Wireless Federation

Telcos speak out on metamorphosis into softcos, partnering and new revenue streams.
The growing importance of software in the telecoms space is requiring telecoms operators to change their business models, and this transformation means new ways of generating revenues. 

“We are already transforming ourselves [into] more than a software company,” said Denis Guibard, VP of innovation and new ecosystems at France Telecom, addressing delegates at this year’s Sofnet event in London on Wednesday.

“[There is] still value in providing access and connectivity,” he said, adding that in addition to moving further into software, France Telecom is also focusing on areas such as content and advertising.

“[We are] becoming more and more a softco… but not exclusively,” he insisted.

Meanwhile Belgacom is also ringing the changes.

The Belgian incumbent has reorganised its fixed, mobile and ICT operations around a single platform, known as ‘explore’.

“It stands for the transformation” to future services, said Belgacom vice president Hendrik Van de Velde.

The telco is aiming for “all customers, all services on one network… We have an excellent technology. It’s called MPLS,” he added.

“What’s really important is the services we bring on that platform,” Van de Valde reminded attendees.

The operator may not want the customer to care about network technology, “but you want your customer to pay,” interjected session chairman, Roberto Saracco, head of future centre and technical communications at Telecom Italia, introducing a subject close to the heart of all telcos, among them U.K. incumbent BT.

“We’re having to focus on ‘what are the new ways of making money?’” said JP Rangaswami, managing director, service design at BT.

Rangaswami used the analogy of an airport to explain the changes happening within the U.K. incumbent.

“An airport is an open, multi-sided marketplace,” he said. “What we are doing at BT is pretty much the same thing.”

Rather than looking at what customers want to have for free, “our concentration at BT is on figuring out what’s not free,” he said.

“Some people will pay for immediacy… some people will pay for interpretation,” he went on.

In TV shows like American Idol, “entry is free… the money is made in the voting,” he explained. Similarly, while Prince gave away many copies of his latest CD, the revenue was in the concerts.

“You have got to listen to your customers,” said Telecom Italia’s Saracco. Our customers tell us that what we offer is “perfect… just give it to me for free!” he said. The telco has many employees with innovative ideas, he added “They might even fly as services if you give them connectivity for free.”

But talk of free entry and free connectivity is still uncomfortable for operators.

Revenue is still in providing basic services, such as fixed broadband said Guibard of France Telecom. Even though prices have fallen due to intense competition, “we’re not going to give that away for free,” he insisted.

He believes the answer is in bundling more services for a flat fee, that might even be perceived by the customer as being free. In addition, “these new services may be financed by advertising,” he said.

Power in partnerships
The key message from Wednesday’s debate was clear: telco businesses are evolving, but the telcos will not be able to go it alone.

Innovation will be critical for telecoms operators, but this innovation can come from outside the company, said Sapthagiri Chapalapalli, client director at Tata Consultancy Services.

“Build a network of partners and participants,” he urged. This is vital to the transformation journey. Otherwise, investment in next-generation networks “is not going to work.”

France Telecom is already taking that advice.

“IT and software [are] very important to the trend towards convergence,” said Guibard, outlining the various steps his company is taking towards convergence, a journey that will culminate in the deployment of IMS.

“We are not doing that alone,” he added.

Meanwhile, dismissing suggestions that telecoms operators moving into software would hurt his company, Chris Bray, telecoms industry solution sales at IBM Software Group, also highlighted the importance of working with partners.

“Service providers are going to have to learn to partner a little better,” he said, adding that some cultural change will be required.

“Use the data,” he urged, referring to the amount of subscriber information held by the telcos. Service providers have not made significant investments in that data historically, “but I suspect that’s about to change,” said Bray. Software companies can interrogate that data, he said.

France Telecom believes it is already well on the way to becoming a strong player in software.

“We are already a software company,” said Guibard, explaining that the telco has begun developing software and licensing it to other players.

We’re not Google, “but starting to change in that direction,” he said.

Telcos need to “compete [with] or complement the Web as a platform,” added Bray, suggesting they “have to take innovation lessons,” and boost speed to market if they are going to move forward.

“[But] BT is not about to become Google, [and] Google is not about to become BT,” he said, adding that “Google owns probably more dark fibre than most of the service providers in the world.”

And in a warning to telecoms operators, quoting Charles Darwin, Bray noted that it is not necessarily the strongest or the most intelligent that survives, “it’s the one that’s most adaptable to change.”

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