This weekend, I was cleaning out old files, and came across some industry outlooks made by market research and consulting firms a few years ago. In it were predictions of the distant future (say 2005 …), you remember the inflated expectations people had back in de dot com boom days. It turns out that most of these predictions were actually fairly accurate (I bragged earlier about my own predictions).
With this is mind, I had a new look at some predictions on digital architectures, infrastructures, and the future state of the market that happened to land in my mail the other day. Although past performance is no guarantee for future success, it is the next best thing to sheer guesswork.
In the 2006 Telecommunications predictions, Deloitte identifies a number of developments. One development that is continuing strongly is convergence. Convergence is an architecture shift, a different way to organize digital infrastructures. In the end, voice, data, TV, etc, will all be an application of top of an Internet type connection. Telcos could be the losers in this game, delivering the bits but not making money on the content. Margins will be thin, because shipping bits is a commodity. So, how can telcos improve their margins? They should not move into high end IT services, they just do not have the senior level project engagement skills and the synergy with the core business is low.
Telcos can team up with application and content providers. There is a market demand for that content delivered with service level agreements that go beyond best-effort promises, and those service levels merit a higher price. Telcos should be well positioned to deliver commodity style applications. For example, in the past week KPN has announced a deal with Exact for delivering online bookkeeping software. Henjo Groenewegen, KPN director for its business market, cites billing as an additional advantage: “We are experienced in monthly billing, Exact is not”.
This is the way forward for telcos, although the road is long and winding. KPNs European roll out of NTT Docomo’s I-mode has had lukewarm success. On the other hand, at the end of 2006 there will be an estimated 40 million paid-for VOIP (Voice over IP) subscribers, more than double the 2005 number. Apparently there is a market. Managed VOIP may actually generate a premium over traditional voice, because it allows for additional services and functionality that traditional voice cannot deliver (think stereo, user administered conference calls, follow-me, etc). At the other end of the spectrum there is a place for ‘free’ VOIP (Skype, Google Talk, etc). Skype typically has around 3-5 million people online at any time.
If you want a copy of the Deloitte predictions, drop me a line.