Convergence will change the game, they said, and they were right…
Is it possible to make a link between Nokia and Siemens’ decision to merge their networks businesses, and the decision of many of their operator customers to make clear their plans for converged plans, combining fixed broadband and mobile.
What are the drivers in the vendor market at the moment? Low cost coverage for emerging markets. Low cost solutions for expanding or increasing capacity in mature markets. Dealing with the opportunities and threat of convergence.
What were the major infrastructure announcements in Barcelona? Siemens had a remote radio head system, Nokia had UMA, both had low cost systems for expanding coverage.
What are the drivers for operators at the moment? Deal with IP based convergence. Take the opportunity, deal with the threats. How can we do that? Either by using your own fixed assets, combining them with your mobile play and treating them as part of the whole (Orange), partnering on a reseller basis with fixed providers (Vodafone), or buying a fixed provider(O2 – ex of BT, oh the irony).
So as they strip cost out, as network equipment margins decrease in order to support a much flatter IP and IMS-related business model, so the supplier community is reacting.
And yet, is there an element that operators are, Cnut-like, trying to turn back the tide? Well, the true Cnut story is, of course, that he was proving to his advisors that he was not all-powerful. He’s had a bad press over the years. But will the Sarins and Ahujas have as bad a press? Will we too look back on their plans to control the IP beast and say, “It never could happen” Mobile operators are doomed, are they not, to a life as low growth yet valuable access providers for third party service and content providers? You don’t buy your TV from your energy provider any more, do you? But you need the electricity to run it and pay a little bit more each year. And yes, mobile operators are in a better position than pure utilities. There is true competition, they are modelling business plans that give them a cut of the services they provide, and in some instances they may yet pull off the trick of the vertically integrated service provider.
One operator we spoke recently to was more like the true Cnut — not trying to turn back the tide, aware of his limitations, but in this case still trying to make the most of it. He is Cenk Serdar, head of value added services at TurkCell. Now, Turkey is a massive, growing market, with plenty of headroom for penetration (nice metaphor). And Cerdar says that many of his company’s top earners have been as a technology provider (facilitator, enabler, take your pick) for third party service providers. In the initial circumstances the operator has had to give certain services a nudge, to get things running, but after that they are content to hand over control to the service provider in return for a cut.
Cerdar thinks it is futile trying to control everything. There’s just too many possible services, and in any case there are too many potential disruptive influences that can come along to undermine any major service investment. So the option is to open up the network, allow other people to take the risk, and if it pays off, you are in for your cut. If not, as long as you have controlled the user experience in a way to protect your own brand equity (ie if the service turns out to be no good, it’s not associated with you) then nothing has been lost. And that model will only be more true as IP networks flatten service layers, and open up applications to new players and developers. And if that happens then the vendors, too, will not have to get their toes wet.