Here are three very different recent posts from around the web. Superficially they’re almost unrelated, but put them together and it makes for some interesting questions for the telecoms environment, and for the policymakers and regulators setting out the playing field.
- This piece from Kester Mann at FDR CCS Insight, looking at what’s enabling the rise of brand-based MVNOs in the UK – essentially a very simple way for brands to extend themselves into telecoms with some very different commercial motivations.
- A blog by GRCco on telecoms cybersecurity compliance which outlines the different kinds of compliance pressures that are faced and the real-world problems of not just compliance but also creating security to the level required.
- This piece from TelcoForge discussing the value of 6G as the enabler of a “guarantee economy” for telecoms players, as suggested by Rakuten’s David Soldani. The very brief argument is that telcos in future should be able to sell guaranteed outcomes to enterprises based on more programmable and flexible networks; less Gb/s and more “I need this thing to work”.
These three articles are essentially viewing the same changes in the telecoms industry through three different lenses. They imply a need for thinking differently about what telecoms as an industry is or does. I’ll put forward two theses here:
- The telecoms network is simultaneously becoming more significant to the economy and less valuable to the telco.
- Control over the boundary between services and the network is increasingly where value lies.
Old News, Fresh Mistakes
MVNOs aren’t new in the least. Mann’s article looks at the role of non-telco brands coming into UK telecoms, such as Klarna, Lidl and Revolut, but major retailers such as Tesco have had their own MVNOs for over a decade. However, the article points to enabling companies like 1Global and Gigs simplifying the process of setting up and running an MVNO to a point where there’s very little moat for telcos. Mann suggests that MVNOs may take 30% market share by the end of the decade – which is great for telco-as-wholesaler but problematic for telco-as-retailer.
What this reflects is that the telecoms network infrastructure is increasingly separable from the customer relationship, whether that’s with consumers in this case or with enterprises.
The reasonable response is, arguably, for the operators to stop selling more capacity, because that’s not what customers will pay for. Instead, they should be looking for revenue from elements such as identity, orchestration, security and – as per Soldani’s suggestion – assurance of outcomes. These are in many ways alien to traditional billing systems, but of course an SLA-based contract stops selling capacity on a cable. It’s going to depend on exposing performance monitoring capabilities instead to determine whether an SLA has been met or not.
The work of Open Gateway and CAMARA on network APIs is a very clear example of this move beyond a connectivity proposition. Instead, it’s providing information, or security, or reliable service on demand – all as-a-service. Despite some cynicism from an industry that’s seen this attempted twice before, there is real traction.
However, monetisation is where the problem lies. Demand exists and there’s scope for a good deal more, but operators are seeing income as a drop in the bucket. The value to a user depends less on the API call itself and more on how it’s packaged and presented. For example, an enterprise doesn’t really want a Quality-on-Demand API, it wants its robots to keep working.
And here’s where Soldani comes in.
Security Guarantees
Soldani’s proposed “guarantee economy” is a future where operators sell measurable and enforceable outcomes. He argues that 6G should prioritise operator control over a network that delivers customer outcomes backed by guarantees – and, heretic that he is, that technology choices in hardware and software should serve that outcome (as opposed, he says, to technology choices determining the services telcos can offer). Obviously a guarantee is only useful to a company if it can be defined in the network, enforced and verified to the end user.
Here, as with the APIs, there’s a piece missed out. Who gets to sell that guarantee, either for an API’s performance or for a 6G guarantee economy? Because whoever does that owns the customer and takes the lion’s share of the value.
We saw this in the 2010s when the app economy took control of data monetisation out of the hands of telcos’ walled gardens. With APIs, there’s still an open question about who will control that piece of the economy… but aggregation platforms who have a connection to developers will be in pole position unless operators are able to do some kind of collective bargaining. With MVNOs, the operator provides the underlying capability but Tesco or Ryan Reynolds owns the relationship and can capture the value.
So what about the cybersecurity piece? How does that tie in?
Quite simply, the more deeply telecoms becomes embedded in other industries, the more important it becomes to the wider economy and the more significant it is whether telecoms services are secure or not. That’s a cybersecurity issue, it’s a sovereignty issue and it’s why we’ve heard increasingly about telecoms as critical national infrastructure. It’s true, but it also underpins other national infrastructure in the same way that electricity underpowers telecoms.
If a telecoms network stops showing somebody’s Youtube video, it’s annoying. If it stops running authentication for financial transactions, industrial automation or emergency services then it’s a serious problem. And that means that governments have been beefing up their requirements for resilience, security, sovereignty and all those other words to make sure things keep working.
So this puts telcos a weird situation: the more important telecoms networks become to the wider economy, the less visible and harder to monetise telecoms services may become in their own right.
And, as a result, we’re seeing operators under pressure to move up the value chain at exactly the same time as other companies are trying to move into that territory, or expand their role in it.
Control System
This is why the question of 6G becomes much more significant, as the next chance telcos have to make a significant change in business model supported by a change in capabilities. While we talk about what Integrated Sensing and Communications, speeds, frequencies, efficiency and so on might offer to end users, one critical commercial question must be about who controls the technical and commercial bottlenecks that make those capabilities commercially useful.
Soldani argues that previous generations have left operators increasingly reliant upon vendor-supplied black boxes and platforms which they themselves fear to touch, taking control of their own networks out of their hands. 6G may be an opportunity to reverse that trend, depending on the architectural decisions taken in the next 18 months.
If telcos don’t reverse that trend then they may be providers of secure, reliable infrastructure which systems integrators, hyperscalers and others are selling on top of and capturing the lion’s share of value. That’s workable, but means that the telecoms provider is primarily a capital-intensive, highly regulated infrastructure provider – a utility for the economy to work on top of more than a beneficiary of that economy. There’s a workable business there, but it’s not one that many companies actively embrace.
There are two other possible scenarios. One is where operators are able to capture the value from their APIs, from a guarantee economy, from being providers of digital trust and so on. It would require quite the re-tooling but it would give them brand visibility and an active engagement with, and share of, economic activity.
The third is that we end up with hybrid situations where the operators are able to own a significant share of the value in some environments or markets and not in others. For example, succeeding in moving up the value chain in the API market and selling outcomes, while being out-competed in the B2C space by brands that don’t need their mobile service to be at all profitable.
Questionable Business
So this leaves us with a few questions.
For regulators used to watching competition, how does that environment look now? Who should control that access to future programmable networks and their capabilities? Maybe more importantly, who’s accountable if it fails?
After all, if the operator is financing increasingly expensive infrastructure that other companies capture the value from, that makes for a hard investment case. More so if the companies with the customer relationships can then blame the operator for any failures. The telco has the downsides but few upsides.
Having said that, giving a few network operators control over APIs or other network capabilities could inhibit the kinds of innovation policymakers and regulators usually want to encourage.
So the challenge isn’t so much about regulating who can access telecoms networks, but more about establishing where the boundary between network infrastructure and the wider digital economy should sit (A propos, we recently wrote about one person who has a firm opinion about that).
It also leaves the telcos with a question about 6G.
We’ve tended to treat technologies as things we load up with and then push at people to get our money back. How do we monetise 5G? How do we monetise APIs? How do we monetise 6G? Implicit in all those questions is the primacy of the technology, and monetisation works to support the inevitable progress of purchases. Instead, there may be a better question to ask.
What becomes possible when networks can be controlled, adapted, guaranteed and verified in real time, and who gets to sell that capability?
That moves us from conversations on network architecture towards questions about the economic framework of a digital economy. It’s not about spectrum but about who controls that layer between connectivity and business outcome.
If the telecoms industry doesn’t decide to take control of that layer, it’s inevitable that somebody else will.
Image by Erika Alina from Pixabay
