This is the second of a two part post about the future of mobile, long-term dreams compared to short-term reality. Part 1 was yesterday's post The Future of Mobile: Part 1 . AT&T First of the pessimists, was John Stankey, CEO of AT&T entertainment group. He took the consumer's perspective that "It's not about the Gs". To the customer, it is not about 5G or 5Gbps. Mobile needs to deliver an end-to-end experience and that means it has to be wrapped with software. "It's the customers' world, we're just living in it," he said. The big challenge is that value chains are compressing. Value in historical parts of the chain are being torn out and transferred back to the consumer. The 5 most valuable companies in the world are digital platforms, whereas just 5 years ago, there was just one. In case it's not obvious, they are Apple, Alphabet (Google), Microsoft, Amazon and Facebook. Just as Sunil had 4 messages, John had 5 principles: video will be dominant payload multi-sided business models will remain important (subscriptions and advertising) content that is compelling matters integration matters for value and convenience the product is software John put a stake in the ground that he can't imagine AT&T being successful if it "does not participate in some of the stuff flowing through our pipes." The big change is that software is the product. The days of just integrating cell-towers, handsets, retail stores etc are ending. If you don't own and control the software stack you may not have a product. "Entertainment is the water in our pipes and it must flow to our customers in a differentiated way." It will not be possible to acquire and retain customers through connectivity alone. I am not convinced. When Comcast acquired NBC I had the same view. Of course any particular content company might be a good business. NBC seems to do just fine as part of Comcast, but it's not clear it is different as a result, nor that Comcast is changed through owning a lot of content. Another reason for skepticism is that adding a good business to a bad business might improve the financials, but probably doesn't improve the bad business. However, the telcos are stuck with the business, in at least the short and medium term, due to all the capital already invested. Just as a DRAM company can't "get out of DRAM" just because there is a glut and prices have fallen below cost. They still have to keep the fab full, since empty fabs are even more expensive. Cash flow is king. I see two main problems. The first is that I don't see how a company like AT&T can deliver product in a "differentiated" way. If I watch Mr Robot on my iPhone on AT&T, in what way is the experience going to be different from watching on Verizon. The second problem is that to get to senior management in a telco like AT&T, you need decades of experience of what it takes to run a phone network. It is unclear to me in what way that makes for a team that would do a great job of managing a content company, either by producing better content, or by monetizing the same content better. Ansible Travis Johnson, the CEO of Ansible, was critical too. Mobile is so important and yet it delivers a poor experience. That day, he announced an index called mdex that ranks brands' performance and presence in the mobile space. It covers 16 countries, evaluates the mobile assets of over 2000 brands. The primary criteria were: how discoverable is the site in search results? how optimized for mobile is the site? navigation and content how user-friendly is the site? does the side drive the desired actions? (purchase, like, comment...) Full results are on theMdex.com . Top of the global rankings are Facebook, Amazon, 7-Eleven, Hyundai, Nike, Microsoft, Google, Adidas, Olx, Target. I won't go over all the results presented, but it is clear that a bad user experience (UX in the jargon) has a big negative impact and there is a strong uplift from brands with good mobile UX such as BofA, Walmart, American Eagle, Anthropologie. You might think that the telcos, being in the mobile industry, would have excellent results, sites that are optimized for mobile and...well, they mostly do not. Some are good but most are poor. The best tend to be small telcos. So generally speaking, the mobile industry doesn't do mobile that well. Private Equity Spells out Hard Truths The final person I'll cover in detail was Alexei Reznikovich. who is managing partners of a private equity firm, and also CEO of Veon. He echoed a little of John's message about it being more than connectivity. He quoted Chekhov who said "No matter how much you shorten a play it is never enough”. In the same way, no matter how much mobile cuts costs and improves efficiencies, it is never enough. There are three big lies in telecom: data monetization is coming...in fact the best you can do is try and replace voice revenue with data revenue we have billions of customers...but they are really just people who tolerate us we are utility with stable, sustainable returns and exclusive access to spectrum...but actually all the margins are competed away and there is true competition, not a natural monopoly (like wireline telecom) Alexei had a brutal table looking at what the assets are of a telco compared to a digital company like Google, Microsoft, Apple, Uber etc. people: we are middle aged corporate execs with minimal appeal to new graduates. Young people, the people creating the future, don't want to work for us. We have no assets on the people side culture: we are bureaucratic compared to a digital company equipment/software: no internal R&D, complete reliance on vendors' proprietary solutions. Digital companies have in-house R&D and open source tech expertise: lots related to networks, none for software customers: disengaged, disintermediated. They tolerate us compared to a digital company. whose customers are engaged and satisfied customer info: lots and lots of information stored but none used. Google and Co have less data but monetize it spectrum: yes, oligopoly with regards to spectrum but NVMO (network virtual mobile operator) taking more of market, and technical spectrum compression techniques reducing its value One conclusion is that telcos are in a tough competition for talent. The table in the image on the right shows the competition by country. In the US, Google, Microsoft, and Apple are #1, #2 and #3. AT&T comes in at #43 and Verizon at #51. Ouch. Another bottom line: telcos need to find a way to engage and get customers back. One example is that telcos invented the text message. Young people only use about 15% voice, if that—all the rest is messaging. But telcos are not in that business since nobody uses traditional text messages anymore, we all use WhatsApp, WeChat (WeiXin), Facebook Messenger, Apple iMessage etc. All OTT services that are just a few bytes of data to the telco. Text messages used to be a billion dollar part of their business but they refused to disrupt themselves. As it happens, I wrote about it 5 years ago too. The challenge is to build a gateway enabled with software. It needs a new business model since connectivity revenues are not going to reverse and start growing. In his view, telcos need to stop thinking of their business as charging people for connectivity. It is futile trying to increase ARPU and they are missing big picture. The same consumer that spends $10/month with the telcos, spends $500 on other things where they don’t participate. It is essential to find incremental revenue on top of connectivity. As to his own telco, Veon is building new a biz model (although he didn't really say what it is), and hopefully connectivity revenue will last for some time to fund the transition. He realizes that they need to become relevant to their customers. "There is a bright future for the industry but not in the traditional sense of connectivity." It remains to be seen if this is true, it is by no means a certainty. Summary So there you have a number of different views. The long-term future is bright and mobile underlies all sorts of things, pretty much everything in fact. However, the short-term challenges are severe, not financial and regulatory, but the "sexiness" of the industry when it comes to attracting the necessary talent. There are some shades of the EDA industry here, which suffers from some of the same talent issues. The big networks all seem to believe that they have to get into content, although I really don't see how that makes their connectivity business more attractive. Alexei's position is especially interesting since he is in private equity, CEO of a telco, and completely honest about the issues and challenges facing operators. But there are some patterns too: the big operators see their profitability from connectivity as inadequate for sustaining their business long-term with its high capital requirements, and they see getting into content as a way to address that. I remain a skeptic the big operators (at least in their self-aware moments) are aware that they are merely tolerated by their users. International roaming is a big deal in Europe (not so much in the US where only 30% of people even have a passport). Hiring is a challenge vs Googel/Apple etc but Google/Apple etc depend on good mobile operators for their own businesses. I'm not sure how that plays out the small operators see delivering a wonderful connectivity experience as a competitive advantage that they can monetize. They are not just tolerated, they are loved the content providers realize that the whole world is going mobile and they need good mobile pipes to deliver their product, but see no need to own those pipes mobile is the biggest industry the world has ever seen, and when you throw in all the things that the IoT will connect (including all future cars) then it will only get bigger mobile is disrupting many industries, from photography (camera market basically gone), newspapers (going...going...), music industry and more. Brand experience on mobile is very variable, and ironically the mobile industry itself provides an especially bad experience We will have to wait and see how it all plays out. There does seem to be a challenge running businesses that have very high capital requirements. The airline business has been basically breakeven since its inception. Mobile risks being similar, essential to the modern world, so creating a lot of value, but not able to generate reasonable profits, let alone any sort of premium that reflects its importance to modern life. But supermarkets would say that too, since we all need food and yet they operate on razor thin margins. Of course, those of us in EDA all like to point out that the $350B semiconductor industry and the $1T electronics industry depends completely on us, yet we "get no respect."![]()
![]()
↧