Tuesday, January 11, 2011

What to do to not become a dumb pipe?

As a new system evolves over a period of time, it expands. Over time, it becomes so huge that it's no longer self-contained small system. In fact, it becomes an eco-system. In business context, if a firm was initially a part of that small system, it may find itself too stretched out in order to cover the whole eco-system. It may lose its strategic focus and would rather become an assorted list of complementary business units. Few companies has been able to manage that. Apple, as an example, used to make its own hardware and software. However, as PC industry has expanded, they have given certain pieces to others, extended partnerships and find an evolving strategic vision which is consistent around an evolving yet sustainable competitive edge.

Today, Telecommunication operators are feeling the same way. In initial days, when the US telecom market was full of home grown local operators, mobile phone manufacturers had their brand and control. Over a period of time, as the telecom operators consolidated, the power shifted. As technology progressed and human needs evolved, communication expanded from voice to words to sharing information. When iPhone came along, for the first time, it made it easier for people to access internet over phone more easily than ever before. The applications took off. Now, the telecom operators collect the ARPU only from voice, text, data, and value added services. They are looking to venture out in other areas, but are not able to find a way. The games and applications revenue is split between phone manufacturers and game providers. Once again, the power is shifting and telecom operators are feeling the heat.

If they do not invent new revenue sources, business models or ways to increase ARPU, the growth will subside and they would actually become just dumb pipes. The question is, what choices do they have apart from becoming a dumb pipe? The ecosystem has expanded so large that the control has to be given up in order to survive. The focus has to be narrowed to keep territorial control.

The only way I think that telecom operators have to increase revenue is to expand the ecosystem. The information sharing need to increase in such a way that it is dependent upon not only creators of information, but also the carries of information. And, I strongly believe that one of the significant ways to achieve this is to connect devices to it. Now, the ecosystem would add on to people talking to people, people text messaging to people, people sharing information and accessing information via internet from people - people talking to devices, devices talking to people, devices talking to devices, devices accessing information from internet and posting information to internet. This expansion would require network and would help telecom operators gain their ground once again.