HomeTelecomsFacebook: 4x more relevant than telecoms players? The loss of the network effect

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Facebook: 4x more relevant than telecoms players? The loss of the network effect — 3 Comments

  1. What is the rationale for telcos partnering with each other to increase network effects, rather than partnering with Internet companies?

    I’d argue that your premise “Operators must collaborate with each other to create services that work seamlessly across their networks” has multiple problems. Firstly, there is very little evidence that such efforts work – numerous attempts at creating national mobile messaging, payments and API collaborations have failed. Fiascos like Weve and Joyn abound. Secondly “This does not require global co-ordination” overlooks the fact that national operators will often be members of international groups that have their own imperatives for a common platform. Thirdly, one of the pre-requisites for standardised services will be standardised networks. This approach may make it harder for network providers to differentiate on QoS, policy management, charging policies, rollout of 4G/5G/small cells and other issues.

    I’d say it makes much more sense to collaborate with web or device players. One of the few successful telco-led partnering activities of the last decade was with RIM at its heyday, with various operators successfully collaborating with BlackBerry to create and sell new services. Other deals with Opera, Facebook, Google and even Skype have been interesting. Currently, we see Telefonica working with Mozilla/Firefox as another example.

    Conversely, I struggle to think of telco collaborations that have borne fruit, apart from in the M2M space.

    • Permit me to add a bit some context to Dean’s observation about the success of M2M.

      I contributed to the mobile industry’s strategy to develop the M2M market with the aim of scaling it up to levels comparable with the then dominant handset market. This was a market led strategy (I did the market research); by contrast, many other initiatives seem to be motivated by technology ‘push’.

      What this meant is that the M2M market development strategy, coordinated by the GSMA, included some technical work to address architectures as well as hardware costs. More importantly, however, the strategy included objectives to address market evangelization, to optimize operational deployment and to foster business model innovation.

      This example should be a lesson for future efforts, especially where success depends on creating a functioning eco-system across value chain partners. After all, this is a market reality that shows up in your ‘network effect’ analysis.

  2. Thanks Dean for your typically well-considered comments. You are right that telco collaboration has been a failure in the past, and that a lot would need to change for it to be successful in the future… and you do make a good point about the international group effect.

    Now you may not need standardised networks for standardised services. You need “compatible networks” for “interconnected services” which is not the same thing, and what compatible means will depend on the service being offered. As BSS/OSS and networks themselves become more open/programmable, however, some of the technical barriers may ease.

    My overall point, however, is that if a network operator tries to differentiate on its own footprint alone (i.e. with a web or device maker alliance!) then it will not be able to take advantage of a significant network effect (online services will win, as they have global reach from the get-go). However, a national footprint is, for many service types, practically as valuable as a global one, hence the incentive to collaborate with other telcos.

    The biggest problem, I agree, is implementation – and telco culture plays a large role here. There is still a bigger desire to compete with other telcos than to expand the pie – and when collaboration is on the cards, it is an engineering-led exercise that misses the market opportunity.

    Example of successful telco collaboration? Cellular roaming? Wi-Fi roaming/federation (in some markets)? But I agree, there aren’t many.

    Richard

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