Telcos understand they need external inspiration to compete with the faster moving digital services providers. Their challenge, however, is finding the right partnership model and devising a process to select the future winners.
These were the key takeaways during a panel discussion on industry partnerships at Telecom Asia’s Insight Summit in Singapore on December 5.
The telecom industry recognizes that innovation isn’t going to come from within, it’s going to come from more innovative external companies, said Amrish Kacker, partner at Analysys Mason. “But to filter that and add to their portfolio is where telcos struggle. Because it costs money and they don’t have an unlimited budget to take every interesting idea.”
Referring to the perceived gap in the speed, thinking and execution between telco and IT industry, Bubbly chief executive Thomas Clayton said: “I’ve worked in Silicon Valley my whole life, always on the start-ups and have worked with operators. It’s not just operators. It’s big vs smaller, nimbler companies. It’s a fundamental cultural difference between how Silicon Valley works and how any operator or big, bureaucratic, hierarchical companies works.”
Clayton made of a point of telling the telco audience that app companies don’t even know what OTT means. “OTT is what telcos call them. And if you ask Line, Skype, Viber, Facebook or Twitter, not one of them would say they are a competitor to an operator. It’s a one-way competition here.”
Laurent Chivallier, founder and chief executive of ApiLinx, and previously with SingTel, acknowledged doing innovation inside a telco is always very difficult, but noted there is an opportunity for telcos when they work with others.
“If you look at the wholeseller/retailers, like Walmart and Carrefour, what do they do? No more than telcos. They are just picking products, putting them together and selling them at the best price. They even do house brands now, and the differentiator is the house brands. So here is a model that operators can learn from or get inspired from,” he said.
“Let’s say I can’t be doing FMCGs - I can’t be doing everything. Walmart doesn’t make anything, just distributing and they are making a huge amount of money. Everybody needs to go to Walmart to get their product sold. So operators on the local scale or international scale, can do exactly the same. We have many companies that have spent a lot of energy trying to get the right product, so why don’t they rebrand apps, because frankly not all apps want to have their own brand. But I admit it’s not something easy to do.”
In the future Chivallier sees more small companies generating new ideas and going through telcos to hit the market, with the operator acting as a kind of an incubator to bring those products to the market. But not on an exclusive basis, which they have tended to require in the past, because it’s limiting for the partners.
Kacker noted the issue is what problem are you trying to solve. “I think the biggest problem to a partnership is defining the problem you are solving. You have services like Skype, WeChat and Line that have proliferated. So what operators are willing to do to differentiate their service is to partner. This is one form of partnership with established providers, which could exist without the operators’ support because they are global services not local. But at the same time, if they get some operator support, there’s a bit more usage.”
Clayton argued that’s not a partnership. “That’s a one-way partnership in the other direction. Facebook has a couple of guys to go talk to operators and say ‘hey operators, zero rate us and we’re going to give you nothing in return and you can have some brand association’.”
He points out Facebook is doing the same thing the operators used to do to the app guys in reverse, “but it’s not a partnership, it’s still one-way.
“From my perspective the biggest issue with partnering with OTT providers and operators is just learning that it’s a new world and partners learning how to work with each other. It’s not something like Facebook saying ‘zero rate us’, or the other direction some little start-up in the operator saying ‘I’ll take 70% of the revenue share and you keep 30% and you take all the risk’. It needs to be something more balanced.”
Clayton said that even to this day he’ll go to some operators and they’ll say “you want to rebrand the service, I want you to add this feature” or “hey, I don’t think this is going to work in my country because our people don’t like to talk as much and we’re not really into that.
“But I’ll say ‘you already have two millions users of the app in your country so obviously someone likes to use it.’ That’s the best part of having the app now, you can point to it as a data point. Before that, you had no validation point, you just sort of had the keys to the kingdom sitting in this castle, and you’d go to them and they’d tell you what was going to work and what wasn’t going to work, and you had to take their word as gospel. But now you don’t.”
Bypassing the networks
Moving away from the partnerships theme, Tony Poulos, the moderator and market strategist at the TM Forum, said he thinks the biggest threat to telcos is services offered by providers that completely bypass their networks.
He pointed to Free, an MVNO in France that uses Orange’s network, which constantly offloads him to Wi-Fi. “Every where I go, to any shopping mall, any major city center I’ll be offloaded onto Wi-Fi and the service is fantastic. Why do they do that? Because they don’t have to pay Orange anything for the traffic on the network.
“If I were a big digital service provider and could offload the traffic, I’d pick up the business and wouldn’t have to worry about the operator.”
Asked by the audience if social media properties are facing the same types of government crackdowns on their services as mainstream media, Clayton said they definitely are.
“We just got shutdown in Saudi and our top two guys are in jail. I’m trying to get the government to reopen the service because it has quite an active user base there. We were blocked six months ago in China. Vietnam shut us down. [Both are back up.] In Thailand we got hit buy a summons because someone said something about the king in one of his blog posts. We’ve dealt with it everywhere in the world. What I’ve found is you need to engage the governments in the beginning and give them certain permissions. We’re a public network, so anyone can follow anyone. Our argument is we’re not spreading anything you can’t follow yourself, so we try to engage them.”
Poulos asked do you give them the right to pull something down. “It’s community policed, so people report things. In terms of giving them [the government] the ability to take something down, we just tell them to report it and if it’s breaking a law then we’ll take it down,” Clayton said.