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How telecoms companies predicted the future, and missed out on it

Written by Martin North

Back in 1998 I was a young graduate engineer working for a large UK telecoms company, and I was part of a team building the technology for the “Home of the future”. We built a futuristic living room. In that room was the ability to go to a computer (a bright blue iMac!) and pick a song to play, with the song being downloaded from “a server”. We had a TV with a crude Set Top Box where you could play some Video On Demand from a choice of films we had setup. One of the team built a little application on the iMac to turn the wall light on and off, as I recall he was very proud of that.

At a time when a “cloud” was generally referring to floating moisture in the atmosphere and “streaming” was something associated to rivers, it turned out we had done a pretty good job of visualising what the world would look like in 20 years, and we had done an even better job of inventing and building the technology that would be needed to take advantage of it. But it was the likes of Netflix, Google, Spotify and Amazon who took advantage of the changing world, not the telecoms company who predicted it and had the technology ready 20 years earlier.

Another colleague of mine in the same telecoms company, worked in a team building a simple application that sent you a text to your (very simple) mobile phone when you missed a call in the office. Remember this was a time where companies did not give out mobile phones to employees, so all you had was your office landline. So this simple idea of being able to “present” in the office when not physically there, being able to link a mobile device to a physical office – being able to use an “App” to keep in contact with the world was, by 1998 standards, quite ground breaking.

Around the company, fantastic teams of engineers where producing brilliant world leading technology solutions. Senior management where talking about the new “digital future”. Predicting that the world will be not be driven by cables and fibre optics, but by Applications. The successful telecoms company will be one that facilitates communication, that enables applications to interact with communication networks to deliver all sorts of innovative content to the customers. How right they where.

These conversations and innovations where happening in telecoms companies all over the world. They all had that same crystal ball. So how did these companies foresee the future so accurately and fail to take advantage of it? How did a set of companies, with very deep pockets, invent the future and largely watch it race past them?

I’ve been in telecoms for the last 25 years so I was part of that journey. I’ve been part of that innovation, the good and the bad. I’ve been with the large incumbent telecoms companies and the small startups. I’ve been a young engineer and a senior director, at one time someone who laments people for making poor decisions to the one making such decisions. What went on behind the scenes?

Financial Stress

To answer that question, it is important to understand one of the biggest problems telecoms company face – growth. The amount of data a given customer uses doubles roughly every 18 months. And it has done that for the last 25 years. Think about your own usage, you probably watch more Netflix and streaming than you did a couple of years ago. And yet, your telecoms and broadband bill hasn’t really changed, it probably hasn’t change much in 25 years. It is hard to think of any other industry where customers consume twice as much product than they did a year ago, and still expect to pay the same. If you go to the supermarket and buy twice as much food, your bill goes up. If you use twice as much gas and electricity, go on twice as many holidays, buy twice as much clothes – you pay more. In fact go back to the late 1980s or early 1990s, that was how telecoms used to be – you made twice as many phone calls back then, you pay twice as much. But somewhere along the line, the telecoms companies fell into a commercial trap of giving away unlimited consumption and products for free – and free has never been a great business model.

The result is that telecoms companies have to spend vast quantities on money constantly upgrading their infrastructure to cope with growing demand, and get precisely zero extra revenue for their troubles. It is a huge cash drain. If you are operating in a world where margins are tight and you have to spend huge amounts of money in order to stand still, don’t be surprised to find yourself in a permanent financial straight jacket. And ultimately that is one of the issues – telecoms companies can’t afford innovation.

It is often said that the stock market is unfair to the telcos. The argument goes that the markets happy to support stratospheric share price growth of tech startups who have never made a singe penny in profit, whilst pushing telcos for immediate financial results and never allowing them room to plan long term growth. The inconvenient truth is that the markets have been waiting for “long term growth” of the telecoms market for a quarter of a century and patience ran out quite some time ago.

The upshot is that telecoms companies are under a permanent state of financial stress – cash drain for their free and unlimited business models along with aggressive belt tightening to squeeze out the smallest of profits. In that climate, there has never been room for long term innovation. Initiatives spending money on blue sky development, which may not see any return for quite some years, never last long. The hard reality is that many telcos do not have the financial or cultural appetite for long term innovation, especially innovation outside their traditional markets.

Seeing the light of day

Despite the challenges, there is some great innovation to be found in telecoms companies around the world. I’ve been privileged to be part of some of that over the years. Which brings us to the next obstacle; of the fantastic science that you can find in telco’s, how much of it ever sees the light of day. And for that which does find its way to the market, does the leading telco financially benefit?

Telecoms companies obsess over provisioning and billing. Really obsess. It is an obsession which was born out of necessity, telcos are regulated companies and their billing is highly scrutinised; phone calls need to be billed to the second, your service charges must start only when you receive that service. Telcos are fined heavily when it goes wrong. There are huge numbers of people that work in billing and provisioning, be that the front line contact centre agents, the software developers building these systems, the IT teams running them, the project mangers and business analysts organising the to-do list – it is an industry within an industry. My experience was there are more people fiddling around with billing and provisioning inside telecoms companies than any other discipline (I’ve often wondered could be achieved with that many people if they where all focused on innovation and growth).

Billing and provisioning isn’t trivial, but it is hardly rocket science either. Quite why telco’s manage to create such a cottage industry of it is something for another day, suffice to say that the consequence is that it dominates the internal conversations. Any innovation can be flattened in a heart beat by an impact statement on billing and provisioning. However much time and effort a bunch of smart people put into innovating a new product, you can be sure that an effort many times greater is needed to fit it into billing and provisioning. And the time taken to do it usually means you don’t bother.

I’ve been on both sides of those conversations. I’ve been the innovation champion, developing some new technology only for the “How do we provision this” Grim Reaper to kill all optimism stone dead. I’ve also been the person running these fragile systems, where I know any change to the provisioning systems is a game of Kerplunk – and I’ve resisted anyone pulling out another straw, fearful of the inevitable consequences of a mess to clean up off the floor. It is a pattern I have seen across multiple telecoms companies. Even the startup telcos, which a clean slate and no baggage eventually succumb to the gravitational pull.

My experience is that the engineers who work on billing and provisioning are some of the smartest people I’ve ever worked with. The systems they build are sophisticated, elegant and the backbone of the organisation. And yet, it is another inconvenient truth that these systems become something of innovation mill stone.

A gift to humanity

One of the first projects I worked on as a young engineer was developing what became Broadband. I played a very tiny role, but I’m happy to look back and say that I did play – however small – a role in developing technology which has changed everyone’s lives. And I’m happy to look back and say this was one piece of technology innovation that absolutely saw the light of day, all be it I was a small cog in a very complex innovation machine. But how much did that telco gain from gifting the world broadband? The majority of broadband customers sit with their competitors, the equipment suppliers (Chinese, Israeli, Japanese and others) have supplied billions of dollars of equipment around the world to fuel the resulting demand for the technology. It is another inconvenient truth that the biggest innovations I can look back on, which actually changed the way we go about our lives, ending up being a philanthropic gift to humanity which everyone else cashed in on.

 Closing thoughts

It can be hard to predict the next 25 years, but there will be some smart people inside telecoms companies who have already mapped it out. If telecoms companies can figure out there business models, cleanse themselves of their billing and provisioning filth, and figure out how to hold onto something of the world changing events they create, maybe the next 25 years will be more financially rewarding.

About the author

Martin North is a Senior Telecoms leader of 25 years, now founder of tech company.

Original Article

Lisa Baker is Group Editor for the Need to See IT Publishing Group. Lisa writes about HR, Technology, Health, the Environment and Business.
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