Only One Rival Can Topple Tech (and You’re Not Going to Like It)
The Google/Facebook duopoly* seems impenetrable — but telecom can disrupt the disruptors.
Verizon and the rest of big telecom could rival the Google/Facebook duopoly by creating open standards for data aimed at interoperability. This would be a power-move by service providers: leverage control of a chokepoint that’s upstream from the software giants in big data’s supply chain. Counterintuitively, that would actually enhance consumer protections, satisfying regulators by introducing competition in an otherwise monopoly market.
Big telecom would have to start by creating industry-wide “open standards,” a compulsory requirement for all players to make their common data interoperable (and anonymized 🙏). It sounds scary, like a cartel composed of the last people you’d ever want colluding, but it’s a mere agreement on data standardization with a crucial kicker: users must be given the choice to both opt-out and take their data with them to another carrier — an important check & balance for the industry.
There are many benefits from such a groundswell. From the consumer perspective alone, it would reduce the friction of changing services, which would incentivize telecoms to improve their user experiences. Effective monopolies over fiber infrastructure are part of what enables telecoms’ poor UX and atrocious customer service. If data becomes their new goldrush, they would not be hoarding a scarce physical resource anymore; rather, they would start competing to aggregate something abundant — and that competition has historically been won by servicing the demand-side with a superior experience.
Google and Facebook each own substantially all of the aggregate demand in the addressable market for digital consumers. From that position of power, they’re the gatekeepers for the one scarce resource on the free and open web: end-user demand. That privileged position comes to them by virtue of occupying an important bottleneck through which all of this abundant information must pass.
Big telecom is a different kind of gatekeeper, occupying a different bottleneck, en route to all of the same end-users. Telecom owns the same, scarce aggregate demand as do Google and Facebook, but telecom’s marketshare is relatively distributed among a number of companies — not consolidated into a single entity as in tech. Consequently, standardizing anonymized user data allows telecoms to sell (or open source) their data. That commoditizes data, letting anyone access quantities of it at a comprehensive scale that’s the closest thing to Google/Facebook volumes that you can get.
But, why would telecom want to commoditize this valuable resource?
First, when you have something as abundant as data, scale is an important ingredient of the “superior user experience” that determines winners and losers. By virtue of being the transmission mechanism that delivers all the media for Google and Facebook’s fodder, telecom is the only industry that can rival these tech giants’ scale — both in depth and breadth of data.
Specifically, open sourcing all of the data that flows through their pipes creates an opportunity for telecoms to rival the great Google/Facebook duopoly in a competition for ad dollars. If you think Google and Facebook’s platforms have reach, the telecoms have that and more (e.g. the web and TV).
At this point, it is a race to aggregate more of the aforementioned supply chain. For example, the Verizons of the world have accumulated a lot of media producers — the original sources of all this content. Further downstream, Verizon has also acquired a lot of web/app properties — the very merchandisers who feel burdened by a prisoner’s dilemma, forced to either feed Google/Facebook or suffer the consequences. (I use Verizon as a choice example in light of its recent acqusition of Yahoo/Oath, but this applies just as much to Comcast, et al.)
There’s no doubt that the great duopoly is aware of their vulnerability. Google and Facebook don’t control the connectivity that delivers their services (nor all of the hardware that frequently displays them), so each has invested in connectivity solutions like Project Loon, Google Fiber, and Aquila. Big tech is vertically integrating, backfilling down the supply chain; Big telecom ought to answer in kind.
Yet, Apple hasn’t trifled in the data wars, since data/advertising are not part of its monetization playbook (for better and worse), not to mention that its business model is aligned with wireless carriers and ISPs. Given Apple’s dominance in devices — the supply chain’s other bookend — a joint venture between Apple and its prexisting partners in big telecom would be a game-changing end-around the Google/Facebook duopoly. Will be interesting to see how this transpires.
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*The use of “duopoly” notwithstanding, I’m on the record as opposing antitrust action against the tech giants today. (Read: Antitrust is tech’s endgame + The market inefficiency sustaining Big Tech)
In addition, this article is about business strategy, strategic options, and competitive advantage — as opposed to what I personally hope to have happen or wish into existence.