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Peter Jarich |
Two years ago, I attended a conference on network traffic management and came away with one key message; vendors selling policy and network optimization products, almost universally, felt that U.S. operators trailed the rest of the world in terms of service innovation. A few weeks later, I did my best to defend the state of service innovation here in America with a column that pointed to everything from speed tiering and WiFi services to T-Mobile's homegrown OTT apps and the (now-defunct) plans for a wholesale LTE network from Lightsquared. If you wanted to argue for more service experimentation out of telecom operators, that's fine. Positioning the U.S. as an innovation backwater, however, was a misrepresentation, looking solely at service pricing models--and not even doing that very well.
Two years later, the innovation imperative--including a need to fully understand the full scope of what is means to be "innovative"--has only grown more acute.
By now, the story should be well-known. More and more, operators find themselves facing new, nimble (sometimes OTT, sometimes MVNO) competitors while their traditional voice and data services get commoditized. Their survival, then, requires telcos to think beyond their traditional way of doing business. To roll out service innovations that can both grow revenues and keep hold of existing customers. And yet, well-publicized examples of innovation efforts like AT&T's Foundries or Telefonica Digital simply seem to stand out as the exceptions that prove the rule. It begs the question, then, of why service providers have struggled so much to experiment with new business models and, then, roll out ground-breaking services.
The answer that's too often given is that innovation simply isn't in an operator's DNA; it's not a part of who they are. It's the kind of answer that often shuts down the conversation, leaving everyone nodding as if it were some immutable law of nature. It also overlooks the fact that telecom operators should be in a prime position to envision and develop new services and consumer-facing business models. They have direct access to insights around consumer behavior and demands. They have direct access to some of the most cutting-edge electronics--heck, they have device vendors ready to build-in specific features at their bidding. Finally, they have a critical need to "innovate or die."
So, what is the gating factor on service provider innovation?
- Blame The Vendors. It's been argued that, looking for ways to trim OpEx, many operators offloaded services R&D to network and IT vendors who were more than eager to become "partners" and ramp up their managed services revenues. It's not entirely true. Vendors might deliver new solutions to support service innovation--IMS, SDP, policy and OSS/BSS evolutions--but operators still need to roll out services based on them. Unfortunately, vendors haven't always been helpful in providing guidance around which services to launch or how to support them post launch. To be fair, they might not have all the details on what's working and why. Going forward, if only to sell more gear, they should.
- Innovation Isn't Singular. The word "innovation" may be singular, but the concept isn't. That's pretty deep, I know. Still, think about it. If the concept of innovation is, broadly, about looking for new types of services beyond traditional voice and data (along with the business models behind them) then an operator has plenty of options before them. Consider completely new pricing models for an existing service like mobile data vs. building off a competitor's new device financing scheme vs. pushing into an adjacent market like mobile payments. This isn't to say that with so many options new thinking should be easy. Rather, with little history to guide investment decisions, "analysis paralysis" is all too easy to set it.
- Competition Makes Us Insular. Competition with OTTs is almost universally understood to be a top operator priority. Yet, long before carriers had to compete with new players birthed from the Internet, they were busy competing against one another on a local level. This focus on local competition has made them expert at evolving services in-line with local demands along with matching the moves of other in-market carriers (sometimes even with the help of friendly analyst partners). It also complicates their ability to get a grasp on what's happening outside the local market. A resource-constrained operator in Bolivia, for example, isn't likely to pay too much attention to new service launches from Japan; it's not directly competing with them. Unfortunately, this means that innovation insights from other markets may often go unnoticed.
- Uncharted Territory. It's easy to take for granted the state of today's mobile ecosystem, including OTT disruptions, connected tablets, multi-screen content plays and smartphone saturation in mature markets. That's another way of saying that it's all too easy to forget that so much of this is still relatively new. Operators may be scrambling to build connected tablet use cases, but the original iPad (the device that validated tablets as a device category) is just over three years old. LTE networks only began going commercial around the same time. This isn't an excuse for operators that have been slow to evolve their services. Instead, it's a reminder; in the middle of intense market disruption, it's unrealistic to expect the people who created the market (in this case, service providers) to lead--or fully understand--its transformation.
- High Stakes Games. Innovation is risky. If "credibility" is one of the core assets an operator possesses, the risk of a new service not meeting customer expectations is very real. Beyond reputation considerations, there's the risk of revenue cannibalization where a new service is particularly disruptive, not to mention the risk of simply wasting lots of time and money if the new service fails or is kept alive long past its expiration date. Service providers, however, are generally risk-averse. Again, many see reputation as a core asset, one that supports other assets like billing and customer relationships. They've also got shareholders who are particularly sensitive to rapidly wasting investments.
If we began with the question of why innovation is tough for service providers, all of this leads to another question. Where do all of these obstacles to service provider innovation leave us?
While his mind was obviously elsewhere, Teddy Roosevelt might as well have had today's carriers in mind when he argued that, "nothing in the world is worth having or doing unless it means effort, pain, difficulty…" Service innovation and business model evolution was never going to be easy for operators. That only highlights its importance.
Peter Jarich is the VP of Consumer and Infrastructure at Current Analysis. Follow him on Twitter: @pnjarich.