In their current model, some traditional telecoms companies will not succeed,” says Roman Friedrich, Booz & Company analyst, the Financial Times reports. But just what might mean is difficult to foresee at the moment.
One might argue the same is true for many other participants in the telecom business, including cable operators and competitive local exchange carriers, for example. But among the potentially brightest opportunities for a range of players is “cloud computing,” according to Lawrence R. Freedman, a partner with Edwards Wildman Palmer LLP.
“There’s a compelling value proposition and business model,” Freedman argues Also, “there’s a convergence between cloud computing and communications.” Basically, “telcos see a need to evolve to become technology providers,” and cloud computing is a logical path, in that regard.
Ideally, a cable or telco becomes a one stop shop for connectivity and applications, for both enterprises and small and mid-sized businesses. In the SMB market, it is conceivable, Freedman argues, for a regional CLEC to become a provider of services that convert capex to opex, better use real estate and applications optimized for certain verticals, for example.
And most of the issues are not related to technology, he says. “There are strategic, legal and regulatory issues, especially for providers working both in the United States and Europe, for example,” he says.
In some cases, telcos or cable companies entering the market will resell or represent services and software provided by other larger cloud service providers. Ultimately, though, most will prefer to provide their own branded and owned services. That suggests the early “go to market” strategies might lean towards agency agreements or resale, and only later change to branded, owned services.
Smaller CLECs need stickier services to compete with the larger providers in their markets, and just offering the same connectivity products, when competing with firms with better ability to secure volume discounts, for example, will be a tough and losing battle.
Aside from that, there will be cultural changes as well. “It’s essentially a different business than what they’ve been in,” says Freedman. The point, though, is to move from “selling connections” to selling products such as security and data integrity, he argues.