Telecom Innovation: Bottom-up and Top-down

Author: Derek Kerton, Founder and Chairman of the Telecom Council

Telecoms, historically, were driven by and advanced through very vertical development, with a limited number of global vendors and telco labs inventing, designing, and building the solutions they deployed for the world to use. Bell Labs is the best example of this kind of in-house expertise, where the American telecom monopoly invented an impressive amount of innovations that they deployed into their networks.

But it is increasingly the case that progress in telecommunications, Internet, & general connectivity is driven by a wider range of companies, from different sectors, and from different parts of the world. The merging of data networking, IT, and Telecoms has meant that many modern innovations hail from outside the domain of traditional phone companies.

As a result of this, traditional telcos have adapted by learning to adopt and incorporate outside technologies. The term “Not Invented Here” used to be an impassable barrier for a technology, but has morphed into a “Badge of Honor” for telcos that prove most nimble at incorporating outside technologies. The only way for modern network operators — whether telco, cable, wireless, or trans-oceanic — to remain competitive is to intelligently adopt the best of outside innovations, as well as home-built customizations.

So how do network operators position themselves to attract, adopt, and deploy the best innovations? There are a few general tendencies:

  • Work within standards
  • Adopt “open” technologies to deploy a platform for innovation
  • Shift from a “box-based” hardware view to a software view of engineering
  • Have high-level buy-in to work with partners
  • Develop stable processes to integrate partners, both business and tech
  • Carefully evaluate hundreds of potential partners worldwide
  • Consider their brand, & understand relative strengths

And while all of these are interesting, the last one is where we will dive a little deeper here. It requires an understanding that not all telcos are the same. While there are important similarities, there are notable differences and idiosyncrasies which make each one different to work with, from a start-up’s perspective. They have different regulations, different footprints, different legacy technologies, frequencies, and they have different strengths and brands. So, it should come as no surprise that they approach potential partners differently, too.

Take the example of Verizon Wireless. If we asked you: “What is their main brand value proposition”, what would you guess? “Best Network”, right? So Verizon’s approach to potential start-up partners echoes its TV brand campaign: “Partner with us to leverage our excellent network and wide coverage.”  And this is what they do. Verizon executives prepared a video recently addressing the innovator community at VMware’s VMworld Conference, and carried the message that their upcoming 5G network would be fertile soil for distributed cloud solutions, containers, and virtualization. The carrier also touted its live 5G network test bed, where innovators could test their technology on a container-based, evolved packet core network using Kubernetes orchestration. Not only does Verizon Wireless intend to support innovation with a rapid nationwide roll-out of 5G networks, but they plan on emphasizing open-standards containerization, which makes the network a much more agile platform for integrating partner solutions, products, and services. As a result, Verizon is encouraging innovation from a bottom-up perspective: if you build it (a great network platform) they will come (partners).

Separately, let’s look at the example of T-Mobile USA. They call themselves the “un-carrier“. So if we asked you, “What is T-Mo’s main brand characteristic”, what would you guess? If you guessed “focus on the customer“, then you’d have a pretty good idea of their approach to partnering with start-ups and innovators. T-Mo doesn’t just want technology for technology’s sake – they want solutions that will delight their customers. Whether that is a new product or service, a drop in prices, or relieving a pain point customers often cite. As an example, cellular customers hate overages on their bills – but they also hate having their data run out and stop. So T-Mo sought out technology that allowed them to implement a “soft’ limit on monthly data, meaning customers would hit the limit, and have their speeds reduced. Now, this concept of “throttling” customer’s speeds is also controversial, but turns out to be a lower pain for T-Mo subscribers than the alternatives of bill-shock or a hard-stop. T-Mo does such innovation around reducing customer’s pain points, but also around bringing them new features, such as free streaming of music and video. All told, T-Mo sees innovation from a top-down perspective, where the customer is on top. “What does the customer want? And how do we give it to them?”

With competitors like T-Mobile and Verizon, and similar aggressive players in most developed nations, no telecom operator can afford to sit still. If they want to survive, they’ll need to compete with the leaders, and that means rapid adoption of new network technologies, better customer value, and new products and services. There is no way an operator can do that in-house, so partnerships with established vendors, and fast-moving start-ups are an essential piece of the strategic mix. Carriers may approach that partnership process differently based on their assets and their brand, but the result is the same: there’s ample opportunity for start-ups in the telecom sector, but not all carriers are the same, so start-ups should start with the carrier that is the best fit.

 

About the Author:

Derek Kerton, Founder of Telecom Council and Chair of the annual TC3 Carrier Connections, connects global innovative operators and telecom vendors who are pushing the telecommunications industry into the future with the startups and new technologies that will get us there. 

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