parts and then keep it all running. As technology has grown
increasingly complex, this burden on our customers has grown
increasingly expensive and hard to maintain (at a human level,
much less an operational level). The increasingly tight integration
of the computer infrastructure with the network infrastructure has
created demand for people who can live in both worlds, and by
the way, has made us even more zealous about defending the
demarc.
Sure, there are some telecom companies that are willing to
provide professional services to reach across the demarc and
perform that integration and operations, but usually its with fear
and trembling, at inflated margins to protect against the threat
of the unknown, and almost always only when absolutely
necessary to protect the most important customers. But our
normal model is to tell our customers to do the dirty work
themselves.
As data networking has moved down from large enterprises into
the smallest of businesses and even into homes, we’ve continued
this trend. Sure we can sell you ADSL -- or do you need SDSL or
maybe VDSL? Do you want to buy the modem from us? I hope
you have your own router and firewall and can configure your
own Ethernet network, because we won’t do that for you....
I wonder why broadband deployment is limited to 12% of homes
in America? I wonder why broadband over cable is outpacing
DSL? Why would consumers rather buy "Broadband Internet
Access" from their cable MSO when they can just as easily buy
"Asynchronous Digital Subscriber Line" service from their
telephone company?
I wonder why telecom services have become commodities?
Even though networks are critical to the operation of today’s
businesses, business customers are unwilling to place high
value on the capacity creating those networks. (Don’t kid
yourselves, as an industry, we aren’t selling networks. We’re
selling the component parts that we force our customers to
integrate together into networks...)
Current Situation
Conventional wisdom says that the clear telecom winners are
emerging. The RBOCs will dominate the residential and small
business markets. AT&T, Sprint, and maybe WorldCom will
dominate the large business to global enterprise space.
The RBOCs’ monopoly reach into consumer homes gives them
the unique opportunity to sell the low-cost bundles that consumers
crave.
The Big 3 IXCs’ full product portfolio and network reach position
them well to meet the complex needs of large enterprise
customers. Increasingly, these arrangements have included
professional services and outsourcing, but providing these
services profitably has proven a challenge for our asset-focused
industry.
A couple of recent transactions should be a warning signal to the
telecom industry. The large systems integrators are investing in
growth through acquisition and, by doing so, moving into new
realms. Just as telecom vendors have been dragged into the
computer world, the systems integrators are increasingly
integrating large networked systems involving complex
networking technologies connected across oceans and continents
by telecom capacity.
These large integrators have the can-do mindset, customer focus,
solutions orientation, and business model to easily make this
transition. Managing a complex set of intellectual resources is
core to their business; and as the technologies evolve, managing
networking expertise is logistically no different from managing
computing expertise.
And now, WorldCom’s bankruptcy has opened the door for these
integrators to waltz in and cherry pick the missing pieces they
need to complete the portfolio of capabilities they can offer to
customers.
They don’t need much. They already have the customer
relationships, and they can buy network capacity on a wholesale
basis a lot more cost effectively than they could own and operate
their own networks.
It’s probably a good time to rearchitect the way networks are built
to provide the solutions that enterprises need. Now that the
customer doesn’t have to worry about the underlying technology,
does an IP VPN or Virtual Routed Network make sense? Is an
IP Centrex model more suited to EDS’ outsourcing infrastructure
(especially with Loudcloud) than a traditional PBX or CO-based
services? Which services do you buy from a wholesaler and
which do you operate on your own platform? A clean slate
provides plenty of opportunities to redesign to optimize
operational efficiency with customer focus.
Bottom line, despite AT&T’s projected confidence these days,
the enterprise customer base is not safe. Our attitudes and our
outsourcing of the valuable activities to our own customers has
set us up as an industry for a fall.
But it’s not just the large enterprise market that’s at risk. Today’s
IP Centrex players offer a compelling value proposition to small
and mid-sized players. Vendors like Narad Networks are also
arming the Cable MSOs to march into this space with broadband
offers to compete with the RBOCs.
Of course, the MSOs already appear to be winning the consumer
space. Telecom players continue to fall behind cable in
broadband to the home, and where voice over cable has been
offered, the take rates are phenomenal. And don’t look now, but
even more consumer-focused giants are eyeing this market:
most prominently Sony and Microsoft.
It pains me to say it, but our customers no longer need us.
Of course, businesses and consumers need what we have more
than ever. They crave increasing amounts of bandwidth. They talk
continuously on the telephone, whether at home or in the office or in
the car or on the golf course.
But we, as an industry, may no longer be best positioned to provide
our components to them. For that’s all that we’ve become,
component vendors. And the integrators are lining up to integrate
our components with those from other industries into solutions that
truly create value for "our" customers.
+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+
What's Next?
+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+
What Can You Do?
Obviously, this is intended to be a "wake up" issue. I ask you to sit up,
take a deep breath, and consider what implications this potential future
industry scenario has on your business. What can you do to be
prepared for this future?
Specifically, consider this:
- If you are a service provider/carrier that sells directly into the
consumer, business, or enterprise space, carefully consider the
implications of this threat. Is it time for you to reconsider your product
portfolio and to move from selling components you force your
customers to integrate into complete solutions? If so, how can you
prioritize your target markets so that you can deliver high-value
solutions based on the unique strengths and capabilities within
your company? If not, what’s your exit strategy if this scenario starts
to play out?
- If you are a wholesale service provider/carrier, what
implications does this scenario have on your business? Who are
your target markets today and who are your largest customers?
Does this scenario represent risk to your business plan? Are you
positioned to serve the integrator market? Do you have a channel
enablement strategy that would arm these integrators to effectively
and quickly deliver your components as part of their solutions?
- If you’re a technology vendor, are you ready to support the
systems integrators? How well would your product and delivery
suit their needs? Do your products enable new kinds of services
that should be positioned through the integrators? As this scenario
develops, are you prepared to partner with the integrators to help
them launch new solutions successfully to their customers?
- If you are EDS or IBM or another systems integrator, are you
ready? Have you evaluated the market opportunity? Have you
defined the solutions that you can deliver to your customers? Are
you going to do it right, or just repeat the mistakes of the telecom
industry?
The ability to cut through the confusion and fear in the industry, to
look through today’s fog to perceive tomorrow’s potential futures, to
logically and sensibly and bravely ask and answer the critical
strategic questions, and to understand your competitive
positioning and differentiation and act accordingly has never
been more critical. Let us know if we can help.
+=+=+=+=+=+=+=+=+=+=+=+=+=+
Need Some Help?
+=+=+=+=+=+=+=+=+=+=+=+=+=+
TeleChoice helps companies everyday better position their
firms and products for success, whether re-examining
fundamental business strategy or clearly communicating
unique position and value in today’s tough marketplace.
Contact us at info@telechoice.com or visit ( http://www.telechoice.com/)
+=+=+About TeleSparks+=+=+
On occasion, we share with our industry
friends our views on major events and issues in telecom.
We use TeleSparks as the primary vehicle for sharing these
(usually highly opinionated) views, and we welcome your
feedback. Feel free to forward these on to others, but please
copy us on the messages so we have a sense of the extent
of distribution of our views.
TeleSparks is generally authored by Russ McGuire,
TeleChoice Chief Strategy Officer, with input from others
throughout the TeleChoice organization. You may contact
Russ (rmcguire@telechoice.com) or your favorite TeleChoice
contact to share your thoughts on these matters.
|
TeleSparks (Archive)