What Causes the Global Telecoms to Lose Sleep? Convergence.

Convergence. It is certainly a popular buzzword among IT and Telecom Analysts, Bloggers, Tradeshow & Online banners. But beyond the hype, the global telecoms are looking to the future…and looking over their shoulders with a mix of fear, hope and anticipation.

Seem fuzzy to you? Trust me, it seems fuzzy to the strategists at the Global Telecoms as well, and to the Media & Entertainment companies.

Giant corporate arm-wrestling match

Remember those times when your cable/satellite provider had a public spat with one of the networks? “What, I can’t watch my favorite team this season on XYZ provider?! Well I’ll just switch providers!” That’s the sound of a giant arm-wrestling match between TME players trying to decide once and for all who is more important, the content (media) OR the pipe (telecom) that delivers that content to the couch potato, err, consumer.

Now this is fun part where $ billions are at stake. To tip the balance in their favor, and to make a buck in the process, the Telecoms are buying or building their own Media properties. Comcast buys NBC. ABC bought Disney. Multiple competitive broadcasters invest in Hulu.com. The NFL (National Football League) launches the NFL Network, but only on some carriers (“stickiness”). Netflix eats up 29.7% of bandwidth. So the pipes (Telecoms) try to throttle back its usage. After all, the pipes have their own Video on Demand content and why should Netflix have all the fun (and profits) over someone else’s pipes? But if the pipes get too restrictive, then the consumer may jump to a more accommodating, more “Netflix-friendly” pipe. Did I mention $ billions at stake? And don’t forget about Google offering OTT (over the top) “phone service” or Microsoft buying Skype. No big deal – just the systematic removal of traditional phone service profits by formidable IT giants.  By the way, given ubiquitous broadband internet and high-speed home routers, what now prevents a movie studio (media) from bypassing their traditional cable distributors and Netflix to simply deliver their own library (movies) directly to the consumer? Outside of a little Next Generation IT infrastructure OR cloud delivered services, not much. Convergence.

So what’s a Telecom to do?

  1. Decide first what they want to accomplish. Typically this involves a mix of goals:
    • Driving out costs of proprietary, legacy systems that steal resources from more forward-looking projects
    • Increasing customer intimacy through sticky new services (“upload your family photos and videos to our cloud!”). Would you dream of switching providers once you did this?
    • Grabbing new revenue through new acquisitions of content/media companies; or building their own media.
  2. Next step, assess and map the capabilities of the tier-one IT service providers (just a few of us out there).
  3. Finally, settle in on a tier-one IT provider that insists on truly “Open” standards. (Hint!) The Virtual Era is all about nimbleness and digital media partners and competitors will run rings around anyone who voluntarily locks themselves into a proprietary cage. Whether they are discovered now or later, those ugly, proprietary surprises are definitely lurking out there.

Learn more about the Next Gen Service Provider story on the NGSP YouTube Channel, follow on @DellNGSP.

About the Author: Scott Turner