Monday, 30 November 2015

Dichotomy of the modern ‘telco’ Part II – content strategy



The previous article discussed the challenges faced by the telcos and this that their content strategy is possibly misplaced in the internet era.  An alternative is suggested..

Telcos have long struggled with content.  This article makes some suggestions that play to their strength.

If phone calling were invented after the internet, how would voice calls be delivered? 

Yup, it’s what Skype, WeChat, WhatsApp are doing.  In fact voice is merely a type of content in the internet ecosystem.

Content is king

The irony is that telcos for a long time, as far back as 20 years when they entered the ISP business, knew they needed a content strategy. But the fact that voice is content completely eluded them.  If they did, meaning they fully grasps content in the context of digitisation, their strategy forward would have been different.

“Remember ringtones? They were what passed for a content play in the 1990s telecoms industry” - ‘Telecoms groups find it difficult to connect with content strategies’, Financial Times, 23 Nov. 2014.




Instead telcos have struggled to profit from content.  When they first entered the internet access business, they thought access a loss leader and that content would make up for it.  They were mistaken.  In fact access increases revenue significantly and is quite profitable.  And while they are right to target a content strategy they seem neither structured nor have the organisational culture yet to execute and compete within the industry.


But they were mistaken.  Broadband is wrongly assumed to be a loss leader.  In fact it increases revenue significantly and is quite profitable.  And they are right to target a content strategy but they were neither structured nor have the organisational culture yet to understand and compete within the industry.

Take video.  They had a video plan all along but they saw this as a classic telco triple-play and not in the larger context of the content sector.  Voice, video and data in a single subscription would have worked pre-internet, not post.  Can they compete with local cable tv?  If they need time to do so, there’re NetFlix and Amazon, both not even at their prime.  Reselling looks a better bet.  Worst, it’s only a matter of time before original programming is directly accessible or through HBO and the like.  And YouTube which has surpassed tv for the bright young things could be the real competitor.  Providing video as part of triple-play is short term because like voice, it’ll pass them over.  And like ATM, telcos could misspend billions in a strategy past, losing the initiative to the global players.

Taking WhatsApp as a example, if telcos understood the internet economy early they will have created a ‘WhatsApp’ to replace traditional voice but then it’s culture will dictate that it’s offered within their infrastructure!  End of a good idea.

Content is progressing towards what telcos ironically call ‘OTT’ services



Telcos’ perception of content may have limited their execution. They have attempted content plans, often taking the cue from Silicon Valley but mostly to no avail.  Sometimes it appears random.  Wouldn’t finding areas that play to their strength be better?

Phone calls are person to person.  In the internet this is the peer-to-peer model, but with a difference. They could figure this out and look at ways to use a model familiar to them.  They could seek inspiration from M-Pesa, the Kenyan phone-based p2p payment scheme by Safaricom, a telecoms group.  That’s playing to their strength.  What’s more, M-Pesa’s co-creator Vodafone saw its churn there reduced to below 0.1%.

Telcos already take deposits. Once a senior executive told me they considered offering some form of banking service but said they will never get the license.  That world has changed.  The Indian government through the Jan Dhan Yojana scheme to provide each Indian household with a bank account by 2018 issued light touch licenses for ‘payment banks’ designed to appeal to mobile-phone companies’.  And in China, barrier to non-Banks have been lowered.  And if tech industry can......!

Four other areas related to data, each of which can stand alone or be combined to add value are location data, data, their being carriers of data and trust. 

Telcos have location data, something of value to digital businesses.  Further by the very nature of their business they have plentiful of data like consumer demographic.  Big data and analytics are well discussed topics but telcos don’t seem to have leveraged their advantage enough to serve the digital sector.  They could also consider services related to telcos being carriers of data.  Think secured data, security, end-to-end delivery and the like.  Telcos have long offered the latter but instead of networks, they could think in terms of data.  Finally trust is a cornerstone of the digital economy and consumers trust telcos so maybe something to run with.  The trust industry is still at an early stage. 

Most of all, telco 2.0 is really a communications provider.  But communications may not look like a "call" at all.  If they can unshackle from the 130-year thinking, maybe they’ll also think of communications in terms of social linking, conversations, messages, etc.  Facebook, Snapchat, WeChat, blogs are all about communications, as is broadband services.  This is not to suggest that they try to create another Facebook but that this line of thinking may help them create something to their strength along the lines of communications.  Consider sms that by itself has no value.  It is generated by one person to another.  But aggregated over time, conversations create indirect value, like WeChat and Facebook creating value from social postings. Celcos however make money directly from sms.  And left it at that.  These show a difference in strategic thinking.  A modern telco can leverage on indirect value creations to complement the direct method.  And they need to get it that data now has a lot of value.


Whatever it is, telcos should bear in mind the borderless nature of digital businesses, a natural for digital firms but seemingly a challenge for telcos.

Whatever will be will be

With the transition from voice to data, many telcos seem less sure of themselves.  As the old voice model is swept away, this is a period of rediscovery and trying to find its feet with new business models.  Telcos will add content/OTT and this is why they ought to be mindful over their negativity over net neutrality.  The business of voice is now moving irrevocably on to the WeChats, WhatApps and Lines of the internet messaging world.  Even if telcos want to upend them with their own version, the networking effect that had worked for the telcos now works against them.    Instead they could participate directly in the digital sector by leveraging their strength.  Alternative, focus on the core task – connecting people – and let others work out what to push down the pipes. 

Next week, we’ll discuss the cause of change.  It may point towards what ‘telco’ 2.0 would look like.


@tommichen7
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