That was the first thing the telephone company executive said as he started his presentation. The preceding IBM presenter had pointed out that the all the telecoms companies, especially those in the advanced economies, face considerable “business challenges” to adapt to a changing world.
The telco executive continued; “I had to tell the executive board that if we don’t move quickly, then we won’t be able to fire people fast enough to cover the revenue we’ll be losing. Two guys set up YouTube in a garage and they sell it for nearly $2 billions. These people are eating our lunch. Facebook is eating our lunch.”
And that is the whole point, put much better than I could put it.
The telcos did very well for decades in a business that combined managing large networks and gathering revenue from little more than voice traffic. And so did the mobile carriers. Well, it’s pretty much over for voice. Skype hasn’t killed voice revenues yet, but it’s clear to everyone that voice revenues are heading south. (I’ll not be in the least bit surprised if Google comes out with a Skype-type of service sometime soon).
On land lines, data traffic overtook voice (in terms of volume) a long time ago on land lines and it recently passed voice on mobile networks. According to one rough estimate, more than 50% of Internet traffic is now split between YouTube/Google (with about 20%) and Bit Torrent (file sharing) with about 35%.
It’s a depressing picture for the telcos. They know that Google is now focused on the telco market. Google’s recent announcement of a mobile platform makes is plain. But of course, it’s not just Google. It’s Facebook and MySpace and the whole tsunami of Web 2.0 web services. Even Second Life, quirky though it is, qualifies. These are data services, now in their infancy, that will become the communications services of tomorrow.
And in case you haven’t noticed none of these services were created by telcos.
There may be a business in managing the pipes that carry the traffic, but that’s not much of a business. As the telco executive said, “If we’re reduced to transport then we’ll need to reduce more than 200,000 staff to, maybe 5000.” Tell that to the shareholders.
That’s the conundrum that the telcos have to solve.
The presentation was part of IBM’s Telecom conference last week. What followed was a good deal of talk about the telcos offering identity management and security as a fundamental service. This makes sense to me. They have the data and they have the capability. If they move fast enough then those could be the services that save them - because you can build on that. But if they are going to do that, they need to move fast.
Unfortunately, as one IBM consultant remarked to me: “The problem with the telcos is that they move very slowly.”
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