This article was authored by Jouko Ahvenainen, and was originally posted on telecomasia.net.
I was recently sitting on the London Underground and observing how every person uses their mobile phones. It reminded me of times 18 years ago. I then worked first for Nokia in Asia and subsequently for a leading management consulting firm in London, and we spent a lot of time developing 3G strategies and business plans. In the Underground I felt that all we planned for and more has happened. Except the carriers didn’t get the business they hoped for. Why, and can we learn something from this? Maybe 5G and FinTech are now in a similar planning phase.
Basically, the visions and plans back then were to have the internet on mobile devices. But I especially remember two important components regarding how this internet would be available in mobile. First, the plans were that carriers would dominate this business. Users would use the internet through carrier portals, with the carriers setting up phones and software (later called apps) for them. Second, WAP (I wonder if someone still remembers this) would be a ‘lighter internet protocol’ for mobile and a kind of telco standard protocol.
Neither of those scenarios happened. I remember discussions from that time, such as asking carrier representatives why they think people would use portals, rather than go directly to services. The answer was it is easier for users not to type URLs, they trust carriers and the services carriers choose, and the walled garden (with carriers controlling and monetizing internet services) would be a good business model for carriers.
The telco world had learned to live based on official standards. 2G and 3G were significant achievements of telco standards. It was natural to think that other things, like mobile Internet protocol, would be similar. But the internet has been a very different story, it has never been based on real industry standards, but de facto standards. After 3G we saw the internet model take over mobile business, and telco standards had a role only in very technical layers.
Since 3G we have followed the developments that made carriers into data pipes. Other guys won the apps business, content business and also the mobile advertising business. This is nothing new, but it is interesting to go back to these experiences, and try to learn and contrast to other situations and industries.
Now we are stepping into the 5G era. According to plans it will include components like IoT, smart houses and cities, autonomous machines including vehicles, VR/AR, and new more distributed cloud services. The leading network vendors (Ericsson, Nokia, Huawei) also develop solutions for these concepts. It is very hard to see carriers filling much more of a role than as data pipes and more than standard hardware sales for network vendors. Value added services, data services and applications will be run by other parties. Telecom Asia’s Vision 2018 publication also introduced an interesting vision – if Amazon acquires Ericsson and starts a development whereby the internet companies take over connectivity services too.
Probably one reason for how carriers lost their more important role was that they thought they own customers, and can decide what customers get and how. They also planned things based on their technologies, service history and organization. The internet services made it possible to bypass them, and then other companies that planned services based on customer needs won the business.
Now it is interesting to compare this to the developments in finance services, and especially FinTech and distributed finance (e.g. blockchain) development. Banks have quite similar stories as telcos used to have. They believe they own customers, customers trust them and they believe other players are not able to bypass them in finance services.
Finance institutions also often plan new services based on their own historical services, legacy IT and organization. At the same time, the reality is that new technology (e.g. cloud based back offices and open APIs), distributed models and data analytics offer totally new opportunities to develop and offer finance services. I very much feel that comments from banks are like “customers must stay in bank’s walled garden, use all services through their portals, and FinTech can only happen under their control and on their standards.”
3G included hype that caused a few years hangover in the early 2000’s. 5G and FinTech have some hype components too. But 3G came to change the whole mobile business, and FinTech will do it for finance, and also 5G probably changes a lot with connectivity. Those who want to be successful must think hard how to offer something that customers are really ready to use and pay for. Of course, this is not revolutionary itself. It is just so hard in reality to do, especially when you have a big legacy organization, business lines and IT systems. It is fancy to create some innovation and new business units, but to adapt to a new business reality, you must get the whole organization to work for it, ignore the past and just focus to make better services for customers.
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!Categories: Other Posts · Wireless