“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.

Still, it is instructive that, increasingly, there is talk of the extent to which “telcos” compete with the likes of Google and Apple.

The European Union’s telecom regulator, for example, now is investigating whether Vodafone , France Telecom, Telecom Italia, Deutsche Telekom, and Telefonica, as well as to the telecom he GSMA, have violated anti-trust law by trying to create a mobile payments consortium and service.

Advertisement

Google has a major “mobile wallet” service under development, and most observers expect Apple to enter the business in some way, as well. Some mobile service providers want to create their own application stores to compete with iTunes, the App Store and Google Play, as well.

What is interesting, of course, is that Apple is largely a device manufacturer, while Google largely is a software company, though each competes in both hardware and software to some degree.

Essentially, contestants in the communications and entertainment ecosystem are finding they increasingly must compete not only with other competitors within a portion of the ecosystem, but even to a certain extent with partners in the rest of the ecosystem. That’s the sense in which there is validity to assessing how much, and where, telcos and cable companies might actually find themselves competing with traditional partners in the value chain.

Some would say the significance of the European service provider moves are all of the efforts to develop new services ranging from mobile advertising to new messaging technologies to counter competing and often free services from Apple and Google.

That sort of creeping competition between “access providers” and “handset or application providers” might be viewed as a logical extension of current roles into adjacent business roles.

But that raises a bigger question: to what extent is it even feasible for access providers to consider abandoning that role within the ecosystem. In other words, are they network players or not?

There is a “soft” way of answering that question, and a “hard” alternative. The soft answer is that a specific company continues to offer access or transport services, but sources them from a third party.

As a mobile virtual network operator buys capacity from an underlying carrier, or a competitive local exchange carrier buys wholesale service from a third party, so a “soft” way of answering the question of whether a network services provider continues to operate is to say “yes,” but with an increasing emphasis on other ecosystem roles.

One example is the difference between a firm that sees its competencies in “marketing” rather than “network management.” That sort of firm might be comfortable sourcing access and transport from third parties. A firm that believes its core competence lies in networking will generally prefer to own its own network assets.

The more radical “hard” answer is that a company literally divests network assets and seeks its fortune elsewhere in the ecosystem. That so far has seemed an unworkable strategy.

But it is not unknown. The 1985 divestiture of the Bell System had AT&T completely getting out of the access business, to focus exclusively on long distance and technology services (Bell Labs and Western Electric). In essence, AT&T became a technology supplier and long distance specialist, and not longer was a “telco” in sense of providing access services and “dial tone.”

Rochester Telephone in the 1990s essentially gave up its local exchange monopoly, creating a separate wholesale access company and then a separate retail services division. The deal was part of a larger bargain that gave Rochester Telephone the right to create a long distance services business, at the time seen as the faster-growing revenue opportunity.

In similar fashion, Singapore Telecom gave up its own retail monopoly in exchange for freedom to pursue offshore growth opportunities.

In those cases, an incumbent gave up ownership of the “networks” business to become just one of many local retail providers. To be sure, Rochester Tel and SingTel continue to sell access services, but don’t own the networks.

The more radical, “hard” strategy would have had either firm abandoning the access business entirely.

That probably still will be an exceedingly rare occurrence. What could prove less rare are divestitures of whole parts of an access business though, as if a firm divests landline assets to become a wireless “pure play.”

The point is that it would at one time have been meaningless to talk about direct competition between an application provider or device manufacturer and a telco or cable company. That increasingly is less true.

Join the Conversation

Leave a Reply

Your email address will not be published. Required fields are marked *

Don’t Miss Any of Our Content

What’s happening with broadband and why is it important? Find out by subscribing to Telecompetitor’s newsletter today.

You have Successfully Subscribed!