Rise of ITelco’s

I have been watching the Telecommunications space for a while now and some of the recent developments in this space has made me believe that the sleepy boring industry is about to get revitalized again.

The growth and emergence of new technology like Dockers, Mesosphere, Serverless compute, Azure Stack and AWS EC2 Run Command will further add fuel to the revitalization effort by ensuring simplicity and scalability.

Growth of the telecommunications industry has been slowing down since the 2010. There was enough saturation in the market and mobile penetration had also reached its peak. Content was (and is to a large extent) always considered the ‘King’. Most of the Telco’s jumped onto the bandwagon of driving and delivering content with the intent that there would be an inherent usage of bandwidth. This started to saturate a couple of years ago as well and now the Telco’s are looking at other avenues.

Here are 3 solid recent examples on why I believe that the Telco industry is up for a transformation and the emergence of ITelco:

Example 1: Companies like Verizon has started to make very large M&A’s in this area that will help fuel their growth. The recent acquisition of Yahoo for 5B$. Acquisition of Yahoo will provide Verizon with a digital media platform that will allow them to break away from the slumping telecom business. This acquisition gives Verizon the ability to serve mobile ad’s, targeting services and huge amount of content to break into the digital marketing sector. This also means that they have access to online behavioral data of the customers and a place to advertise on some of web’s most trafficked websites (Yahoo News and Yahoo Sports) something that google and Facebook still doesn’t have a strong foothold on yet. (https://techcrunch.com/2016/07/25/verizon-buys-yahoo-for-4-83-billion/)

Example 2: Verizon acquires Fleetmatics for 2.4B$. Fleetmatics is a telematics company based out of Ireland. Fleetmatics is a IoT company and a SaaS based provider of GPS and other services to fleets and companies with mobile workforce. Services it offers include location services, driver and car security services, fuel tracking, dispatching and billing/invoice services. This clearly gets Verizon in the emerging IoT space and also potentially drive some of the same analytics that Uber or Lyft has. It also clearly carves out a new stream of revenue for Verizon and incremental revenue when combined with some of the stuff from AOL and Yahoo. (https://techcrunch.com/2016/08/01/verizon-buys-fleetmatics-for-2-4b-in-cash-to-step-up-in-telematics/)

Example 3: This third example is a great example of a Telco’s strong commitment to the emerging IoT space and the opportunity they see here. Softbank will buy the Chip designer ARM for 32B$. ARM manufactures chips for Apple iPhones but what was interesting was comment from Softbank “. “ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the Internet of things. This is one of the most important acquisitions we have ever made.””, Softbank said. ARM’s architecture is designed to use as little power as possible and it is well placed for the nascent IoT market — the new world of everyday decides that have processors embedded in them to give them some smarts. This is a good example of a Telco expanding into the nascent IoT space and I am very sure there will be a platform acquisition that will soon follow to augment this strategy.(https://techcrunch.com/2016/07/17/arm-holdings-confirms-softbank-is-buying-the-chip-designer-for-24-3b-in-bold-iot-move/)

Example 4: The fourth example is not really an example of any acquisition but infact it’s an example of how one of the world’s largest phone manufacturer’s — Apple has probably seen the end of cellular telephony. “Apple unveiled their huge iOS10 release that now includes a third-party API for the green ‘phone’ app, meaning your regular phone calls if you use an iPhone. This means that any call service from a third-party app — say WhatsApp, Facebook, or Skype — will be able to work through the usual green phone button on Apple devices.”

This essentially means that Apple has seen the end of cellular telephony coming (possibly end of phone numbers entirely) and we will all just used data/VoIP to make phone calls in the future. (https://www.linkedin.com/pulse/did-apple-just-seed-end-cellular-telephony-claus-hetting?trk=hp-feed-article-title-like)

These four examples are a clear sign of how the end of traditional telephony is coming and the emergence of a new ITelco (IT Telco) where Telco’s are not just telecommunications company but really a IT company that’s backed by strong telecommunications back end infrastructure. They will be agile, nimble and will begin to attract the smartest brains in the industry again.