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Rita McGrath

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September 11, 2005

Telecom - coming industry shift?

Just back from a trip to Finland – the land of saunas, reindeer and telecommunications. While there had a number of fascinating conversations with those in the know about telecommunications. Clearly, the current industry configuration (with hardware folks being dictated to by operators who in turn do most of the customer relationship work) is going to change. Companies like Skype (eBay reported to be considering a $3 billion bid!) and Vonage are making voice over IP a reality, cutting out the operators’ lucrative long-distance and roaming business.The dilemma for the hardware guys is that even if they see this change coming, they have to move carefully. Experiment too much with alternatives to the operator channel and your main customers of today get really ticked off. Fail to experiment and come up with offerings in that space, and all you do is leave the door open to future competition who will be much stronger for lack of initial competition when the industry finally does shift over.

This is clearly going to call for novel thinking. So what about a JV WITH an operator to help both parties discover where the opportunities might lie? Or innovating with a non-operator model in places where they don’t have any business today, or where the business is so heavily regulated that they won’t get upset. Come to think of it, why not innovate around low-end markets in places like the one I wrote about earlier in which theft of copper for tourist trinkets is making land-lines unreliable and creating demand for mobile solutions.

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Princeton, NJ 08543

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