Is disruption coming for Telcos?
Is the dumb pipe business also at stake?
One of the cool things we have at Designit are Practice Development Groups. In these groups, we share knowledge, discuss and reflect about topics that matter to us. Anyone can create a group, and anyone can join. We have groups about Business Design, Service Design and Research; about Education, Wellbeing, Money, City and Citizens… through these groups, we develop our expertise and our point of view about certain topics, which ultimately helps us do better in our projects, and win new ones.
A couple of months ago I created a group to share what we know and debate about the ICT macro sector, called #connect. Recently, we have been talking about disruption in the Telco industry, and I’ve thought it might be a good idea to write this post in order to continue the discussion in another medium and format, as well as to open it to other non-Designit colleagues.
When we think about disruption in the Telco arena, immediately we think about how Whatsapp killed the SMS business, or how Skype has affected international calls. These services have dramatically affected the communication services that constituted the core business of Telcos, making their focus shift to data and connectivity services, assuming the risk of becoming the “dumb pipes” that connect us to services offered by third parties.
But lately, I’m more intrigued about other disruptive technologies, which could potentially wipe out Telcos for good. What if the “dumb pipe” business is also at stake?
In the following paragraphs, I’ll describe different types of disruption affecting Telcos. The idea for this post is to serve as a spark to kick start a conversation about the topic: it doesn’t intend to be neither exhaustive nor completely accurate, so please bare with me if something I say doesn’t correspond with reality :)
OTT Disruption
By OTT (Over The Top) Disruption, I mean all those services that, enabled by Internet technologies, substitute traditional communication services based on circuit-switched technologies, like voice or SMS. Whatsapp, as well as Skype, belongs in this category. But also social networks like Facebook, Twitter or Instagram: today, there is a myriad of services you can use to communicate with someone, which do not only substitute calls and SMS, hence reducing the number of times we use Telco services for communication purposes, but also enrich the way we communicate with one another (think about adding video to an international call via Skype or Hangouts, how Whatsapp groups have changed the way we communicate with our friends, or minimum interaction concepts like “likes” in social networks).
In this category, I’d also include companies that offer Telco services by reusing the telco infrastructure, without having to deploy their own network: MVNOs (Mobile Virtual Network Operators). A particularly interesting case is that of Freedom Pop, an MVNO that recently launched in Spain. These guys offer mobile voice and data bundles for free, being the first “telco” I hear of that’s completely free of charge. They operate under a freemium business model: up to a certain amount of minutes/MBs, everything’s free; if you go beyond those limits, you pay a reasonable price. The company is heavily funded and seemingly surfing the startup/venture capital bubble, and it remains to be seen whether they’ll be able to find a sustainable business model, but I consider it worth mentioning.
Peer Disruption
By “Peer Disruption” I want to describe new players that are entering the traditional Telco business, but doing it differently, with style, and making Telcos nervous. The best example, to me, is Google Fiber: wherever they launch, the home connectivity business is dramatically affected, customers are switching to Google and Telcos are obligued to wake up and offer a better service as a reaction to the new scenario.
Will Google deploy FTTH all over the US, and then all over the world? I don’t think so… Will someone else do it? Who knows…
Also in this category, I’d include the proliferation of WiFi Hotspots in cities and all over the place. More and more, there’s a WiFi network you can connect to which is completely free of charge. From a user’s perspective, it’s a pain to go through all the hassle of finding a network, selecting it, and then getting through; but I don’t see why this couldn’t be done automatically by software, as today our phones are connecting to mobile networks in a completely transparent manner. If this trend continues, there may be more and more people who decide not pay for Telco services, as WiFi becomes ubiquitous.
New Technology Disruption
Here come some interesting initiatives by Tech giants to bring the Internet to those parts of the world’s population where there isn’t (yet) a case for Telcos to deploy networks in the traditional way. Cases like Google X’s Project Loon, who provides Internet access by launching balloons in the stratosphere that smartly use winds and communicate with each other in order to provide the best possible coverage; or Facebook’s Internet.org initiative, who uses drones to provide connectivity via optical communication technologies… are quite mind-blowing, aren’t they? However, it remains to be seen whether these initiatives could harm Telcos in places where they are already…
What about SpaceX? Musk and his team are dramatically reducing the cost of launching satellites to space, and working towards having us humans living in Mars by 2030. If they can do this (and providing Internet services in Mars is included in their plans), why couldn’t they provide satellite coverage all over the place?
Unknown Disruption
Of course, there’s the possibility that something crazy, totally unprecedented happens. One day, Designit’s Sr. Fellow and friend César Astudillo described to me a sci-fi story about a network that’s created by connecting all of our devices, making it unnecessary, in enoghly populated areas, to access the Telcos’ networks: some kind of peer-to-peer, LPWA network. It may sound crazy, but isn’t having humans in Mars in a couple of years crazy, too? :)
What other disruptive technologies exist, or might pop up, that could affect Telcos? Is there any other case or example you could share? Are Telcos too busy fighting each other, when there are other “white-walker” players and technologies out there that could kill ’em all? What do you think? Please share, comment, discuss… I’d love to hear your opinion!
